Kulczyk Oil commences drilling of K-7 well

KUB-Gaz, a 70%-owned Ukrainian subsidiary of Kulczyk Oil (KOV PW), after successful tests of its M-20 well earlier this month, commenced drilling of the new K-7 well, Kulczyk announced yesterday. Drilling is expected take about 50 days to reach total measured depth of 3,200 m and explore new gas bearing zones, which were earlier defined by 2D seismic tests.

Roman Dmytrenko: Unlike the company’s recently drilled M-20 well, which targeted proved reserves in the R8 production zone, the new K-7 well targets prospective resources that imply a high risk of failure. This risk exacerbates the company’s need for additional financing (via a previously announced SPO) as the company may not have sufficient internal funds to continue its drilling program. On the flipside, successful exploration will be beneficial for the company’s value, as it could expand Krutogorovskoye license area 3P reserves by 2x-9x to 4.7-21.8 Bcf.