Kulczyk Oil Ventures Inc.
WARSAW : KOV

Kulczyk Oil Ventures Inc.

June 14, 2010 02:45 ET

Kulczyk Oil Ventures Acquires Ukrainian Gas Production

WARSAW, POLAND--(Marketwire - June 14, 2010) -

THIS PRESS RELEASE OR THE INFORMATION CONTAINED HEREIN IS NOT BEING ISSUED IN OR INTO, AND MAY NOT BE DISTRIBUTED DIRECTLY OR INDIRECTLY IN OR INTO, THE UNITED STATES OF AMERICA, AUSTRALIA OR JAPAN OR ANY JURISDICTION WHERE TO DO SO WOULD CONSTITUTE A VIOLATION OF THE RELEVANT LAWS OF SUCH JURISDICTION.

Kulczyk Oil Ventures (WARSAW:KOV) ("KOV", "Kulczyk Oil" or the "Company") is pleased to announce that through a subsidiary, Loon Ukraine Holding Limited ("Loon Ukraine"), it has completed the acquisition of an effective 70% interest in KUB-Gas LLC ("KUB-Gas"). KUB-Gas is a private Ukraine company which owns gas producing assets and certain service assets. Kulczyk Oil owns 70% of Loon Ukraine and Loon Ukraine owns 100% of the share capital of KUB-Gas and a 1,000 horsepower drilling rig built in Canada in 2007. The vendor was Gastek LLC ("Gastek"), a private Californian company, who continue to own an effective 30% interest in KUB-Gas through their 30% share ownership in Loon Ukraine. The transaction was completed on June 11, 2010 with the payment of the balance of the gross purchase price of US$45 million.

KUB-Gas is one of the largest private producers of natural gas in Ukraine and it sells approximately 75% of its production to wholesalers and 25% to industrial consumers. The gas producing assets of KUB-Gas consist of 100% interests in four licenses near to the City of Lugansk in the northeast part of Ukraine. The gas is produced from reservoirs within the Dneiper-Donets sedimentary basin, an area that accounts for approximately 90% of Ukraine's natural gas production and which has a well-developed transport infrastructure for the movement of produced gas. In addition to the four licenses: Vergunskoye, Olgovskoye, Makeevskoye and Krutogorovskoye, KUB-Gas also owns two service rigs and four gas processing installations and will operate the drilling rig on behalf of Loon Ukraine.

Statement by the President and Chief Executive Officer of Kulczyk Oil Ventures

"The acquisition of KUB-Gas opens a new chapter in the history of KOV, as it brings the Company both proven and probable reserves, natural gas production, and cash flow. The Company's goal is to double both the reserves base and the production rates from the existing fields within two years through a capital expenditure program which will be partially funded from the cash flows that KUB-Gas is currently generating" said Tim Elliott, President and CEO of Kulczyk Oil Ventures.

During the first five months of 2010 the average gas production from the licenses owned by KUB-Gas was 5.9 million cubic feet per day ("MMcfd") (166 thousand m3 per day) and the average selling price was US$6.76 per thousand cubic feet ("Mcf") (US$239.90 per thousand m3).

RPS Energy, a division of RPS Group plc, a global engineering firm which specialized in the evaluation of oil and gas assets and the provision of other engineering services to the international oil and gas industry, has estimated the reserves and resources attributable to 70% of KUB-Gas effective as of April 1, 2009. The RPS report estimates Proven and Probable Reserves of 15 billion cubic feet ("Bcf") (424.7 million m3) of natural gas and 81 thousand barrels ("Mbbls") of natural gas liquids ("NGLs"), totaling 2.6 million barrels of oil equivalent ("MMboe") and an additional 1.2 MMboe of Possible Reserves. RPS Energy also provided a "best estimate" of the Contingent and Prospective Resources of natural gas attributable to a 70% interest in KUB-Gas at 14.63 Bcf (2.44 MMboe) and 6.65 Bcf (1.11 MMboe) respectively.

Hydrocarbon production began in the 1880's but the sedimentary basins of Ukraine remain only partially explored due to a historical reliance on imports and the high costs associated with drilling to the depths at which most reserves of oil and natural gas have been found. According to The World Factbook, Ukraine produced more than 21 billion m3 of natural gas in 2009 but remained a net importer of natural gas with overall consumption of approximately 52 billion m3

Statement by the Managing Director of Gastek

"We are very pleased to have Kulczyk Oil join us in the further development of KUB-Gas. In the past months, we have had many meetings with the technical experts of Kulczyk Oil, discussing how to enhance natural gas production from the KUB-Gas licenses, and we are confident that production can be increased by using some of the international operating experience of the KOV team" said Mikhail Afendikov, Managing Director of Gastek.

Defined Terms

"Contingent Resources" are those quantities of petroleum estimated, as of a given date, to be potentially recoverable from known accumulations using established technology or technology under development, but which are not currently considered to be commercially recoverable due to one or more contingencies.

"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 have significant additional risks relative to Contingent Resources. Prospects are categorized as Prospective Resources because of the lack of discovery wells and production tests. There is no certainty that any portion of the Prospective Resources will be discovered. Furthermore, if discovered, there is no certainty that it will be commercially viable to produce any portion of the Prospective Resources.

"Best Estimate" is a term used to describe an uncertainty category for resource estimates referring to the best estimate of the quantity that will actually be recovered. It is equally likely that the actual remaining quantities recovered will be greater or less than the "best estimate". The best estimate of the Contingent and Prospective Resources is prepared independent of the risks associated with achieving commercial production.

"BOEs" may be misleading, particularly if used in isolation. A BOE conversion ratio of 6 thousand cubic feet of gas 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.

Assets of 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.

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 gas producing assets of KUB-Gas consist of 100% interests in four licenses near to the City of Lugansk in the northeast part of Ukraine.

In Syria, KOV holds a direct 75% interest in a production sharing agreement that gives it the right to explore for and produce oil and natural gas from Block 9, a 10,032 square kilometre area in northwest Syria.

The main shareholder of the Company, Kulczyk Investments S.A., increased its holdings in the Company through participation in the initial public offering of the Company on the Warsaw Stock Exchange in May 2010 and the partial conversion of a debenture (the "KI Debenture") and owns approximately 48.55% of the issued common shares as of the date of this news release. Kulczyk Investments S.A., an international investment house founded by Polish businessman Dr. Jan Kulczyk.

For further information, please refer to the Kulczyk Oil website (www.kulczykoilventures.com). 
 
Translation: This news release has been translated into Polish from the English original.

Disclaimer: Neither this news release nor any copy of it may be taken or transmitted into the United States of America, Australia or Japan. This news release does not constitute or form part of any offer or invitation to sell, or any solicitation of any offer to purchase nor shall it (or any part of it) or the fact of its distribution, form the basis of, or be relied on in connection with, any contract therefore. The offer and distribution of this news release and other information in connection with the listing and offer in certain jurisdictions may be restricted by law and persons into whose possession any document or other information referred to herein comes should inform themselves about and observe any such restriction. Any failure to comply with these restrictions may constitute a violation of the securities laws of any such jurisdiction.

This announcement is provided for information purposes only and does not constitute an offer for sale or subscription of or solicitation or invitation of any offer to buy or subscribe for any securities of Kulczyk Oil. The securities have already been sold.

This announcement is not a prospectus and investors should not subscribe for or purchase any shares referred to in this announcement or take any investment decision in relation to the IPO except on the basis of information contained, or incorporated by reference, in the Prospectus. This announcement is not and does not constitute or form part of any offer to sell or issue, or any solicitation of any offer to acquire, any shares or securities by any person in any jurisdiction in which such an offer or solicitation is unlawful.

This announcement and the information contained herein do not contain or constitute an offer for sale or the solicitation of an offer to purchase securities in the United States. The shares referred to herein have not been and will not be registered under the U.S. Securities Act of 1933, as amended (the "Securities Act"), and may not be offered or sold in the United States absent registration under the Securities Act or an available exemption from, or in a transaction not subject to, the registration requirements of the Securities Act. There will be no public offer in the United States of the shares referred to herein.

This announcement and the information contained herein do not contain or constitute an offer for sale or the solicitation of an offer to purchase securities in Australia, Japan or any other jurisdiction where to do so would constitute a violation of the relevant laws of such jurisdiction, and no public offer of rights or shares will be made in such jurisdictions. The shares referred to herein have not been and will not be registered under the securities laws of such jurisdictions and may not be offered, sold, resold, transferred or delivered, directly or indirectly, within such jurisdictions except pursuant to an exemption from and in compliance with any applicable securities laws.

The distribution of this announcement and/or the prospectus (when available) and/or the transfer of the shares referred to herein into jurisdictions other than Poland may be restricted by law. Persons into whose possession this announcement comes should inform themselves about and observe any such restrictions. Any failure to comply with these restrictions may constitute a violation of the securities laws of any such jurisdiction.

HSBC, Dom Maklerski BZ WBK S.A., Erste Group Bank AG, Erste Securities Polska S.A. and Lazard & Co. Limited are each acting exclusively for the Company and no one else in connection with the IPO and each of them will not regard any other person as its client in relation to the IPO and will not be responsible to anyone other than the Company for providing the protections afforded to clients or for providing advice in relation to the IPO and/or matters referred to in this announcement.

Apart from the responsibilities and liabilities, if any, which may be imposed on HSBC by or under the United Kingdom's Financial Services and Markets Act 2000, HSBC, Dom Maklerski BZ WBK S.A., Erste Group Bank AG, Erste Securities Polska S.A. and Lazard & Co. accept no responsibility whatsoever and make no representation or warranty, express or implied, for or in respect of the contents of this announcement, including its accuracy, completeness or verification. HSBC, Dom Maklerski BZ WBK S.A., Erste Group Bank AG, Erste Securities Polska S.A. and Lazard & Co. accordingly disclaim any and all responsibility and liability whether arising in tort, contract or otherwise in connection with this announcement.

This communication is directed only at (i) persons who are outside the United Kingdom or (ii) investment professionals falling within article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (as amended) (the "Order") or (iii) high net worth companies and other persons to whom it may lawfully be committed falling within article 49(2)(a) to (d) of the Order (all such persons together being referred to as "Relevant Persons"). Any person who is not a Relevant Person must not act or rely on this communication or any of its contents. Any investment or investment activity to which this communication relates is available only to Relevant Persons and will be engaged in only with Relevant Persons.

In any EEA Member State that has implemented Directive 2003/71/EC (together with any applicable implementing measures in any Member State, the "Prospectus Directive"), this communication is only addressed to and is only directed at qualified investors in that Member State within the meaning of the Prospectus Directive.

Neither the content of the Company's website nor any website accessible by hyperlinks on the Company's website is incorporated in, or forms part of, this announcement.

Forward-looking Statements

This release contains forward-looking statements made as of the date of this announcement as to the nature of the KUB-Gas assets, potential future activity in Ukraine, the conversion of the balance of the KI Debenture and other statements 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. The timing for the conversion of the balance of the KI Debenture is subject to regulatory approval. 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.

Suite 1170, 700-4th Avenue S.W., Calgary, Alberta, Canada
Telephone: +1-403-264-8877 Facsimile: +1-403-264-8861

Al Shafar Investment Building, Suite 123, Shaikh Zayed Road,
P.O. Box 37174, Dubai, United Arab Emirates
Telephone: +971-4-339-5212 Facsimile: +971-4-339-5174

Contact Information

  • Kulczyk Oil Ventures Inc. - Canada
    Norman W. Holton
    Vice Chairman
    +1-403-264-8877
    nholton@kulczykoil.ca
    or
    Kulczyk Oil Ventures Inc. - Poland
    Jakub Korczak
    Vice President Investor Relations & Managing Director CEE
    +48 22 522 3150
    jkorczak@kulczykoil.ca