PetroNeft Resources Books Big Reserve Increase

PetroNeft Resources plc owner and operator of Licences 61 and 67, Tomsk Oblast, Russian Federation, is pleased to provide an update on its operations.


· PetroNeft’s 2P reserves increase 36% to 131.7 mmbbls

o Sibkrayevskoye 49.83 mmbbls

· PetroNeft’s proved reserves (P1) increase 50% to 20.03 mmbbls

o Lineynoye 8.86 mmbbls

· Ledovaya No. 2a well achieves natural flow

· Arbuzovskoye pipeline construction completed; Development Programme on schedule

· Option to advance Sibkrayevskoye development later this year

· Production remains steady at 2,300 bopd

Ryder Scott Report as at 1 January 2012

Independent reserve auditor Ryder Scott has completed an assessment of PetroNeft’s petroleum reserves and resources on Licence 61 as at 1 January 2012. The principal changes from the previous year’s report were the addition of proved and probable reserves at the Sibkrayevskoye and North Varyakhskoye oil fields which were discovered in August and September 2011 respectively. The development drilling results at Lineynoye have confirmed that Lineynoye and West Lineynoye are one continuous oil field. The Pad 2 wells and fracture stimulation results led to a reserve write down in this area of the field, however, this reduction was more than compensated for by the successful exploration programme.

Sibkrayevskoye is the largest discovery made to date by PetroNeft and it is potentially larger than the new reserve booking of almost 50 mmbbls. Prior to drilling, Sibkrayevskoye was estimated to contain 44 mmbbls. The rig that was used to drill the discovery well has been moved to a new location for the purposes of drilling a delineation well which we hope to drill later in the year.

Ryder Scott has not yet updated the reserves in Licence 67, as studies are underway to better define the three new oil pools discovered at Cheremshanskoye, and testing has just been completed at Ledovaya 2a.

As a result of the new report on Licence 61, total proved and probable (2P) reserves net to PetroNeft have risen by 36% from 96.9 mmbbls to 131.7 million bbls. Total proved reserves (P1) have increased by 50% from 13.35 mmbbls to 20.02 million bbls.

Licence 67 – Ledovaya No. 2a testing

Testing of the combined J1-1 + J1-2 interval consisting of 5 m of net oil pay is now complete. The well achieved stabilised natural oil flow of 8.3 m3/day (52 bopd) on a 3 mm choke. The oil is good quality at 34 degree API. We are now in the process of temporarily suspending the well and reviewing our options for further delineation/development of the field.

Licence 61 Arbuzovskoye Pilot Development Programme

The Arbuzovskoye Pilot Development Programme is progressing on schedule and most items that needed to be moved or constructed this winter have already been completed. The production drilling rig has been moved from Lineynoye Pad 3 to Arbuzovskoye Pad 1. Construction of the power line from Lineynoye to Arbuzovskoye has been completed and commissioned. Construction of the 10 km pipeline has been completed, with pressure testing and commissioning commencing this week. Production through this new pipeline from Arbuzovskoye is scheduled to commence in Q2 2012.

Licence 61 – Lineynoye Field Development Programme

Current Group production remains steady at about 2,300 bopd. We are pleased with the water injection response on the Pad 1 wells and have initiated water injection into one well on Pad 2, with additional wells planned in the future.

As previously indicated, a number of studies have been defined that will help us to better understand the disappointing results from the Pad 2 wells. One of these will be a field wide pressure transient test of the field. This will commence when warmer weather allows us to shut-in the wells and not have the flow lines freeze. This data will then be used in the reservoir simulation of the field and to optimize water injection. We will also have an independent expert review the fracture stimulation results. These studies will take at least six months to complete and we believe they will make a significant contribution to ensuring the optimal development and production approach is adopted for current and future projects in Licence 61

Dennis Francis, Chief Executive Officer of PetroNeft Resources plc, commented:

“The Ryder Scott reserve report reinforces the exploration potential of our licences by recognising material new commercial reserves at Sibkrayevskoye. While additional seismic and drilling will be required to fully define the size of the field, it is currently the largest field discovered by the Company and will be an important element of our future development and production growth plans. We have selected a delineation well location, prepared a drilling pad and moved the drilling rig and supplies to location this winter so that we have the option of advancing the Sibkrayevskoye development later this year. We are also very pleased with the progress of our Arbuzovskoye development where we have been able to accelerate the pressure testing and commissioning of the pipeline.”


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