Roxi Petroleum (LON:RXP) this morning announced that the Kazakh authorities have given approval for gas flaring on the NW Konys Field for the period 2012 to 2014.

This is the final regulatory approval that Roxi has been waiting for and it means that pilot production can now begin on the field.

Roxi says the NK4 and NK6 wells will be put into pilot production in the first quarter.

"(Roxi) and our partner LGI are now in a position to commence pilot production from two of our wells on NW Konys and at the same time will test the outcome of wells NK 9 and NK 10 in early in 2012," said chief executive David Wilkes.

Last month Roxi got the go-ahead for a similar pilot production programme on the South Yelemes field.

Roxi expects wells 54 and 805 on South Yelemes to be put into pilot production in the second quarter of 2012.

Kazakhstan oil firm Roxi Petroleum (LON:RXP) this morning announced that the NK-9 well has encountered oil bearing reservoir sands.

The well was spudded at the end of last month. The well was designed to appraise the Arskum discovery. It was drilled to a depth of 1,505 metres. 

Roxi said that the preliminary interpretation of wireline logging indicates that the well encountered oil bearing reservoir sands in the Upper Jurassic section. This was at a depth of 1,294 metres. 

Following final interpretation of the data from wireline logs Roxi will perforate and test the well. 

Meanwhile the drill rig will now move on to drill the NK-10 well. This well will appraise the Upper Jurassic sands on the same structure.

"I am delighted that the results of drilling NK-9 have confirmed our understanding of the oil in place on NW Konys and look forward to the final results of the logging and putting this well onto test after completing the drilling of well NK-10," said chief executive David Wilkes.

Roxi Petroleum (LON:RXP) today told investors that it has spudded the NK-9 well to appraise the Arskum discovery in Kazakhstan.

Drilling began on October 27 at 13:00 local time. Roxi expects the drilling work to last for 30 days.

NK-9 is being drilled to a depth of 1,500 metres to appraise the discovery of Arskum formation in the south channel of the Galaz block.  It is the first of three wells that Roxi intend to drill by the end of this year.

"I am delighted that after many months of preparation and dealing with the company's finances we are able to commence drilling on what we believe to be a promising asset,” said chief executive David Wilkes.

“We await with interest the results of the drilling.”

It told investors that its partner Canamens BNG will not make the US$11.9 million final payment due under a sale and purchase agreement dating back to 2009.

Canamens’ decision will have little operational impact but the longer term development of the BNG asset will now require additional funding, Roxi said.

Roxi said that Canamens will forfeit a 6.25 percent stake in the BNG contract area as a result. 

Subsequently Roxi’s interest in BNG will increase from 23.41 to 29.66 percent and Canamens stake will be reduced from 35 to 28.75 percent. Alongside its other partner Baverstock - which owns just over 40 percent of BNG - Roxi will look to raise additional funding from industry sources.

Canamens, an independent oil group part funded by Goldman Sachs private equity, said it made the decision because it plans to refocus its resources but it will work with Roxi and Baverstock in an ‘optimal way’ to explore and develop BNG’s hydrocarbon potential.

"We have been aware that Canamens shareholders have been conducting a strategic review of its operations,” chief executive David Wilkes said. “It is disappointing that Canamens has decided not to invest the full consideration under the agreed terms of the existing sale and purchase agreement."

Originally Roxi acquired a 58.41 percent stake in BNG back in 2008, when it bought Eragon Petroleum from Baverstock - which is currently Roxi’s largest shareholder and is controlled by Roxi’s executive director Kuat Oraziman.

It subsequently struck a deal with Canamens in January 2009, to sell it 35 percent of BNG in two stages.

Since then Canamens handed over a total of US$34 million in stage one. It paid US$9 million so far under stage two, but a $1.7 million cash call was not met and a US$10.28 million balance remained under the 2009 agreement.

The preparations for the 2011 pilot production drilling programme is now under way.

There are already five wells drilled and completed on the field with standalone facilities ready to start pilot production.

Initially two wells will be put into production with the remaining three wells to be brought on as the pilot development progresses.

“The conclusion of this deal represents the beginning of our new partnership with LGI and we look forward to working alongside them on developing this exciting asset," said chief executive of Roxi Petroleum David Wilkes.

“The deal also provides Roxi with sufficient funds to focus on its two principal assets, being Galaz and BNG, and will enable us to better develop these core assets into production going forward,”

Roxi also reported that Galaz and Company has received preliminary confirmation of the extension and amendment of the Sub-Soil User Contract, increasing the total Contract Area six fold to approximately 180 square kilometres.

Shares in the company climbed 6 percent on the news.

Kazakhstan-focused oil and gas junior Roxi Petroleum (LON:RXP) has spudded a new exploration well on the BNG contract area.

The Yelemes 135 well was spudded on the 29 December 2010. It is expected to take 42 days to drill the well to an estimated total depth of 2,950 metres.

On AIM the stock shot up more than 10 percent following the announcement, to trade at around 7.5 pence per share.

The BNG contract area - which is also referred to as the Ayrshagyl block - covers 1,561 square kilometres at the edge of the Caspian Sea, in Western Kazakhstan. Around 20 percent of the BNG area consist of a ‘transition zone’ that floods twice a year, depending on the sea level and weather conditions in the Caspian Sea.

Roxi highlight that the BNG is surrounded by producing fields - Tengiz, Borankol, Tolkyn, and Nsanovskoye. 

The BNG is one of two key areas that Roxi is concentrated on following its rationalisation and re-structuring efforts in 2010 – which saw a number of disposals.

Pre-tax loss narrowed to US$8.9 million from US$18.3 million a year ago when Roxi still had no revenues, while turnover for the half amounted to US$0.52 million, roughly unchanged from US$518,000 in the second half of the previous year.

Roxi said it was able to achieve considerable progress in advancing its project by securing multiple farm-out agreements and securing new funding, including a US$24 million equity line from GEM Global Yield Limited and a US$5 million convertible loan from Arawak Energy Limited. An equity issue was also undertaken in September this year, when Roxi issued 6 million new shares at 10 pence per share.

“Roxi has successfully concluded a number of funding and farm-out transactions which have allowed us to continue to develop our assets when traditional funding methods have been closed. These transactions have also brought on board a number of partners whose involvement will undoubtedly benefit the company in the long term,” said chief executive of Roxi Rob Schonbrood.

The company noted that the financial markets “seemed to be returning to a more positive state,” saying further recovery would make “the maximization of (Roxi’s) existing assets an easier proposition than it has been for some time.”

Roxi’s assets in Kazakhstan cover a combined area of 1,880 square kilometres. The company said it had so far received US$13.5 million from the farm-out agreement with Canamens over the Ravninnoye field, which was signed in November last year and called for an upfront payment of US$5 million and a further US$22.5 million to fund the work programmes on the area for a 32.5% interest.

Four wells that were drilled on the Galaz area, in which Roxi has a 50.15% stake, have so far produced 63,000 barrels of oil, the company said in the statement.

Shares in Roxi slid 6.8% on the London Stock Exchange following the release of the interims.

LG has been granted exclusive access to the Galaz records until the end of September 2009. Further announcements will be made in due course.

Roxi also said has agreed to issue 7.08 million shares to Starostin Sergey Valentinovich in return for his assistance in securing much needed equity funding in November 2008.

The latest deal means Roxi has in the past month put in place facilities to provide up to an additional  US$29 million of funding.

Approximately US$3 million of the Arawak funding will be used to bring the Galaz assets into full production. Approximately US$2 million will be available for general administrative purposes.

The loan is repayable in 12 months at the company's option. In the event it is not then repaid the loan will, based on today's exchange rate, convert into approximately 31 million Roxi shares.

The board believes that the convertible loan, taken together with funding available under the recently announced US$24 million facility with GEM Global Yield Fund Ltd, will provide a far greater level of financial stability that has existed of late and allow the management to focus on the development of the company's assets, Roxi added.

The Kazakhstan based oil exploration and development company said it will control the timing and the maximum amount of any draw down under the GEM credit line and is not obliged to draw on the funds on offer.

As part of the deal, Roxi has agreed to issue to GEM warrants to subscribe for up to 9 million shares at a price of 13.75p per share at any time over the next five years.

Updating on operations, it said the third of four wells has been successfully tested on the company's NW Konus field in the Galaz contract area. The well will be put onto a long-term 90 day test. The final well to be tested, NK4, is being worked over and scheduled for testing in June.

Acquisition of the 360 square kilometre 3D seismic programme over the Yelemes and Ayrshagyl areas of the BNG contract area was completed in May. Initial results of the processing will be available in June, with full results completed in the third quarter.

Chief executive Rob Schoonbrood said: “The GEM facility will provide reassurance to our trading partners that Roxi will be able to develop its assets as planned, meeting all our current commitments.”

“Following a tough year in capital markets, we believe that with this combination of new funding, and a positive outlook operationally, there is every reason for cautious confidence for the future,” he added.