TIDMRPT
RNS Number : 4659L
Enwell Energy PLC
13 January 2021
13 January 2021
Enwell Energy plc
("Enwell" or the "Company")
Ukraine Update
Enwell Energy plc (AIM: ENW), the AIM-quoted oil and gas
exploration and production group, provides an update on its
operational activities in Ukraine, where it operates the
Mekhediviska-Golotvshinska (MEX-GOL), Svyrydivske (SV) and
Vasyschevskoye (VAS) gas and condensate fields, as well as the
Svystunivsko-Chervonolutskyi (SC) exploration licence .
Production - Q4 2020
The average daily production of gas, condensate and LPG from the
MEX-GOL, SV and VAS fields for the period from 1 October 2020 to 31
December 2020 was as follows:-
Field Gas Condensate LPG Aggregate
(MMcf/d) (bbl/d) (bbl/d) boepd
Q4 2020 Q4 2019 Q4 2020 Q4 2019 Q4 2020 Q4 2019 Q4 2020 Q4 2019
-------- -------- -------- -------- -------- -------- -------- --------
MEX-GOL
& SV 17.4 18.0 614.2 700.7 309.4 308.3 3,908 4,093
-------- -------- -------- -------- -------- -------- -------- --------
VAS 2.7 3.5 29.4 38.1 - - 536 683
-------- -------- -------- -------- -------- -------- -------- --------
Total 20.1 21.5 643.6 738.8 309.4 308.3 4,444 4,776
-------- -------- -------- -------- -------- -------- -------- --------
Overall production volumes in Q4 2020 decreased by approximately
7% compared with Q4 2019, mainly due to natural field production
decline, albeit offset by new volumes from May 2020 onwards when
the SV-54 well in the SV field commenced production testing (see
announcement dated 22 May 2020). More particularly , a decline in
production rates from the VAS-10 well in the latter part of 2019
impacted overall production at the VAS field in 2020. As a
consequence, in early 2020, compression equipment was installed to
stabilise production from the VAS-10 well, and a workover of the
well is planned to commence in late Q1 2021 to access an
alternative reservoir horizon, with the aim of boosting production
from this well.
Additionally, in Q4 2020, flow rates from the producing
reservoir horizon in the SV-54 well, which was a secondary horizon
targeted in the well, declined significantly, materially affecting
production rates from the SV field. As a result, the primary
horizon targeted in the well is being perforated with the aim of
increasing production rates from this well.
Production - Full Year 2020
The average daily production of gas, condensate and LPG from the
MEX-GOL, SV and VAS fields for the year ended 31 December 2020 was
as follows:-
Field Gas Condensate LPG Aggregate
(MMcf/d) (bbl/d) (bbl/d) boepd
2020 2019 2020 2019 2020 2019 2020 2019
----- ----- ------ ------ ------ ------ ------ ------
MEX-GOL
& SV 17.6 14.8 640.6 577.8 295.3 274.4 3,960 3,391
----- ----- ------ ------ ------ ------ ------ ------
VAS 2.9 4.4 32.2 61.9 - - 581 872
----- ----- ------ ------ ------ ------ ------ ------
Total 20.5 19.2 672.8 639.7 295.3 274.4 4,541 4,263
----- ----- ------ ------ ------ ------ ------ ------
Overall production volumes for the full year 2020 increased by
approximately 6.5% compared with the 2019 year.
Operations
At the MEX-GOL and SV fields, the SV-25 well has been drilled to
its target depth of 5,320 metres, and logging and completion
operations have been performed. Dismantling of the drilling
equipment is now underway, and it is anticipated that initial
testing of the well will commence by the end of January 2021.
Subject to successful testing, production hook-up is planned to be
completed by the end of the first quarter of 2021. The well is an
appraisal well, with its primary targets being the B-20, B-22 and
B-23 horizons in the Visean formation. In addition, planning for
the drilling of the SV-29 well in the SV field is progressing, with
the well due to be spudded in Q1 2021, and preparations for upgrade
works to the gas processing plant at the MEX-GOL and SV fields are
continuing, with the design phase now completed and procurement of
long-lead items underway. These works involve an upgrade of the LPG
extraction circuit, an increase to the flow capacity of the plant,
and a significant increase to the liquids tank storage capacity.
The works are designed to improve overall plant efficiencies and
boost recoveries of condensate and LPG, and are planned to commence
in mid-2021.
At the VAS field, planning is continuing for a new well to
explore the Vvdenska (VED) prospect within the VAS licence area, as
well as the workover of the VAS-10 well referred to above.
Arkona Legal Dispute
As announced on 24 March 2020, the Company has acquired the
entire issued share capital of LLC Arkona Gas-Energy ("Arkona"),
which holds the SC exploration licence (the "SC Licence"). As
further announced on 3 July, 31 July, 30 September and 23 November
2020, there are legal proceedings between NJSC Ukrnafta
("Ukrnafta") as claimant and Arkona as defendant, in which Ukrnafta
has made claims asserting that irregular procedures were followed
in the grant of the SC Licence to Arkona in May 2017. Ukrnafta was
the holder of a previous licence over this area which expired prior
to the grant of the SC Licence. Arkona disputes these claims.
In July 2020, the First Instance Court in Ukraine made a ruling
in favour of Ukrnafta, determining that the grant of the SC Licence
was irregular, and accordingly, the SC Licence would be invalid.
However, in August 2020, Arkona filed an appeal of this decision in
the Appellate Administrative Court in Kyiv, and pending the hearing
of this appeal, the SC Licence remained valid.
At a hearing of this appeal on 29 September 2020, the Appellate
Administrative Court ruled in favour of Arkona, overturning the
earlier decision of the First Instance Court. In November 2020,
Ukrnafta filed a further appeal to the Supreme Court in Kyiv,
appealing the ruling of the Appellate Administrative Court, which
further appeal will be heard by the Supreme Court in due course.
Pending the hearing of this appeal, the SC Licence remains
valid.
Ukrnaftinvest Acquisition Discussions Terminated
As announced on 1 April 2020, the Memorandum of Understanding
(the "Memorandum") for the potential acquisition of PJSC Science
and Production Concern Ukrnaftinvest ("Ukrnaftinvest") , announced
on 26 November 2019, expired and was consequently terminated as a
result of the parties to the Memorandum, being (1) the Company and
(2) Ms Lidiia Chernysh and Bolaso Investments Limited, being unable
to reach a final agreement for such potential acquisition on the
contemplated terms at the time. As a result, the provisions
relating to such termination set out in the Memorandum became
applicable, which included the refund of the deposit of $0.5
million previously paid to the sellers under the Memorandum. In
addition, the Group made a series of advances, totalling UAH47.3
million (approximately $1.8 million), to Ukrnaftinvest over the
period from October 2019 to March 2020 in conjunction with the
Memorandum to fund certain operational works, and these advances
have also become repayable. Notwithstanding these provisions and
the terminated Memorandum, the parties continued discussions in
relation to the potential acquisition of Ukrnaftinvest, but
unfortunately the parties have not been able to agree upon mutually
acceptable acquisition terms, and therefore these discussions have
been terminated. Accordingly, arrangements for the repayment of the
deposit and advances are being made, with repayments of $0.25
million towards the deposit and UAH25.8 million (approximately $1.0
million) towards the advances having been received to date, and the
remaining amounts are anticipated shortly.
VAS Licence Order for Suspension
The Company does not have any further information to report in
relation to the Order for suspension relating to the production
licence for the VAS field since the announcements made on 12 March
2019 and 19 March 2019 respectively, other than to report that the
legal proceedings issued in the Ukrainian Courts to challenge the
validity of the Order are ongoing, and the Com pany remains
confident that it will ultimately be successful in such legal
proceedings.
Cash Holdings
At 31 December 2020, the Company's cash resources were
approximately $61.0 million, comprised of $20.6 million equivalent
in Ukrainian Hryvnia and the balance of $40.4 million equivalent in
a combination of US Dollars, Pounds Sterling and Euros.
COVID-19 Pandemic
The Group continues to monitor the evolving situation relating
to the COVID-19 pandemic, and to take any steps necessary to
protect its staff and operations. However, as of the date hereof,
there has been no operational disruption linked to the COVID-19
pandemic, and no material impact is currently envisaged on the
Group's prospects. Nevertheless, the Group remains acutely aware of
the risks, and is taking action to mitigate them where possible,
with the safety of individuals and communities continuing to be the
priority.
Sergii Glazunov, Chief Executive Officer, said : "We are pleased
with the continued progress in the development of our fields during
2020, where we saw strong production, albeit in a lower gas price
environment than in 2019. We are also pleased with progress on the
SV-25 well, which we hope will continue our success in the
development of our fields. We are closely monitoring the
developments of the COVID-19 pandemic, and although we have not
experienced any material impact on our operations so far, we have
taken and will continue to take action to ensure the safety of our
employees and local communities."
This announcement contains inside information for the purposes
of Article 7 of EU Regulation 596/2014.
For further information, please contact:
Enwell Energy plc Tel: 020 3427 3550
Chris Hopkinson, Chairman
Sergii Glazunov, Chief Executive Officer
Bruce Burrows, Finance Director
Strand Hanson Limited Tel: 020 7409 3494
Rory Murphy / Matthew Chandler
Arden Partners plc Tel: 020 7614 5900
Ruari McGirr / Dan Gee-Summons (Corporate
Finance)
Simon Johnson (Corporate Broking)
Citigate Dewe Rogerson Tel: 020 7638 9571
Elizabeth Kittle
Dmitry Sazonenko, MSc Geology, MSc Petroleum Engineering, Member
of AAPG, SPE and EAGE, Director of the Company, has reviewed and
approved the technical information contained within this press
release in his capacity as a qualified person, as required under
the AIM Rules.
Definitions
bbl/d barrels per day
boepd barrels of oil equivalent per day
cf cubic feet measured at 20 degrees Celsius and
one atmosphere
LPG liquefied petroleum gas
MMcf/d million cubic feet per day
% per cent
$ US Dollars
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END
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