Urals Energy, the independent exploration and production company with operations in Russia, has provided an update on its drilling operations at the South Dagi licence area on Sakhalin Island.

South Dagi licence on Sakhalin Island

The Company's initial South Dagi development programme consists of the drilling of four new wells (Well 1, Well 2, Well 3 and Well 5), which are being drilled using the rig purchased by the Company in 2017 from Jereh Group.  The Company's target for the South Dagi development programme is to achieve aggregate production in excess of 1,000 bbls/day, which will help in offsetting the decline in production at Petrosak and thus sustain production at the Company's refinery on Sakhalin Island.

The Jereh rig has experienced a number of problems with its mobilisation and operational set up which, together with adverse weather conditions earlier this year, have delayed completion of the first new well at South Dagi (Well 1). The Board anticipates that Well 1 will now be completed by the end of July 2018.

However, in line with the Company's previous announcements, the Board has decided to start a work-over programme of existing wells at South Dagi using a smaller capacity workover rig. The Company has completed and tested a workover of an existing well located on the South Dagi licence area (Well 7).  Well 7 flowed liquids to the surface which have been delivered to the Company's refinery for separation of oil and water. During well tests, the daily oil volumes achieved from Well 7 were approximately 225 bbls/day.  A separator is to be set up in the licence area, so that oil/water separation can be carried out at the field.  Well 7 was drilled to a depth of approximately 1,250 metres.  Its perforation interval is 1,170 to 1,190 metres, with a pay zone thickness of eight metres.  The well is formed from sand stone (of the Dagi formation type).

The smaller capacity workover rig has been moved to the second workover well (Well 4), which is likely to be a gas well, which will be used to provide power for operations.

As announced on 4 May 2018, in the summary of the assessment of the Company's Remaining Reserves and Resources Potential by Blackwatch Petroleum Services, the Proven Reserves (1P) of South Dagi have been estimated at 2.9 million bbls, with Proven and Probable Reserves (2P) estimated at 20.9 million bbls and Proven, Probable and Possible Reserves (3P) being estimated at 38.3 million bbls, of which the Company's share is 97.16%.

The Company will review the results of the initial South Dagi development programme and then make a decision on further development operations in the field.

First 2018 Shipment from Kolguev Island

Tanker loading is scheduled for the first 10 days of July 2018. The Company expects to ship 20,000 tons, equivalent to 158,000 bbls, of special light crude.

Andrew Shrager, Chairman of Urals Energy, commented:
"Despite the delays with Well 1, the results of the first well workover on the South Dagi licence are encouraging, in terms of achieving a level of production that is consistent with our target for the initial development programme."