Kulczyk Oil Ventures Inc.
WARSAW : KOV

Kulczyk Oil Ventures Inc.

November 14, 2011 05:50 ET

Kulczyk Oil Announces Third Quarter Financial & Operating Results

CALGARY, ALBERTA--(Marketwire - Nov. 14, 2011) - Kulczyk Oil Ventures Inc. ("Kulczyk Oil", "KOV" or the "Company") (WARSAW:KOV), an international upstream oil and gas exploration and production company, is pleased to announce its financial and operating results for the period ended 30 September 2010. All dollar amounts are expressed in United States currency.

THIRD QUARTER HIGHLIGHTS

Financial

  • Third quarter revenue from hydrocarbon sales increased more than 300% over 2010 to $7.61 million, net to KOV
  • Production, net to KOV, at 1,237 barrels of oil equivalent per day ("boepd") is more than double the same period last year and up 64% when compared with the first half of 2011
  • Gas production, net to KOV, averaged more than 7 million cubic feet per day ("MMcf/d")
  • Commodity prices average $10.53 per thousand cubic feet ("Mcf") for natural gas and $94.92 per barrel for condensate
  • Netback after royalty and production expense was $5.45 per Mcf for natural gas and netback after royalty was $47.85 per barrel for condensate

Operations

  • Prepared for a two well fracture stimulation program in Ukraine which started in late October
  • Finished drilling O-14 in Ukraine and cased it as a potential gas well
  • Tie-in the M-19 well in Ukraine at an initial rate of more than 5.5 MMcf/d (3.8 MMcf/d net to KOV)
  • Tested two zones in the O-9 well in Ukraine at aggregate rates of up to 3.7 MMcf/d (2.6 MMcf/d net to KOV)
  • Tie-in the O-9 well at a rate of approximately 2 MMcf/d (1.4 MMcf/d net to KOV)
  • Drilled O-12 natural gas well in Ukraine
  • Commenced drilling of the Itheria-1 exploration well on Syria Block 9
  • New Canadian-made service rig purchased for Ukraine operations

Tim Elliott, President and Chief Executive Officer of KOV stated that:

"We are pleased with the steady growth demonstrated by the continued increases in our net production and revenues and look forward to continuing this trend in the coming months as new production comes on-stream from the tie-in of our behind pipe production capability, from the drilling of new wells, from our frac'ing programs and from the effective use of our new service rig."

Net production to the Company during the third quarter of 2011 of 7.4 million cubic feet of gas equivalent per day ("MMcfe/d"), or 1,237 boepd, was more than double the 3.5 MMcfe/d produced during the third quarter of 2010 and an increase of 64% over the 4.5 MMcfe/d produced during the first half of 2011. This increase is primarily due to the tie-in of the Makeevskoye-19 ("M-19") well in July. During the quarter the split in production was 95% natural gas and 5% condensate with average production, net to the Company, of 7.064 MMcf/d of natural gas and 59 bbls/d of condensate.

Production has continued to grow since the end of the third quarter with a net increase to KOV during the month of October 2011 averaging 8.5 MMcf/d of natural gas and 93 bbls/d of condensate. Production behind-pipe has also increased with the newly drilled Olgovskoye-12 ("O-12") testing at rates as high as 8.1 MMcf/d (5.7 MMcf/d net to KOV) in early October. The successful frac'ing of two wells at Olgovskoye-6 ("O-6") and Olgovskoye-8 ("O-8") further increases the production capability of the Ukraine assets. The Olgovskoye-14 ("O-14") well, which finished drilling in early July, has not yet been tested.

The price received for natural gas during the third quarter was $10.53 per Mcf, 24% higher than the $8.49 per Mcf received during the first half of 2011 and 44% higher than the $7.32 per Mcf realized during the three months ended 30 September 2010. Condensate price was $94.92 per barrel during the third quarter, up substantially from the $53.58 realized in the same period in 2010 and essentially unchanged from the $95.51 per barrel received for condensate during the first half of 2011. The price received for natural gas in October 2011 was $10.51 per Mcf.

Increased sales volumes and the improved selling price for natural gas contributed to an increase in the netback per Mcfe to $5.82 during the third quarter of 2011 compared to $3.52 during the same period in 2010 and $4.52 in the first half of 2011.

Exploration and development activities continued throughout the third quarter with the spud of the O-12 well, the testing and tie-in of the O-9 well, the tie-in of the M-19 well and the casing of the O-14 well in Ukraine, and with the spud of the Itheria-1 well In Syria.

In Ukraine, the O-12 well was cased to total depth ("TD") of 2,700 metres as a potential producer. The O-14 well reached a TD of 2,800 metres in early July and was cased as a potential gas well. M-19, a new gas discovery that had been drilled in the fourth quarter of 2010, added significant production volumes when it went on-stream in July and the O-9 well further increased production when it went on-stream in September.

In Syria, the Itheria-1 well, with a projected TD of 3,256 metres, was spud in early July and was suspended in October 2011 at a depth of 2,072 metres without having reached two of its primary objectives due to the need to assess well results and an increasingly more difficult operating environment.

A newly-built modern service rig, manufactured in Canada during the second and third quarter of 2011, has been purchased and is in the process of being delivered in Ukraine. The rig, which comes complete with hydraulics, blowout prevention system, pumping equipment and a 50 tonne crane, will increase our ability to complete new wells, re-work existing wells and enhance productivity from multiple zones in an economic manner. It is expected to be operational by the end of the year.

KOV filed its third quarter operating and financial results on 10 November 2011 in Canada by filing on SEDAR (www.sedar.com) and in Poland by filing on ESPI (www.gpwinfostefa.pl) and has posted them on its website at www.kulczykoil.com.

Cautionary Statement

"BOEs may be misleading, particularly if used in isolation. The BOE conversion ratio of 6 Mcf of gas being equivalent to one barrel of oil is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead."

About Kulczyk Oil

Kulczyk Oil is an international upstream oil and gas exploration company with a diversified portfolio of projects in Brunei, Syria and Ukraine and with a risk profile ranging from exploration in Brunei and Syria to production and development in Ukraine. The common shares of Kulczyk Oil trade on the Warsaw Stock Exchange under trading symbol "KOV".

In Brunei, KOV owns working interests in two production sharing agreements which gives the Company the right to explore for and produce oil and natural gas from Block L and Block M. KOV owns a 40% working interest in Block L, a 2,220 square kilometre (550,000 acre) area covering onshore and offshore areas in northern Brunei and a 36% working interest in Block M, a 3,011 square kilometre (744,000 acre) area onshore in southern Brunei.

In Ukraine, KOV owns an effective 70% interest in KUB-Gas LLC. The assets of KUB-Gas consist of 100% interests in five licenses near to the City of Lugansk in the northeast part of Ukraine. Four of the licenses are gas producing.

In Syria, KOV holds a participating interest of 50% in the Syria Block 9 production sharing contract which provides the right to explore for and, upon fulfillment of certain conditions, to produce oil and gas from Block 9, a 10,032 square kilometre (2.48 million acre) area in northwest Syria. The Company has an agreement to assign a 5% in 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.

The main shareholder of the Company, Kulczyk Investments S.A. owns 47.6 % of the issued common shares. Kulczyk Investments S.A. is an international investment house founded by Polish businessman Dr. Jan Kulczyk.

For further information, please refer to the Kulczyk Oil website (www.kulczykoil.com).

Translation: This news release has been translated into Polish from the English original.

Forward-looking Statements: This release contains forward-looking statements made as of the date of this announcement with respect to future activities of KUB-Gas and related to its five license areas (Vergunskoye, Krutogorovskoye, Makeevskoye, North Makeevskoye and Olgovskoye) in Ukraine and to certain wells drilled within those license areas that are not 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.

Canada
Suite 1170, 700-4th Avenue S.W., Calgary, Alberta, Canada
Telephone: +1-403-264-8877
Facsimile: +1-403-264-8861
Dubai
Al Shafar Investment Building, Suite 123, Shaikh Zayed Road,
Box 37174, Dubai, United Arab Emirates
Telephone: +971-4-339-5212
Facsimile: +971-4-339-5174
Poland
Nowogrodzka 18/29
00-511 Warsaw, Poland
Telephone: +48 (22) 414 21 00
Facsimile: +48 (22) 412 48 60

Contact Information