REG - Petroneft Resources - 2021 Reserves & Resource Audit
21/12/2021 07:00
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RNS Number : 2743W Petroneft Resources PLC 21 December 2021
PetroNeft Resources plc
21(st) December 2021
THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION
PetroNeft Resources plc ('PetroNeft' or 'the Company')
2021 RESERVES & RESOURCE AUDIT
PetroNeft (AIM: PTR) an oil and gas exploration and production company,
operating in the Tomsk Oblast, Russian Federation and 90% owner and operator
of Licence 67 and 50% owner and operator of Licence 61 is pleased to provide
the results of the reserves and resource audit, the first undertaken since
2016 for Licence 61, and 2011 for Licence 67.
Highlights
· Miller & Lents (M&L), an independent oil and gas consulting
firm, have completed the 2021 Reserves & Resource audit for both Licences
61 and 67, link available at:
http://petroneft.com/investor-relations/reserve-reports/
(http://petroneft.com/investor-relations/reserve-reports/) This is the first
review of reserves and resources in five years on Licence 61 and a decade for
Licence 67.
· Updated 2P reserves of 48.655 Mbbls and a 2P NPV(10) valuation across
Licences 61 and 67 of $522.2M net to PTR
All figures in Mbbls Gross Net Attributable
Asset Name Proved Proved & Proved Proved Proved & Proved
Probable Probable & Probable P
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Possible P
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Licence 67 4.780 27.214 79.646 4.302 24.493 71.681
Licence 61 24.345 48.325 70.950 12.173 24.163 35.475
Total = 29.125 75.539 150.596 16.475 48.655 107.156
NPV10 $(US)M Gross Net Attributable
Asset Name Proved Proved & Proved Proved &
Probable Probable
Licence 67 50.186 281.895 45.167 253.706
Licence 61 266.302 536.998 133.151 268.499
Total = 316.488 818.893 178.318 522.205
· Additional 3C Net contingent resource - 23.74 Mbbls
All figures in Mbbls Gross Net Attributable
Asset Name 1C 2C 3C 1C 2C 3C
Licence 67 0.566 3.387 24.512 0.509 3.048 22.061
Licence 61 0.499 1.471 3.369 0.250 0.736 1.685
Total = 1.065 4.858 27.881 0.759 3.784 23.745
· Significant low risk prospective resource estimate for Licence 61 -
Emtorskaya prospect, Gross Pmean 96.19 Mbbls with a geological Chance of
Success of 49.7%, and Gross P10 upside of 253.35 Mbbls
· The M&L report underlines the importance and value of License 67
for the Company's future, with the 2P and 3P gross reserves largely driven by
the newly producing Cheremshanskoye field and further upside now recognised,
supporting the Company's new strategy, and added forward focus on License 67
M&L has completed its assessment of the Group's petroleum reserves and
resources with an effective date of 30(th) July 2021, in accordance with the
standards of the Petroleum Resources Management System, prepared by the Oil
and Gas Reserves Committee of the Society of Petroleum Engineers (SPE-PRMS).
This is the first reserves and resource audit since Ryder Scott completed
their assessment in 2016 for Licence 61 and 2011 for Licence 67.
The following is a comparison between the legacy audits carried out by Ryder
Scott and the current Miller & Lents report. Such a comparison is partly
complicated by updates to the PRMS standards, which have impacted the
categorisation of the Emtorskaya prospect in Licence 61.
Table 1: Net reserves comparison between legacy (Ryder Scott) and 2021 (Miller
& Lents) audits
All figures in Mbbls Ryder Scott 2011/16 Miller & Lents 2021
Asset Name Proved Proved & Proved Proved Proved & Proved
Probable Probable & Probable Probable &
Possible Possible
Licence 67 1.500 14.000 17.400 4.302 24.493 71.681
Licence 61 14.170 49.390 86.810 12.173 24.163 35.475
Total = 15.670 63.390 104.210 16.475 48.655 107.156
Miller and Lents have also estimated additional net additional Contingent
resource (3C) of 23.74 Mbbls (22.06 Mbbls in Licence 67 and 1.68 Mbbls in
Licence 61) and net Pmean prospective resources for the Emtorskaya prospect of
48.09 Mbbls (Gross 96.18 Mbbls with a 49.7% geological chance of success).
In Table 2 below, the 2P NPV10 has increased significantly from $255.716M in
2011/16 to $522.21M as of 30(th) June 2021. The increased valuation is mainly
a reflection of the materially improved long term oil pricing environment both
internationally and domestically within Russia since the last report. The
total valuation uplift is further increased by the recent acquisition of an
additional 40% interest in Licence 67 in 2021.
Table 2: Discounted cashflow (NPV(10)) comparison between legacy (Ryder Scott)
and 2021 (Miller & Lents) audits
Net NPV10 $(US)M Ryder Scott 2011/16 Miller & Lents 2021
Asset Name Proved Proved & Proved Proved &
Probable Probable
Licence 67 8.590 76.642 45.167 253.706
Licence 61 55.409 179.074 133.151 268.499
Total = 63.999 255.716 178.318 522.205
Note: Ryder Scott L67 at 50%, Miller & Lents L67 at 90%
While full copies of the actual reserve reports, which are by operational unit
on a gross and net attributable basis, can be downloaded by clicking on the
following link http://petroneft.com/investor-relations/reserve-reports/
(http://petroneft.com/investor-relations/reserve-reports/) , below is a
management summary of the audit results.
David Sturt, CEO PetroNeft commented:
'We are delighted to be able to finally publish the results from our recent
reserves and resource audit.
This has been a painstaking interactive process and we are pleased to have
engaged Miller & Lents due to their depth of expertise and considerable
experience of working with significant Russian oil operators, some with assets
near our licenses and fields that are likely analogous to ours.
We feel the audit results fully supports our on-going strategy, with the
Cheremshanskoye field on License 67 providing the most exciting near-term
upside for our continued growth, reflected in the strong reserves numbers,
which are all new and not reported at all in the last reserves audit.
On License 61, it is satisfying to see the exciting upside and running room
potential of our northern hub, particularly at Emtorskaya, beginning to show
through numerically. An extensive inventory of reserves remains at our other
License 61 fields. Whilst comparison with the 2016 report is not
straightforward due to the evolution of assessment methodology which has
become more rigorous in the intervening years of production, we are satisfied
that the latest audit gives a suitably robust view of our reserve base and
wish to thank Miller & Lents for their thoroughness and professionalism.
The NPV(10) valuation of our 2P reserves of over $520M is a clear indicator of
our material value proposition, and we will continue to focus on building our
production and cashflow to deliver the underlying values of our assets to our
shareholders.'
Licence 67
PTR own and operate a 90% interest in the licence. The last reserves audit was
carried out by Ryder Scott from existing legacy data in 2011, just after the
award of the licence. Since then, the C-3 and C-4 wells on the Cheremshanskoye
field and the L-2a well on the Ledovoye field have been drilled. Due to
improved oil prices and cost optimisation initiatives, the 2P NPV(10) per
barrel has increased from approximately $3.50/bbl in 2011 to approximately
$10.36/bbl in 2021.
Table 3: Licence 67 - Net Reserves and Cash flow value (NPV10), as of 30(th)
June 2021
All reserve figures in Mbbls Gross Net Attributable
Licence 67 Reservoir Proved Proved & Proved Proved Proved & Proved
Fields Probable Probable & Probable Probable &
Possible Possible
Cheremshanskoye U. Jurassic 4.556 22.900 34.467 4.100 20.610 31.020
L. Jurassic 0.067 0.244 17.589 0.060 0.220 15.830
Ledovoye U. Jurassic 0.156 4.067 27.600 0.140 3.660 24.840
Total Reserve = 4.778 27.211 79.656 4.300 24.490 71.690
Total NPV 10 $M= 50.189 281.900 45.170 253.710
NPV10 $/bbl = 10.50 10.36 10.50 10.36
Cheremshanskoye Field
There were no reserves calculated for this field by Ryder Scott in 2011. Since
the last audit the C-3 and C-4 wells have been successfully drilled with the
C-4 well currently producing.
The results demonstrate sizeable and well-defined reserves in two reservoirs
(J1 ad J14) of the main Upper Jurassic zone, currently producing in the C-4
well. In addition, recognition is also made of the upside potential within the
Lower Jurassic Tyumen formation with 15.83 Mbbls 3P net reserves, albeit with
very modest 1P and 2P numbers at this early stage. The Tyumen formation is an
economically attractive target as any production qualifies for a 20% reduction
in the Mineral Extraction Tax.
Ledovoye Field
The field was last audited in 2011 soon after the licence award and before the
acquisition of the 3D seismic data with a net 2P reserve of 14.0 Mbbls. Since
then, the L2a well was drilled in 2012, which encountered oil but with a
higher Oil Water Contact. This created uncertainty about the precise location
of the Oil Water Contact, which has led to a significant portion of the 2P
reserves now being moved to 3P with the 2P net reserve reduced from 14Mbbls in
2011 to the current 3.66Mbbls
Following the successful re-entry of the L-2a well earlier this year and the
recovery of oil to surface on test, we are evaluating forward options for this
field.
Licence 61
PTR own a 50% operated interest in the licence which was last audited by Ryder
Scott in 2016. The NPV(10) per barrel has increased from approximately
$3.50/bbl in 2016 to over $11.00/bbl on a 2P basis.
Table 4: Licence 61 - Net Reserves and Cash flow value (NPV10), as of 30(th)
June 2021
All reserve figures in Mbbls Gross Net Attributable
Licence 61 Reservoir Proved Proved & Proved Proved Proved & Proved
Fields Probable Probable & Probable Probable &
Possible Possible
Lineynoye incl. west U. Jurassic 7.380 16.280 16.920 3.690 8.140 8.460
Arbuzovskoye U. Jurassic 5.060 6.180 7.800 2.530 3.090 3.900
Sibkrayevskoye U. Jurassic 11.700 24.160 42.520 5.850 12.080 21.260
Tungolskoye U. Jurassic 0.180 1.560 3.480 0.090 0.780 1.740
Kondrashevskoye U. Jurassic 0.020 0.160 0.240 0.010 0.080 0.120
Total Reserve = 24.340 48.340 70.960 12.170 24.170 35.480
Total NPV 10 $M= 266.300 537.000 133.150 268.500
NPV10 $/bbl = 10.94 11.11 10.94 11.11
Lineynoye & West Lineynoye Field
There is a reduction of 2P reserves on a net basis of 4Mbbls, this is due to a
more rigorous well log interpretation reducing overall net pay. Recent
engineering studies based on historical production (material balance
calculations) provided a degree of verification of the new volumes calculated.
This field cluster is a key producing asset of the Company. The production
wells at Pad 1 continue to perform well, with three producing over 700,000
bbls and two more over 300,000 bbls cumulative production to date. The recent
re-frac of the L-115 well has proven highly successful, with additional wells
planned to be fracked this winter (Q1 2022).
Sibkrayevskoye Field
The unsuccessful drilling of two appraisal / development wells (S-374 and
S-375) in 2016 and 2017 has resulted in a significant reduction of 2P
reserves at this field compared to the 2016 report, with the southern
extension of the field being written off.
Despite this, management remains very confident that this field will continue
to provide an engine room for production growth and are particularly
enthusiastic regarding last year's frac of the S-373 well having added more
than 500 bopd post frac. While the field still has a substantial reserve base
and future upside, management focus will be on the further development of the
frac programme, which is expected to provide a continuing and growing revenue
stream. The earlier unsuccessful drilling results have confirmed
management's view of the pitfalls of drilling certain development wells, prior
to 3D seismic and therefore no further drilling is anticipated to take place
prior to 3D seismic.
Arbuzovskoye Field
There has been a small 0.36 Mbbls net reduction in 2P reserve, but we are
pleased to see a 1.6Mbbls net increase in 1P reserves due to the drilling of
the horizontal wells at PAD 2 in 2016.
The performance of these two horizontal wells has been excellent, with the
A-214 Hz well recovering 750,000 bbls and the A-215 Hz well recovering almost
400,000 bbls.
Tungolskoye Field
There has been a reduction of 2Mbbls (net) of 2P reserves due to the poor
performance of the wells drilled in 2015 when four horizontal and four
vertical wells were drilled. Initial rates on the horizontal wells were very
encouraging with rates over 500 bopd but declined rapidly. As reported
earlier, the field was suspended in early 2019 due to low flow rates leading
to non-commercial production. There are plans to re-enter the T-501
horizontal well during this coming winter season, and if successful, the
program could expand. Upon success, we would expect reserve numbers to
increase at the next reserve audit.
Emtorskaya Prospect
The Emtorskaya prospect sits on the northern margin of the licence up dip and
between the Lineynoye field to the south and the Sibkrayevskoye field to the
east. This prospect provides material risked upside for License 61.
Table 5: Licence 61 - Gross Unrisked Prospective Resources (M&L), as of
30(th) June 2021
Prospect Gross Net Attributable
P90 P50 Pmean P10 P90 P50 Pmean P10
Mbbls Mbbls Mbbls Mbbls Mbbls Mbbls Mbbls Mbbls
Emtorskaya 10.50 55.52 96.18 253.35 5.25 27.76 48.09 126.68
Geological Chance of Success = 49.7%
The prospect was also evaluated in 2016 by Ryder Scott, but due to changes in
assessment methodology associated with reserve audit regulations, direct
comparison is not straightforward. PTR believes the 2016 P3 figure of 46.78
Mbbls as not fully reflecting the more robust upside seen with additional
in-house integrated evaluation of legacy wells in the vicinity and newer 2D
seismic data.
M&L estimated the (gross) Pmean of 96.18 Mbbls with an estimated
geological chance of success of 49.7% which PTR believes is a more accurate
reflection of the potential value of the prospect to the Company.
In 2016, the Company also had 11 prospects in the southern part of the licence
audited by Ryder Scott as potential prospective resources. This portfolio of
dependent prospects presents future significant upside unrisked gross
potential of ca.287Mbbls. However, as very little new information is
available on these prospects since the last audit, combined with the
operational focus of the value creation being around existing fields and the
northern hub, a decision was taken to exclude this resource in the current
audit report.
For further information, contact:
David Sturt, CEO, PetroNeft Resources plc +44 7903 869 608
John Frain / Ciara O'Mongain, Davy (NOMAD and Joint Broker) +353 1 679 6363
Joe Heron / Douglas Keatinge, Murray Consultants +353 1 498 0300
Notes and Glossary
These assessments are made in accordance with the standards defined in the
Petroleum Resources Management System (Revised June 2018) jointly sponsored by
SPE, WPC, AAPG, SPEE, SEG, SPWLA, and EAGE.
The information contained in this announcement has been reviewed and verified
by Mr. David Sturt, Chief Executive Officer and Executive Director of
PetroNeft, for the purposes of the Guidance Note for Mining and Oil & Gas
Companies issued by the London Stock Exchange in June 2009. Mr. Sturt holds a
B.Sc. Degree in Earth Sciences from Kingston University and an MSc. in
Exploration Geophysics from The University of Leeds. He is a member of the
Petroleum Exploration Society Great Britain and has over 35 years' experience
in oil and gas exploration and development.
1P Proved Reserves, those quantities of petroleum, which, by analysis of
geoscience and engineering data, can be estimated with reasonable certainty to
be commercially recoverable, from a given date forward, from known reservoirs
and under defined economic conditions, operating methods, and government
regulations.
2P Proved + Probable Reserves, those additional Reserves which analysis of
geoscience and engineering data indicate are less likely to be recovered than
Proved Reserves but more certain to be recovered than Possible Reserves. It is
equally likely that actual remaining quantities recovered will be greater than
or less than the sum of the estimated Proved plus Probable Reserves
3P Proved + Probable + Possible Reserves, those additional reserves which
analysis of geoscience and engineering data suggest are less likely to be
recoverable than Probable Reserves.
$M US $ Million
NPV10 Net Present Value discounting at 10%.
P10 / P50 / P90 / Pmean A probability methodology used to describe the size of the Reserves in a Field
or resources in a prospect.
PRMS Petroleum Resource Management System of reserve and resource classification
under the Society of Petroleum Engineers (PRMS-SPE)
U. Jurassic Upper Jurassic
L. Jurassic Lower Jurassic
3C Contingent Resource category 3 (PRMS-SPE)
bbl Barrel
Mbbls Millions of barrels
3D Three Dimensional
Hz Horizontal
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