TIDMUEN
RNS Number : 3864N
Urals Energy Public Company Limited
28 September 2012
Urals Energy Public Company Limited
("Urals Energy" or the "Company")
2012 Half Year Results
Urals Energy (LSE: 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
2012.
Highlights
Operational
-- Total production at Arcticneft increased to 128,249 barrels (H1 2011: 126,780 barrels)
-- Total production at Petrosakh reached 233,484 barrels (H1 2011: 249,728)
-- Current daily production at Arcticneft is 700 BOPD slightly
down from an average of 705 BOPD for the six months ended 30 June
2012
-- Current daily levels of production at Petrosakh increased to
1,395 BOPD from an average of 1,283 BOPD for the six months ended
30 June 2012
-- Measures to halt natural decline at Petrosakh have stabilised
production including the completion of successful workovers
-- New well drilling and existing well optimisation programs in place and being implemented
Financial
-- Operating results were improved by 79% reducing the operating
loss to US$0.6 million from US$2.9 million loss in H1 2011
-- Net working capital position improved by 69% by a net
reduction of $6 million in current liabilities to US$25.9 million
(H1 2011: US$35.8 million)
-- Net loss of US$2.0 million (net profit of US$3.6 million for
H1 2011) was caused by exchange rate movements during both H1 2011
and H1 2012 as Ural's Russian subsidiaries recognised forex gains
in 2011 and forex losses in 2012 on various intracompany loans
nominated in US Dollars
-- Successful finalisation of cost reduction program, which
resulted in 21% and 12% decrease in selling, general and
administrative expenses and cost of sales respectively.
-- Company's headcount decreased by 11% during the period to 507 employees.
Post-period end
-- Initial production testing on Well #41 on the Petrosakh Field
completed and now put into production at approximately 180 BOPD
-- Renewal of the license for the Okruzhnoye field until 2037
-- Release of charge over the Company's Petrosakh assets by
Petraco Oil Company Limited ("Petraco")
-- Restructure of Petraco repayment agreement to coincide with
the shipment of the tanker from Arcticneft
Outlook
-- Tanker shipment of 28,000 metric tonnes of crude oil for
export from Arcticneft expected in Q4 2012
-- Finish the year with repayment of the majority of the
outstanding debts and further strengthening of the Company's
balance sheet
-- Implement new well drilling and existing well optimisation programs for 2013
-- Identify upside potential in downstream and marketing opportunities on the existing acreage
-- Actively seek possible M&A and joint venture targets with
a view to expanding and optimising the Company's asset
portfolio
-- Anticipated tax break from 2013 for companies located in the
far northern territories of Russia to benefit the Company's
operations in Arcticneft
Commenting on today's announcement, Alexei Maximov, CEO,
said:
"I am pleased to report on what has been a positive period for
Urals, both operationally but also in the further strengthening of
our balance sheet. I reported this time last year that
operationally we have been laying the foundations for maximising
production from both Arcticneft and Petrosakh, and, with the
various measures we have taken to stabilise production at
Petrosakh, the completion and entry into production of Well #41 at
Petrosakh and the implementation of new well drilling and existing
well optimisation programs we have certainly started to build upon
those foundations.
The release of Petraco's charge over Petrosakh was a pivotal
point in Urals' recovery and for the first time in many years we
are now approaching a time where we anticipate we will be free of
all major debtors and able to leverage on our existing asset base.
This will enable us to push on with our plans to increase
production at both of our assets as well as dedicate time to our
M&A strategy.
Shareholders can now view the future with renewed confidence as
the board anticipates the completion of the final year of recovery
for Urals and the start of what it expects to be a key period of
development for Urals."
Enquiries:
Urals Energy
Alexei Maximov, CEO
Sergey Uzornikov, CFO + 7 49 5795 0300
Allenby Capital Limited
Nominated adviser and broker +44 20 3328 5656
Nick Naylor
Alex Price
Pelham Bell Pottinger +44 20 7861 3232
Mark Antelme
Maria Blank
CEO STATEMENT
General overview
2012 is expected to be the final year of recovery for Urals
Energy which will bring to a close the numerous legacy issues which
had to be resolved before we were able to put into place any growth
strategy.
With the majority of the Petraco loan rescheduled to be repaid
before the end of November 2012, the positive outcome of the
arbitration in London and the settlement of other minor outstanding
debts, Urals will start 2013 well-positioned to seek new ways of
growth and expansion while shifting its focus from the past to the
future and, in doing so, management's attention will change to
focus predominantly on operational improvement, growth of
production and seeking new ways to increase the Company's asset
portfolio.
In order to strengthen its shift in priorities, the Company has
successfully concluded its cost-cutting program, made several key
management decisions in the production companies, hired a new chief
operations officer and is currently considering the strengthening
of its board. Further announcements will be made at the appropriate
time in connection with the strengthening of the Company's board
but new appointments will only be made where the individuals are
able to add value, seek out new ways of corporate growth and
increase of shareholder value.
The Company is also looking forward to 2013 as the year when
companies located in the far northern territories of Russia will
receive a tax break which is anticipated to have an immediate
effect on the Company's operations in Arcticneft, as well as
potentially adding additional value to the possible participation
in the Tarkskoye field development, as well as deep-well drilling
on Kolguyev island.
Financial Results
Operating Environment
The six months ended 30 June 2012 were characterised by stable
crude oil market price at an average level of US$110 per barrel.
Domestic prices for light oil products ranged from US$85 to US$129
per barrel thus securing the Company's operating cash flows at a
level sufficient to maintain its operations and comply with license
requirements at both fields.
There were no deliveries of crude oil exported from Arcticneft
during the reporting period, resulting in 22,257 metric tonnes of
crude oil that remained in stock at 30 June 2012 (H1 2011: 22,000).
The tanker from Arcticneft is scheduled to be shipped as planned in
Q4 2012.
Operating Results
During the first half of 2012 and following the assignment of
the Taas-YuriakhNeftegazodobycha ("Taas") loan, the Finfund Limited
debt resolution and subsequent payment of the large portion of the
Petraco loan, the overall financial health of the Company has been
significantly strengthened eliminating the impending threat of
insolvency as well as the going concern issue which was reported in
the Company's year end accounts for 2009, 2010 and 2011 but which
we do not anticipate will be continued in the Company's accounts
for the current financial year.
Period ended 30
$ '000 June:
----------------------------
2012 2011
--------------------------------------------- ------------- -------------
Gross revenues before excise, export duties 16,832 17,139
Net revenues after excise, export duties
and VAT 15,362 15,395
Gross profit 3,077 1,513
Operating (loss)/profit (591) (2,851)
Management EBITDA 1,391 114
Total net finance benefits/(costs) (1,542) 5,868
Profit for the period (2,043) 3,607
--------------------------------------------- ------------- -------------
Gross Revenues ($'000)
Period ended 30
June:
----------------------------------------- --------------------------
2012 2011
----------------------------------------- ------------ ------------
Crude oil 1,114 1,807
Export sales - -
Domestic sales (Russian Federation) 1,114 1,807
Petroleum (refined) products - domestic
sales 15,473 14,930
Other sales 245 402
Total gross revenues 16,832 17,139
----------------------------------------- ------------ ------------
For the six months ended 30 June 2012, total gross revenues
decreased by US$0.3 million as a result of decline of sales volumes
totaling 219,010 barrels for the six months ended 30 June 2012
(compared with 264,092 barrels for the six months ended 30 June
2011). The decline, which is part of the anticipated natural
decline at Petrosakh, was partially off-set by raise of average net
back prices for petroleum (refined) products of US$57.73 per barrel
for the six months ended 30 June 2012 (US$47.43 for the six months
ended 30 June 2011) and a higher crude oil net back price of
US$49.88 per barrel for the six months ended 30 June 2012 (US$35.87
per barrel for the six months ended 30 June 2011). Netback, in the
case of domestic crude oil sales, is the gross sales net of VAT.
Netback for domestic product sales is defined as gross product
sales minus VAT, transportation, excise tax and refining costs.
For the six months ended 30 June 2012 all domestic sales of
crude oil and almost all petroleum (refined) products related to
Petrosakh. During the six months ended 30 June 2012 Arcticneft sold
petroleum (refined) products to AMNGR for US$356,000 (US$302,000
for the six months ended 30 June 2011).
Summary table: Net backs ($/bbl)
Period ended 30
June:
----------------------------------------------- ------------------------
2012 2011
----------------------------------------------- ----------- -----------
Crude oil 49.88 35.87
Export sales - -
Domestic sales (Russian Federation) 49.88 35.87
Petroleum (refined) products - domestic sales 57.73 47.43
----------------------------------------------- ----------- -----------
Gross profit (net revenues less cost of sales) for the first
half of 2012 doubled to US$3.1 million from US$1.5 million for the
six months ended 30 June 2011. The main driver of the increase was
the higher netbacks.
Operating Loss for the first half of 2012 was US$0.6 million was
significantly reduced as compared with an Operating Loss of US$2.9
million for the six months ended 30 June 2011.
The net finance costs during the first half of 2012 were US$1.5
million and net interest cost was US$0.2 million (for the six
months ended 30 June 2011: net finance benefits of US$5.9 million
and net interest benefit of US$1.3 million).
Decrease of Finance benefits for the six months ended 30 June
2012 resulted in a Net Loss of US$2.0 million compared with a Net
Profit of US$3.6 million for the six months ended 30 June 2011.
Consolidated Management EBITDA in the six months ended 30 June
2012 was US$1.4 million as compared with US$0.1 million during the
six months ended 30 June 2011.
Management EBITDA ($'000) - Unaudited
Period ended 30 June:
----------------------------
2012 2011
----------------------------------------------- ------------- -------------
(Loss)/Profit for the period (2,043) 3,607
Net finance costs/(benefits) 1,542 (5,868)
Income tax (90) (591)
Depreciation, depletion and amortization 1,891 2,455
----------------------------------------------- ------------- -------------
Total non-cash expenses 3,343 (4,004)
Share-based payments - 290
Loss/(gain) from disposal of property,
plant and
equipment - 704
Release of provisions - (569)
Other non-cash income 91 (88)
----------------------------------------------- ------------- -------------
Total non-recurrent and non-cash items 91 511
Normalised EBITDA 1,391 114
----------------------------------------------- ------------- -------------
Net debt Position
As at 30 June 2012 the Company had net debt of US$6.6 million
(calculated as Long-term and Short-term debt plus finance lease
obligations less cash in bank and less Loans issued to related
parties). As at 30 June 2011 the Company had net cash of US$9.1
million (calculated as Long-term and Short-term debt plus payables
to Finfund less cash in bank, less loan receivable from Taas and
less Loans issued to related parties). As at 31 December 2011 net
debt was US$1.4 million.
As at 30 June 2012 and 31 December 2011 the Group impaired a
loan to a formerly related party by US$6.2 million and US$5.9
million, respectively. This amount relates to a loan to a
shareholder and former member of management of the Group,
Vyatcheslav Rovneiko. Taking into account that according to the
loan agreement all disputes are subject to final resolution by
arbitration under the Rules of Arbitration of the London Court of
International Arbitration (the LCIA), the Company filed a claim
with the LCIA in June 2011. Following hearings in the arbitration,
the arbitrator has issued two Partial Final Awards pursuant to
which the arbitrator has ruled against the respondent on his
principal defense. The respondent has subsequently challenged the
latter of the two awards on procedural grounds which the Company
intends to oppose. Independent of the outcome of the arbitration,
for accounting purposes the management has reassessed the carrying
value of the loan and has impaired it fully. However, this does not
reduce the validity of the legal claim against this related party
and the Company's intent to bring the arbitration to a positive
conclusion.
Accounts payable and accrued expenses of US$5.8 million at the
period end was significantly reduced from the US$10.7 million at
the end of June 2011, mainly as a result of the reduction in
accounts payable following the settlement with Finfund Limited.
Outlook and operational update
Petrosakh
After several years of limited funding, Petrosakh has emerged in
2012 having made considerable strides in optimization of its
production from the Okruzhnoye field. This can be attributed
primarily to the change of management team and other necessary
efficiency measures aimed at increasing efficiency and
production.
The following is a chronology of the main activities undertaken
at Petrosakh during 2012, both before and after the period end:
-- prior to installation of a gas injection compressor in March,
Petrosakh was producing 165 tonnes of crude per day. In June 2012
Well #41 came onstream with an initial oil rate of 24 t/d and, for
the month of June, the average production in the field was 181 t/d
with Well #41 producing intermittently
-- in July, encouraged by this result, management at Petrosakh
began discussing a schedule of additional workovers and other
cost-effective activities to be performed each month, with the
following actions having been completed to-date:
o the Company has lowered the line pressure in all in-field
pipelines to offset declines in reservoir pressure. Correspondingly
the Company reduced choke sizes in the flowingwells to increase
wellhead pressure and the differential across the choke
o optimization of the surface rod-pumping units including the
choice of unit and stroke length.
o conducted 9 bottom-hole hot-oil circulations
o planned injection well treatments in October to optimize rates
and injectivity profiles
o replacement of old sucker rods and acquisition/installation of
3 new surface rod-pumping units
o continuing introduction of cyclic 2-phase injection
As a result of these activities for July and August management
at Petrosakh was able to halt the increasing decline in production
and return to a stable level. July and August oil production
averaged 1,358 BOPD and on 10 September 2012 the Company reinstated
gas injection to the reservoir. Consequently at the present time
oil production is 1,395 BOPD relative to the approved plan of 1,380
BOPD.
The management at Petrosakh continues to demonstrate that
further opportunities exist in the Okruzhnoye field to build on
these production gains.
During the year to date Petrosakh has been subject to a number
of rigorous state inspections that targeted all the operations,
facilities and technical aspects of the technological, production,
safety, environmental and labor related issues. The Company has
successfully passed all of these and has been shown to be in full
compliance with the state regulations.
In addition, one of the largest shareholders of Urals Energy,
Alpcot Capital Management Ltd visited Petrosakh. The
representatives visited all existing wells, the refinery, and had a
chance to meet with the drilling team, workers, and management on
site and in Yuzhno-Sakhalinsk.
Presently the company is reevaluating its drilling plans to
include further drilling of 8 new wells in the Southern part of the
Okruzhnoye field; the drilling plan will be submitted and hopefully
approved by the General Directorate of State Expertise of the
Russian Federation by the end of the year and whereupon the
drilling of well #53 is to be started
The Company will continue optimizing the existing well stock
through a comprehensive program of workovers. Management believes
that additional production gains can realistically be achieved by
the end of 2013. Furthermore, management believes that
opportunities exist downstream to increase margins of refined
products through changes to the downstream operator's client base,
thus leveraging the Company's unique position as sole provider of
refined products on Sakhalin Island.
The license for the Okruzhnoye field was successfully extended
and now expires at the end of 2037.
Downstream
Petrosakh continues to refine and sell 100% of its crude oil
production. In 2012 the Company finds itself operating in a highly
competitive refined products market in which the state conglomerate
Rosneft holds a close to monopolistic position on Sakhalin island,
which they are able to exploit by keeping their wholesale and
retail prices for oil products unchanged during the year to date.
Nevertheless, as a result of the balanced and individual work with
our customer base in 2012, the Company managed to increase netbacks
on the sales of oil and oil products by 39.0% and 21.7%
respectively to US$49.88 per barrel and US$57.73 per barrel. These
steps, combined with further continuing work on cost optimization,
allowed the Company to almost double its profit margin. In
anticipation of the winter period, the Company is actively working
with budgeted (state owned) companies and is participating in
tenders regarding fuel oil shipment, These are new types of
customers for us but we are confident that our bids are competitive
and, if successful, will allow us to generate additional
margins.
The Company has completed the evaluation of the feasibility of
revitalizing export shipments from Petrosakh, particularly of
refined products. Additional capital expenditure for terminal
upgrade will be needed and the Company is expecting to receive an
estimation of these expenses shortly. At the current date, our
expectation is that given the geographical vicinity of Petrosakh to
the growing Asian markets, the demand for exported refined products
will grow continuously and we anticipate that this will represent
an additional source of revenue for the Company.
Arcticneft
Current production at Arcticneft is stable and stands at 700
BOPD. As at 23 September 2012 crude oil in stock was 27,100
(214,090 bbls). The tanker is scheduled to be loaded in Q4
2012.
During the reporting period, there have been no major
operational changes in the Company in respect of Arcticneft
The main efforts of the Company in the coming year will be
focused on the following:
1. reducing decline in production by adding new (up to 3) wells
and optimizing the existing well stock;
2. improving geological data and minimizing drilling risk. For
these purposes the Company has entered into a partnership with a
western company which specializes in geological data reading and
interpretation. This work will include the existing, as well as
deeper horizons; and
3. a possible participation in Tarkskoye field auction.
Petraco loan
Under the terms of the debt repayment agreement with Petraco
Urals Energy pledged 97.2% of the shares it held in CJSC Petrosakh
to Petraco as security against the restructured prepayment
financing arrangements with Petraco.
After the payment to Petraco of US$10 million following the Taas
loan assignment, and in accordance with the terms of the Agreement,
as announced on 9 August 2012, Petraco released its charge over the
shares of CJSC Petrosakh in full.
In addition, the payment to Petraco, scheduled for 31 July 2012
according to the Restructuring Agreement, has been extended to
coincide with the shipment of the tanker from Arcticneft. The
remaining debt to Petraco is currently US$10.2 million, with US$7.3
million due by the end of November this year and the balance to be
paid by the end of November 2013. The Company anticipates that the
revenue from the tanker shipment will be sufficient to discharge
the US$7.3 million due to Petraco in November 2013 in full.
Outlook
Looking ahead, as part of the recovery strategy, we aim to
finish the year with repayment of the majority of our outstanding
debts and further strengthening of the Company's balance sheet.
We are shortly going to be loading up to 28,000 metric tonnes of
crude oil for export from Arcticneft, which is scheduled for Q4
2012. At the same time, we await the results of the deep
exploration drilling results by AMNGR which may provide a strong
indication for the potential for Urals to increase its reserves.
Furthermore, we expect that the anticipated tax break from 2013 for
companies located in the far northern territories of Russia will
benefit the Company's operations in Arcticneft.
The Company continues to focus on increasing production and cash
generation at both Arcticneft and Petrosakh. In addition to our
existing operations, we are actively looking at new opportunities,
be it in identifying ways of utilising the upside potential in
downstream and marketing opportunities on the existing acreage, or
evaluating possible acquisition and joint venture targets with a
view to expanding and optimising the portfolio.
Shareholders can now view the future with renewed confidence as
the board anticipates the completion of the final year of recovery
for Urals and the start of what it expects to be a key period of
development for Urals.
Alexei Maximov
Chief Executive Officer
-ends-
Consolidated Statement of Financial Position (presented in US$
thousands)
30 June 30 June 2011 31 December
Note 2012 2011
--------------------------------- ----- ---------- -------------- ------------
Assets
Current assets
Cash in bank and on hand 2,590 830 7,722
Accounts receivable and
prepayments 3,462 4,737 4,769
Inventories 5 17,263 21,694 10,019
Total current assets 23,315 27,261 22,510
--------------------------------- ----- ---------- -------------- ------------
Non-current assets
Property, plant and equipment 6 114,077 135,511 118,267
Supplies and materials
for capital construction 2,644 2,852 2,695
Other non-current assets 7 1,118 41,263 1,147
--------------------------------- ----- ---------- -------------- ------------
Total non-current assets 117,839 179,626 122,109
--------------------------------- ----- ---------- -------------- ------------
Total assets 141,154 206,887 144,619
--------------------------------- ----- ---------- -------------- ------------
Liabilities and equity
Current liabilities
Accounts payable and accrued
expenses 8 5,821 8,742 4,782
Provisions 2,199 2,000 2,199
Income tax payable 5,128 5,118 5,128
Other taxes payable 4,506 8,004 5,118
Short-term borrowings and
current portion of long-term
borrowings 9 7,316 8,127 7,316
Advances from customers 977 3,844 1,705
Total current liabilities 25,947 35,835 26,248
--------------------------------- ----- ---------- -------------- ------------
Long-term liabilities
Long term borrowings 9 2,865 19,356 2,655
Long term finance lease
obligations - 645 -
Dismantlement provision 1,485 1,422 1,398
Deferred income tax liabilities 13,010 12,864 13,347
Total long-term liabilities 17,360 34,287 17,400
--------------------------------- ----- ---------- -------------- ------------
Total liabilities 43,307 70,122 43,648
--------------------------------- ----- ---------- -------------- ------------
Equity
Share capital 1,589 1,569 1,569
Share premium 656,855 656,821 656,875
Translation difference (31,735) (23,269) (30,672)
Accumulated deficit (529,737) (499,401) (527,684)
--------------------------------- ----- ---------- -------------- ------------
Equity attributable to
shareholders
of Urals Energy Public
Company Limited 96,972 135,720 100,088
--------------------------------- ----- ---------- -------------- ------------
Non-controlling interest 875 1,045 883
--------------------------------- ----- ---------- -------------- ------------
Total equity 10 97,847 136,765 100,971
--------------------------------- ----- ---------- -------------- ------------
Total liabilities and equity 141,154 206,887 144,619
--------------------------------- ----- ---------- -------------- ------------
Consolidated Statement of Comprehensive Income (presented in US$
thousands)
Six months ended 30
June
---------------------------
Note 2012 2011
------------------------------------------------------------ ----- ------------- ------------
Revenues after excise taxes and export
duties 11 15,362 15,395
Cost of sales 12 (12,285) (13,882)
Gross profit 3,077 1,513
------------------------------------------------------------ ----- ------------- ------------
Selling, general and administrative
expenses 13 (3,577) (4,525)
Other operating (loss)/income (91) 161
Operating loss (591) (2,851)
Interest income 9 44 1,727
Interest expense 9 (278) (393)
Foreign currency (loss)/gain (1,308) 4,534
Total net finance (costs)/benefits (1,542) 5,868
(Loss)/profit before income tax (2,133) 3,017
Income tax benefit 90 590
(Loss)/profit for the period (2,043) 3,607
------------------------------------------------------------ ----- ------------- ------------
(Loss)/profit for the period attributable
to:
* Non-controlling interest 10 (8)
* Shareholders of Urals Energy Public Company Limited (2,053) 3,615
------------------------------------------------------------ ----- ------------- ------------
(Loss)/earnings per share from profit
attributable to
shareholders of Urals Energy Public
Company Limited: 10
- Basic (loss)/earnings per share
(in US dollar per share) (0.01) 0.0145
- Diluted (loss)/earnings per share
(in US dollar per share) (0.01) 0.0145
Weighted average shares outstanding
attributable to:
- Basic shares 251,901,871 248,912,887
- Diluted shares 253,414,431 248,912,887
(Loss)/profit for the period (2,043) 3,607
Other comprehensive loss:
- Effect of currency translation (1,081) 5,785
Total comprehensive (loss)/profit
for the period (3,124) 9,392
------------------------------------------------------------ ----- ------------- ------------
Attributable to:
- Non-controlling interest (8) 75
- Shareholders of Urals Energy Public
Company Limited (3,116) 9,317
------------------------------------------------------------ ----- ------------- ------------
Consolidated Statements of Cash Flows (presented in US$
thousands)
Six months ended 30 June
---------------------------
Note 2012 2011
------------------------------------------------------------- ----- ------------ -------------
Cash flows from operating activities
(Loss)/profit before income tax (2,133) 3,017
Adjustments for:
Depreciation, amortization and depletion 12 3,255 5,164
Share-based payments - 290
Interest income 9 (44) (1,727)
Interest expense 9 278 393
Gain on disposal of property, plant and equipment (19) (704)
Foreign currency loss, net 1,308 (4,534)
Other non-cash transactions 46 (69)
Operating cash flows before changes in working capital 2,691 1,830
Increase in inventories (7,635) (6,588)
(Decrease)/increase in accounts receivables and prepayments 1,236 (834)
Increase/(decrease) in accounts payable and accrued
expenses 1,092 (30)
Decrease in advances from customers (710) (553)
(Decrease)/increase in other taxes payable (531) 3,124
------------------------------------------------------------- ----- ------------ -------------
Cash used in operations (3,857) (3,051)
Interest received 98 -
Interest paid - -
Income tax paid - (271)
------------------------------------------------------------- ----- ------------ -------------
Net cash used in operating activities (3,759) (3,322)
Cash flows from investing activities
Purchase of property, plant and equipment and intangible
assets (1,032) (1,565)
Net cash used in investing activities (1,032) (1,565)
Cash flows from financing activities
Repayment of borrowings - (4,000)
Finance lease principal payments (195) (104)
Cash proceeds from issuance of ordinary shares, net - 8,750
Net cash used in/(generated from) financing activities (195) 4,646
Effect of exchange rate changes on cash in bank and
on hand (146) 84
------------------------------------------------------------- ----- ------------ -------------
Net decrease in cash in bank and on hand (5,132) (157)
Cash in bank and on hand at the beginning of the period 7,722 987
------------------------------------------------------------- ----- ------------ -------------
Cash in bank and on hand at the end of the period 2,590 830
------------------------------------------------------------- ----- ------------ -------------
Consolidated Statements of Changes in Shareholders's Equity
(presentedin US$ thousands)
Equity
attributable
to
Difference Shareholders
from of Urals
conversion Energy
of share Cumulative Public
Share Share capital Translation Accumulated Company Non-controlling Total
Notes capital premium into US$ Adjustment deficit Limited interest equity
Balance at 1
January 2011 1,543 656,557 (113) (28,858) (503,016) 126,113 970 127,083
--------------- ------ -------- --------- ----------- ------------ ------------ ------------- ---------------- ---------
Effect of
currency
translation - - - 5,702 - 5,702 83 5,785
Loss for the
year - - - - 3,615 3,615 (8) 3,607
-------- --------- ----------- ------------ ------------ ------------- ---------------- ---------
- - - 5,702 3,615 9,317 75 9,392
Total
comprehensive
loss
Issuance of
shares 10 26 (26) - - - - -
Share-based
payment 10 - 290 - - - 290 - 290
Balance at 30
June 2011 1,569 656,821 (113) (23,156) (499,401) 135,720 1,045 136,765
--------------- ------ -------- --------- ----------- ------------ ------------ ------------- ---------------- ---------
Balance at 1
January 2012 1,569 656,988 (113) (30,672) (527,684) 100,088 883 100,971
Effect of
currency
translation - - - (1,063) - (1,063) (18) (1,081)
Loss for the
year - - - (2,053) (2,053) 10 (2,043)
-------- --------- ----------- ------------ ------------ ------------- ---------------- ---------
Total
comprehensive
loss - - - (1,063) (2,053) (3,116) (8) (3,124)
Issuance of
shares 10 20 (20) - - - - - -
Balance at 30
June 2012 1,589 656,968 (113) (31,735) (529,737) 96,972 875 97,847
--------------- ------ -------- --------- ----------- ------------ ------------ ------------- ---------------- ---------
1 Activities
Urals Energy Public Company Limited ("Urals Energy" or the
"Company" or "UEPCL") was incorporated as a limited liability
company in Cyprus on 10 November 2003. Urals Energy and its
subsidiaries (the "Group") are primarily engaged in oil and gas
exploration and production in the Russian Federation and processing
of crude oil for distribution on both the Russian and international
markets.
The registered office of Urals Energy is at 31 Evagorou Avenue,
Suite 34, CY-1066, Nicosia, Cyprus. UEPCL's shares are traded on
the AIM Market operated by the London Stock Exchange.
The Group comprises UEPCL and the following main
subsidiaries:
Effective ownership interest at
------------------------------- ----------------- ----------------------------------
Entity Jurisdiction 30 June 2012 31 December 2011
------------------------------- ----------------- -------------- ------------------
Exploration and production
ZAO Petrosakh ("Petrosakh") Sakhalin 97.2% 97.2%
ZAO Arcticneft ("Arcticneft") Nenetsky Region 100% 100%
Management company
OOO Urals Energy Moscow 100% 100%
------------------------------- ----------------- -------------- ------------------
2 Summary of Significant Accounting Policies
Basis of preparation. The consolidated financial statements of
the Group have been prepared in accordance with International
Financial Reporting Standards (IFRS) as adopted by the European
Union (EU) under the historical cost convention as modified by the
change in fair value of financial instruments.
The preparation of consolidated financial statements in
conformity with IFRS requires management to make estimates and
assumptions that affect the reported amounts of assets and
liabilities at the reporting date and the reported amounts of
revenues and expenses during the reporting period. These policies
have been consistently applied to all the periods presented, unless
otherwise stated. Critical accounting estimates and judgements are
disclosed in Note 4. Actual results could differ from the
estimates.
Functional and presentation currency. The United States dollar
("US dollar or US$ or $") is the presentation currency for the
Group's operations as management have used the US dollar accounts
to manage the Group's financial risks and exposures, and to measure
its performance. Financial statements of the Russian subsidiaries
are measured in Russian Roubles, their functional currency.
The functional currency of the Company is the US Dollar as
substantially all the cash flows affecting the Company are in US
Dollars.
Translation to functional currency. Monetary assets and
liabilities denominated in foreign currencies are retranslated into
the functional currency at the rate of exchange ruling at the
reporting date. Any resulting exchange differences are included in
the profit or loss component of the consolidated statement of
comprehensive income. Non-monetary assets and liabilities that are
measured at historical cost and denominated in a foreign currency
are translated into the functional currency using the rates of
exchange as at the dates of the initial transactions. The US dollar
to Russian Rouble exchange rates were 32.82 and 32.20 as of 30 June
2012 and 31 December 2011, respectively.
Translation to presentation currency. The Group's consolidated
financial statements are presented in US dollars in accordance with
IAS 21, The Effects of Changes in Foreign Exchange Rates. The
results and financial position of each group entity having a
functional currency different from the presentation currency are
translated into the presentation currency as follows:
(i) Assets and liabilities for each statement of financial
position presented are translated at the closing rate at the date
of that statement of financial position. Monetary assets and
liabilities denominated in foreign currencies are translated into
the functional currency at the rate of exchange ruling at the
reporting date. Any resulting exchange differences are included in
the profit or loss component of the consolidated statement of
comprehensive income. Non-monetary assets and liabilities that are
measured at historical cost and denominated in a foreign currency
are translated into the functional currency the Company using the
rates of exchange as at the dates of the initial transactions.
Goodwill and fair value adjustments arising on the acquisitions are
treated as assets and liabilities of the acquired entity.
(ii) Income and expenses for each statement of comprehensive
income are translated to the functional currency of the Company at
average exchange rates (unless this average is not a reasonable
approximation of the cumulative effect of the rates prevailing on
the transaction dates, in which case income and expenses are
translated at the dates of the transactions).
(iii) All resulting exchange differences are recognised as a
separate component of equity.
When a subsidiary is disposed of through sale, liquidation,
repayment of share capital or abandonment of all, or part of, that
entity, the exchange differences deferred in other comprehensive
income are reclassified to the profit and loss.
Uncertain tax positions. The Group's uncertain tax positions are
reassessed by management at the end of each reporting period.
Liabilities are recorded for income tax positions that are
determined by management as more likely than not to result in
additional taxes being levied if the positions were to be
challenged by the tax authorities. The assessment is based on the
interpretation of tax laws that have been enacted or substantively
enacted by the end of the reporting period, and any known court or
other rulings on such issues. Liabilities for penalties, interest
and taxes other than on income are recognised based on management's
best estimate of the expenditure required to settle the obligations
at the end of the reporting period.
Accounting standards adopted during the period. In the current
period, the Group has adopted all of the new and revised Standards
and Interpretations issued by the International Accounting
Standards Board (the IASB) and the International Financial
Reporting Interpretations Committee (the IFRIC) of the IASB that
are relevant to its operations and effective for reporting periods
beginning on 1 January 2012.
3 Going Concern
A significant portion of the Group's consolidated net assets of
$ 97.0 million (31 December 2011: $100.1 million) comprises
undeveloped mineral deposits requiring significant additional
investment. The Group is dependent upon external debt to fully
develop the deposits and realise the value attributed to such
assets.
The Group had net current liabilities of $ 2.6 million as of 30
June 2011 (31 December 2011: $3.7 million). The most significant
creditor as of 30 June 2012 was $ 10.2 million loan from Petraco
(31 December 2011: $10.0 million) (Note 9).
Management have prepared monthly cash flow projections for
periods throughout 2012 and 2013. Judgments which are significant
to management's conclusion that no material uncertainty exists for
going concern this year include future oil prices and planned
production which were required for the preparation of the cash flow
projections and model. Positive overall cash flows are dependant on
future oil prices (a price of $90 per barrel has been used for 2012
and for 2013). Despite the above matters, the Group still has
funding and liquidity constraints, though these are less severe
than in the prior year. Despite the uncertainties and based on cash
flow projections performed, management considers that the
application of the going concern assumption for the preparation of
these consolidated financial statements is appropriate.
4 Critical Accounting Estimates and Judgments in Applying Accounting Policies
The Group makes estimates and assumptions that affect the
amounts recognised in the consolidated financial statements and the
carrying amounts of assets and liabilities within the next
financial year. Estimates and judgments are continually evaluated
and are based on management's experience and other factors,
including expectations of future events that are believed to be
reasonable under the circumstances. Management also makes certain
judgments, apart from those involving estimations, in the process
of applying the accounting policies. Judgments that have the most
significant effect on the amounts recognised in the consolidated
financial statements and estimates that can cause a significant
adjustment to the carrying amount of assets and liabilities within
the next financial year include:
Tax legislation. Russian tax and customs legislation is subject
to varying interpretations, and changes, which can occur
frequently. Management's interpretation of such legislation as
applied to the transactions and activity of the Group may be
challenged by the relevant authorities.
Initial recognition of related party transactions. In the normal
course of business the Company enters into transactions involving
various financial instruments with its related parties. IAS 39,
Financial Instruments: recognition and measurement, requires
initial recognition of financial instruments based on their fair
values. Judgment was applied in determining if transactions are
priced at market or nonmarket interest rates, where there is no
active market for such transactions. This judgment was based on the
pricing for similar types of transactions with unrelated parties
and effective interest rate analyses.
Estimation of oil and gas reserves. Engineering estimates of
hydrocarbon reserves are inherently uncertain and are subject to
future revisions. Accounting measures such as depreciation,
depletion and amortization charges, impairment assessments and
asset retirement obligations that are based on the estimates of
proved reserves are subject to change based on future changes to
estimates of oil and gas reserves.
Proved reserves are defined as the estimated quantities of
hydrocarbons which geological and engineering data demonstrate with
reasonable certainty to be recoverable in future years from known
reservoirs under existing economic conditions. Proved reserves are
estimated by reference to available reservoir and well information,
including production and pressure trends for producing reservoirs.
Furthermore, estimates of proved reserves only include volumes for
which access to market is assured with reasonable certainty. All
proved reserves estimates are subject to revision, either upward or
downward, based on new information, such as from development
drilling and production activities or from changes in economic
factors, including product prices, contract terms or development
plans. In some cases, substantial new investment in additional
wells and related support facilities and equipment will be required
to recover such proved reserves. Due to the inherent uncertainties
and the limited nature of reservoir data, estimates of underground
reserves are subject to change over time as additional information
becomes available.
The Group last obtained an independent reserve engineers report
as at 31 December 2007. Management believes that these reserves
have not changed, other than through production, as the amount of
subsequent additional drilling has been minimal.
In general, estimates of reserves for undeveloped or partially
developed fields are subject to greater uncertainty over their
future life than estimates of reserves for fields that are
substantially developed and depleted. As those fields are further
developed, new information may lead to further revisions in reserve
estimates. Reserves have a direct impact on certain amounts
reported in the consolidated financial statements, most notably
depreciation, depletion and amortization as well as impairment
expenses. Depreciation rates on production assets using the
units-of-production method for each field are based on proved
developed reserves for development costs, and total proved reserves
for costs associated with the acquisition of proved properties.
Assuming all variables are held constant, an increase in proved
developed reserves for each field decreases depreciation, depletion
and amortization expenses. Conversely, a decrease in the estimated
proved developed reserves increases depreciation, depletion and
amortization expenses. Moreover, estimated proved reserves are used
to calculate future cash flows from oil and gas properties, which
serve as an indicator in determining whether or not property
impairment is present. The possibility exists for changes or
revisions in estimated reserves to have a significant effect on
depreciation, depletion and amortization charges and, therefore,
reported net profit/(loss) for the year.
Deferred income tax asset recognition. The recognised deferred
tax asset represents income taxes recoverable through future
deductions from taxable profits and is recorded in the statement of
financial position. Deferred income tax assets are recorded to the
extent that realisation of the related tax benefit is probable. The
future taxable profits and the amount of tax benefits that are
probable in the future are based on the medium term business plan
prepared by management and extrapolated results thereafter. The
business plan is based on management expectations that are believed
to be reasonable under the circumstances. Key assumptions in the
business plan are an average oil price of $90 for 2012 and $90 in
real terms for future sales.
Impairment provision for receivables. The impairment provision
for receivables (including loans issued) is based on management's
assessment of the probability of collection of individual
receivables. Significant financial difficulties of the
debtor/lender, probability that the debtor/lender will enter
bankruptcy or financial reorganization, and default or delinquency
in payments are considered indicators that the receivable is
potentially impaired. Actual results could differ from these
estimates if there is deterioration in a debtor's/lender's
creditworthiness or actual defaults are higher than the
estimates.
When there is no expectation of recovering additional cash for
an amount receivable, the expected amount receivable is written off
against the associated provision.
Future cash flows of receivables that are evaluated for
impairment are estimated on the basis of the contractual cash flows
of the assets and the experience of management in respect of the
extent to which amounts will become overdue as a result of past
loss events and the success of recovery of overdue amounts. Past
experience is adjusted on the basis of current observable data to
reflect the effects of current conditions that did not affect past
periods and to remove the effects of past conditions that do not
exist currently.
Asset retirement obligations. Management makes provision for the
future costs of decommissioning hydrocarbon production facilities,
pipelines and related support equipment based on the best estimates
of future cost and economic lives of those assets. Estimating
future asset retirement obligations is complex and requires
management to make estimates and judgments with respect to removal
obligations that will occur many years in the future. Changes in
the measurement of existing obligations can result from changes in
estimated timing, future costs or discount rates used in
valuation.
Useful lives of non-oil and gas properties. Items of non-oil and
gas properties are stated at cost less accumulated depreciation.
The estimation of the useful life of an asset is a matter of
management judgement based upon experience with similar assets. In
determining the useful life of an asset, management considers the
expected usage, estimated technical obsolescence, physical wear and
tear and the physical environment in which the asset is operated.
Changes in any of these conditions or estimates may result in
adjustments to future depreciation rates. Useful lives applied to
oil and gas properties may exceed the licence term where management
considers that licences will be renewed. Assumptions related to
renewal of licences can involve significant judgment of
management.
Impairment. Management have estimated the recoverable amount of
cash generating units. Changes in the assumptions used can have a
significant impact on the amount of any impairment charge.
5 Inventories
30 June 30 June 31 December
2012 2011 2011
--------------------------------- ---------- -------- ------------
Crude oil 10,218 13,071 4,046
Oil products 3,123 3,721 1,941
Materials and supplies 3,922 4,902 4,032
--------------------------------- ---------- -------- ------------
Total inventories 17,263 21,694 10,019
--------------------------------- ---------- -------- ------------
Inventory provision
Six months ended
30 June:
-------------------------------- --------------------
2012 2011
-------------------------------- --------- ---------
At 1 January - 1,012
Utilization of provision - (948)
Effect of currency translation - 87
At 30 June - 151
-------------------------------- --------- ---------
6 Property, Plant and Equipment
Oil and gas Refinery and Assets under
Cost at properties related equipment Buildings Other Assets construction Total
-------------------- ------------------- ------------------ ---------- ------------- ------------------ --------
1 January 2011 153,611 8,601 928 6,010 7,934 177,084
Translation
difference 13,120 735 80 517 702 15,154
Additions - - 39 1,197 1,236
Capitalised
borrowing
costs - - - - 171 171
Transfers 81 - - 12 (93) -
Disposals (855) - - (57) - (912)
-------------------- ------------------- ------------------ ---------- ------------- ------------------ --------
30 June 2011 165,957 9,336 1,008 6,521 9,911 192,733
-------------------- ------------------- ------------------ ---------- ------------- ------------------ --------
Average capitalisation rate of capitalised interest expense for
the period ended 30 June 2011 is 5.75%.
Oil and gas Refinery and Assets under
properties related equipment Buildings Other Assets construction Total
------------------- ------------------- ------------------ ---------- ------------- ------------------ ---------
Accumulated
Depreciation,
Amortization and
Depletion at
1 January 2011 (42,283) (2,358) (537) (3,089) - (48,267)
Translation
difference (3,703) (206) (46) (270) - (4,225)
Depreciation,
depletion and
amortization (4,594) (213) (13) (255) - (5,075)
Disposals 313 - - 32 - 345
------------------- ------------------- ------------------ ---------- ------------- ------------------ ---------
30 June 2011 (50,267) (2,777) (596) (3,582) - (57,222)
------------------- ------------------- ------------------ ---------- ------------- ------------------ ---------
Oil and gas Refinery and Assets under
properties related equipment Buildings Other Assets construction Total
-------------------- ------------------- ------------------ ---------- ------------- ------------------ --------
Net Book Value at
1 January 2011 111,328 6,243 391 2,921 7,934 128,817
-------------------- ------------------- ------------------ ---------- ------------- ------------------ --------
30 June 2011 115,690 6,559 412 2,939 9,911 135,511
-------------------- ------------------- ------------------ ---------- ------------- ------------------ --------
Oil and gas Refinery and Assets under
Cost at properties related equipment Buildings Other Assets construction Total
------------------- ------------------- ------------------ ---------- ------------- ------------------ ---------
1 January 2012 149,213 8,141 879 5,488 6,004 169,725
Translation
difference (2,831) (154) (16) (104) (164) (3,269)
Reclassification
as intangible
assets - - - - - -
Additions 251 - - 5 706 962
Capitalised
borrowing costs - - - - 43 43
Transfers - - - - - -
Disposals (161) - - - - (161)
30 June 2012 146,474 7,987 862 5,388 6,589 167,300
------------------- ------------------- ------------------ ---------- ------------- ------------------ ---------
Average capitalisation rate of capitalised interest expense for
the period ended 30 June 2012 is 5.5%.
Accumulated
Depreciation,
Amortization and Oil and gas Refinery and Assets under
Depletion at properties related equipment Buildings Other Assets construction Total
------------------- ------------------- ------------------ ---------- ------------- ------------------ ---------
1 January 2012 (45,025) (2,660) (552) (3,221) - (51,458)
Translation
difference 1,021 65 12 74 - 1,172
Depreciation (2,613) (225) (24) (179) - (3,041)
Disposals 104 - - - - 104
30 June 2012 (46,513) (2,819) (564) (3,327) - (53,223)
------------------- ------------------- ------------------ ---------- ------------- ------------------ ---------
Refinery and
Oil and gas related Assets under
properties equipment Buildings Other Assets construction Total
Net Book Value at
1 January 2012 104,188 5,481 327 2,267 6,004 118,267
30 June 2012 99,961 5,168 298 2,061 6,589 114,077
------------------- ------------------- ------------------ ---------- ------------- ------------------ ---------
Included within oil and gas properties at 30 June 2012 and 31
December 2011 were exploration and evaluation assets:
Cost at Cost at
31 December Translation 30
2011 Additions difference June 2012
---------------------------- ------------- ---------- ------------ -----------
Exploration and evaluation
assets
Arcticneft 16,006 - (303) 15,703
Petrosakh 29,136 - (552) 28,584
---------------------------- ------------- ---------- ------------ -----------
Total cost of exploration
and evaluation assets 45,142 - (855) 44,287
---------------------------- ------------- ---------- ------------ -----------
The Group's oil fields are situated in the Russian Federation on
land owned by the Russian government. The Group holds production
mining licenses and pays production taxes to extract oil and gas
from the fields. The licenses expire between 2037 and 2067, but may
be extended. Management intends to renew the licences as the
properties are expected to remain productive subsequent to the
license expiration date.
Estimated costs of dismantling oil and gas production
facilities, including abandonment and site restoration costs,
amount to $1.5 million and $1.4 million at 30 June 2012 and 31
December 2011, respectively, are included in the cost of oil and
gas properties. The Group has estimated its liability based on
current environmental legislation using estimated costs when the
expenses are expected to be incurred.
7 Other Non-Current Assets
30 June 30 June 31 December
2012 2011 2011
--------------------------------------- -------- ---------- --------------
Loans receivable - 39,482 -
Loans issued to related parties
(Note 14) 818 850 851
Advances to contractors and suppliers
for construction in process 168 405 110
Intangible assets 132 526 186
------------
Total other non-current assets 1,118 41,263 1,147
--------------------------------------- -------- --------- ------------
8 Accounts Payable and Accrued Expenses
30 June 31 December
30 June 2012 2011 2011
----------------------------------- ------------- ---------- ------------
Payable to Finfund Ltd. - 4,431 -
Trade payables 735 412 503
Accounts payable for construction
in process 349 439 96
Wages and salaries 2,458 1,025 2,325
Advances from and payables
to related parties - 13 -
Other payable and accrued
expenses 2,279 2,422 1,858
----------------------------------- ------------- ---------- ------------
Total accounts payable and
accrued expenses 5,821 8,742 4,782
----------------------------------- ------------- ---------- ------------
9 Borrowings
Long-term and short-term borrowings. Long-term and short-term
borrowings were as follows at 31 December 2011 and 2010:
30 June 31 December
2012 30 June 2011 2011
----------------------------- -------- --------------- ------------
Long-term borrowings
Petraco
* Principal - 17,316 -
* Interest 2,865 2,040 2,655
Total long-term borrowings 2,865 19,356 2,655
Short-term borrowings
Petraco
* Principal 7,316 8,000 7,316
* Interest - - -
Other - 127 -
Total short-term borrowings 7,316 8,127 7,316
Total borrowings 10,181 27,483 9,971
----------------------------- -------- --------------- ------------
Petraco. In April 2010 the Company reached an agreement
(subsequently amended on 18 November 2010) 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 $34.3 million, made up as follows:
- capital amount outstanding (the "Capital Outstanding") of $30.7 million; and
- accrued interest outstanding (the "Accrued Interest") of $3.6 million.
As at 1 April 2010, the Capital Outstanding and Accrued Interest
were added together and carried forward as principal ("Principal").
After 1 April 2010 interest is 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.
As part of the restructuring agreement the Company converted $2
million of the Capital Outstanding into 8,693,006 ordinary shares
of the Company (recorded in the consolidated statement of changes
in shareholders' equity) and gave an option to Petraco to acquire
additional new ordinary shares in the amount of 12,576,688 for GBP
0.26 per share. The fair value of the option is not material. This
option is considered as non dilutive instrument.
In June 2010 Company pledged 100% of the shares it currently
holds in Arcticneft and 97.2% of shares it currently holds in
Petrosakh to Petraco as security against the restructured Petraco
facility.
In December 2011 following the disposal of the Taas loans the
Group partly discharged the debt to Petraco in the amount of $10
million.
As of 30 June 2012 the repayment schedule of the balance for the
Capital Outstanding and the Accrued Interest was as follow:
Payment date Amount to be paid by UEPCL to
Petraco
------------------ ------------------------------
31 July 2012 $6.0 million
30 November 2012 $1.3 million
31 December 2013 Repayment date of outstanding
interest
------------------ ------------------------------
Weighted average interest rate. The Group's weighted average
interest rates on borrowings were 5.5% and 5.75% at 30 June 2012
and 31 December 2011, respectively.
Interest income and expense. Interest income and expense for the
six months ended 30 June 2012 and 30 June 2011, respectively,
comprised the following:
Six months ended 30
June
----------------------
2012 2011
------------------------------------------------- ---------- ----------
Interest income
Interest on loan issued to TYNGD - 1,672
Related party loans issued (Note 14) 44 55
------------------------------------------------- ---------- ----------
Total interest income 44 1,727
------------------------------------------------- ---------- ----------
Finfund pledge fee - -
Interest on loan from Petraco Oil Company
Limited (163) (237)
* accrued (206) (702)
* capitalised into PP&E and finished goods 43 465
Finance leases (35) (73)
Change in dismantlement provision due to
passage of time (80) (83)
Total interest expense (278) (393)
Net finance income (234) 1,334
------------------------------------------------- ---------- ----------
10 Equity
At 31 December 2011 authorised share capital was $1,890 thousand
divided into 300 million shares of $0.0063 each.
Difference
Number from conversion
of shares of share
(thousand Share Share capital to
of shares) capital premium USD
-------------------------------- ------------ --------- --------- -----------------
Balance at 1 January 2011 245,192 1,543 656,670 (113)
Shares issued under restricted
stock plans 4,059 26 (26) -
Share-based payment under
restricted stock - - 290 -
-------------------------------- ------------ --------- --------- -----------------
Balance at 30 June 2011 249,251 1,569 656,934 (113)
-------------------------------- ------------ --------- --------- -----------------
Balance at 1 January 2012 249,251 1,569 656,988 (113)
Shares issued under restricted
stock plans 3,195 20 (20) -
Balance at 30 June 2012 252,446 1,589 656,968 (113)
-------------------------------- ------------ --------- --------- -----------------
Restricted Stock Plan. During the six months ended 30 June 2012
and 30 June 2011, nil and $290 thousand, respectively, of expense
related to share-based payments were recognized in the interim
condensed consolidated statement of comprehensive income.
At 30 June 2012 and 30 June 2011, restricted stock grants for
3,194,914 shares and 4,059,112 shares were fully issued.
As of 30 June 2012, the number of unvested restricted stock
grants and their respective vesting dates are presented in the
table below.
January January January January
Date of Grant 2009 2010 2011 2012 Total
Unvested Restricted
Stock Granted as
of 31 December 2011 354,096 354,095 260,180 3,194,914 4,163,285
Vested in the six
months ended 30
June 2012 - - - (3,194,914) (3,194,914)
---------------------- --------- --------- --------- ------------ ------------
Total Restricted
Stock Granted as
of 30 June 2012 354,096 354,095 260,180 - 968,371
---------------------- --------- --------- --------- ------------ ------------
Profit/(loss) per share. Basic profit/(loss) per share is
calculated by dividing the profit/(loss) attributable to equity
holders of the company by the weighted average number of ordinary
shares in issue during the year.
Six months ended
30 June
---------------------
2012 2011
---------------------------------------------- ----------- --------
(Loss)/profit attributable to equity holders
of the Company (2,043) 3,615
Weighted average number of ordinary shares
in issue (thousands) 251,902 248,912
---------------------------------------------- ----------- --------
Basic (loss)/profit per share (in US dollar
per share) (0.01) 0.015
---------------------------------------------- ----------- --------
11 Revenues
Six months ended
30 June
------------------------------------------------- -------------------
2012 2011
------------------------------------------------- -------- ---------
Petroleum (refined) products - domestic sales 15,473 14,930
Crude oil - domestic sales 1,114 1,807
Other sales 245 402
------------------------------------------------- -------- ---------
Total proceeds from sales 16,832 17,139
------------------------------------------------- -------- ---------
Less: excise taxes (1,470) (1,744)
Revenues after excise taxes and export duties 15,362 15,395
------------------------------------------------- -------- ---------
12 Cost of Sales
Six months ended
30 June
------------------------------------------ -------------------
2012 2011
------------------------------------------ --------- --------
Unified production tax 7,816 7,431
Wages and salaries 5,141 - 5,983
Depreciation, depletion and amortisation 3,255 5,164
Materials 2,658 2,706
Oil treating, storage and other services 724 560
Rent, utilities and repair services 421 673
Other taxes 256 333
Other 58 135
Change in finished goods (8,044) (9,103)
Total cost of sales 12,285 13,882
------------------------------------------ --------- --------
13 Selling, General and Administrative Expenses
Six months ended
30 June
------------------------------------------------------ -------------------
2012 2011
------------------------------------------------------ ---------- -------
Wages and salaries 1,399 1,635
Professional consultancy fees 712 665
Transport and storage services 613 913
Office rent and other expenses 435 431
Share based payments - 290
Trip expenses and communication services 189 198
Other expenses 229 393
------------------------------------------------------ ---------- -------
Total selling, general and administrative expenses 3,577 4,525
------------------------------------------------------ ---------- -------
14 Balances and transactions with Related Parties
Parties are generally considered to be related if one party has
the ability to control the other party, is under common control, or
can exercise significant influence over the other party in making
financial or operational decisions as defined by IAS 24 Related
Party Disclosures. Key management personnel are considered to be
related parties. In considering each possible related party
relationship, attention is directed to the substance of the
relationship, not merely the legal form.
Balances and transactions with related parties
Six months ended
30 June
-------------------
2012 2011
------------------------------------------ -------- ----------- ------------
Transactions with related parties
Interest income 44 55
30 June 30 June 31 December
2012 2011 2011
------------------------------------------ -------- ----------- ------------
Balances with related parties
Loans issued to related parties 782 842 755
Interest receivable from other related
parties 380 478 458
-------- ----------- ------------
Total of loans and interest receivable
from related parties 1,162 1,320 1,213
-------- ----------- ------------
Accounts and notes receivable 5 5
Advances from and payables to related
parties (8) (13) (16)
As of 30 June 2012 and 31 December 2011 the Group has an
impairment provision against a loan to a related party of $6.2
million and $5.9 million, respectively. This amount relates to a
loan to shareholder and former member of management of the Group.
This loan is overdue. For accounting purposes management reassessed
the carrying value of the loan and impaired this fully. However,
this does not reduce the validity of the legal claim against this
related party. Management formally informed this related party and
demanded repayment of the full amount by 20 May 2011. By 20 May
2011 management did not receive any response from the related
party. Considering that according to the loan agreement all
disputes shall finally resolved by arbitration under the Rules of
Arbitration of the London Court of International Arbitration (the
LCIA) the Company filed a claim to the LCIA in June 2011. Following
hearings in the arbitration, the arbitrator issued a Partial Final
Award on Preliminary Issues on 21 June 2012 pursuant to which the
respondent is liable to repay to the Company the entire principal
sum due under the Loan Agreement, plus interest.
Loans receivable include amounts due by OOO Komineftegeophysica
in the amount of $1.2 million (31 December 2011: $1.2 million),
where shareholders of the Group hold the majority of shares. The
loans bear interest 10%. Loans in the amount of $0.4 million is
short term in nature. Loans in the amount of $0.8 million mature on
31 December 2015. These loans are not secured.
15 Events after the reporting period
Release of the Charge
Under the terms of the debt repayment agreement with Petraco
Urals Energy pledged 97.2% of the shares it held in CJSC Petrosakh
to Petraco as security against the restructured prepayment
financing arrangements with Petraco (Note 9). After the payment to
Petraco of $10 million following the Taas loan assignment, and in
accordance with the terms of the Agreement, Petraco has released
its charge over the shares of CJSC Petrosakh in full.
Petraco Payment Extension
In addition, the payment to Petraco scheduled for 31 July 2012
according to the Restructuring Agreement dated 1 August, 2011 has
been extended to 30 November 2012 (after the shipment of the tanker
from Arcticneft).
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR DDLFLLKFLBBL
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