Kulczyk Oil Ventures Inc. ("Kulczyk Oil", "KOV" or the "Company")
(WARSAW:KOV), an international upstream oil and gas company,
announces Reserves and Resource volumes and estimated value for its
Ukrainian reserves effective as of 31 July 2012, as evaluated by
independent reserve engineers RPS Energy Consultants Ltd. ("RPS")
in their report dated 12 November 2012. All Reserve and Resource
volumes, as well as Reserves net present values attributed to the
Ukraine assets herein refer to KOV's effective 70% ownership
interest in KUB-Gas LLC ("KUB-Gas"), its majority-owned subsidiary,
which owns and operates four producing licenses (Vergunskoye,
Olgovskoye, Makeevskoye and Krutogorovskoye).
Highlights:
-- Net Present Value ("NPV") of future net revenue attributable to Proved
plus Probable (2P) Reserves in Ukraine increased 9.2% since the last
report of RPS on the Ukraine assets effective 31 December 2011 and dated
20 March 2012 ("Prior Ukraine Report") to USD 177.8 million before tax
at a discount factor of 10%;
-- Proved + Probable + Possible (3P) Reserves, after royalties, were
estimated at 54.2 billion cubic feet ("Bcf") of natural gas (compared
with 40.4 Bcf in the Prior Ukraine Report) and 427.8 thousand barrels
("Mbbls") of natural gas liquids ("NGL") (compared with 213.0 Mbbls in
the Prior Ukraine Report) for a total of 9,463 million barrels of oil
equivalent ("MMboe");
-- Proved + Probable (2P) Reserves, after royalties, were estimated at 32.5
Bcf of natural gas (compared with 30.8 Bcf in the Prior Ukraine Report)
and 202.5 Mbbls of NGL (compared with 142.6 MMbbls in the Prior Ukraine
Report) for a total of 5.624 MMboe;
-- Proved (1P) Reserves, after royalties, were estimated at 18.6 Bcf of
natural gas (compared with 26.6 Bcf in the Prior Ukraine Report) and
84.1 Mbbls of NGL (compared with 120.1 Mbbls in the Prior Ukraine
Report) for a total of 3.192 MMboe;
-- Ukraine Contingent Resources "Best Estimate" (2C) increased to 65.9 Bcf
of natural gas from 59.6 Bcf in the Prior Ukraine Report while
Prospective Resources unrisked "Best Estimate" remained unchanged
compared to the Prior Ukraine Report.
Net production to the 70% interest of KOV during the first seven
months of 2012 (until the date of the new RPS report) was 3.0 Bcf
of natural gas and 30.4 Mbbls of condensate. Net operating income
to the 70% interest of KOV during the first seven months of 2012
was $27.1 million.
Tim Elliott, CEO of Kulczyk Oil, commented:
"The increase in the value of our 2P Reserves at NPV10 to $177.8
million while at the same time receiving $38.4 million from sales
of production is very gratifying. Our success in the Ukraine has
been driven by a team effort by KOV, its 30% partner in KUB-Gas and
by the KUB-Gas team in Ukraine. We are extremely pleased with the
progress made to date in Ukraine and, while we do not expect every
new well to be a success, we are confident that our drilling
program will continue to yield positive results and that we will
continue to build on the solid base that we have established."
Ukraine Reserves
Proved plus Probable (2P) Reserves at 31 July 2012, net to KOV,
have increased to 33.7 billion cubic feet equivalent ("Bcfe")
(5.624 MMboe) after royalties, a modest increase of 6.7% since the
last RPS evaluation effective 31 December 2011. The percentage
change in Reserves volumes from 31 December 2011 to 31 July 2012,
after considering KOV's net production during the seven months
between the effective dates, is shown in the table below. Reserves
additions came from a continuation of our successful drilling and
development program in the Makeevskoye and Olgovskoye field areas.
Any decreases in Reserves resulted from technical revisions and
from the approximately 3.2 Bcfe of net natural gas and condensate
volumes produced during the year.
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RPS RESERVES (1)
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Natural Gas NGL
% Change (2) (MMcf) (Mbbl) MMboe Bcfe
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Total Proved (1P) (13.7) 18,646.4 84.1 3.192 19.151
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Total Proved Plus Probable
(2P) 6.7 32,531.8 202.5 5.624 33.747
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Total Proved Plus Probable
Plus Possible (3P) 36.2 54,211.9 427.8 9.463 56.779
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(1) Reserves are net to the 70% KOV interest after deduction for royalty
(2) % change since 31 December 2011 after adjustment for 3.2 Bcfe of net
production during the seven month period ending 31 July 2012
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Ukraine Resources
The report prepared by RPS evaluated the Prospective and
Contingent Resources attributable to the 70% interest of KOV in
KUB-Gas and estimated total high case (3C) Contingent Resources at
more than 157 Bcf and total unrisked high case (High Estimate)
Prospective Resources at more than 108 Bcf as summarized in the
table below:
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RPS CONTINGENT RESOURCES RPS PROSPECTIVE RESOURCES
(1) (1)
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License Area Billion Cubic Feet (Bcf)
------------------------------------------------------
Low Best High
1C 2C 3C Estimate Estimate Estimate
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Olgovskoye (2) 3.92 15.32 38.61 0.09 0.39 1.02
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Makeevskoye (2) 11.27 45.44 109.58 10.67 40.71 93.83
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Krutogorovskoye (2) 1.81 5.13 8.83 1.71 6.31 13.58
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TOTAL (3) 17.00 65.90 157.02 12.47 47.41 108.42
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(1) Resources are gross to the 70% KOV interest
(2) Prospective or Contingent resources were not assigned to North
Makeevskoye in this report. Table volumes are unrisked with Chance of
Discovery (GPoS) estimated to be approximately 35% for each of Olgovskoye,
Makeevskoye and Krutogorovskoye.
(3) All Prospective and Contingent Resources are natural gas.
(4) Total assumes all drilling is successful which has an estimated GPoS of
4.8%. Arithmetic totals of Low and High Estimates are statistically
incorrect as it tends to under-state the true P90 (Low Estimate) and over-
state the P10 (High Estimate).
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There is no certainty that it will be commercially viable to
produce any portion of the Contingent Resources. There is no
certainty that any portion of the Prospective Resources will be
discovered. If discovered, there is no certainty that it will be
commercially viable to produce any portion of the Prospective
Resources.
Oil and Gas Equivalents
Production information is commonly reported in units of barrel
of oil equivalent ("boe" or "Mboe" or "MMboe") or in units of
natural gas equivalent ("Mcfe" or ("MMcfe" or ("Bcfe"). However,
boe's or Mcfe's may be misleading, particularly if used in
isolation. A boe conversion ratio of 6 Mcf = 1 barrel, or a Mcfe
conversion ratio of 1 barrel = 6 Mcf, is based on an energy
equivalency conversion method primarily applicable at the burner
tip and does not represent a value equivalency at the wellhead.
Defined Terms
"Reserves" are those quantities of petroleum anticipated to be
commercially recoverable by application of development projects to
known accumulations from a given date forward under defined
conditions. Reserves must further satisfy four criteria: they must
be discovered, recoverable, commercial, and remaining (as of the
evaluation date) based on the development project(s) applied.
Reserves are further categorized in accordance with the level of
certainty associated with the estimates and may be sub-classified
based on project maturity and/or characterized by development and
production status.
"Proved Reserves" are those quantities of petroleum, which by
analysis of geosciences and engineering data, can be estimated with
reasonable certainty to be commercially recoverable, from a given
date forward, from known reservoirs and under defined economic
conditions, operating methods and government regulations.
"Probable Reserves" are those additional Reserves which analysis
of geosciences and engineering data indicate are less likely to be
recovered than Proved Reserves but more certain to be recovered
than Possible Reserves.
"Possible Reserves" are those additional Reserves which analysis
of geosciences and engineering data indicate are less likely to be
recoverable than Probable Reserves. There is a 10% probability that
the quantities actually recovered will equal or exceed the sum of
proved plus probable plus possible Reserves.
"Contingent Resources" are those quantities of petroleum that
are estimated, as of a given date, to be potentially recoverable
from known accumulations using established technology or technology
under development, but which are not yet considered mature enough
for commercial development because of one or more contingencies.
Contingencies may include factors such as economic, legal,
environmental, political, and regulatory matters, or a lack of
markets. Contingent Resources are further categorized into low case
(1C), best case (2C) and high case (3C) according to the level of
certainty associated with the estimates and may be sub-classified
based on economic viability.
"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 are
further subdivided in accordance with the level of certainty
associated with recoverable estimates assuming their discovery and
development and may be sub-classified based on project
maturity.
"Low Estimate" is considered to be a conservative estimate of
the quantity that will actually be recovered. It is likely that the
actual remaining quantities recovered will exceed the low estimate.
If probabilistic methods are used, there should be at least a 90
percent probability (P90) that the quantities recovered will equal
or exceed the low estimate.
"Best Estimate" is considered to be the best estimate of the
quantity that will actually be recovered. It is likely that the
actual remaining quantities recovered will be greater or less than
the best estimate. If probabilistic methods are used, there should
be a 50 percent probability (P50) that the quantities recovered
will equal or exceed the best estimate.
"High Estimate" is considered to be an optimistic estimate of
the quantity that will actually be recovered. It is unlikely that
the actual remaining quantities recovered will exceed the high
estimate. If probabilistic methods are used, there should be at
least a 10 percent probability (P10) that the quantities recovered
will equal or exceed the high estimate.
About Kulczyk Oil
Kulczyk Oil is an international upstream oil and gas exploration
and production company with a diversified portfolio of projects in
Ukraine, Brunei and Syria 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 Ukraine, KOV owns an effective 70% interest in KUB-Gas LLC.
The assets of KUB-Gas consist of 100% interests in five licences
near to the City of Lugansk in the northeast part of Ukraine. Four
of the licences are gas producing.
In Brunei, KOV owns a 90% working interest in a production
sharing agreement which gives the Company the right to explore for
and produce oil and natural gas from Block L, a 1,123 square
kilometre area covering onshore and offshore areas in northern
Brunei.
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 the satisfaction of certain conditions, to
produce oil and gas from Block 9, a 10,032 square kilometre 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. KOV declared force majeure, with respect to its operations
in Syria, in July 2012.
The main shareholder of the Company is 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.kulczykoil.com).
Translation: This news release has been translated into Polish
from the English original.
Forward-looking Statements This release may contain
forward-looking statements made as of the date of this announcement
with respect to future activities of KUB-Gas and related to its
five licence areas in Ukraine and to certain wells drilled or
seismic activities undertaken within those licence areas that
either are not or may not be 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
Contacts: Kulczyk Oil Ventures Inc. - Canada Norman W. Holton
Vice Chairman +1-403-264-8877nholton@kulczykoil.com Kulczyk Oil
Ventures Inc. - Poland Jakub J. Korczak Vice President Investor
Relations & Managing Director CEE +48 22 414 21
00jkorczak@kulczykoil.com www.kulczykoil.com