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Cub Energy Inc. Operations Update for Q4 Of 2015

Source: www.gulfoilandgas.com 2/4/2016, Location: Not categorized

Cub Energy Inc. provides the following update for its operations for the fourth quarter of 2015. This update includes ongoing operations from KUB-Gas LLC (KUB-Gas), which Cub has a 30% ownership interest, and Tysagaz LLC (Tysagaz), Cub’s 100% owned subsidiary.

Fourth Quarter Production and Realized Prices Average production for the fourth quarter was approximately 1,353 boe/d (Cub WI), which was flat as compared to third quarter production of 1,350 boe/d. Production volumes at KUB-Gas declined approximately 5% due to natural declines with the absence of development drilling while production volumes at Tysagaz increased 15% due to a successful workover on the RK-23 well.

The estimated prices received in Ukraine current during the quarter were $7.32 per thousand cubic feet (Mcf) and $46.84 per barrel (bbl) for natural gas and liquids respectively. The comparable prices realized in the third quarter of 2015 were $6.58/Mcf and $42.91/bbl. Cub is paid in hryvnia (UAH), so the realized price in USD will continue to be influenced by changes in the exchange rate. The exchange rate went from 21.3 UAH/USD at the end of the third quarter to 24.2 UAH/USD at the end of the fourth quarter for an approximate 12% devaluation.

KUB-Gas Update
Pursuant to a letter agreement announced on February 1, 2016, the Company can earn up to an additional 10% ownership interest in KUB-Gas with the first 5% expected to be transferred for no additional consideration on or about February 8, 2016. The remaining 5% is earned subject to certain benchmarks and optional payments.

Tysagaz Update
In December 2015, a workover to recomplete the RK-23 well to the L-1 Upper was successful and the well is currently producing approximately 1.3 million cubic feet per day (“MMcf/d”). In January 2016, a workover at RK-21 set a retrievable plug above the current open perfs in the D-2 through D-3 Lower reservoirs and opened the D-0 reservoir for production. The workover was successfully completed and the well is on production at approximately 1.3 MMcf/d.

The Company is evaluating the 2016 work program in light of the recently reduced royalty rate of 29% effective January 1, 2016. KUB-Gas has an inventory of drilling locations and several fracture stimulations candidates.

Cautionary Statements:
BOEs may be misleading, particularly if used in isolation. A BOE conversion ratio of 6 Mcf:1 bbl is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead.

Test results are not necessarily indicative of long-term performance or of ultimate recovery. The test data contained herein is considered preliminary until full pressure transient analysis is complete.

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