TIDMUEN
RNS Number : 1648A
Urals Energy Public Company Limited
25 September 2015
Press Release 25 September 2015
Urals Energy Public Company Limited
("Urals Energy" or the "Company")
2015 Half Year Results
Urals Energy PCL (AIM: UEN), the independent exploration and
production company with operations in Russia, is pleased to
announce its half-year results for the six months ended 30 June
2015.
Operational highlights
-- Total production at Arcticneft during the period
reached 124,697 barrels (H1-2014: 118,958 barrels)
-- Total production at Petrosakh during theperiod
reached 196,890 barrels (H1-2014: 210,435 barrels)
-- Current daily production at Arcticneft is 716 BOPD,
4% higher than the average of 689 BOPD for the six
months ended 30 June 2015
-- Current daily production at Petrosakh is 1,110 BOPD
compared with an average of 1,088 BOPD for the six
months ended 30 June 2015
-- In June 2015 the Company completed drilling of well
112 at Petrosakh, resulting in the daily production
rate stabilizing in Petrosakh
-- In June 2015 the Company completed the installation
and testing of new control equipment in the Petrosakh
refinery after theaccident which occurred at the
beginning of the year
-- In January 2015 the Company signed a comprehensive
settlement agreement with Mr V Rovneiko, a former
Director of the Company, on all outstanding
litigation and pending or threatened disputes. This
resulted in a material decrease in consulting
services costs in the period
Financial highlights
* Positive net working capital position at 30 June 2015
of US$3.1 million (30 December 2014: US$1.6 million)
* In May 2015 the Company and its subsidiary Petrosakh
entered into a short-term loan agreement with Petraco
Oil Company Limited ("Petraco"). Under the terms of
this agreement, Petraco has advanced the Company
US$6.0 million and the Board expect to repay the loan
with the proceeds of the September 2015 Arcticneft
tanker shipment (expected to be received shortly). In
addition the Company has entered into an 18 month
revolving credit facility with the Sakhalin branch of
OJSC Sberbank of Russia, under which Sberbank will
provide, by way of several tranches, the sum of 300
million Russian Roubles. The loans are being used by
the Company to both progress its 2015 CAPEX plan and
as working capital financing
* Gross profit reduced by 45% to US$2.0 million
(H1-2014: US$3.5 million)
* Operating loss decreased to US$0.1 million for the
period (H1-2014: US$0.4 million)
* Loss for the period of US$0.1 million (H1-2014:
US$1.2 million)
* EBITDA* decreased to US$1.3 million from US$3.3
million in H1 -2014
* Continuous successful implementation of cost
reduction programme and effective cost management in
the period allowed the Company to decrease the
operating costs and SG&A costs in Russian Rouble
equivalent by 8% and 10% respectively
*Earnings before interest, taxation, depreciation and
amortisation ("EBITDA") is a non IFRS measure which the Group uses
to assess its performance. It is defined as earnings before
interest and taxation.
Post-period end and outlook
* On 1 September the planned annual tanker shipment for
export from Arcticneft was successfully completed.
The Company shipped 217,282 bbls (2014: 207,940
bbls). Preparatory maintenance work and changing the
timing of the shipment allowed the Company to
complete the shipment in less than four days without
any demurrage charges. Payment for the tanker
shipment is expected to be received shortly
* In July 2015 the Company commenced drilling of well
54. The target depth has been reached and the results
of this drilling are expected shortly
* The Company successfully continues to rationalise its
marketing policy. In anticipation of the winter
period Petrosakh has rented several tanks near Yuzhno
- Sakhalinsk and started small wholesales activity
that will increase net backs by at least 5 %
- Ends -
For further information, please contact:
Urals Energy Public Company
Limited
Andrew Shrager, Chairman Tel: +7 495 795
Leonid Dyachenko, Interim 0300
Chief Executive Officer
Sergey Uzornikov, Chief www.uralsenergy.com
Financial Officer
Allenby Capital Limited
Nominated Adviser and Broker
Nick Naylor / Alex Brearley Tel: +44 (0) 20
3328 5656
www.allenbycapital.com
Media enquiries:
Abchurch
Quincy Allan Tel: +44 (0) 20
7398 7710
uralsenergy@abchurch-group.com www.abchurch-group.com
The accounts for the six months ended 30 June 2015 will shortly
be available from the Company's website www.uralsenergy.com in
accordance with AIM Rule 20.
Interim Chief Executive Officer's Statement
Operating environment
The six months ended 30 June 2015 was a challenging period for
the Company, characterised by continuing high volatility in the
crude oil market price at an average level of US$58 per barrel
(H1-2014: US$109) as well as high volatility in the Russian FOREX
market. Domestic prices for light oil products ranged from US$82 to
US$106 per barrel (H1-2014: US$113 to US$137).
Due to the fire that occurred at the Petrosakh refinery at the
beginning of the year, the Company was forced to stop the
production of oil products for a period of time. This led to a
reduction in processing volumes during January and February 2015,
resulting in decreased sales volume and increasing stock. At the
end of the reporting period the Company had 26,985 barrels of crude
oil and 52,905 barrels of refined product in stock (H1-2014: 16,680
bbls and 48,735 bbls respectively). Subsequently the refinery has
recommenced production.
There were no deliveries of crude oil exported from Arcticneft
during the reporting period, resulting in 182,885 barrels of
commercial crude oil that remained in stock. The tanker shipment
from Arcticneft was completed at the beginning of September 2015,
payment from the shipment is expected to be received shortly.
Operating Results
Period ended
US$'000 30 June
----------------
2015 2014
-------------------------------------- ------ --------
Gross revenues before excise and
export duties 7,715 18,909
Net revenues after excise, export
duties and VAT 7,214 16,605
Gross profit 1,950 3,531
Operating profit (57) (438)
Normalised management EBITDA 1,323 3,306
Total net finance (expense)/benefits 282 (715)
(Loss) / profit for the year (48) (1,167)
-------------------------------------- ------ --------
Period ended
Production 30 June
------------------
2015 2014
--------------------------- -------- --------
Petrosakh bbls 196,890 210,435
Arcticneft bbls 124,697 118,958
Petrosakh BOPD (average) 1,088 1,163
Arcticneft BOPD (average) 689 660
Summary table: Gross Revenues before excise and export duties
($'000)
Period ended
30 June
----------------------------------------- ---------------
2015 2014
----------------------------------------- ------ -------
Crude oil 1,337 1,236
Export sales - -
Domestic sales (Russian Federation) 1,337 1,236
Petroleum (refined) products - domestic
sales 6,257 17,503
Other sales 121 170
Total gross revenues before excise
and export duties 7,715 18,909
----------------------------------------- ------ -------
For the six months ended 30 June 2015, total gross revenues
decreased by US$11.2 million as a result of a decrease of sales
volumes to 133,034 barrels for the six months ended 30 June 2015
(H1-2014: 209,564) and a 39% average devaluation of Russian Rouble
vs US dollar. These negative factors were partly offset by a 5%
average increase in refined products prices in Russian Rouble
equivalent.
High volatility in crude oil prices and FOREX rates during the
reporting period led to a decrease in average net back prices for
domestic sales of petroleum (refined) products. At the same time a
26% decrease in excise rate for gasoline in Russian Rouble
equivalent and slight increase in the prices had a positive effect
on net back for refined products. Net back for domestic product
sales is defined as gross product sales minus VAT, transportation
costs, excise tax and refining costs.
(MORE TO FOLLOW) Dow Jones Newswires
September 25, 2015 02:00 ET (06:00 GMT)
Summary table: Net backs (US$/bbl)
Period ended
30 June
----------------------------------------- ---------------
2015 2014
----------------------------------------- ------- ------
Crude oil 46.43 58.30
Export sales - -
Domestic sales (Russian Federation) 46.43 58.30
Petroleum (refined) products - domestic
sales 49.25 65.41
Other sales - -
----------------------------------------- ------- ------
Gross profit (net revenues less cost of sales) for the first
half of 2015 decreased 45% to US$2.0 million (H1-2014: US$3.5
million). The main drivers for this decrease were the decline of
sales volumes and the lower netbacks.
Cost of sales for the six months ended 30 June 2015 totalled
US$5.3 million as compared with US$13.1 million for the six months
ended 30 June 2014 of which US$2.1 million and US$3.8 million
respectively represented non-cash items, principally depreciation,
amortisation and depletion. The decrease in operating costs was
mainly due to exchange rate fluctuation. However, it was also as a
result of the Company decreasing its operating costs in Russian
Rouble equivalent by 8% (adjusted for 2.5% production decrease and
11% unified production tax increase) compared with that achieved
for the six months ended 30 June 2014. This was despite the
depreciation of the Russian Rouble and an official inflation level
around 16% (1H-2015 vs 1H-2014).
Selling, general and administrative expenses decreased during
the first half of 2015 by US$2.0 million to US$1.9 million
(H1-2014: US$3.8 million). Apart from Russian Rouble depreciation,
the Company achieved an average decrease in Russian Rouble
denominated SG&A cost in the reporting period in the amount of
10% compared with the previous period. Professional and consultancy
fees are mainly denominated in US dollars and represent quite a
significant portion of the total SG&A costs. A material amount
of the fees in 2014 were represented by professional fees related
to the requisitioned EGM, and non-recurrent expenses relating to
legal action and the criminal investigation of the ADRA and
Vyatcheslav Rovneiko in Cyprus and Russia. At the end of 2014 the
Company settled all outstanding litigation and pending or
threatened disputes and this resulted in a US$0.6 million decrease
in SG&A cost.
The net finance income for the first half of 2015 was US$0.3
million (H1-2014: net finance cost of US$0.7 million). Net finance
income for the period primarily consisted of exchange rate
movements caused by a slight strengthening in the first half of
2015 of the US$ vs the Russian Rouble.
The decrease in sales volumes and net backs in the six months
ended 30 June 2015 resulted in a consolidated normalised management
EBITDA decrease of US$2.0 million to US$1.3 million for the first
half of 2015, compared with US$3.3 million in for the first half of
2014, with EBITDA margins of 18.3% and 19.9% respectively.
Management EBITDA (US$'000) - Unaudited
Period ended
30 June
------------------------------------------- ------------------
2015 2014
------------------------------------------- -------- --------
(Loss) for the year (48) (1,167)
Income tax (charge) 273 14
Net interest and foreign currency
(gain)/loss (282) 715
Depreciation, depletion and
amortisation 1,232 2,803
------------------------------------------- -------- --------
Total non-cash expenses 1,223 3,532
Charge of bad debt provision - 389
Other non-recurrent (income)/losses 148 552
------------------------------------------- -------- --------
Total non-recurrent and non-cash
items 148 941
Normalised EBITDA 1,323 3,306
------------------------------------------- -------- --------
Net debt Position
As at 30 June 2015, the Company had net debt of US$4.9 million
(calculated as long-term and short-term debt less cash in bank and
less loans issued). As at 31 December 2014, the Company had net
cash of US$4.4 million.
In May 2015 the Company received a loan of US$6.0 million from
Petraco. In June 2015 it also received the first tranche of US$1.3
million (RR$70 million) of a 300 million Russian Roubles 18 month
revolving credit facility from the Sakhalin branch of OJSC Sberbank
of Russia.
Operational update
Petrosakh
The Company completed the drilling and testing of well #112 in
July 2015. Due to difficult geological conditions, well # 112 has
not yet achieved the final expected production rate. However, time
this lower volume of oil well gas received from the well allowed
for an increase in reservoir pressure resulting in an improved
production rate from existing wells.
The Company commenced the drilling of well #54 in July 2015.
This well is now at the final stage of completion and testing. The
Company is planning to complete the drilling of well #54 and start
to drill a third well by the end of 2015.
During the first half 2015 the Company continued its focus on
optimising the cost structure at Petrosakh. During the first stage,
Management's main efforts were concentrated on transport and
storage services. This included, replacement of an external
contractor through the purchase of Company owned fuel trucks
resulted in a significant reduction in these costs.
Downstream
Petrosakh continues to refine and sell 100% of its crude oil
production to a highly competitive local refined products
market.
Despite the price stability and even some decline in the refined
product prices on the local market during the reporting period, the
flexible pricing policy allowed the Company to keep Russian Rouble
net backs on the sales of oil and oil products stable. Although US
dollar net backs decreased during the reporting period, the Russian
Rouble net back increased by 5% adjusted for a decrease in Excise
rate.
n 9 January 2015 a fire occurred at the Petrosakh refinery. The
fire was caused by an accident which occurred during adverse
weather conditions, and electrical control equipment was damaged.
This accident did not have a significant impact on the refining
activity of Petrosakh. The plant was out of operation for
approximately a month and a half and was brought back into
operation via a manual regime. The Company finished the
installation of replacement automated equipment in July 2015,
without any material effect on the production process.
At the same time the decrease in refining volumes in January -
February 2015, which is the most favorable period in terms of
demand, led to the short-term loss of some customers, resulting in
dropping sales volume and increasing stock. At present the Company
has stabilised the situation and even increased its customer base
by attracting smaller customers, participating in tenders and
developing small wholesale activity.
Arcticneft
Current production at Arcticneft is stable and stands at 716
BOPD.
Due to the weakness of the oil markets the Company decided to
focus on minimising the natural decline in production through
workovers and re-entering old existing wells. During the period the
Company perforated, re-entered and performed acid stimulation of
seven wells in total. This resulted in the stabilision of
Arcticneft and the production of an additional 56 bbls per day when
compared to the average level of production during the six months
ended 30 June 2014.
Arcticneft is in the final stage of the working with the
regulatory authorities to expand the boundaries of the license area
and update the scheme for the development of the oil field. The
expected time of completion is the fourth quarter of 2015.
Borrowings
In May 2014 the Company entered into a pre-export short-term
loan finance arrangement with Petraco Oil Company Limited
("Petraco") under which Petraco has advanced the sum of US$6.0
million to the Company ahead of its anticipated August 2015 tanker
shipment from Arcticneft. The proceeds of the loan were used by the
Company for working capital financing of Arcticneft. The loan,
including the accrued interest, will be fully repaid via non-cash
settlement transactions against trade receivables due in respect of
crude oil sales to Petraco in September 2015.
In June 2015 Petrosakh entered into an 18 month revolving credit
facility with the Sakhalin branch of OJSC Sberbank of Russia under
which Sberbank will provide, by way of several tranches, the sum of
300 million Russian Roubles to Petrosakh for working capital
financing.
Owing to the uncertainty about the direction of the oil price,
even though there is significant benefit from the Russian Rouble
exchange rate offsetting much of the recent fall in the price, the
Board will follow a cautious policy to maintain a cash positive
position in the coming months.
Strategy
Our strategy is to:
-- Continue work overs at our two operations so as to maintain
production levels as far as possible
-- Enhance refinery margins at Petrosakh by adjusting product
mix for local sales of products, and preparing to be able to import
crude to increase refinery throughputs
-- Seeking economies where possible to offset Russian Rouble cost inflation
-- Delaying major capex to exploit undeveloped reserves at
Arcticneft until there is more confidence in the oil market
-- Look to acquire exploration licences for modest consideration
and limited initial spending obligations
(MORE TO FOLLOW) Dow Jones Newswires
September 25, 2015 02:00 ET (06:00 GMT)
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