Kulczyk Oil Ventures Inc.
WARSAW : KOV

Kulczyk Oil Ventures Inc.

July 26, 2011 05:43 ET

Kulczyk Oil Ventures Inc.: Ukraine-Gas Production Up 70% To More Than 10 MMcf/d

CALGARY, ALBERTA--(Marketwire - July 26, 2011) - Kulczyk Oil Ventures Inc. (WARSAW:KOV) ("Kulczyk Oil", "KOV" or the "Company") is pleased to announce that total gas production on its properties in Ukraine has increased by 70% to more than 10 million cubic feet per day ("MMcf/d") (more than 7 MMcf/d net to KOV), as a result of the tie-in of the M-19 discovery well in the Makeevskoye Field.

Highlights

  • M-19 well initial average gas production rate in excess of 5.5 MMcf/d (3.85 MMcf/d net to KOV) since tie-in;
  • Projected production rate for the remainder of 2011 from the M-19 well is a minimum of 4 MMcf/d (2.8 MMcf/d net to KOV);
  • The tie-in of the M-19 well has increased the gas production by almost 70% from an average of approximately 6 MMcf/d (4.2 MMcf/d net to KOV) for the first six months of 2011 to the current rate of more than 10 MMcf/d (more than 7 MMcf/d net to KOV).

Timothy M. Elliott, the President and Chief Executive Officer of KOV, stated that "we have substantially increased production from our Ukraine assets since closing the acquisition in June 2010 and are very pleased that KUB-Gas is already producing more than 10 MMcf/d before the end of July. We are confident that we will meet or exceed our target of exiting 2011 with a production rate for KUB-Gas of 12 MMcf/d (8.4 MMcf/d net to KOV). KOV will continue with its active development program in the Ukraine during the coming year and we expect to have a number of new locations defined once the 3D seismic surveys recently completed at Makeevskoye and Olgovskoye are processed and interpreted. The successful start-up of gas production from the newly discovered zone in the M-19 well has confirmed the effectiveness of modern seismic interpretation techniques in the identification of new exploration targets".

The M-19 well

The M-19 exploration well was drilled in the second half of 2010 to a total depth of 2,060 metres and tested gas at a rate of approximately 5 MMcf/d in January 2011 before being suspended pending completion of a pipeline to tie the well to the production facilities of KUB-Gas LLC ("KUB-Gas"). The pipeline was completed and all regulatory approvals required for the commercial production of the well were obtained prior to the start of production on July 11, 2011.

Average gas production from the M-19 well was 5.52 MMcf/d (3.86 MMcf/d net to KOV) since the first full day of production on July 11, 2011. It is presently anticipated that production rates from the well will stabilize at a lower rate and average about 4.0 MMcf/d for the remainder of 2011. The successful tie-in of the M-19 well to production facilities has increased total KUB-Gas production from its four producing gas licenses in Ukraine to an average of 10.73 MMcf/d (7.51 MMcf/d net KOV) during the 10 producing days ended July 24th.

The estimated selling price per thousand cubic feet ("Mcf") in the second quarter of 2011 was approximately US$9.00 per Mcf with as estimated netback of US$5.80. The netback during the first quarter of 2011 was US$4.77 per Mcf. The final financial information with respect to the second quarter will be released in mid-August.

The M-19 well was the first well operated by KUB-Gas logged with western logging tools. By comparing the Ukrainian and western logging data over the same formations, the Company is developing a methodology to better understand and analyze existing Ukrainian log data with a view to more effectively evaluating the potential of the area.

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 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% 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.

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.

The main shareholder of the Company, Kulczyk Investments S.A. owns almost 50% 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, the stabilized future production rates from the M-19 well and from the KUB-Gas assets as a whole, the selling prices and netbacks for gas sales in the second quarter of 2011 and other matters related to the M-19 well located in the Makeevskoye license in Ukraine 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.

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