TIDMENW
RNS Number : 1868I
Enwell Energy PLC
13 April 2022
13 April 2022
Enwell Energy plc
("Enwell" or the "Company")
Quarterly Operations 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 .
In light of the Russian military action in Ukraine, on 24
February 2022, Enwell shut-in and made safe its production and
drilling operations at all of its fields. Subsequently, on 11 March
2022, having taken a number of measures to ensure safe operations,
Enwell commenced the partial restart of production operations at
its MEX-GOL and SV fields. Further details can be found in the
Company's announcements dated 24 February 2022 and 15 March
2022.
The Company continues to be cautious and vigilant in continuing
these partial production operations and is taking all measures
available to protect and safeguard its personnel and business. The
safety and wellbeing of its personnel and contractors is paramount
and the Company will continue to take all possible steps to ensure
their safety.
Production - Q1 2022
The average daily production of gas, condensate and LPG for the
76 days that the MEX-GOL and SV fields were producing and for the
55 days that the VAS field was producing, during the period from 1
January 2022 to 31 March 2022, was as follows:-
Field Gas Condensate LPG Aggregate
(MMcf/d) (bbl/d) (bbl/d) boepd
Q1 2022 Q1 2021 Q1 2022 Q1 2021 Q1 2022 Q1 2021 Q1 2022 Q1 2021
-------- -------- -------- -------- -------- -------- -------- --------
MEX-GOL
& SV 11.6 18.2 487 635 286 336 2,730 4,079
-------- -------- -------- -------- -------- -------- -------- --------
VAS 2.2 2.5 24 27 - - 434 497
-------- -------- -------- -------- -------- -------- -------- --------
Total 13.8 20.7 511 662 286 336 3,164 4,576
-------- -------- -------- -------- -------- -------- -------- --------
The average daily production of gas, condensate and LPG from the
MEX-GOL, SV and VAS fields over the entire period from 1 January
2022 to 31 March 2022 (inclusive of shut-in periods) was as
follows:-
Field Gas Condensate LPG Aggregate
(MMcf/d) (bbl/d) (bbl/d) boepd
Q1 2022 Q1 2021 Q1 2022 Q1 2021 Q1 2022 Q1 2021 Q1 2022 Q1 2021
-------- -------- -------- -------- -------- -------- -------- --------
MEX-GOL
& SV 9.8 18.2 412 635 241 336 2,305 4,079
-------- -------- -------- -------- -------- -------- -------- --------
VAS 1.3 2.5 15 27 - - 265 497
-------- -------- -------- -------- -------- -------- -------- --------
Total 11.1 20.7 427 662 241 336 2,570 4,576
-------- -------- -------- -------- -------- -------- -------- --------
The disruption to production operations and the shut-in of the
fields during Q1 2022 meant that production volumes were materially
lower, both compared with Q1 2021 and the previous quarter. In
addition, drilling and remedial work on existing wells has been
stopped until there is an improvement in the situation in
Ukraine.
Notwithstanding the disruption to production operations, the
continuing high gas prices in Europe have fed through to Ukrainian
gas prices, which has benefited the sales prices being achieved by
the Company for its gas, as well as condensate and LPG. These
continued high hydrocarbons sales prices have helped to offset the
impact on revenues during the quarter due to the lower production
volumes.
Operations
Partial production operations are ongoing at the MEX-GOL and SV
fields, where a proportion of the wells have been put on
production, and currently the production rate is approximately
2,500 boepd. Other field operations, including the testing of the
SV-29 development well, the drilling of the SV-31 development well
and the workovers of the SV-2 and MEX-109 wells have been
suspended. In addition, construction work on the upgrades to the
gas processing facilities at the MEX-GOL and SV fields has also
been suspended.
Drilling of the SC-4 appraisal well at the SC licence and all
field operations at the VAS field have also been suspended.
Gas Price Regulation to Support Social Initiatives
The temporary and partial gas price regulation imposed by the
Ukrainian Government to support the production of certain food
products through the supply of gas at regulated prices to the
producers of such products is continuing to operate. Under this
scheme, all independent gas producers in Ukraine are required to
sell up to 20% of their natural gas production for the period until
30 April 2022 at a price set as the cost of sales of the relevant
gas producer (based on established accounting rules) for such gas,
plus a margin of 24%, plus existing subsoil production taxes (the
"Regulated Price"). This gas is then sold to specified producers of
designated socially important food products at the Regulated Price,
so as to reduce the energy costs of such producers during the
period through to 30 April 2022. The designated products are
certain types of flour, milk (with up to 2.5% fat), bread, eggs,
chicken and sunflower oil, for sale in the Ukrainian domestic
market. Further details are set out in the Company's announcement
dated 17 January 2022.
Subsoil Production and Excise Tax Changes
The Ukrainian Government has enacted changes to the subsoil
production tax rates applicable to gas production by modifying the
applicable rates based on gas prices, extending the incentive rates
for new wells for a further 10 years and making improvements to the
regulatory environment. These changes took effect on 1 March 2022,
and the legislation includes provisions that these rates will not
be increased for 10 years.
The new subsoil production tax rates are as follows:
(i) when gas prices are up to $150/Mm(3) , the rate for wells
drilled prior to 1 January 2018 ("old wells") is 14.5% for gas
produced from deposits at depths shallower than 5,000 metres and 7%
for gas produced from deposits deeper than 5,000 metres, and for
wells drilled after 1 January 2018 ("new wells") is 6% for gas
produced from deposits at depths shallower than 5,000 metres and 3%
for gas produced from deposits deeper than 5,000 metres;
(ii) when gas prices are between $150/Mm(3) and $400/Mm(3) , the
rate for old wells is 29% for gas produced from deposits at depths
shallower than 5,000 metres and 14% for gas produced from deposits
deeper than 5,000 metres, and for new wells is 12% for gas produced
from deposits at depths shallower than 5,000 metres and 6% for gas
produced from deposits deeper than 5,000 metres;
(iii) when gas prices are more than $400/Mm(3) , for the first
$400/Mm(3) , the rate for old wells is 29% for gas produced from
deposits at depths shallower than 5,000 metres and 14% for gas
produced from deposits deeper than 5,000 metres, and for new wells
is 12% for gas produced from deposits at depths shallower than
5,000 metres and 6% for gas produced from deposits deeper than
5,000 metres, and for the difference between $400/Mm(3) and the
actual price, the rate for old wells is 65% for gas produced from
deposits at depths shallower than 5,000 metres and 31% for gas
produced from deposits deeper than 5,000 metres, and for new wells
is 36% for gas produced from deposits at depths shallower than
5,000 metres and 18% for gas produced from deposits deeper than
5,000 metres.
Prior to the changes, the tax rate for old wells was 29% for gas
produced from deposits at depths shallower than 5,000 metres and
14% for gas produced from deposits deeper than 5,000 metres, and
for new wells was 12% for gas produced from deposits at depths
shallower than 5,000 metres and 6% for gas produced from deposits
deeper than 5,000 metres. The tax rates applicable to condensate
production were unchanged and remain at 31% for condensate produced
from deposits shallower than 5,000 metres and 16% for condensate
produced from deposits deeper than 5,000 metres, for both old and
new wells.
In addition, the excise tax of EUR52/ML applicable to LPG sales
was cancelled entirely with effect from 24 February 2022, and the
VAT rate applicable to condensate and LPG sales was reduced to 7%
(from 20%) with effect from 18 March 2022.
Cash Holdings
At 31 March 2022, the Company's cash resources were
approximately $81.3 million, comprised of $21.8 million equivalent
in Ukrainian Hryvnia and the balance of $59.5 million equivalent in
a combination of US Dollars, Pounds Sterling and Euros.
The Company has contributed funds and is intending to allocate
further funds to certain humanitarian aid organisations to assist
with the valuable work that such organisations are undertaking in
Ukraine.
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.
COVID-19 Pandemic
The Group continues to monitor the situation relating to the
COVID-19 pandemic, and to take any steps necessary to protect its
staff and operations. 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 : "The situation
in Ukraine is extremely challenging at present, but we continue to
focus on taking all available measures to protect our business and
ensure the safety and wellbeing of our personnel ."
This announcement contains inside information for the purposes
of Article 7 of EU Regulation 596/2014, which forms part of United
Kingdom domestic law by virtue of the European Union (Withdrawal)
Act 2018, as amended.
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 / Elliot Mustoe (Corporate
Finance)
Simon Johnson (Corporate Broking)
Citigate Dewe Rogerson Tel: 020 7638 9571
Ellen Wilton
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
ML thousand litres
Mm(3) thousand cubic metres
MMcf/d million cubic feet per day
% per cent
$ US Dollars
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END
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