TIDMUEN
RNS Number : 2709B
Urals Energy Public Company Limited
15 June 2016
15 June 2016
Urals Energy PCL
("Urals Energy", the "Company" or the "Group")
Licence award, general update and notice of results
Urals Energy PCL (AIM:UEN), the independent exploration and
production company with operations in Russia, is pleased to provide
an update for shareholders.
Licence award
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. The
licence, with an area of 28.8 sq. kms, was the subject of an
earlier exploration and appraisal programme in the 1970s, followed
by additional seismic work done in the middle of 1990s and 2007.
During these periods two exploratory and six appraisal wells were
drilled. Russian State Registered reserves C1 plus C2, equivalent
to 2P (proven and probable), on the South Dagi license area are
17.7 million barrels, with C3 or possible reserves of 9.0 million
barrels. At shallow levels, the oil is relatively heavy (23.5 -
25.5degAPI), with light oil (36.5 - 37.5degAPI), similar to the oil
at the Company's Petrosakh operation, at lower horizons. The
auction bid price payable by the Company is Russian Roubles 134.6
million, equivalent to US$2.1 million, and thus approximately 12
cents US per barrel of 2P reserves.
The reserves and resource figures stated above have not been
reviewed in accordance with the AIM Guidance Note for Mining, Oil
and Gas Companies and the Company plans to get a review of the
South Dagi licence undertaken, in addition to the Company's other
assets, in accordance with an appropriate Standard in an updated
Competent Person's report to be undertaken this year.
Dr Svyatoslav Bilibin, (Dr.Sci.Tech. and Corresponding Member of
the Russian Academy of Natural Sciences), an independent adviser to
Urals Energy, who meets the criteria of a qualified person under
the AIM Guidance Note for Mining, Oil and Gas Companies, has
reviewed and approved the technical information contained within
this announcement.
The Company's plan is to design and seek approval for a
Development Plan for the South Dagi license with the official
authorities, which is expected to involve a drilling program with
the objective of producing up to 2,000 bbls/day over the next 5
years. The oil from South Dagi will be transported by road tanker
to the Company's refinery at Petrosakh, a distance of 400 kms,
increasing the utilisation rate of the refinery, which will not
need additional investment to process both the heavy and light oils
produced at South Dagi.
The payment for the South Dagi licence has been funded from the
Company's existing capital resources, while its development will be
financed on a project basis with a loan from local banks, which is
being negotiated.
General overview
The substantial improvement in the oil price in recent months
has been somewhat offset by the recovery of the Russian Rouble
against the US$. The Company has continued to trade profitably on a
cash basis, even after recent increases in taxes. It is clear
though that the development of oil fields in Russia, such as at the
Company's new license at South Dagi, requires a higher net return
after taxes. This is affecting all Russian producers and thus the
general level of development. As with other independent oil
companies, Urals has been discussing the need for reform of the tax
system with the Russian Government, but we must be patient before
we can expect changes.
The Company's strategy therefore remains to acquire licences and
defer significant development decisions until conditions (oil
price, exchange rates and taxes) become more favourable. By
acquiring licences now, performing modest geological studies and
work overs rather than new developments, we are able to acquire
licences at modest cost.
As a result of our efforts over the last seven months, we now
have an expanded portfolio of licences:
-- The extension of our licence area at Arcticneft, announced on
7(th) of October 2015, adding 10.3 million barrels of reserves
ABC1;
-- The acquisitions of the two licences in the Komi Republic,
announced on 19(th) of November 2015, adding 14.9 million barrels
of reserves C1 plus C2; and 25.0 million barrels of D1 or possible
reserves
-- Today's announcement of the licence award at South Dagi.
In total, the above represents the equivalent of an additional
42.9 million barrels of 2P reserves. It remains our intention to
have a reserve report prepared by a Competent Person later in the
year.
At the same time, we have been able to maintain production at
Arcticneft ("AKN") and Petrosakh ("PSK") at approximately 2,000
bbls/day on average, (AKN 676: bbls/day and PSK: 1,317 bbls/day) at
low average operating costs of US$8.4 per barrel, as announced on
18 April 2016.
At AKN, the loading of our annual shipment should be in
mid-July, but may be deferred until late in August, as we negotiate
shipping arrangements.
At PSK, we are still testing Well 109, which has started to
produce modest amounts of oil, but needs further intervention to
reduce high pressure water from deeper horizons flowing to the
surface. We have decided to defer drilling of additional wells at
PSK until the completion of further geological investigation. It is
therefore possible that the Company will not be able to defer the
natural decline of the field. It is in this context that the
acquisition of the South Dagi licence will be increasingly
important for the optimisation of the refinery at PSK.
The Directors are disappointed by the further weakness of the
Company's share price, but believe that by continuing our strategy
we are building a platform for a significant increase in the scale
of the Company's operations for the future, without taking undue
risk in leveraging the balance sheet.
Financial results for the year to 31st December 2015
The Company intends to announce its financial results for the
year ended 31 December 2015 on 28 June 2016.
- Ends -
For further information, please contact:
Urals Energy Public Company Limited
Andrew Shrager, Chairman Tel: +7 495 795 0300
Leonid Dyachenko, Interim Chief Executive Officer www.uralsenergy.com
Allenby Capital Limited
Nominated Adviser and Broker
Nick Naylor Tel: +44 (0) 20 3328 5656
Alex Brearley www.allenbycapital.com
This information is provided by RNS
The company news service from the London Stock Exchange
END
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