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Cub Energy Inc. announces that KUB-Gas LLC has been granted a new exploration and production licence in eastern Ukraine, covering 449 km2 (approximately 111,000 acres). Cub has a 30% ownership interest in KUB-Gas.
The West Olgovskoye block was awarded to KUB-Gas Borova LLC (a newly incorporated subsidiary of KUB-Gas) by way of a Special Permit by the State Service of Geology and Mineral Resources of Ukraine.
West Olgovskoye is located in the Kharkiv oblast, outside of the military conflict zone. The new licence immediately offsets the Olgovskoye and North Makeevskoye licences currently owned and operated by KUB-Gas. It surrounds (but does not include) the existing Druzhelyubovskoe gas/condensate field, which is owned and operated by Ukrgasdobycha, a subsidiary of Naftogaz, the state owned oil company. Since starting production in 1979, Druzhelyubovskoe is believed to have produced over 180 billion cubic feet of gas from the same Moscovian and Bashkirian zones that produce in KUB-Gas' Olgovskoye and Makeevskoye fields. The new permit area has several hundred kilometres of 2D seismic data, which suggest additional undrilled structural features are present, although new 3D seismic data will have to be acquired before any are upgraded to drillable prospect status.
The term of this new Special Permit is for 20 years with the right to a 20-year extension, during which KUB-Gas will be allowed to conduct both exploration and production activities. There are work commitments of 202.3 million hryvnia or approximately $9.6 million at the current exchange rate of 21 UAH/USD. These requirements include geological studies, seismic acquisition and processing, and drilling and completion operations. All of the work programs are expected to be funded by KUB-Gas's internal cash flow. Although there are several shorter intermediate deadlines, almost 90% of the total required spending is scheduled for between 2018 and 2020. Geological studies and interpretation will commence immediately, and KUB-Gas anticipates mobilizing a seismic crew for new data acquisition in the fourth quarter of 2015.
Mikhail Afendikov, Chief Executive Officer of Cub said, "West Olgovskoye more than doubles the KUB-Gas land base in Ukraine, and increases Cub's total Ukraine acreage to approximately 355,000 gross acres. Based on the large volumes of production from the Druzhelyubovskoe field, we are hopeful that our successful hydrocarbon discoveries in our Olgovskoye and Makeevskoye fields continue into West Olgovskoye."