Enwell reports progress at Ukraine operations

Oil and gas exploration and production company Enwell Energy updated the market on its operational activities in Ukraine on Tuesday, 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.

The AIM-traded firm said overall production volumes from the MEX-GOL, SV and VAS fields for the period from 1 July to 30 September continued to be “strong”, showing an increase of about 11% compared with the third quarter of 2020.

It said that was primarily the result of new production volumes from the SV-25 well in the SV field, which starts production in February, offset by natural field decline.

The significant, and to-date sustained, increase in European gas prices in the period had fed through to Ukrainian gas prices, which benefited the sales prices being achieved by the company.

On the operational front, Enwell said that at the MEX-GOL and SV fields, drilling of the SV-29 well was completed at a final depth of 5,450 metres, and testing operations were currently underway.

The well was primarily a development well, targeting production from the V-22 horizon, as well as appraising the V-21 and V-23 horizons in the Visean formation.

It said the SV-31 well was spudded in September, having a target depth of 5,250 metres.

Drilling operations were scheduled to be completed by the end of the first quarter of 2022, and, subject to successful testing, production hook-up was scheduled during the second quarter of 2022.

The well is a development well, targeting production from the V-21 and V-22 horizons in the Visean formation, which had demonstrated good productivity in an existing nearby well.

In addition, work had started on upgrades to the gas processing plant at the MEX-GOL and SV fields, which involved an upgrade of the LPG extraction circuit, an increase to the flow capacity of the plant, and a significant increase to the liquids tank storage capacity.

The works were designed to improve overall plant efficiencies, improve the quality of liquids produced and boost recoveries of LPG, while reducing environmental emissions.

In total, the works were expected to take three-and-a-half months to complete.

At the SC exploration licence, drilling of the SC-4 well started in August, with the board saying the well, which had a target depth of 5,565 metres, was primarily an appraisal well targeting production from the V-22 horizon, as well as exploring the V-16 and V-21 horizons in the Visean formation.

Drilling operations were scheduled to be completed in mid-2022.

In addition, the acquisition of 150 square kilometres of 3D seismic at the licence was planned to begin later in the year.

At the VAS field, planning was continuing for a new well to explore the Vvdenska (VED) prospect within the VAS licence area.

Enwell said it did not have any further information on the order for suspension relating to the production licence for the VAS field since it made announcements 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 were ongoing, with the company remaining confident that it would ultimately be successful in such legal proceedings.

As at 30 September, the company's cash resources totalled $62.7m, comprising $25.7m equivalent in Ukrainian hryvnia and the balance of $37m in a combination of dollars, sterling and euros.

“We are pleased to report another very good operational quarter, with strong production volumes and significantly higher gas prices in Ukraine,” said chief executive officer Sergii Glazunov.

“We are looking forward to the test results of the SV-29 well, to continued good progress with the drilling of the SC-4 and SV-31 wells, and to further progressing the company's overall development plans, enabled by the strong current gas revenues and cash resources resulting from the recent surge in gas prices.”

At 0938 BST, shares in Enwell Energy were up 3.71% at 41.9p.