Petraco Debt Restructuring and Operational Update


 

TIDMUEN 
 
RNS Number : 0677K 
Urals Energy Public Company Limited 
12 April 2010 
 

12 April 2010 
                      Urals Energy Public Company Limited 
                        ('Urals Energy' or the 'Company') 
                Petraco debt restructuring and operational update 
 
Urals Energy, the AIM listed independent exploration and production company with 
operations in Russia, is pleased to announce that it has reached agreement with 
Petraco Oil Company Limited ("Petraco") relating to the restructuring of the 
Company's prepayment financing arrangements with Petraco (the "Petraco 
Facility"). In addition, Urals Energy is today providing an operational update. 
 
Petraco Facility restructuring 
 
Urals Energy has reached agreement with Petraco relating to the restructuring of 
the Petraco Facility (the "Restructuring Agreement"). The principal terms of the 
Restructuring Agreement are as follows: 
 
·         Total indebtedness owed by the Company to Petraco, as at 31 March 
2010, was US$34.3 million, made up as follows: 
 
+------------------------------------+------------------+ 
| - capital amount outstanding (the  | US$30.7 million  | 
| "Capital Outstanding") of:         |                  | 
|                                    |                  | 
+------------------------------------+------------------+ 
| - accrued interest outstanding     | US$3.6 million   | 
| (the "Accrued Interest") of:       |                  | 
|                                    |                  | 
+------------------------------------+------------------+ 
 
At 1 April 2010, the Capital Outstanding and Accrued Interest will be added 
together and carried forward as principal ("Principal"). After 1 April 2010 
interest will be accrued on the Principal and will not be compounded.  All 
accrued interest from 1 April 2010 will be paid once the Principal has been 
repaid and all payments made by the Company according to the payment schedule 
set out below will be applied against the Principal outstanding.  Interest will 
be charged on the Principal at a rate of 6 month LIBOR plus 5% per annum, 
non-compounding. 
 
·         Subject to a waiver of preemption rights by shareholders in Urals 
Energy (the "Shareholders") at an extraordinary general meeting (the "EGM"), 
Petraco will convert US$2.0 million of the Capital Outstanding into Urals Energy 
ordinary shares at the volume weighted average price for the five days following 
the date of this announcement, but at not more than GBP0.15 per Urals Energy 
ordinary share. Also, subject to approval from the Shareholders at the EGM, 
Petraco will receive an option to acquire $5.0 million of new Urals Energy 
ordinary shares at the volume weighted average price for the five days following 
the date of this announcement plus 50%. 
 
·         The repayment schedule of the balance for the Capital Outstanding and 
the Accrued Interest will be as follows: 
 
+-------------------------------------+-------------------+ 
| Payment date                        | Amount to be paid | 
|                                     | by Urals Energy   | 
|                                     | to Petraco        | 
|                                     |                   | 
+-------------------------------------+-------------------+ 
| 30 September 2010                   | US$3.0 million    | 
|                                     |                   | 
+-------------------------------------+-------------------+ 
| 31 December 2010 **                 | US$3.0 million *  | 
|                                     |                   | 
+-------------------------------------+-------------------+ 
| 31 December 2011                    | US$8.0 million    | 
|                                     |                   | 
+-------------------------------------+-------------------+ 
| 31 December 2012                    | US$11.7 million   | 
|                                     |                   | 
+-------------------------------------+-------------------+ 
| 31 December 2013                    | Outstanding       | 
|                                     | balance           | 
|                                     |                   | 
+-------------------------------------+-------------------+ 
| Notes                                                   | 
| * In the event that Urals Energy does not export any    | 
| oil from Petrosakh (Urals Energy's operations on        | 
| Sakhalin Island), the amount of this tranche is to be   | 
| increased to US$4.0 million.                            | 
|                                                         | 
| ** Urals Energy and Petraco as part of the              | 
| Restructuring Agreement have also agreed a distribution | 
| schedule of the Taas-Yuriakh Neftegazodobycha loan (the | 
| "Taas loan") proceeds based on the amount of any early  | 
| repayment received by the Company.  In the event of     | 
| early repayment of the Taas Loan in 2010, the maximum   | 
| payment by the Company to Petraco is to be not more     | 
| than US$10.0 million. If the Taas Loan is repaid        | 
| earlier than maturity, but later than 31 December 2010, | 
| Urals Energy and Petraco have agreed to a schedule of   | 
| settlement.                                             | 
+---------------------------------------------------------+ 
|                                                         | 
|                                                         | 
+-------------------------------------+-------------------+ 
·         Urals Energy will, subject to the approval by Urals Energy 
shareholders at the EGM, pledge 100% of the shares it currently holds in CJSC 
Arcticneft and 97.2% of shares it currently holds in CJSC Petrosakh to Petraco 
as security against the restructured Petraco Facility. 
 
In accordance with AIM Rule 15 "Fundamental changes of business", completion of 
the Restructuring Agreement is conditional, inter alia, upon the Urals Energy 
obtaining certain approvals from its Shareholders and this will form one of the 
resolutions put to Shareholders at the EGM. 
 
 
The EGM is being convened for 10.00 a.m. local Cyprus time on 29 April 2010 in 
Evagoras Building Office 34 3rd Floor 31 Evagorou Avenue, Nicosia, Cyprus. 
 
A circular (the "Circular") setting out the details of the Restructuring 
Agreement and a notice of the EGM will be posted to Urals Energy shareholders 
shortly and will, when published, be available, in electronic form, for download 
on the Company's website at www.uralsenergy.com. 
 
Further details of the Restructuring Agreement will be set out in the Circular. 
 
Operations update 
 
Commencement of drilling of the first side track well in Petrosakh 
 
The Company has signed drilling contracts for the first side track well #35b at 
Petrosakh.  Prepayments for materials and drilling equipment have been made and 
the Company's management plans to spud this well on or around 1 June 2010.  For 
drilling this well the Company will use its own rig and total costs should not 
exceed Roubles 16 million ($0.53 million) and production should  commence in 
July 2010.  An expected production rate from this well is approximately 225 
BOPD. 
 
Management plans to spud the second side-track well in July following the 
completion of well #35b. 
 
 
Petrosakh. 
 
Current production remains at 1,500 barrels of oil per day ("BOPD"). 
 
The recent decline in production at Petrosakh has been stabilised. The Company 
has completed two wells with workovers and installed two rod pumps on the other 
two wells. 
 
Production from well #47 after a workover has increased by 50 BOPD.  Following 
an installation of a rod pump a further increase of 50 BOPD is expected by the 
management. The Company purchased two rod pumps and expect delivery by the end 
of April 2010. 
 
Well #34 was reperforated in the interval 1,411-1,651 meters. The total fluid 
production rate doubled after perforation, but the level of crude oil production 
remained unchanged.  It was decided to stop a nearby water injection well and 
production rate of crude started increasing.  Management plans to increase the 
diameter of a rod pump to increase the production volume of liquids.  At the 
moment review and assessment of this well's performance is ongoing and 
preliminary results are expected by the end of this week. 
 
Currently, 100% of production is refined and sold on a local market. 
 
Arcticneft 
 
Current production at Articneft is 700 BOPD. 
 
Since the Company's last operational update the production decline has 
stabilised. By using internal resources and existing perforators in stock on the 
island, the Company has performed several minor workovers on the existing wells 
of the Western Block of the field. As a result production increased by 56 BOPD. 
Currently 4 wells on the Western Block of the field remain shut, but production 
is anticipated to restart in April 2010. Before shutting production from these 
wells was 70 BOPD. 
 
By the end of April, the Company expects to receive preliminary results of a 
geological update and study which will determine the remaining field development 
programme in 2010. 
 
As of 11 April 2010 Arcticneft had 103,412 bbls of self produced crude oil in 
stock.  First delivery of crude oil from Arcticneft is expected in July 2010. 
 
 
Enquiries: 
+----------------------------------+--------------------------------+ 
|                                  |                                | 
| Allenby Capital Limited          | +44 (0)20 3328 5656            | 
+----------------------------------+--------------------------------+ 
| Nick Naylor                      |                                | 
| Alex Price                       |                                | 
+----------------------------------+--------------------------------+ 
|                                  |                                | 
+----------------------------------+--------------------------------+ 
| Pelham Bell Pottinger            | +44 (0)20 7337 1500            | 
+----------------------------------+--------------------------------+ 
| Mark Antelme                     |                                | 
+----------------------------------+--------------------------------+ 
| Evgeniy Chuikov                  |                                | 
+----------------------------------+--------------------------------+ 
 
 
This information is provided by RNS 
            The company news service from the London Stock Exchange 
   END 
 
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