Petroneft production wobbles as wells hit snags

Petroneft, the Siberian oil and gas driller, disappointed investors with news that production has not increased as much as expected due to difficulties at several wells.

The new T-501 and T-503 horizontal wells at the Tungolskoye project in the Tomsk region were brought online but the pressure depleted quickly due to what management believe was some damage caused during the drilling process.

A workover was performend on the first well and production of 190 barrels of oil per day (bopd) was achieved, while a workover on the second is expected to have completed in January.

A third and final, vertical, well at Tungolskoye is being tested for oil before possibly being converted as part of a water injection plan to provide pressure support for the two recent horizontal wells.

At the nearby Arbuzovskoye development, which is part of the same Licence 61 and was drilled earlier this year, production from the new wells has declined more than expected, with a remedy workover in the planning stages.

On the upside, well and seismic data acquired earlier this year indicate the current 2P reserves of 6.54m barrels for Arbuzovskoye are likely to increase by more than 50% to over 10m for the year-end audit, Petroneft said, with four more wells planned next year as part of a second 'pad'.

Current gross production at Licence 61 is about 2,500 bopd, which is up 40% over the year but well short of the 3,500-to-4,000 bopd range predicted earlier in the year.

"While the initial results of the last two horizontal wells have been disappointing," said chief executive Dennis Francis, "we believe the results can be improved at minimal costs with the planned workovers and acid treatment of the reservoir."

Shares in Petroneft were down 21% to 1.86p by 1300 GMT on Monday.