Latest Results

Final results for the year ended 31 December 2016

The information contained within this announcement is deemed by the Company to constitute inside information as stipulated under the Market Abuse Regulations (EU) No. 596/2014 ("MAR"). With the publication of this announcement via a Regulatory Information Service, this inside information is now considered to be in the public domain.

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Urals Energy PCL (AIM: UEN), the independent exploration and production company with operations in Russia, is pleased to announce its audited financial results for the year ended 31 December 2016.

Key statistics for the year ended 31st December 2016 compared with the year ended 31 December 2015:

  2016 2015 Change
       
Total production (barrels)                         756,708 675,318 +12%
Gross revenue before excise and export duties US$ 35.3 m US$ 31.4 m +12%
Gross profit after excise, export duties and VAT US$ 7.3 m US$ 7.1 m +3%
Operating profit US$2.0 m US$3.3 m -39%
Normalized EBITDA (see definition below - not audited) US$7.8 m US$7.7 m +1%
Net profit pre-tax and FOREX effects US$1.0 m US$2.9 m -65%
Profit (Loss) for the year US$8.0 m US($4.1) m  

Operational highlights

  • Total production at Arcticneft reached 289,986 barrels, including four months of Arctic Oil Company Limited ("ANK") production of 39,818 barrels (2015 total production of Arcticneft alone: 253,592 barrels)
  • Total production at Petrosakh reached 466,721 barrels (2015: 421,726 barrels)
  • Average daily production at Arcticneft (without ANK) for the first five months of 2017 was 738 barrels of oil per day ("BOPD"), compared with an average of 684 BOPD for the twelve months ended 31 December 2016
  • Average daily production at ANK for the first five months of 2017 was 312 BOPD
  • Average daily production at Petrosakh for the first five months of 2017 is 1,134 BOPD, compared with an average of 1,275 BOPD for the twelve months ended 31 December 2016
  • In August 2016 the Company successfully completed the tanker shipment of 225,283 barrels of crude oil from Arcticneft (2015: 217,282 barrels)
  • In June 2016 Petrosakh was awarded a 25 year exploration and development licence for the South Dagi oil field on Sakhalin Island, following an auction by the Russian State Authorities, with C1 and C2 Russian State Registered reserves of approximately 17.7 million barrels
  • In August 2016, the Company completed the acquisition of ANK. At the time of acquisition ANK was producing 340 barrels/day and had 16 million barrels of C1 and C2 Russian State Registered reserves. The acquisition is expected to bring substantial future production economies for the Group

Financial highlights

  • Gross profit increased by 3% to US$7.3 million (2015: US$7.1 million)
  • Operating profit of US$2.0 million for the year (2015: US$3.3 million)
  • Net profit before income tax of US$5.9 million (2015: loss of US$4.3 million). The fluctuation in net profit before income tax was largely caused by exchange rate movements during both years. Underlying net profit before income tax and FOREX effects of US$1.0 million (2015: profit of US$2.9 million)
  • Normalized EBITDA* of US$7.8 million (2015: US$7.7 million), an increase of 1.3% with simultaneous slight decrease of normalized EBITDA margins to 26.8% from 28.5%
  • Positive net working capital position on 31 December 2016 of US$5.6 million (2015: US$0.3 million negative)
  • The Company finished 2016 with a net debt position of US$5.1 million (2015: US$2.2 million) with Debt/EBITDA ratio of 0.87 as at 31 December 2016 (2015: Debt/EBITDA ratio 0.51)

*Earnings before interest, taxation, depreciation and amortisation (hereafter - "Normalised EBITDA" or "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

  • In January 2017 the Company announced the granting of conditional share awards over a total of 13,127,192 new ordinary shares of US$0.0063 each in the capital of the Company, pursuant to the Company's performance share plan
  • In February 2017 Petrosakh entered into a new 24 month non-revolving CAPEX credit facility with the Sakhalin branch of PJSC Sberbank of Russia, under which Sberbank will provide the sum of 50 million Russian Roubles (representing approximately US$0.9 million at prevailing exchange rates) to Petrosakh
  • In March 2017 Arcticneft entered into a new short-term non-revolving credit facility with Kamchatcomagroprombank. Under the loan the bank will provide a total of 30 million Russian Roubles (representing approximately US$0.5 million at prevailing exchange rates) to Arcticneft. The proceeds of the loan will be used for working capital financing
  • In April 2017 the Group completed an internal reorganisation of its subsidiaries, which is intended to streamline the management of the Group and allow the Group to take advantage of modest tax advantages
  • In April 2017 the Company spudded two wells in its subsidiaries: its first well on the Ordymskiy block in the Komi Republic, the second one on the main Petrosakh licence area on the Eastern coast of Sakhalin Island
  • The planned first shipment of approximately 30,000 tons of oil (237,000 barrels) is scheduled for later in June 2017. The tanker has recently arrived at Kolguev Island
  • In April 2017 the Company entered into a secured short-term loan agreement with Petraco under which Petraco advanced US$3.0 million to the Company. The proceeds of the loan will be used for working capital financing
  • Extraordinary General Meeting held on 26 May 2017, which resulted in a share consolidation and the approval for a reduction of the Company's share premium account
  • In June 2017 the Company signed a rig delivery contract with Jereh Group, a Chinese company. The rig will be deployed to drill our first well at South Dagi

Andrew Shrager, Chairman of Urals, commented:

"In 2016, the Company has maintained cash generation, equivalent to EBITDA, at just under US$8 million, despite continued volatility in crude oil and product prices and in the Russian Rouble/Dollar exchange rate, increased production and excise taxes, and local inflation. This was achieved through significant production and revenue increases, both rising by 12%.

Our strong financial position has allowed us to acquire Arctic Oil and also the licence for South Dagi on Sakhalin Island, and thus continue our strategy of acquisitions to broaden our portfolio of licences for development.

Further to our announcements of 18 January 2017, 21 April 2017 and 26 May 2017, once we have received Court approval in Cyprus for the offset of our Cumulative Profit and Loss deficit by our substantial Share Premium Reserve, we will seek further shareholder approval at an EGM for a dividend payment to shareholders. Subject to these approvals, the Board proposes that the maiden dividend should be approximately 6.2 US cents per share, equivalent to approximately 10% of our 2016 EBITDA, costing US$780,000 (£604,650). This provides shareholders with their first yield since the listing of the Company, but more importantly it is a statement of our intent to follow a policy of rewarding shareholders as we rebuild the Company.

In 2017, we anticipate maintaining production at current levels on Kolgyev Island and Petrosakh through further work overs. We must be prepared for continued volatility in crude oil prices and exchange rates, and already notice that increased excise taxes on certain refined products may be difficult to pass on to customers. This places significant importance on our drilling programme for this year: we have spudded two key wells, one at Petrosakh as a development well after further studies and one at the Ordymskiy block in the Komi Republic as an exploration well; and we plan to drill our first well on the South Dagi licence once the rig we have leased has been mobilised and deployed. We want to complete our development plans for Kolgyev Island, the Komi companies and South Dagi this year, so we are in a good position to increase production progressively over the next few years. The speed of development will depend on market conditions, as always, but I believe we can be confident that Urals Energy has a bright future."

 

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