PetroNeft's shares plunged 20 per cent Friday after the oil and gas company said it reduced output at two wells in Russia following mechanical production issues.

The group has encountered operational problems at its Arbuzovskoye oil field in Tomsk Oblast in recent weeks which has cut back overall production by 300 barrels of oil per day (bopd).

"The reduced output may be due to migration of fine grained materials that are gradually plugging the well bore which can be rectified with a simple workover," the company explained.

"We are also investigating possible pressure depletion in the reservoir, which can be addressed with a planned pressure maintenance programme."

This winter the company has also had to contend with unusually extreme temperatures at Licence 61 - which includes the Arbuzovskoye and Lineynoye oil fields - reaching as low as -49 degrees Celsius, slowing operations significantly.

Nevertheless, the group successfully completed well 112 at Arbuzovskoye with an initial oil flow rate of 140 barrels of oil per day. No water production was associated with the well which is currently shut-in for pressure build-up testing.

Drilling on the Arbuzovskoye well 105, the next in the sequence of the prospect, has commenced.

Arbuzovskoye contains proven reserves in excess of 13m barrels of oil, according to independent reserve auditors Ryder Scott, and is the company's second field in development.

Overall, the average initial production rates from the first five wells in the programme have exceeded targets of 150-200 bopd per well.

"The initial flow rate on well 112 is encouraging and the fact that there is no water production bodes well," Chief Executive Officer, Dennis Francis, said.

"We continue to delineate the field and hope to alleviate the issues with the two Arbuzovskoye wells in the coming weeks. We also look forward to completing further wells in Arbuzovskoye and implementing the planned pressure maintenance programme over the coming months."

RD

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