CALGARY, ALBERTA--(Marketwired - Jul 3, 2013) - Serinus Energy Inc. ("Serinus", "SEN" or the "Company") (SEN.TO)(SEN.TO), an international upstream oil and gas exploration and production company, is pleased to announce a new discovery in the Serpukhovian aged reservoir underlying the Olgovskoye Production Licence. The Olgovskoye-15 ("O-15") well tested the S5 zone at a maximum flow rate of 1.5 million cubic feet per day ("MMcf/d"). The O-15 well is operated by KUB-Gas LLC ("KUB-Gas"), a partially-owned subsidiary in which Serinus has a 70% effective ownership interest.
The O-15 well was drilled as a directional well to evaluate the potential of the Bashkirian R30c and Serpukhovian S5 reservoir sands. Well logs indicated up to 9 metres of potential gas pay in the R30c and up to 6 metres of potential gas pay in the deeper Serpukhovian S5 zone. Potential gas pay was also encountered in the B3 (5 metres) and R22 (3 metres) zones.
The Makeevskoye-16 ("M-16") well, located approximately 13 kilometres to the southeast of O-15, which was tested in April 2013 at 4.3 MMcf/d, was the first well drilled by the Company into the Serpukhovian reservoir. The M-16 well started producing in late May at 2.7 MMcf/d (1.9 MMcf/d net to Serinus). This led the Company to deepen the target depth of the O-15 well to target the S5 While log interpretation led the company to test the S5 zone, the initial view was that the zone would require stimulation in order to flow commercial quantities of gas. Consequently the Company was pleasantly surprised by the test results.
Testing of S5 Zone
The S5 zone was perforated over a 6 metre interval from 3,094 metres to 3,100 metres and flow tested for 2 days. The well was tested using various choke sizes achieving a maximum stabilized natural gas flow rate of 1.5 MMcf/d through a 6 millimetre ("mm") choke at a flowing tubing head pressure ("FTHP") of 8,600 kilopascals ("kPa") or 1,247 pound-force per square inch guage ("psig") The reservoir pressure was measured at 4,468 psi and at this point no depletion is indicated.
The Company's internal estimates of Prospective Resources, for the S5 zone in the prospect tested by the O-15 well are: a Best Estimate of 23 billion cubic feet ("Bcf"), a High Estimate of 55 Bcf and a Low Estimate of 9.5 Bcf. These Prospective Resources have been substantially de-risked by the results of the O-15 testing program. It is notable that there were no Prospective Resources attributed to the S5 zone tested by the O-15 well in the Company's third party engineering report for the year ended 31 December 2012.
Production and Gas Processing Facility Upgrade
It is anticipated that the well will be tied in to a nearby flow line which will take the gas to the KUB-Gas processing facility at Makeevskoye (the "Makeevskoye Facility"). First production, which is expected in August of 2013, will be contrained by facility capacity. After the tie-in of M-16, the Makeevskoye Facility, which handles the gas produced in both the Makeevskoye and Olgovskoye field areas, was very near its maximum capacity with total throughput of more than 28 MMcf/d. The additional gas production from the O-15 well is expected to exceed the capability of the plant. KUB-Gas is currently working on an expansion of the gas processing capacity of the Makeevskoye Facility to accommodate additional production from the Olgovskoye Licence and from continued development of the gas reservoirs discovered by the M-16 well. It is planned that after the upgrade, scheduled to be completed by early in 2014, the Makeevskoye Facility will have a capacity of more than 65 MMcf/d. The Company expects that capital expenditures for this project will not exceed U$6 million (U$4.2 million net to Serinus).
Future Development - A 24 Month Drilling Program
The information obtained from the drilling and wireline logging of the O-15 well, together with the seismic data acquired previously over the Olgovskoye Licence, indicates potential for at least three additional well locations to fully develop the new S5 gas pool discovered with the drilling of the O-15 well. Together with the additional wells needed to develop the S5 gas pool discovered by the Makeevskoye-16 ("M-16") well, and to explore some of the new drillable prospects which have been identified based on the success of both the O-15 and M-16 wells, the Company now has enough prospects for a continuous drilling program for at least two years. The M-16 test results were announced on 9 April 2013 and the tie-in of the M-16 well was announced on 5 June 2013.
Oil and Gas Equivalents
Production information is commonly reported in units of barrel of oil equivalent ("boe" or "Mboe" or "MMboe") or in units of natural gas equivalent ("Mcfe" or ("MMcfe" or ("Bcfe"). However, boe's or Mcfe's may be misleading, particularly if used in isolation. A boe conversion ratio of 6 Mcf = 1 barrel, or a Mcfe conversion ratio of 1 barrel = 6 Mcf, is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead.
"Prospective Resources" are those quantities of petroleum estimated, as of a given date, to be potentially recoverable from undiscovered accumulations by application of future development projects. Prospective Resources have both an associated chance of discovery and a chance of development. Prospective Resources are further subdivided in accordance with the level of certainty associated with recoverable estimates assuming their discovery and development and may be sub-classified based on project maturity.
"Low Estimate" is considered to be a conservative estimate of the quantity that will actually be recovered. It is likely that the actual remaining quantities recovered will exceed the low estimate. If probabilistic methods are used, there should be at least a 90 percent probability (P90) that the quantities recovered will equal or exceed the low estimate.
"Best Estimate" is considered to be the best estimate of the quantity that will actually be recovered. It is likely that the actual remaining quantities recovered will be greater or less than the best estimate. If probabilistic methods are used, there should be a 50 percent probability (P50) that the quantities recovered will equal or exceed the best estimate.
"High Estimate" is considered to be an optimistic estimate of the quantity that will actually be recovered. It is unlikely that the actual remaining quantities recovered will exceed the high estimate. If probabilistic methods are used, there should be at least a 10 percent probability (P10) that the quantities recovered will equal or exceed the high estimate.
About the Company
Serinus is an international upstream oil and gas exploration and production company with a diversified portfolio of projects in Ukraine, Brunei, Tunisia, Romania and Syria and with a risk profile ranging from exploration in Brunei, Romania and Syria to production and development in Ukraine and Tunisia. The common shares of the Company trade on the Warsaw Stock Exchange and on the TSX.
In Ukraine, Serinus owns an effective 70% interest in KUB-Gas LLC. The assets of KUB-Gas LLC consist of 100% interests in five licences near to the City of Lugansk in the northeast part of Ukraine.
Four of the licences are gas producing.
In Tunisia, Serinus owns a 100% working interest in the Chouech Essaida, Ech Chouech, Sanrhar and Zinna concessions, and a 45% working interest in the Sabria concession. Four of the concessions are currently producing oil or gas.
In Brunei, Serinus owns a 90% working interest in a production sharing agreement which gives the Company the right to explore for and produce oil and natural gas from Block L, a 1,123 square kilometre area covering onshore and offshore areas in northern Brunei.
In Romania, Serinus expects to have assignment of an undivided 60% working interest in the onshore Satu Mare concession in north western Romania by the end of June 2013, subject to the satisfaction of certain conditions.
In Syria, Serinus holds a participating interest of 50% in the Syria Block 9 production sharing contract which provides the right to explore for and, upon the satisfaction of certain conditions, to produce oil and gas from Block 9, a 10,032 square kilometre area in northwest Syria. The Company has an agreement to assign a 5% ownership interest to a third party which is subject to the approval of Syrian authorities, and which, if approved, would leave the Company with a remaining effective interest of 45% in Syria Block 9. Serinus declared force majeure, with respect to its operations in Syria, in July 2012.
The main shareholder of the Company is Kulczyk Investments S.A., an international investment house founded by Polish businessman Dr. Jan Kulczyk.
For further information, please refer to the Serinus website (www.serinusenergy.com).
Translation: This news release has been translated into Polish from the English original.
Forward-looking Statements This release may contain forward-looking statements made as of the date of this announcement with respect to future activities of KUB-Gas and related to its five licence areas in Ukraine and to certain wells drilled or seismic activities undertaken within those licence areas that either are not or may not be historical facts. Although the Company believes that its expectations reflected in the forward-looking statements are reasonable as of the date hereof, any potential results suggested by such statements involve risk and uncertainties and no assurance can be given that actual results will be consistent with these forward-looking statements. Various factors that could impair or prevent the Company from completing the expected activities on its projects include that the Company's projects experience technical and mechanical problems, there are changes in product prices, failure to obtain regulatory approvals, the state of the national or international monetary, oil and gas, financial, political and economic markets in the jurisdictions where the Company operates and other risks not anticipated by the Company or disclosed in the Company's published material. Since forward-looking statements address future events and conditions, by their very nature, they involve inherent risks and uncertainties and actual results may vary materially from those expressed in the forward-looking statement. The Company undertakes no obligation to revise or update any forward-looking statements in this announcement to reflect events or circumstances after the date of this announcement, unless required by law.
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