Kulczyk Oil Ventures Inc.
WARSAW : KOV

Kulczyk Oil Ventures Inc.

November 14, 2011 11:54 ET

Kulczyk Oil Ventures Inc.: Ukraine - Second Successful Fracture Stimulation; Ologovskoye-8 Well Yields1 MMcf/d

CALGARY, ALBERTA--(Marketwire - Nov. 14, 2011) - Kulczyk Oil Ventures Inc. (WARSAW:KOV) ("Kulczyk Oil", "KOV" or the "Company"), an international upstream oil and gas company, is pleased to announce the successful completion of the second reservoir stimulation in Ukraine using modern hydraulic fracturing ("frac'ing") technology. The frac was undertaken by KUB-Gas LLC ("KUB-Gas"), a partially-owned indirect subsidiary of KOV, on the R30c zone in the Ologovskoye-8 ("O-8") well. After being frac'd, the O-8 well flowed gas at a rate of 1 million cubic feet per day ("MMcf/d") through a 7 mm choke, from a previously non-commercial zone. The O-8 well was drilled by KUB-Gas in the first quarter of 2011 to a total depth ("TD") of 2,780 metres but did not test commercial volumes of natural gas prior to the frac'ing operation.

HIGHLIGHTS

  • O-8 well flows gas with condensate at a rate of 1 MMcf/d from a previously unproductive zone after fracture stimulation
  • The second successful frac by KUB-Gas using modern Canadian technology in eastern Ukraine
  • Confirms the potential to significantly increase production utilizing frac'ing technology
  • Both of the frac'd wells expected to be producing by end of year

The O-8 frac was implemented in the first week of November 2011 utilizing a cross-linked gel water frac fluid with 40 tonnes of ceramic proppant. The target zone for the frac'ing of the O-8 well was the R30c unit, a Middle Bashkirian silty sandstone interval with a gross thickness of 13 metres which occurs at a depth of approximately 2,300 metres. The zone had an indicated permeability of less than 1 millidarcy and was not capable of flowing gas at commercial rates before the frac'ing operation. The frac was designed to penetrate beyond the immediate vicinity of the well bore in to the R30c unit by creating fractures to liberate gas trapped in the tight formation. The successful frac of the R30c unit in the O-8 well, the second well in the frac program confirms the potential for enhancement of productivity utilizing frac'ing. On 2 November 2011 the Company announced that the R30c zone in the Olgovskoye-6 ("O-6") well was frac'd successfully and flowed 2.3 MMcf/d through an 8 mm choke. The O-8 and O-6 wells are both expected to be tied-in for regular production prior to the end of 2011. Based upon the positive results of this first fracture stimulation program, the Company is selecting candidates and planning for a second multi-well frac'ing program in mid-2012.

The total cost of the two-well hydraulic fracturing program is expected to be approximately $1.6 million ($800,000 per frac). By way of comparison, the estimated costs to drill and complete a new 2,500 metre well are approximately $2.5 million.

Jock Graham, Executive Vice President stated that:

"The successful fracs in the O-8 and O-6 wells confirms our belief that modern frac technology can have a material impact on the Company by unlocking new production and reserves from zones that had previously been considered to be uneconomic. The economics of frac'ing appears to be quite favourable and, by proving that some of the zones in our license areas respond to modern frac technology, we appear to have opened the door to substantial upside, in terms of both production and reserves, from our Ukraine project."

KUB-Gas owns a 100% interest in the Olgovskoye, Makeevskoye and North Makeevskoye, Krutogorovskoye and Vergunskoye licenses in the Lugansk area of Ukraine. KOV owns an effective 70% interest in KUB-Gas with Gastek LLC owning the remaining 30%.

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 the Company 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.

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