Enwell Energy, the AIM-quoted oil and gas exploration and production group, has provided an update on its operational activities in Ukraine, where it operates the Mekhediviska-Golotvshinska (MEX-GOL), Svyrydivske (SV) and Vasyschevskoye (VAS) gas and condensate fields, as well as the Svystunivsko-Chervonolutskyi (SC) exploration licence.

The Russian military action in Ukraine, which began on 24 February 2022, is ongoing, and has made the situation in Ukraine extremely challenging. Nevertheless, Enwell had been able to continue production and some field operations at the MEX-GOL and SV fields, and completion of the drilling of the SC-4 well at the SC licence is planned shortly. However, all operations at the VAS field (located near to Kharkiv) remain suspended due to the risks associated with the military activity near this location.

The Company continues to be cautious and vigilant in continuing these operations and is taking all measures available to protect and safeguard its personnel and business. The safety and wellbeing of its personnel and contractors is paramount and the Company will continue to take all possible steps to ensure their safety.

The disruption to production operations at the MEX-GOL and SV fields, where certain remedial and maintenance work was delayed and/or disrupted, and the shut-in of the VAS field since February 2022 meant that production volumes were materially lower compared with Q2 2021. In addition, drilling of new wells and some remedial work on existing wells has been deferred or suspended until there is an improvement in the situation in Ukraine.

Notwithstanding the disruption to production operations, the continuing high gas prices in Europe have fed through to Ukrainian gas prices, although there has been significant volatility in gas prices, both in Europe and Ukraine. Nevertheless, the sales prices being achieved by the Company for its gas, as well as condensate and LPG, have been high by comparison to Q2 2021, and the continued high hydrocarbons sales prices have helped to offset the impact on revenues during the quarter due to the lower production volumes.

Demand for hydrocarbons, particularly gas, has been understandably variable since the military conflict commenced in February 2022. The Company has continued to supply gas to its existing ultimate off-takers, although volumes ordered by such off-takers have reduced over recent months, which has meant that the Company has been selling a higher proportion of its gas through the Ukrainian electronic gas trading market. It has been necessary for the Company to allow some flexibility in the recovery of sales receivables from certain ultimate off-takers, while sales through the Ukrainian electronic market are made on a prepayment basis. The Company is working with its customers and ultimate off-takers to manage the situation as satisfactorily as possible in the circumstances.  

Operations

Production operations are continuing at the MEX-GOL and SV fields, where a proportion of the wells have been put on production, and, currently, the production rate is approximately 2,600 boepd. Some other field operations have resumed, including workover operations on the SV-2 well, and perforation and testing of various intervals in the SV-29 development well. In addition, construction work on the upgrades to the gas processing facilities at the MEX-GOL and SV fields was completed during the quarter. All o ther works have been deferred or suspended.

Preparations to resume drilling of the SC-4 appraisal well at the SC licence are also underway, and once drilling operations are completed, it is planned to log, and subject thereto, test this well.

All production and field operations at the VAS field remain suspended.

Sergii Glazunov, Chief Executive Officer, said:
"The situation in Ukraine continues to be extremely challenging, but we are taking all available measures to protect our business and ensure the safety and wellbeing of our personnel, while continuing to operate where we believe it is safe to do so."

KeyFacts Energy: Enwell Energy Ukraine country profile