Petroneft comes up dry at Sibkrayevskoye, reports production decline

Petroneft saw production at one of its two licenses decline and reported that a major step out well had come up dry and would be plugged.

Russia-focused Petroneft said gross production from License 61 in the Tomsk oblast region in central Russia was running at approximately 3,300 barrels per day (1,650 bopd net to PetroNeft), down from a peak of about 3,700 barrels in July.

Management attributed the output drop to a lack of new wells, natural declines in production and higher water cuts at its A-216 (Arbuzovskoye) well.

Nevertheless, "production is still significantly above our previous estimates given the success of the other wells drilled at South Arbuzovskoye earlier in the year," the company said in a statement.

Step-out well Sibkrayevskoye S-374 was drilled about 10km from existing wells to a total depth of 2,640 m MD.

In reference to S-374, on 21 July analysts at Peel Hunt said: "A successful outcome should help increase reserves and assist in the sanction process to start development during Q1 2017."

PetroNeft chief Dennis Francis said: "The S-374 well at Sibkrayevskoye was a major step out well, 10km from the existing well control, which was drilled with the intention of increasing 2P reserves. While the result is disappointing, Sibkrayevskoye remains a very attractive project for PetroNeft with gross 2P reserves of 59 million bbls.

"Our strategy of developing this field in Q1 2017 remains on course and we are currently putting in place the necessary permits and approvals to progress this important asset."

As of 1602 BST shares in Petroneft were down by 12.37% to 2.13p.