Urals Energy PCL, 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 2014.
• Total production at Arcticneft reached 118,958 barrels (H1-2013: 125,651 barrels).
• Total production at Petrosakh reached 210,435 barrels (H1-2013: 240,533 barrels).
• Current daily production at Arcticneft is 690 BOPD - slightly higher than the average of 660 BOPD for the six months ended 30 June 2014.
• Current daily level of production at Petrosakh is 1,202 BOPD compared with an average of 1,163 BOPD for the six months ended 30 June 2014.
• Measures to halt natural decline at Petrosakh and Arcticneft, including the completion of successful workovers have stabilised production.
• New well drilling and existing well optimisation programs in place and being implemented on both fields.
• In H1-2014 gross profit was reduced by 28% to US$3.5 million (H1-2013: US$4.9 million), as a result the Company achieved an operating loss of US$0.5 million for the period (H1-2013: US$1.0 million profit).
• EBITDA increased to US$3.3 million from US$2.8 million in H1-2013, an increase of 19%.
• The Company continued to improve its net working capital position with positive net working capital on 30 June 2014 of US$3.8 million (2013: US$2.0 million positive working capital).
• In May 2014, the Company entered into a secured short-term loan agreement with Petraco Oil Company Limited ("Petraco") under which Petraco has advanced the Company US$7.6 million. The Loan is being used by the Company to both progress its 2014 drilling plan and working capital financing.
Post-period End and Outlook
• The annual planned tanker shipment for export from Arcticneft is expected in the middle of October 2014.
• Repayment of all loans from Petraco expected to be made by end of November 2014.
• Expected release of charge over the Company’s Arcticneft assets by Petraco
• Miller and Lents, Ltd. reserves report recently finalised as at 1 January 2014. The Company is currently undertaking an initial review of this and will announce details of the reserves report later this week.
Alexei Maximov, Chief Executive, commented:
"2014 started with the threat of significant management change initiated by Alpcot Capital Management Ltd (“Alpcot”) and Fire East Corporation (“Fire East”), which was defeated at an EGM by the majority of shareholders who voted in support of the existing management and Board. Simultaneously Adler Impex S.A. (“Adler”), which bought Alpcot and Fire East’s shareholdings in the Company, became the largest shareholder in Urals. Since acquiring its shares, Adler has entered into discussions with Urals in relation to increasing Adler’s involvement in the Company at board level and/or an executive appointment. An announcement will be made once an agreement has been concluded with Adler.
“During 2014 the Company continued its activities at both fields aimed at stabilising production in an attempt to curb the natural decline by implementation of workovers and drilling of new wells, which are planned to be finished by the year-end. The Company has made substantial personnel changes both at Petrosakh and at its head-office. At Petrosakh we have hired a new General Director and Chief Engineer, both of whom have impressive backgrounds in oil production and management. On the corporate level we have hired a new Chief Geologist and Processing Manager both of whom are focused particularly on improving operations at Pterosakh in addition to determining potential new drilling locations, increasing the margins of refined products and the introduction of a new product mix.
“At Arcticneft the annual tanker shipment is planned for mid-October. Final preparations are being implemented, contracts have been signed and the vessel has been chartered.
“The Company still has to commit resources to the case regarding Vyatcheslav Rovneiko’s claim to the Company in relation to the Alleged Debt Repayment Agreement (the “ADRA”) which is being defended in two jurisdictions, Russia and Cyprus. Whilst the Board, as has been stated previously, believes that the ADRA is a forgery and represents no substantive threat to the Company, Rovneiko continues in his attempts to extend the process in order to limit the effect of the London arbitration award against him. In addition, the Company has initiated legal proceedings against Komineftegeofizika (“KNGF”) in Russia regarding the non-payment of a loan. The Board is confident that the Company will prevail in both cases; however, to do so will require time and additional legal costs.
“The Board continues in its search for possible acquisition opportunities and has evaluated a number of such potential acquisitions in 2014. Given the overall investing climate towards Russian companies and the overall industry slow-down, we have still not found the “right fit” and will continue to seek new opportunities. We will continue looking at production and exploration opportunities in Russia, with the goal of adding cash-generating assets to the Company’s portfolio.
“Aside from the macro-economic environment in Russia caused by the geo-political crisis in Ukraine, the Board does not consider that this will have any immediate impact on the Company’s day-to-day operations. Since 2009 the Company’s management has made strenuous efforts to rid the Company of its legacy issues primarily stemming from the Taas-Yuriah deal, which to date have been mostly settled (with the exclusion of the Rovneiko situation). We also do not believe that the continued consolidation of the Russian oil sector has had a direct effect on the Company. The Board believes it is in a firm position to move the Company forwards with its operations and is committed to delivering shareholder value."
For more information about related Opportunities and Key Players visit Caspian Region Projects