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Production results for Y2018 in Imperial Energy Group and plans for Y2019

The actual oil production in Imperial Energy Group in Y2018 was 216.4 thousand tons. With a business plan of 236 thousand tons, its fulfillment made 91.7% or minus 19.6 thousand tons.

The main reason for the decline in oil production is non-deployment of a pilot project in the Tyumen deposits of Mayskoye field. In the process of sidetracking in one of the wells, complications were encountered, caused by work of the drilling contractor. These complications could not be eliminated after numerous attempts. As a result, it was decided to shift the sidetracking job followed by multi-stage hydraulic fracturing job (frac) to a different well, and the frac itself to be carried out in the early 2019.

Geological exploration activities were successful in the past 2018. As a result of drilling and testing of exploratory well No. 11 of West-Mayskoye field, increment in geological and recoverable oil reserves of C1 + C2 categories was achieved by 10209/2766 thousand tons, respectively. In order to clarify the production capabilities of the field and to prepare for development drilling in future, it is planned to carry out frac with the following trial recovery of oil from the well in 2019.

In the winter period of 2018, the Group arranged for trial recovery and survey in an exploration well of the East-Maiskoye field discovered in 2017. Activities were also carried out to intensify the flow (additional perforation of the J1 (3-4)), as a result of which a commercial flow of oil was confirmed. In 2019, squeeze jobs are planned in the well to limit the inflow from the water-saturated bottom part of the J1 (3-4).

In 2019, it is planned to produce 216.0 thousand tons of oil from the fields of Imperial Energy. The Group plans to complete a hydraulic fracturing program at Maiskoye group of fields, which includes a multistage hydraulic fracturing in a sidetracked horizontal wellbore of one of the wells, hydraulic fracturing via the new technology in four wells drilled previously and in three exploratory wells, as well as hydraulic fracturing at Snezhnoye field (frac in six previously drilled wells).

In 2019, testing and hydraulic fracturing is planned in J14-15 of well 5R of South Maiskoye field as a result of which the Group expects to transfer oil reserves (1706 thousand tons of in place reserves and 500 thousand tons of recoverable reserves) to commercial category B1.

With respect to geological exploration activities in 2019, the Group has the following plans:

1. drilling of an appraisal well at Festivalnoye field to locate deep deposits in Paleozoic and test the J14 to prepare the Tyumen deposits for development drilling;

2. Field 3D seismic exploration activities in the scope of 170 km to clarify the geological structure of Jurassic and Paleozoic deposits in the vicinity of a well at Khylkinskaya prospect in order to prepare the Paleozoic structure and pinpoint the location for the appraisal well;

3. Start of preparation for the 3D seismic survey at Srednaya (155km) and East-Okonechnaya (160km ~) prospects, as well as 2D survey in the scope of 280 line km at South Festivalny-3 license block.

Imperial Energy Group continues work started in June of 2018 for construction of its associated petroleum gas treatment facility at Snezhnoye oil and gas condensate field. The project is scheduled for completion in 2019.

Сonstruction of gas pipeline from Snezhnoye field to CTF Zavyalovo gas pipeline (46 km, 6 knots, a commercial hub) is almost completed; the gas pipeline has successfully passed the hydraulic testing. Work on the gas pipeline is expected to be completed by July of 2019. Since January of 2018 the Group has also been constructing an oil treatment facility at  Dvoynoye field. At the moment comprehensive testing of process equipment is in progress. Capital repairs of pipeline from South Maiskoye to Maiskoye field (2.7 km, 159x8 mm pipe) was completed. A total of 134 km of winter road was constructed for operations of the Group in 2018.