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 and operational update:
· Strategic step forward on Licence 67 towards year-round production and development of Cheremshanskoye field.
· Offtake contract signed with Alexandrovskoye Oil Refinery that includes circa $1M of advance payment against future oil shipment from the C4 well on the Cheremshanskoye field to cover infrastructure development on Licence 67.
· Contract awarded to Kedr LLC (local construction company in Tomsk) to cover the construction of a 6.5 km all weather road connecting the C4 well to the nearest all season road thereby enabling year round production from early 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 was executed between the owner and operator of Licence 67, LLC Lineynoye (50% owned by Petroneft Resources) and AOR to finance the cost of constructing an all-season road to connect the C4 well with the local all season road network up to a maximum of RUR 75M (approximately $1 million). Following signing of the Heads of Terms, an offtake contract has now been signed reflecting the same terms as in the original Heads of Terms Agreement. The advance payment under the contract will cover the entire costs of the road construction.
AOR is a company located at Alexandrovskoye town in the north-western part of the Tomsk region located 230 km from the Cheremshanskoye oil field. In 2020 AOR purchased all the oil produced from the C4 well during the extended well test at competitive market rates.
Simultaneously with signing the offtake agreement, the contract to construct the all-weather road was awarded to a Kedr LLC (a local construction company) to cover the construction of both the all-weather road which will connect the C4 well to existing infrastructure and a winter road which will provide more immediate access. Construction work will commence imminently and is expected to be completed by the end of Q1 2021.
Production will re-commence from the C4 well as soon as the winter road is in place. Work on this winter road will start immediately with completion expected to be mid-January 2021.
The quality of the all-weather 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 licence area in the event of successful drilling.
David Sturt, Chief Executive Officer of PetroNeft Resources plc, commented:
“It is exceptionally good news to be able to announce the successful signing of the offtake contract at the same time as awarding the road construction contract. In addition to providing funding for building crucial infrastructure on the Cheremshanskoye field, it also provides for the sale of the oil at very competitive market rates.
These agreements are an important step forward towards development of the Cheremshanskoye field, enabling the company to establish year-round production from Licence 67 from early next year and providing additional revenues that will be used for future investment. We see significant value within Licence 67, and execution of these two agreements represents a major step towards realising this value which is a critical element in the company’s strategy.”