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Ruspetro Completes Development Well Campaign on Pottymsko-Inginsky Licence Block

Source: 6/1/2015, Location: Asia

Ruspetro plc announces that it has completed its development well campaign in the area of Pad 23b on the Pottymsko-Inginsky licence block. The 2015 drilling campaign comprised two multi-stage fractured horizontal wells 210 (previously labelled 216) and 212, plus one deviated well (218).

The Group's average monthly oil production over the last two months has increased from 3,262 bopd in April to 5,325 bopd in May as the new wells have progressively come on stream, with production reaching 6,100 bopd at the end of May. The Group continues to evaluate and optimize these three wells and will report on their stabilized performance in due course.

The horizontal well programme implemented over the last year has moved the Group up a very steep learning curve with regard to the future development of our assets. New technology implementation has been aggressive, aided by risk-based decision making and extensive scenario-planning.

With respect to completion technology, the standard Western Siberian well design concept involving a small number of relatively large hydraulic fractures, as employed in the first horizontal well on Pad 23b, has evolved into a fit-for-purpose design with a greater number of smaller fracs tuned to the geological setting. The technology underpinning this design has proved reliable and cost effective.

The Group has also delivered breakthrough reductions in well cost while drilling longer horizontal reservoir sections. This is a result of innovation in drilling and completion operations and design, implementation of alternative services contracting strategies, coupled with the beneficial depreciation of the Ruble exchange rate against the US Dollar. Well 210, our most recent multiple fractured horizontal well, completed with 10 fracs, was drilled and completed for a total cost of approximately $5.4 mln.

Critically for the future, the two most recent wells (210, 218) were targeted on the basis of the interpreted results of the integration of advanced 3D seismic methods with geological and production information. Whereas seismic data was largely overlooked in previous development execution, recent in-depth geophysical analysis has revealed conspicuous geological features, comprising potentially better quality reservoirs of fluvial origin. The new wells have confirmed that those reservoirs are capable of delivering higher and more sustainable production rates compared to typical Jurassic deposits drilled in the Krasnoleninsky arch.

The focus for the second half of 2015 will be on appraising the wider license area with a mixture of vertical and horizontal appraisal wells, designed to mature a portfolio of horizontal development wells to be drilled in 2016 and 2017. This development programme is expected to underpin the next significant step up in production.

The Group has so far drawn down $28.2 mln of the $94.7 mln available pursuant to the development and working capital facilities provided by Bank Otkritie Financial Corporation as required to meet our ongoing programme requirements.

An additional tranche of up to $50 mln will be available to the Group from the Otkritie development facility, upon the Group achieving the facility's cumulative production covenant for first half of 2015, which the Group is on track to achieve. Having received $22.5 mln in pre-export financing from Glencore during May, the Group's cash position at the end of May 2015 was $17 mln.

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