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Hawkley Oil & Gas acquiring Ukraine gas plant

Published: 00:50 05 Oct 2012 BST

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Hawkley Oil & Gas (ASX: HOG) is targeting cost savings and the end of third party constraints on its Ukraine gas production with the acquisition of an existing local gas plant.

The company has signed a binding Memorandum of Understanding to acquire a gas plant in Ukraine from Eurocrimea for US$1.5 million.

The plant is capable of processing about 11 million cubic feet of gas per day – enough to handle Hawkley’s current production of about 4.8 million cubic feet per day (MMcfd) as well as expected production from the Sorochynska 202 well.

It is also scalable and the company plans to expand its capacity in line with its production growth projections.

Hawkley expects to spend about US$1 million to upgrade the plant to its specifications, bringing the total cost up to US$2.5 million though this is still a US$3 million saving on the US$5.5 million it had budgeted earlier this year for the construction of its own plant.

Once the new plant is commissioned, anticipated for December, cost savings are expected to be between US$200,000 and US$250,000 per month, representing a quick payback of about 12 months.

It will also remove the production constraints that Hawkley has faced.

Hawkley is currently carrying production testing on the Sorochynska 202, which was drilled to provide an additional offtake point for the main Upper B18 sand.

While reservoir development of the Upper B18 appears to be slightly less than prognosed at this location, it is mitigated by the improved development of the Lower B18 with the total pay in both B18 sands being close to expectation.

Production testing of the Lower B19 horizon has also confirmed the existence of a substantial gas resource in that interval, opening up the possibility of a second development project.

Sorochynska 202 could double Hawkley’s production from the Sorochynska field.

 

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