Final Results

28 June 2016

Urals Energy PCL ("Urals Energy" or the "Company")
Final results for the year ended 31 December 2015

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 2015.

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Full Final Results Announcement

Key statistics for the year ended 31st December 2015 compared with same period in 2014:

  2015 2014  
       
Total production  (barrels)                          675,318 662,215 +2%
Gross revenue before excise and export duties US$ 31.4 m US$58.2 m -46%
Gross profit after excise, export duties and VAT US$ 7.1 m US$8.7 m -18%
Operating profit US$3.37m US$ 1.17m +188%
EBITDA (see definition below - not audited) US$7.7 m US$8.1 m - 5%
Net profit pre tax and FX effects               US$2.9 m US$1.6 m +81%
Loss for the year US$4.1 m US$13.7 m -70%

 

Operational highlights

  • Total production at Arcticneft reached 253,592 barrels (2014: 240,865  barrels)
  • Total production at Petrosakh reached 421,726  barrels (2014: 421,350  barrels)
  • Current daily production at Arcticneft is 676 BOPD compared with an average of 695 BOPD for the twelve months ended 31 December 2015
  • Current daily production at Petrosakh is 1,317 BOPD, 14% higher than an average of 1,155 BOPD for the twelve months ended 31 December 2015
  • In August 2015 the Company successfully completed the shipment of  217,282 bbls of crude oil from Arcticneft (2014: 207,940 bbls)
  • In 2015 the Company completed the drilling of two wells and started to drill a third well at Petrosakh and this has enabled the Company to maintain stable production  during the reporting period  
  • In 2015 the Company successfully implemented a work over program of re-entering existing wells in Arcticneft which resulted in a 5.3% increase in yearly production
  • In October 2015 the Company expanded the boundaries of its license area at Arcticneft and added ABC1 reserves of 1.3 million tonnes (10.3 million barrels of oil)
  • In November 2015 the Company acquired two companies (RK-Oil Limited and BVN Oil Limited) which hold licenses in the Komi region. The licenses presently have indicated oil reserves of 2.0 million tons C1 and C2 (equivalent to 14.9 million barrels), and possible recoverable resources (D1) of 4.6 million tons (equivalent to 34.3 million barrels)

Financial highlights

  • Gross profit reduced by 18% to US$7.1 million (2014: US$8.7 million)
  • Operating profit of US$3.3 million for the year (2014: US$1.2 million)
  • Net loss before income tax of US$4.3 million in 2015 (2014: net loss of US$16.1 million) caused by exchange rate movements during both 2015 and 2014.  Without the foreign currency losses of US$7.2 million in 2015 and US$17.7 million in 2014, profit before income tax for the year would have increased in 2015 by US$1.3 million. A significant portion of foreign currency losses relate to intercompany loans denominated in US$.
  • EBITDA* decreased to US$7.7 million from US$8.1 million in 2014, a decrease of 4.9% with simultaneous growth of EBITDA margins to 28.5% from 18.2%
  • Negative net working capital position on 31 December 2015 of US$0.3 million (2014: US$1.6 million positive)
  • Continuous effective cost management in the period allowed the Company to decrease the operating costs and SG&A costs in Russian Rouble equivalent by 8.2% and 5% respectively, in addition to a decrease of 70% in US$ denominated G&A.
  • Net cash generated from operating activities allowed the Company to finance the acquisition of new exploration licences. At the same time, in line with its development strategy the Company  entered into an 18 month revolving credit facility for working capital financing with the Sakhalin branch of OJSC Sberbank of Russia
  • The Company finished 2015 with a net debt position of US$2.2 million (2014: net cash US$4.4 million) with Debt/EBITDA ratio equal 0.51 as at 31 December 2015

*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

  • In March 2016 the Company completed Well 109 drilling at Petrosakh which is now at the stage of testing and workover, bur requires further intervention
  • The annual planned tanker shipment for export from Arcticneft to Petraco is expected in July - August 2016.    The estimated shipment based on current daily production is around 230,000 bbls
  • In May 2016 the Company entered into a secured short-term loan agreement with Petraco under which Petraco advanced US$6 million to the Company.  The proceeds of the Loan will be used to working capital financing
  • In June 2016 the Company has been 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 Russian State Registered reserves C1 plus C2, equivalent to 2P (proven and probable) around 17.7 million barrels

Andrew Shrager, Chairman of Urals, commented: “Our results show that the Company has weathered a truly extraordinary period of volatility in the oil price and the FX markets. We have been able to maintain production, reduce costs substantially, particularly costs denominated in US dollars, and moderate the fall in our cash generation which can be seen in the modest fall in EBITDA. Our strategy continues to be to use our cash generation to invest in workovers to maintain production and to acquire licences. We now have a substantial portfolio of additional proven and probable reserves that can be developed as conditions improve. There has been little or no competition in acquiring licences as other companies tend to be either highly leveraged or not generating cash. We will continue to be cautious in 2016, maintain our production levels and seek potential acquisitions.”

 

For further information, please contact:

Urals Energy Public Company Limited
Andrew Shrager, Chairman
Leonid Dyachenko, Interim Chief Executive Officer
Tel: +7 495 795 0300, www.uralsenergy.com

Allenby Capital Limited, Nominated Adviser and Broker
Nick Naylor / Alex Brearley
Tel: +44 (0) 20 3328 5656, www.allenbycapital.com

 

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