PetroNeft Resources plc (LON:PTR) an oil & gas exploration and production company, operating in the Tomsk Oblast, Russian Federation, and 50% owner and operator of Licences 61 and 67, has provided the following financing update:
· Heads of Terms signed with Alexandrovskoye Oil Refinery (“AOR”) to provide up to $1M to finance infrastructure development on Licence 67 to enable year-round production from 2021.
Following successful completion of the C4 extended well test at the Cheremshanskoye field on Licence 67 earlier this year, a non-binding Heads of Terms Agreement has been executed between the owner and operator of Licence 67, LLC Lineynoye (50% owned by Petroneft Resources) and AOR for a financing arrangement (“Facility”) to finance the cost of constructing an all-season road to connect the C4 well with the local year-round road network up to a maximum of $1 million. The financing will be repaid in tranches with produced oil at market rates. The Heads of Terms agreement commits parties to negotiate and enter into a binding Agreement within a 30-day period. The facility will cover the entire anticipated cost of road construction.
AOR is a company located at Alexandrovskoye town in the north-western part of the Tomsk region located 230km from the Cheremshanskoye oil field. In 2020 AOR purchased all the oil produced from the C4 well during the recent extended well test at well head at competitive market rates.
Production will re commence from the C4 well as soon as the winter road is in place which is expected to be by the end of December 2020, subject to the weather conditions. Construction of the new all-weather road will occur through the winter months with completion planned to be by the end of Q1 2021. This will enable year-round production from next year. At present the well can only produce for three to four months each winter.
The quality of the road will ensure all-season access by oil trucks, drilling/workover rigs, and passenger vehicles, thereby removing the seasonal barriers that are usual in West Siberia, increasing revenue by initiating year-round production and reducing operational expenses and complexity. It may also be able to service future producing wells in the license area in the event of successful drilling.
David Sturt, Chief Executive Officer of PetroNeft Resources plc, commented:
“This is a very exciting development. The financing arrangement will enable us to establish year-round production from Licence 67 from the beginning of 2021 and also provides a secure buyer for our produced oil at competitive market rates. It may also have further value, as we look at the potential of further development on Licence 67.
We will be working hard with Alexandrovskoye Refinery to ensure we are able to sign a binding agreement within the 30-day period.”