Aurelian Oil & Gas lifted by Siekierki gas field sales deal and Romanian gas well tests as it outlines new strategy

Shares in Aurelian Oil & Gas (AIM: AUL) were lifted this morning by news of a gas sale agreement for its Siekierki field in Poland and encouraging results of testing the Voitinel-1 gas well at the Brodina concession in Romania. In yet another statement, the group outlined its strategy going forward following the recent management reshuffle.

Shares in the Europe focused exploration and production group were up more than 17.5 percent in London late morning deals.

Aurelian has, through its 90 percent owned subsidiary Energia Zachod, entered into an agreement with Kulczyk Investments SA for the sale of gas produced from EZ's Siekierki field, for gas produced from test wells during an initial 6-month period and a subsequent fully-termed agreement which will run for an initial 10 years. Kulczyk holds approximately 10 percent of Aurelian.

Prices will be set by reference to the published PGNiG SA (Polish Oil and Gas Company) tariff price for system high methane gas fuel. At today's exchange rate, the price converts to a Polish market gas price of US$9.328 per thousand cubic feet.

Aurelian CEO Rowen Bainbridge said: "The conclusion of an agreement for the sale of our gas from Siekierki is a major milestone in the development of one of our most important assets and will enable us to proceed with the initial drilling program and to finalise our options for financing the full development. We are now focused on delivering first gas to our customer under the agreement in 2011."

In a separate statement, Aurelian announced “encouraging” preliminary results from testing the Voitinel-1 well at its Brodina concession in Romania from the interval between 1,653.3 metres and 1,672.5 metres measured depth. The test was designed to collect the data required to characterise the reservoir in order to assess appraisal and development options The well flowed at an initial rate of 85,000 cubic metres of dry gas per day, and is currently being further tested at various flow rates and pressures.

Voitinel-1 has tested 17.6 metres of pay at satisfactory rates. It would be speculative to assign resources at this stage but it is expected that the scale of the discovery will be assessed and announced once the pressure and flow test analysis has been completed over the next three weeks, the company said.

Interests in the Voitinel well are Aurelian Oil & Gas (Romania) SRL with 33.75 percent, S.N.G.N. Romgaz SA with 37.50% and Europa Oil & Gas srl with 28.75 percent.

The group reported in September that the deeper prospects in Voitinel were dry but logs of two shallower sands looked interesting and so it proceeded to assess their potential further. “One zone is now under test and we are encouraged by these early results. We will continue to test this zone over the next three weeks and will provide a further update in due course," it said.

Aurelian issued a further statement today, outlining its strategy going forward following the September 2009 update of the ongoing management reshuffle which saw the appointment of Rowen Bainbridge as chief executive officer and Mark Reid as chief financial officer earlier this year and which will be completed at the end of 2009.

The board will then consist of nine members: three independent non-executive directors, chairman David Prior, Malcolm Pattinson and David Walker; three directors representing substantial shareholders, Miles Donnelly, Dariusz Mioduski, and Nick Coats; and three executive directors, CEO Rowen Bainbridge, CFO Mark Reid and Michael Seymour.

Aurelian will focus its exploration, appraisal and development activities in two core areas: The Rotliegendes and Zechstein plays in Central and Western Poland and the Carpathian Thrust Fold belt in Southern Poland, Slovakia and Western Romania. The company defines a core area as having the potential to deliver 50 million barrels of oil equivalent of proven reserves net to Aurelian.

The company's large appraisal and exploration portfolio will be converted into proven reserves and production, creating a balanced portfolio by 2011.

The Kulczyk gas sale agreement mentioned above is part of its strategy for the Rotliegendes and Zechstein plays. It is still in talks with a view to adding a strong technical partner to optimise full field development in this core area.

Over the next two years, the group is planning an exploration program drilling up to 9 wells in the Carpathian Thrust Fold belt. In Romania, Aurelian will exit for value the Sarmatian exploration play - except Suceava - and focus only in the Carpathian Thrust Fold belt in the West of its Cuejdu block. It further plans to drill up to three wells in Bulgaria, bring these operations on early cash flow and then monetise this non-core area.

The company plans to grow its portfolio in its two core areas organically in the short term, and through M&A in the medium term.

For November, Aurelian plans to report the final results of testing the Voitinel-1 well, and intends to publish the project plan for Siekierki and award engineering and drilling contracts for the field. It envisages announcing a partner for Siekierki in 2010.

Further in 2010, it plans to spud the Suceava, Siekierki 2 and spud and test the Siekierki 3 wells and farm out or sell the non-core Romanian assets. The year will also see spudding of the Bulgaria 1 and 2 wells and drilling of the Bieszczady 1 well.

CEO Bainbridge commented:  “We have taken our time, done our homework and identified the core areas where Aurelian has the best assets and where our skills and technology can be brought to bear. I believe that by focusing on these projects, exiting areas that are not material and working with the best partners we can unlock the value in the business. I look forward to a period of significant share price growth as we start to deliver against the milestones we have set and we demonstrate that we do what we say we are going to do."