TIDMENW
RNS Number : 4539M
Enwell Energy PLC
12 January 2023
12 January 2023
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 .
Production - Q4 2022
The average daily production of gas, condensate and LPG from the
MEX-GOL, SV and VAS fields over the period from 1 October 2022 to
31 December 2022 was as follows:-
Field Gas Condensate LPG Aggregate
(MMcf/d) (bbl/d) (bbl/d) boepd
Q4 2022 Q4 2021 Q4 2022 Q4 2021 Q4 2022 Q4 2021 Q4 2022 Q4 2021
-------- -------- -------- -------- -------- -------- -------- --------
MEX-GOL
& SV 10.8 15.3 426 588 441 295 2,641 3,501
-------- -------- -------- -------- -------- -------- -------- --------
VAS 1.6 2.4 14 24 - - 303 463
-------- -------- -------- -------- -------- -------- -------- --------
Total 12.4 17.7 440 612 441 295 2,944 3,964
-------- -------- -------- -------- -------- -------- -------- --------
The ongoing war in Ukraine has caused disruption to production
operations at the MEX-GOL and SV fields, where certain remedial and
maintenance work was delayed and/or suspended, which meant that
production volumes were materially lower when compared with Q4
2021, with the exception of LPG recoveries, which improved
significantly following the completion of upgrade works to the gas
processing facilities at the MEX-GOL and SV fields in mid-2022. In
addition, the resumption of production from the VAS field in early
October 2022 improved overall production rates during the
quarter.
Production - Full Year 2022
The average daily production of gas, condensate and LPG for the
351 days that the MEX-GOL and SV fields were producing and the 147
days that the VAS field was producing, over the year ended 31
December 2022 was as follows:-
Field Gas Condensate LPG Aggregate
(MMcf/d) (bbl/d) (bbl/d) boepd
2022 2021 2022 2021 2022 2021 2022 2021
----- ----- ------ ----- ----- ----- ------ ------
MEX-GOL
& SV 11.0 18.9 445 681 318 308 2,604 4,237
----- ----- ------ ----- ----- ----- ------ ------
VAS 1.8 2.6 18 26 - - 352 493
----- ----- ------ ----- ----- ----- ------ ------
Total 12.8 21.5 463 707 318 308 2,956 4,730
----- ----- ------ ----- ----- ----- ------ ------
Overall production volumes for the 2022 year decreased by
approximately 37.5% compared with the 2021 year. This was partially
due to the Russian invasion of Ukraine in February 2022, which
resulted in the shut-in of the MEX-GOL and SV fields for the period
from 24 February 2022 - 11 March 2022, and the VAS field for the
period from 24 February 2022 - 1 October 2022. In addition, issues
with the MEX-109 and SV-2 wells at the MEX-GOL and SV fields caused
by water ingress into those wells, which commenced in Q4 2021,
required those wells to be shut-in for remedial work.
Operations
Production operations are continuing at the MEX-GOL and SV
fields, and, currently, the production rate is approximately 2,550
boepd. Some other field operations have resumed, including workover
operations on the SV-2 well and maintenance of field
infrastructure, but o ther works have been deferred or suspended
until there is an improvement in the operating environment in
Ukraine.
In December 2022, the GOL-107 well was spudded. This well has a
target depth of 5,190 metres and is a development well, aiming to
achieve production from the V-20 and V-23 horizons in the Visean
formation. Drilling operations are scheduled to be completed by the
end of Q3 2023, and, subject to successful testing, production
hook-up is scheduled during Q4 2023.
At the VAS field, after being suspended since February 2022,
production operations resumed at the beginning of October 2022,
and, after the clean up of the production wells, the production
rate stabilised at approximately 360 boepd, which is around 90% of
the pre-suspension rate.
On the SC licence area, the SC-4 well was successfully completed
and tested. This well is the Company's first well on the SC licence
area and is primarily an appraisal well, targeting production from
the V-22 horizon in the Visean formation. The well was spudded in
August 2021, and, after a period of suspension due to the conflict
in Ukraine, was drilled to its final depth of 5,585 metres. Three
intervals, at drilled depths of 5,530 - 5,533 metres, 5,483 - 5,486
metres and 5,416 - 5,419 metres, within the V-22 Visean formation,
were perforated and underwent initial testing. The latter interval,
which was the primary target for the well, demonstrated strong
productivity and stabilised flows. Accordingly, this interval
underwent more extensive testing, using a variety of choke sizes,
and produced at a stabilised flow rate of approximately 3 MMscf/d
of gas and 3 bbl/d of condensate (535 boepd in aggregate) . The two
former intervals flowed gas, but not at a sustained commercial
rate. The well has now been suspended for future production. T he
well was intended to also explore the shallower V-16 and V-21
Visean horizons, but, as the primary target of the well in the V-22
formation produced a stabilised flow, testing of these shallower
horizons was not considered necessary at the present stage of
development, and, subject to the successful resolution of the legal
proceedings relating to the SC licence referred to below, it is
intended that the V-22 horizon will be put on production once
surface facilities are completed.
The Company continues to be cautious and vigilant in continuing
its 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.
Cash Holdings
At 31 December 2022, the Company's cash resources were
approximately $88.7 million, comprised of $6.9 million equivalent
in Ukrainian Hryvnia and the balance of $81.8 million equivalent in
a combination of US Dollars, Pounds Sterling and Euros.
New Natural Resources Legislation in Ukraine
As announced on 4 January 2023, new legislation, Law No.
2805-IX, relating to the natural resources sector has been enacted
in Ukraine, which will come into force on 28 March 2023. This
legislation is a substantial package of new procedures and reforms
designed to improve the regulatory process relating to the
exploration and development of natural resources in Ukraine.
However, the legislation includes provisions that if the ultimate
beneficial owner of a mineral or hydrocarbon licence becomes the
subject of sanctions in Ukraine, then the Ukrainian State
Authorities may suspend or revoke that licence. In light of the
imposition of the restrictive measures (sanctions) by the Ukrainian
Authorities against Vadym Novynskyi, who holds a major indirect
shareholding interest in the Company, as announced on 9 December
2022, the Company is investigating whether the Company's
hydrocarbon extraction licences may be adversely affected by these
provisions in the new law.
SC Licence Order for Suspension
As announced on 4 November 2022, there has been a further legal
challenge relating to the SC exploration licence, which is held by
LLC Arkona Gas-Energy ("Arkona"). Since the Company completed the
acquisition of Arkona in March 2020, there have been a number of
legal challenges relating to the SC licence. As announced on 3 July
2020, PJSC Ukrnafta ("Ukrnafta"), as claimant, brought legal
proceedings against Arkona, as defendant, in which Ukrnafta made
claims asserting that irregular procedures were followed in the
grant of the SC licence to Arkona in May 2017. Ukrnafta also
brought these proceedings against the State Service of Geology and
Subsoil of Ukraine ("SGS"). Both Arkona and SGS disputed these
claims. In these proceedings, 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. Arkona filed an appeal of this decision in the
Appellate Administrative Court in Kyiv, and on 29 September 2020,
the Appellate Administrative Court ruled in favour of Arkona,
overturning the earlier decision of the First Instance Court.
Ukrnafta filed a further appeal in the Supreme Court in Kyiv, and
in February 2021, the Supreme Court ruled that the arguments raised
by Ukrnafta in the appeal were not substantiated, and that the
proceedings against Arkona should be dismissed. The decision of the
Supreme Court represented the final appeal procedure in respect of
these legal proceedings, and accordingly, these proceedings against
Arkona were exhausted.
Prior to the Company's acquisition of Arkona, Ukrnafta had
previously issued legal proceedings in 2018, raising substantially
the same claims, which proceeded through the First Instance Court
and Appellate Administrative Court, before a final appeal was
determined by the Supreme Court in October 2019, in which
Ukrnafta's claims were denied. In April 2021, an entity named JV
Boryslav Oil Company ("Boryslav"), which is 25.0999% owned by
Ukrnafta, issued a further legal claim, also claiming that
irregular procedures were followed in the grant of the SC licence,
which claim was denied by the First Instance Court in July 2021 and
by the Appellate Administrative Court in October 2021. There was no
further appeal in this case and so the decision of the Appellate
Administrative Court in these legal proceedings is final. In
September 2021, Boryslav issued a further legal claim, again
claiming that irregular procedures were followed in the grant of
the SC licence, against the SGS, the State Commission of Ukraine
for Mineral Resources ("SCP") and Arkona, as defendants, with
Ukrnafta named as a third party. In this claim, the First Instance
Court made a ruling in January 2022 in favour of Boryslav. This
ruling was appealed to the Appellate Administrative Court, and on 2
November 2022, the Appellate Administrative Court made a ruling in
favour of Boryslav, to uphold the decision of the First Instance
Court, with the effect that the SC licence is now ruled invalid.
The effect of this latest ruling is that the Company cannot conduct
any field activities on the SC licence area. The Company has now
filed an appeal of the decision of the Appellate Administrative
Court to the Supreme Court.
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.
Sergii Glazunov, Chief Executive Officer, said : "Although the
situation in Ukraine continues to be extremely challenging, w e are
pleased that, with the resumption of production operations at the
VAS field, we now have operational activity at both of our
production assets. The adverse Court ruling regarding the SC
licence is very disappointing but we are progressing appeal
proceedings to challenge that ruling."
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 (Corporate Finance)
Simon Johnson (Corporate Broking)
Citigate Dewe Rogerson Tel: 020 7638
9571
Ellen Wilton
Dr Gehrig Schultz, BSc Geophysical Engineering, PhD Geophysics,
Member of the European Association of Geophysical Engineers, Member
of the Executive Coordinating Committee of the Continental European
Energy Council, and a Non-Executive Director of the Company, has
reviewed and approved the technical information contained within
this announcement in his capacity as a qualified person, as
required under the AIM Rules for Companies.
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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