Hawkley Oil & Gas Limited Issues Ukrainian Progress Report

June 7, 2011
Hawkley Oil & Gas Limited (ASX code: HOG) is pleased to provide an interim progress report on the assessment of hydrocarbon volumes in the Sorochynska Licence.

B18b Reservoir, Sorochynska East

Hawkley’s Sorochynska Well #201 is producing from the B18b reservoir in a fault-bounded trap located in the eastern part of the licence. Production commenced on February 17 and is presently running at 7MMscf/day of gas plus 200bbl/day of condensate.

Previous statements from Hawkley were made before the drilling of Sorochynska # 201 and therefore at a time when the discovered recoverable hydrocarbons in the trap were poorly defined. A 2P estimate of 13.2bcf of gas and 0.35 million barrels of condensate reserves were determined by independent experts, RISC, and reported in Hawkley’s 2010 Prospectus. This estimate was based on a development of one well and at an initial flow rate of approximately 4MMscf/day.

Following the drilling and testing of Sorochynska #201, Hawkley commissioned an independent expert of the State Committee of Reserves of Ukraine to produce a simulation model of reservoir performance which predicts the recovery of approximately 46bcf of gas and approximately 1 million barrels of condensate assuming a three-well development, with production taking place over twenty years. Production was assumed to peak at between 8-10MMscf/day in the early years.

Hydrocarbon volumes can be estimated with more accuracy and confidence now that Hawkley has flow rate and pressure history data from three months of production. Hawkley is therefore preparing to commission an independent expert to update the resource and economic reserves assessment of the B-18b pool. This work will begin later in June and produce a conventional classification of resources and reserves according to current SPE/SPEM guidelines.

In summary, the success of Well #201 has indicated that the producible reserves in the trap could be several times larger than reported earlier, and Hawkley is proceeding to prepare a full-field development plan based on three producing wells. The second Sorochynska well is being prepared for a spud in Q4 this year.

B24/25 Reservoirs, Sorochynska West

In addition, Hawkley intends to carry out appraisal drilling in the west part of the licence, where old wells have discovered and flowed hydrocarbons from the B24/25 reservoirs. Official in-place resources booked by the Ukrainian State are 330bcf, and an independent report commissioned by Hawkley in 2009 arrived at an estimate of 320bcf. There is considerable uncertainty on the estimates because the wells were not tested for a sufficient length of time, and the discoveries were not appraised.

Hawkley’s current priority is to generate revenue, and therefore the next well will be an infill development well into the B-18b reservoir already in production in Sorochynska. Appraisal drilling of the B24/25 reservoirs will be scheduled into the 2012 work programme.

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