TIDMVGAS
RNS Number : 6365Q
Volga Gas PLC
07 June 2018
7 June 2018
The following replaces the 'Operational Update' announcement
released on 7 June 2018 at 7.00 am, under RNS No 5539Q.
The announcement contained a reference to the average selling
price for gas for the period between 1 Jan to 31 May 2017 being
US$21.90/mcf which was incorrect and has now been changed to
US$1.90/mcf which is the correct figure.
The full amended text is shown below.
Volga Gas plc
("Volga Gas", the "Company" or the "Group")
OPERATIONAL UPDATE
Volga Gas plc, the oil and gas exploration and production group
operating in the Volga Region of Russia, is holding its Annual
General Meeting today and is pleased to provide the following
update on its activities and operations:
Highlights
-- Year to 31 May 2018, Group production averaged 4,402 barrels
of oil equivalent per day ("boepd").
-- Year to 31 May 2018, Realised prices for oil and condensate
net of sales expenses averaged $45.1 per barrel.
-- LPG production commenced in May 2018 and is expected to reach
full operational capacity by the end of June 2018.
-- The Group's cash position increased by US$4.6 million to
US$12.0 million (as at 31 May 2018).
Production Summary
1 Jan to 31 1 Jan to 31 FY 2017
May 2018 May 2017 Average
Average Average
Gas 15.5 mmcfd 28.9 mmcfd 19.1 mmcfd
Condensate 1,037 bpd 1,627 bpd 1,163 bpd
Oil 747 bpd 509 bpd 596 bpd
LPG 29 boepd Nil Nil
Total 4,402 boepd 6,947 boepd 4,948 boepd
The reduced production compared to the equivalent period in 2017
was due primarily to lower capacity utilisation during
implementation and optimisation of Redox gas sweetening and the
presence of increased formation water during gas production from
certain of the production wells on the Vostochny Makarovskoye
("VM") field. Optimisation of the Redox gas sweetening process
continues together with management studies, as further detailed
below, to optimize the production rate.
Realisations
The average netback sales price for oil and condensate for the
period 1 January to 31 May 2018 was US$45.11 per barrel (1 Jan to
31 May 2017: US$34.80 per barrel). The domestic sales prices
closely track international prices after adjusting for export taxes
and transport costs.
The gas sales price in Ruble terms was RUR 4,025 per thousand
cubic metres excluding VAT (1 Jan to 31 May 2017: RUR 3,856). As
the Ruble weakened in March 2018, the average selling price for gas
for January to May 2018 was the equivalent of US$1.97 per mcf (1
Jan to 31 May 2017: US$1.90/mcf).
Field development operations
During late 2017 and early 2018, the presence of formation water
in certain of the production wells on VM was detected. This led to
the Company to commissioning a new independent reserve report which
resulted in a significant reduction in reserves, mainly in the VM
field, although the estimate of original hydrocarbons in place was
unchanged.
Management has commenced the process of developing technical and
operational solutions to mitigate the impact of the reserves
reductions. Having concluded a preliminary study, management is
considering competing proposals from potential contractors for the
remediation project which will seek to optimise the production rate
and overall extraction of hydrocarbons from the VM reservoir.
In addition, preparations are under way for the drilling of
sidetracks to two currently non-producing wells - VM#2 on the VM
field and well #26 on the Dobrinskoye field - with the aim of
restoring production from these wells by developing undepleted
reservoir zones. The results are anticipated in August 2018.
On the Uzenskoye oil field, the new horizontal well #101 on the
undeveloped Albian reservoir in the Uzen field was drilled by July
2017 and placed on full time production in December 2017. Since
then, the well has been producing at an average rate of
approximately 300 bopd, offsetting declines on the older wells and
leading to an increase in oil production, as reported above.
Further development of the Albian reservoir is anticipated, but not
before the end of 2018.
Gas plant development
Since July 2017, the Dobrinskoye gas plant has been operating
exclusively with the Redox-based gas sweetening process. During the
implementation of this, the capacity utilisation of the gas plant
was reduced as the process has been optimised. The optimization
programme continues with further minor modifications to the process
equipment at the plant. Nevertheless, the Redox process has enabled
reductions in the cost of consumables and has eliminated the need
to dispose of bulky spent chemicals.
The key recent development at the gas plant is the construction
of cryogenic separation of liquid petroleum gases ("LPG"), which
historically was either flared as part of the condensate
stabilization process or included with the sales gas. Construction
of the LPG project was completed in April 2018 and test production
commenced in May. Testing is expected to continue during June 2018
and final commissioning is expected to be concluded towards the end
of the month, after which full time LPG production is
anticipated.
Finance
Revenues for the first five months to 31 May 2018 were US$16.3
million (1 Jan to 31 May 2017: US$19.4 million) with lower
production partly offset by higher prices for oil and condensate.
The estimated EBITDA for January to May 2018 was US$4.6 million (1
Jan to 31 May 2017: US$ 7.2 million).
The Group's cash position increased to US$12.0 million as at 31
May 2018 (US$8.7 million at 31 December 2017), after payment of
approximately US$2.0 million on capital expenditure and US$0.9
million on interest and debt repayments. At the prevailing exchange
rate, the bank loan outstanding as at 31 May 2018 was US$3.0
million (31 December 2017 US$4.0 million).
During May 2018, the Group received a sum of US$3.1 million as
settlement of a court case against a former drilling contractor,
pending one final stage in the legal process. This is included in
the above cash balance.
Andrey Zozulya, Chief Executive of Volga Gas commented:
"I am pleased to report operational and financial performance
that is in line with management's expectations and I am
particularly pleased that our LPG project is in test production.
This project provides an incremental stream of revenue which is
expected to have a material positive impact on profitability, as it
attracts no additional Mineral Extraction Tax.
"The Company is looking forward to delivering further
improvements to the Group's financial performance and to resuming
distributions to shareholders, which will be considered by the
Board in September with the 2018 Interim Results."
Market Abuse Regulation (MAR) Disclosure
Certain information contained in this announcement would have
been deemed inside information for the purposes of Article 7 of
Regulation (EU) No 596/2014 until the release of this
announcement.
For further information, please contact:
Volga Gas plc
+7 495 721
Andrey Zozulya, Chief Executive 1233
Officer
Vadim Son, Chief Financial Officer +44 (0)7824
Tony Alves, Investor Relations Consultant 884 342
+44 (0)20 3470
S.P. Angel Corporate Finance LLP 0470
Richard Redmayne, Richard Morrison,
Richard Hail
+44 (0)20 3727
FTI Consulting 1000
Edward Westropp, Alex Beagley
Editors' notes:
Volga Gas is an independent oil and gas exploration and
production company operating in the Volga region of Russia. The
company has 100% interests in its four licence areas.
The information contained in this announcement has been reviewed
and verified by Mr. Andrey Zozulya, Director and Chief Executive
Officer of Volga Gas plc, for the purposes of the Guidance Note for
Mining, Oil and Gas companies issued by the London Stock Exchange
in June 2009. Mr. Andrey Zozulya holds a degree in Geophysics and
Engineering from the Groznensky Oil & Gas Institute and is a
member of the Society of Petroleum Engineers.
Glossary
bbl Barrel
bopd Barrels of oil per day
bpd Barrels per day
boepd Barrels of oil equivalent per day, in which 6,000 cubic
feet of natural gas is equated to one barrel of oil
mcf thousand cubic feet
mmcfd Millions of standard cubic feet per day
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
UPDSSUSAWFASEEM
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June 07, 2018 04:33 ET (08:33 GMT)
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