Zhaikmunai 2013 Operational Update

Wed Jan 30, 2013 2:08am EST

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  ISLE OF MAN, UNITED KINGDOM, Jan 30 (Marketwire) -- 
 

        __________________________________________________

                      2013 Operational Update
                          30 January 2013

                ZHAIKMUNAI 2013 OPERATIONAL UPDATE

Douglas, Isle of Man - 30 January, 2013: Zhaikmunai L.P. (LSE: ZKM)
("Zhaikmunai") issues the following Operational Update summarizing key
activities since the Q3 2012 Interim Results and Update on 21 November
2012.

KEY HIGHLIGHTS

* Zhaikmunai's total average daily production has been
approximately 46,500 boepd since January 21, 2013. This is a result of
tying in 3 additional gas condensate wells between the end of 2012 and
the beginning of 2013 and bringing them towards full production over
the first few weeks of the year. Zhaikmunai is especially pleased with
the results from the Devonian gas condensate well #217 detailed below;

* Fourth quarter total average daily production (Q4) averaged
37,184 boepd, taking into account Zhaikmunai's two-week annual
maintenance shutdown of the GTF (Gas Treatment Facility) during October
2012. In 2012, total daily production averaged 36,940 boepd.

* In 2013, total average daily production is expected to be in
excess of 45,000 boepd and Zhaikmunai plans to more than double this
total average daily production volume over the next 3-year period with
the increased gas processing capability of the planned third GTF train.

* Drilling plans over the next 12 months include 15 - 17 wells, 9
of which will be appraisal wells, 1 exploration well and 5 - 7
production wells;

Production Overview

* Since 21 January 2013, the total average daily production has
been approximately 46,500 boepd, with the tie-in of 3 new gas
condensate wells;

* Q4 2012 total average daily production amounted to 37,184 boepd,
representing an increase of approximately 83% compared with Q4 2011
(20,355 boepd);

* Total production for 2012 increased by approximately 181% to
13,520,205 boe from 4,803,561 boe in 2011;

* Total average daily production for 2012 was 36,940 boepd, an
increase of approximately 181% compared to 2011 (13,158 boepd);

* The product split for 2012 was as follows:

Products                      2012 Average         2012 Average Product
                              Production           %

Crude Oil & Stabilised        15,764 boepd         43%
Condensate

LPG (Liquid Petroleum Gas)    2,940 boepd          8%

Dry Gas                       18,237 boepd         49%

TOTAL                         36,940 boepd         100%

* The average realized oil price for 2012 was US$ 107.46/bbl.

Summary of New Wells

a) Devonian Gas Condensate Well #217

Zhaikmunai reports the successful drilling and testing of the partially
insolated Biski-Afoninski reservoir compartment in the north-eastern
part of the Chinarevskoye field. Well #217 was drilled as a deviated
directional gas condensate production well for the Biski-Afoninski
reservoirs at a structural high and in a partially separated fault
compartment at the north-eastern block of the Chinarevskoye field,
southeast of production Well #218. The reservoir pressure in this
compartment is near to initial reservoir pressures and about 40 bars
higher compared to other producing Biski-Afoninski wells. The flow rate
is approximately 4,000 boepd, which is significantly above
expectations.

b) Tournaisian Gas Condensate Wells #404 and #406 (Chinarevskoye
Southern Part)

Gas condensate Wells #404 and #406 were drilled using the same
successful directional drilling technology previously applied for
Tournaisian oil production wells in the north-eastern block. Well #404
also confirms the success of the selective multi-step perforation and
stimulation technology, starting with the treatment of the low
permeable reservoir intervals (0.5-5.0 mD) followed by higher permeable
intervals. The production log of Well #404 proved that all potential
sub-layers of the reservoir interval were connected to production. The
flow rates of both wells were in line with expectations at
approximately 1,000 boepd.

Well #404 - drilled as a deviated directional gas condensate production
well for the Tournaisian reservoirs using the same drilling,
perforation, and stimulation technologies as successful oil production
Well #116. The well was drilled in favourable geological conditions
southeast of gas production Well #31 and was perforated at depths of
4,472 - 4,549 meters after applying selective three-step perforation
and stimulation technology.

Well #406 - also drilled as a deviated directional gas condensate
production well for the Tournaisian reservoirs southeast of Well #404,
at the border of the mapped structure, with reduced reservoir thickness
and low permeabilities. This well was perforated at depths 4,504 -
4,544 meters after one-step perforation and stimulation of all
potential reservoir intervals.

2012 - KEY MILESTONES

* Successful Pricing of US$ 560 Million Notes Due 2019 at a Coupon
of 7.125%

In November 2012, Zhaikmunai successfully priced US$ 560 million
aggregate principal amount of senior bonds with a seven-year maturity
(2019) at a fixed coupon of 7.125% per annum. The new notes were used
in part to repay US$ 357 million of its existing notes, which allowed
Zhaikmunai to extend 80% of its existing liabilities to 2019 and to
reduce the interest rate of 10.5% on the previously issued bonds down
to 7.125% on the new bonds.

* Payment of Inaugural Dividend and Adoption of Dividend Policy

In Q3 2012, Zhaikmunai announced the payment of its inaugural dividend,
being a cash distribution of 32 cents per partnership interest (equal
to US$ 60.2 million), and the adoption of a dividend policy by the
Board of Directors of its General Partner of not less than 20% of the
Partnership's consolidated net profit per annum.

* Acquisition of 3 New Licenses

In Q3 2012, Zhaikmunai signed Asset Purchase Agreements to acquire 100%
of the subsoil use rights related to three new oil and gas fields
(Rostoshinskoye, Darzhinskoye and Yuzhno-Gremyachenskoye) in the
pre-Caspian basin to the northwest of Uralsk, located approximately 60
-120 km away from the Chinarevskoye field, for a total purchase price
of US$ 16 million. In Q4 2012, the Antimonopoly Agency as well as the
Ministry of Oil and Gas (MOG) of the Republic of Kazakhstan provided
their consent for the acquisition of all three fields and the
partnership is currently finalizing the supplementary agreements with
the MOG to become the legal owner of the subsoil user rights.

ZKM estimates that it will cost approximately US$ 85 million to conduct
the necessary appraisal and development activities in the three fields
over the next 2 - 3 years. These activities will include the
acquisition of new 3D seismic data and/or the reprocessing of existing
2D and/or 3D seismic data, as well as exploration/appraisal drilling in
order to validate and expand on the existing reserves reports. The
latter include the following reserves estimates: 1P - 28 mmboe; 2P -
131 mmboe; 3P - 187 mmboe for the three fields taken together.
Zhaikmunai believes the upside potential for these fields to be very
promising.

* Drilling

During 2012, 9 wells were drilled and completed, bringing the total
number of producing wells to 29, i.e. 11 gas condensate wells and 18
crude oil wells.

* Expansion of Processing Capacity with Additional Train to GTF

The design of the second phase GTF has been completed and has received
approval from the Kazakh authorities. Zhaikmunai is currently analyzing
and evaluating the response to proposals submitted last year to
contractors for the delivery of equipment and the construction of the
new gas plant.

Kai-Uwe Kessel, Chief Executive Officer of Zhaikmunai commented:"2012 was
an excellent year for Zhaikmunai in which we managed to
achieve a number of important goals. Our first year of operating the
GTF and bringing it towards full capacity reinforces the track record
our team has built in successfully constructing and operating large
infrastructure projects. With current average production within 5% of
full capacity and our balance sheet showing a strong cash position,
combined with the extension to our debt financing from our bond
transaction, we have an excellent platform from which to continue to
build the business. We have an important programme ahead of us in 2013
and I look forward to implementing the next stage of our development."

Frank Monstrey, Chairman of Zhaikmunai commented:"I am delighted to
congratulate the management team on another
excellent 12 months. 2012 was a landmark year with the GTF fully
operational and ramping up towards nameplate capacity consistently.
2013 will be an exciting year as we take the first steps towards our
next goal of more than doubling production to over 100,000 boepd by the
end of 2016. I have full confidence in the management team successfully
implementing the next stage of our development and look forward to an
exciting future for Zhaikmunai."

Further information

For further information please visit www.zhaikmunai.com

Further enquiries

Zhaikmunai LP - Investor Relations
Bruno G. Meere
Kirsty Hamilton-Smith
investor_relations@zhaikmunai.com  + 44 (0) 1624 68 21 79

Pelham Bell Pottinger
Philip Dennis
Elena Dobson                       + 44 (0) 207 861 32 32

About Zhaikmunai

Zhaikmunai is an independent oil and gas enterprise currently engaging
in the exploration and development and production of oil and gas. It is
listed on the London Stock Exchange (Ticker symbol: ZKM). Its principal
producing asset is the Chinarevskoye Field located in northwestern
Kazakhstan. Zhaikmunai L.L.P., a wholly-owned subsidiary of Zhaikmunai
L.P., holds a 100% interest in and is the operator of the Production
Sharing Agreement for the Chinarevskoye Field.

Forward-Looking Statements

Some of the statements in this document are forward-looking.
Forward-looking statements include statements regarding the intent,
belief and current expectations of the Partnership or its officers with
respect to various matters. When used in this document, the
words"expects,""believes,""anticipates,""plans,""may,""will,""should"
and similar expressions, and the negatives thereof, are intended to
identify forward-looking statements. Such statements are not promises
or guarantees, and are subject to risks and uncertainties that could
cause actual outcomes to differ materially from those suggested by any
such statements.

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