Shelton Petroleum and Ukraine's largest oil and gas producer, Ukrnafta, have completed drilling and commenced production from well #309 at the Lelyaki oil field in Ukraine.

The new well, drilled by field operator Kashtan Petroleum, reached a total depth of 2,000 meters and was cased as an oil producer. Log analysis indicate a net pay section of approx. 18 meters in the K1, and P1&P2 formations. The initial tests indicate production of over 70 barrels of oil per day, of which Shelton Petroleum holds a 45% interest. At the current oil price the drilling investment has an attractive payback time of a bit over a year.

'We are now seeing the results of the development program we are implementing at Lelyaki. Step by step we are increasing production. The properties of the field are well known and we are excited about the potential of low cost production increases, especially considering the current pricing of oil in Ukraine', says Zenon Potoczny, President of Shelton Petroleum.

Well #309 is part of the development program for 2012, which includes new wells, sidetrack drilling of suspended wells, workovers and interventions, in order to increase production volumes and cash flows from the field. The drilling rig will be moved to another location where well #310 will be drilled.

The oil in Ukraine is sold monthly at auction and at the most recent public auction of crude oil, prices were $94 per barrel net of VAT. Production from the Lelyaki field in December amounted to 9,100 barrels net to Shelton Petroleum; whereas the production in November, October and September was 8,600, 8,100 and 7,000 barrels respectively.

Shelton Petroleum owns a 45% interest in Kashtan Petroleum (holder of the license to the Lelyaki oil field) through its wholly owned subsidiary Zhoda 2001 Corp. Ukrnafta, Ukraine's largest oil and gas company, owns 55%.

Tags: Shelton Petroleum