Significant discoveries in OOO Geotechnologia and update on the company’s positive development

Significant discoveries in OOO Geotechnologia and update on the company’s positive development
Announcements - 26 April, 2019

Araca Energy ASA (“Araca”), a Norwegian based oil and gas E&P company with its main assets onshore in the Komi Republic of the Russian Federation, is in its final stages of a successful restructuring. At the same time one of Araca´s main assets, the indirect ownership in OOO Geotechnologiya (“GT”) has made significant discoveries on its existing and new licenses that indicates around 250 mmBOE of oil and around 100 bcf (c. 17mmBOE) of gas of proved and probable reserves (2P, undeveloped). GT is currently in the process of implementing a full development program and conducting a formal SPE audit of the reserves by a renowned third party. GT has historically been a Gas company but following these discoveries it has been re-registered as an Oil & Gas company with the authorities.

“The restructuring of Araca is nearing an end and we have seen positive results for some time. The potential of the new discoveries is of course significant for the company and marks a potential game changer for us”, says Rashid Ibrahim, the Chairman of Araca Energy.  

The Araca restructuring

Since 2017 Araca´s Board and management have focused on improving the group´s structure and operations. The overall administration and operational costs have been cut to a minimum and its main office has been moved. The structure of the group has been simplified and certain inter-company debt and receivables have been cleared. Its main current assets are the indirect holdings in GT and Timan Oil & Gas Plc (“Timan”).

In 2017 Araca entered into a farm-in deal with Guernsey-based Culebra Petroleum Ltd and Canonazo Capital Ltd for the development of GT. The team in Culebra Petroleum has been working in the oil and gas industry for more than 20 years with the company’s principals’ background being with Lukoil. Under the terms of the farm-in deal Culebra Petroleum has provided necessary financing for GT and significant management and operational resources, with the core team having an average of more than 25 year’s experience in the oil & gas industry in the region and a solid track record in oil and gas assets turn-around with subsequent asset development.

The following main achievements have been made:

  • Developed GT and reversed the threat to certain of its licences and revamped both administrative and field operations to make the company able to re-establish oilfield activities.
  • The discovery of a significant oilfield under the existing gas field at Sredne-Sedyelskoye - the main operating licence of GT.
  • Secured and reviewed, including well tests, GT’s large Zapadno-Ukhtinskoye licence, which directly borders Lukoil’s core asset in the region, Yarega oil field (321 mmBOE 2P SPE).
  • Participated in the state licence auctions and has acquired a licence immediately bordering the existing licences of GT as well as another perspective licence bordering existing fields successfully operated by the regional and national majors.
  • Re-organised the holding structure of GT and introduced corporate governance mechanisms to the standards required by the Oslo Stock Exchange and the London Stock Exchange.

Below is a more detailed description of the developments and activities stated above.

1. GT Turn-Around

The Culebra Petroleum team has undertaken a range of measures and stabilised GT to allow it to return to normal. This included investments provided by Culebra and associated parties, which allowed settlement of debts, taxes and general expenses.

An intensive work program was implemented at the Sredne-Sedyelskoye gas field and the Suskinaelskoye oilfield, which allowed GT to become compliant with the licence obligations.

The team proceeded with revamping the field operations at GT´s main production licence – the Sredne-Sedyelskoye with recovery and re-equipment of GT’s drilling complex and addition of extra units of oilfield machinery to advance oilfield operations.

2. Sredne-Sedyelskoye discovery

GT’s main operational asset is the Sredne-Sedyelskoye field, where the company has successfully produced gas since 2010. The production was halted in 2016 due to operational and technical challenges. Following the entry of Culebra Petroleum as the farm-in partner the abandoned gas wells were worked over and drilled deeper and a significant oil discovery was made.

Using specialist contractors where required but primarily its own workover team, drilling rig and equipment, GT has successfully worked over five gas wells implementing drilling works to deepen the wells and performing cumulative and hydraulic drilling perforation to the horizons, which the data indicated are oil bearing. The hydraulic drilling perforation proved to be highly effective. The team has run extended well tests and test production of selected wells. Based on the immediate results the company has proven to the State Reserves Commission of the Ministry of Natural Resources and the Central Development Commission of the Ministry of Natural Resource that an oil field was discovered. In December 2018, GT received the certificate of discovery of the oil field and the Sredne-Sedyelskoye was reclassified as an oil and gas field. GT registered 6.5 mmBOE commercially recoverable proved reserves of oil (based on data from two wells) with the State Reserves Register.

In the process of drilling deeper and perforating the wells for oil, additional commercially producible gas reserves were discovered in two wells, which in turn were booked on the State Reserves Register. This increased the commercially recoverable gas reserves of Sredne-Sedyelskoye field by more than 50% taking the recoverable reserves to 22 bcf.

GT has completed a mobile oil gathering and treatment facility with a total capacity of 185 tonnes to treat and store the produced oil, completed all necessary registration procedures and received the necessary permits to commercially trade the produced oil in the market.

Based on the initial success the company now plans to drill new wells in the Sredne-Sedyelskoye field to produce oil and gas reservoirs respectively (separate wells for oil and for gas reservoirs) and take the field back to commercial gas production as well as establishing commercial oil production.

3. Securing and reviewing the Zapadno-Ukhtinskoye license

GT performed a range of activities required by the regulatory bodies following the licence review which brought the company in compliance with the licence terms.

The importance of the Zapadno-Ukhtinskoye licence is that it directly borders the Yarega licence, where Lukoil’s largest owned and operated oilfield in the region is located. Publicly available information indicates that Yarega has been in production since 1933 and currently holds recoverable 321 mmBOE 2P under SPE classification audited by Miller and Lents, a renowned international petroleum auditor.

Zapadno-Ukhtinskoye holds reserves with a large portion identical to those of the Yarega field. The company has estimated that the Zapadno-Ukhtinskoye licence, with its area of 207 km2, may hold in the range of 150 mmBOE of proved and probable, (2P undeveloped) reserves of oil with characteristics that would make the field exempt from Mineral Extraction Tax. The team is currently working on a range of oilfield production activities including extensive tests on the wells drilled by GT in previous years. These will in turn be followed by the drilling of a number of new wells. The company is also conducting a tender to select a renowned petroleum auditor to conduct a formal SPE audit of the Zapadno-Ukhtinskoye reserves.

4. Participating in new license rounds

In November 2017, and in association with Canonazo Capital, GT participated in the state subsoil licence auction and won two licences; the established Vostochno-Sedyelskoye licence (158 km2) and the larger promising Ayuva licence (715 km2).

i)  Vostochno-Sedyelskoye licence (c. 75 mmBOE of oil and c. 100 bcf of gas)

The Vostochno-Sedyelskoye licence is located in the same geological belt stretching from north-west to south-east where the major regional oilfields are located. The field originally belonged to Komineft Oil Company, which in 1998 audited its recoverable reserves to 42 mmBOE of oil and 180 bcf of gas. Based on the work performed, GT believes that the field may hold around 75 mmBOE proved and probable, (2P undeveloped) reserves of oil and around 100 bcf of proved and probable, (2P undeveloped) reserves of gas.

GT is prioritising to put on-stream the existing gas wells at Vostochno-Sedyelskoye, which were tested by extensive production tests to produce from 353 mcf to 2.6 mmcf per day and connecting them to the gas treatment facility and Gazprom pipeline connection terminal at the company’s Sredne-Sedyelskoye oil and gas field, which immediately borders from the north. The program then focuses on work-over activities, testing and putting in production one of the existing oil wells with oil to be trucked out as the field borders a major regional highway. An SPE audit of the reserves is planned to follow the audit of Zapadno-Ukhtinskoye licence.

ii)   Ayuva licence (c. 14 mmBOE of oil)

The Ayuva licence borders Lukoil’s Zapadno-Tebuk oil field with recoverable reserves of c. 400 mmBOE in predominantly upper- and mid-Devonian reef structures. The Company has accumulated data on Ayuva including geological data, core samples, drilling data, well tests and other well data indicating that Ayuva may have larger oil-bearing structures identical to the Zapadno-Tebuk oilfield. The Company plans to implement a workover program on the portfolio of existing wells at the field with perforation of the targeted reef formations. An additional seismic program is planned for 2019-20.

5. New holding structure and corporate governance

Araca and Culebra Petroleum have implemented a series of corporate restructurings resulting in a holding company established in Cyprus, Culebra Jotunheim Ltd, which owns 100% of GT. The holding company is administered by PWC Cyprus – the leader in company administration services. The board of the Culebra Jotunheim consists of directors representing Araca, Culebra Petroleum and Canonazo Capital as well as independent directors. The holding company has a comprehensive set of corporate governance procedures incorporated into its statutory documents guaranteeing shareholder rights to minority shareholders irrespective of what share of the company they hold.


For further information please contact:

Harald Sætvedt
CEO Araca Energy ASA
Phone: +47 911 37 234


About Araca Energy ASA

Araca is an oil and gas exploration and production company (E&P) based in Oslo, Norway with its main assets onshore in the Komi Republic of the Russian Federation. The company´s shares trade under the ticker ARACA on the NOTC-A list in Norway.

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