Oil production was 3,083 barrels of oil per day (bopd) during the first quarter of 2009, down 34%, compared with the 4,687 bopd in the year-ago quarter.
JKX Oil & Gas has continued to focus on its core operations in Ukraine and Russia in the first quarter. Delays in completion and testing of new development wells at Poltava, Ukraine have impacted overall production for the fourth quarter of 2008 and for the period.
The equipment issues behind this have been resolved and, accordingly, production in Ukraine is expected to rise by about 10% during the second quarter. Increasing Ukrainian gas realizations have partially offset the substantially lower oil realizations in the period. The company remains committed to developing its production assets in Ukraine, Russia and Hungary and its portfolio of exploration activities, all of which are targeted primarily at gas reserves.
JKX Oil & Gas chief executive, Paul Davies, said: “While overall production fell, gas production remained constant and gas realizations increased by 36%. Demand for our gas in Ukraine has strengthened through the first quarter and I anticipate that we will maintain our present level of gas realizations through at least the current quarter. We look forward to seeing the test production rates from our initial well workovers in our Russian project and the preliminary results of our fraccing tests in Ukraine around the half year, supported with exploration and development updates in Ukraine and Hungary.”
Ukraine:
Production: Average production through the first quarter was 9,876 boe, comprising 41 MMcfd of gas and 3,083 barrels of oil and condensate. Production is expected to rise by about 10% during the second quarter with the backlog of both new and worked over wells coming on-stream. This expected increase does not take into account possible improvements in gas flow rates which could be achieved by the reservoir stimulation (fraccing) programme due to start in late May 2009. This will involve propped fracs on wells in the Rudenkovskoye field and acid fracs on wells in the Ignatovskoye field.
Development Activity: JKX Oil & Gas is constantly seeking ways to enhance production from our inventory of about 50 wells, whether through stimulation, recompletion, artificial lift or completion technology.
To support this process, an additional test separator is being installed to aid reservoir monitoring and improve reservoir management.
In addition to the planned frac programme in the Rudenkovskoye field, 3D seismic has been reinterpreted and alternative locations for a horizontal well targeting the Devonian sandstone in the southern area of the field have been identified for drilling in the second half of the year.
Most of the northern area of the Rudenkovskoye field lies beyond the existing 3D seismic coverage and an additional 30 square kilometer (sq km) 3D seismic acquisition programme commenced in April 2009. This survey will permit more accurate identification of the multiple sand bodies and potential drilling locations in the main Tournasian sandstone. It should also aid interpretation of the underlying Devonian sandstone penetrated by well R101 but which had to be isolated due to the high pressures encountered.
Drilling, Workover & Testing Activity: Poltava Petroleum Company (PPC) drilled three new development wells and worked over five wells in the first quarter. Delays were experienced in the completion and testing schedule because of the unavailability of a coiled tubing unit (CTU) for the majority of the period.
Well N71 was drilled in the Novo-Nikolaevskoye field area to test a sequence of Visean sandstones and logged hydrocarbons in two layers. Initial production from the secondary target, the lower reservoir, flowed at a rate of 1.9 MMcfd and 118 bpd of condensate. The flow has declined steadily since and it is expected that the well will be recompleted in the upper primary reservoir in the second quarter.
Well M206 was the first well to specifically target the Tournasian T2 carbonate/sandstone in the centre of the Molchanovskoye main field area. It found 39 meters of net pay and, after a very high initial clean-up rate; it tested at a stabilized rate of 4.2 MMcfd with 393 bpd of condensate.
Well M207 was drilled to test an isolated Devonian sandstone fault block in the west of the Molchanovskoye Main field area. Logs indicated in excess of 18 meters of net pay and test production confirmed that the block had not been depleted. The well tested at a stabilized rate of 4.9 MMcfd with 409 bpd of condensate.
Well M166, a horizontal infill well to the Devonian sandstone, is currently being drilled in the Molchanovskoye North field area.
The TW-100 workover rig carried out recompletions in Molchanovskoye Main wells M204 and M205, and Rudenkovskoye wells R101 and R102 during the period and is now working over Well I79.
Exploration Well Z3 on the Zaplavskoye license, located to the west of the Ignatovskoye field , encountered an 80 meters gross gas bearing T2 carbonate interval at a pressure in excess of 5,000 psi. The CTU was unable to reach the reservoir from inside the tubing and the workover rig will be required to pull and re-run the completion at the earliest opportunity to permit stimulation and testing of this well.
Exploration Well Z2 on the Zaplavskoye license, located to the south of the Molchanovskoye field, encountered thicker than expected T2 carbonate with the primary sandstone objective being deeper than prognosed. The reservoir proved to be tight and unproductive and the well will be abandoned.
Russia
Development and Workover Activity: Yuzhgazenergie (YGE), JKX Oil & Gas’ wholly owned subsidiary, has started the initial three well workover operations in the Koshekhablskoye field and the programme for the redevelopment of the gas processing facility (GPF) is underway.
Well 27 has been worked over, re-logged and completed in the Oxfordian limestone. The Kremco-900 rig is currently working over well 20 which will also be completed in the Oxfordian limestone. Both wells are scheduled for testing in early June. The rig will then work over the Callovian sandstone interval in well 9. The workover programme is currently planned to recommence in late 2010 to enable YGE to build up production in accordance with the schedule agreed with the Russian authorities.
Site clearance on the GPF is complete and the land is being levelled and prepared for construction operations. The units for the 70 man camp have been installed and are now being hooked up. Design work on the GPF and related infrastructure is nearing completion and the second half of the year will entail procurement and manufacture of equipment, with construction and installation commencing in 2010. First gas is anticipated in the fourth quarter 2010.
Hungary
Development Activity: The Hajdunanas field development is underway and first gas is expected in July 2009. The completion will take production from the two discovery wells to a simple separator and then via a 14.5 km export line to an existing facility for input to the Hungarian gas pipeline system. JKX Oil & Gas holds 50% equity in the field.
Exploration
Ukraine: PPC has applied for both easterly and westerly extensions to the Zaplavskoye exploration license. Potential exploration well locations in the Chervonoyarske East license are being assessed.
