Volga Gas plc FINAL RESULTS 2016

Transcription

1 Volga Gas plc FINAL RESULTS 2016 April 2017 Andrey Zozulya, CEO

2 Disclaimer This presentation is for information only and does not constitute an offer or invitation for the sale or purchase of securities. Any information or documentation provided as part of the presentation is intended solely for use during the presentation and as a personal record thereafter. Any information or documentation provided as part of the presentation may not be reproduced or circulated or used for any other purpose. This presentation and the information contained herein is restricted and is not for release, publication or distribution, in whole or in part, directly or indirectly, in or into any jurisdiction in which it would be unlawful to do so. In particular, no information provided during the presentation may be taken, transmitted or distributed, directly or indirectly, in or into the United States of America, its territories or possessions or passed to US Persons (as defined in Regulation S of the United States Securities Act of 1933 (as amended)), United States residents, corporations or other entities, save pursuant to an applicable exemption. Distribution of this information in the United States may constitute a violation of Unites States securities law. Certain forward-looking statements may be contained in the Presentation Materials. Although the Company believes that the expectations reflected in such forward-looking statements are reasonable, no assurance can be given that such expectations will prove to be accurate. Accordingly, results could differ from those projected as a result of, among other factors, changes in economic and market conditions, changes in the regulatory environment and other business and operational risks. The information provided during the presentation has not been independently verified. No representation or warranty, express or implied, is given as to the accuracy, fairness or completeness of the information or opinions contained in the presentation and no liability is accepted for any such information or opinions (which should not be relied upon) or for any loss howsoever arising, directly or indirectly, from any use of the information provided. 1

3 Where we operate Dobrinskoye Urozhainoye-2 Source: Incotec Dobrinskoye Source: Incotec 2

4 Business overview Production Gas & condensate production in two fields: Vostochny Makarovskoye ( VM ) and Dobrinskoye Oil production from the Uzenskoye field increased in May 2016 after successful workovers increased production from ~300 bpd to ~800 bpd average production increased 99% to 6,524 boe/d (2015: 3,278 boe/d) Exports of condensate prevented local market conditions from impacting sales/production as experienced during H Increased gas production in 2H 2016 to up to 1,000 mcm/d and achieved production of over 8,000 boepd by the end of the year Gas Processing Plant Increased throughput by to 1000 mcm/d (35.3 mmcf/d) in 2H 2016 and sustained since then bar maintenance downtimes. Testing of lower cost gas sweetening processes with potential for significant operating cost savings and elimination of the need to dispose of bulky waste materials. Plans to construct LPG facility at the plant during mid Long lead items already ordered. Field development VM field development drilling completed in 2015 and well capacity is in place to deliver planned plateau production of 1,000 mcm/d (35.3 mmcf/d) gas plus 2,000 bpd of condensate (total of 8,000 boepd). Uzen field shallower reserves to be developed with horizontal well drilling, in 2Q 2017 Workovers and maintenance to optimise long term extraction of the resources 3

5 Strategy Strategy Establish planned plateau production rate of 8,000 boepd from VM/Dobrinskoye fields Significant increase in oil production from the Uzen field Future development potential for oil resources in the Karpenskiy licence area Expansion of activities into new areas with strong value growth opportunities Maintenance of strong financial condition. 4

6 Financial overview of 2016 Revenue up 122% US$39.4 million (2015: US$17.8 million) Higher production and sales volumes assisted by recovery in oil prices and RUR Exports of condensate accounting for 48% of condensate sales. Netback revenues (after selling costs) up 102% to US$35.3m (2015: US$17.5m) EBITDA US$9.6 million (2015 : US$0.9 million) Operating costs were 28% of revenues (2015: 41%) Mineral Extraction Taxes were 26% of revenues (2015: 33%) Selling expenses (export taxes and transport) were 10% of revenues (2015: n/a) Pre-tax profit of US$1.9 million (2015: loss of US$4.6 million) DD&A of US$5 million (2015: US$2.3 million) driven by higher production Additional expense of US$1.7m (2015: US$3.0m) primarily cost of logging tools lost down a stuck hole. Exploration expense of US$0.2 million (2015: US$0.6m ) remaining expenses on 2015 exploration well Net cash flow from operations of US$13.3 million (2015: US$1.2 million) Cash generation before working capital movements reflecting EBITDA Positive working capital movement of US$2.9m (2015: US$0.7m) due to prepayments from export sales Net cash US$15.8 million at 31 Dec 2016 (31 Dec 2015 : US$6.8 million). Net of US$4.0m borrowing drawn in December 2016 Recommencing dividend payments Total dividend of US$0.062/share proposed (US$5.0m dividend in total) (2015: nil) 5

7 Updated Reserve Report Oil & Condensate (mmbbl) Gas (bcf) LPG (tonne '000) Total (mmboe) Proved Reserves Dobrinskoye VM Uzenskoye Sobolevskoye Total P Reserves Dobrinskoye VM Uzenskoye Sobolevskoye Total Reserve estimates as at 31 December 2016 independently assessed by OOO Geostream Assets Management. 6

8 Vostochny Makarovskoye gas/condensate field Five production wells drilled, completed and hooked up to the Dobrinskoye gas plant, 5 km from the field site Productive capacity of over 8,000 boe/d Final well (VM#3) was completed in June drilling completed the field development Current well stock estimated to deliver > 1.0 mmcm/d (35.3 mmcf/d) of gas to fill the gas plant Sufficient to access all reserves in the field VM field site office VM#4 wellhead and flow line installation Drilling rig on VM#3 7

9 Dobrinskoye gas plant Gas Processing Unit used to process gas from the VM and Dobrinskoye fields Originally constructed solely for the Dobrinskoye field, the GPU has been upgraded to process the gas from VM and to increase its throughput capacity Established 35 mmcf/d physical capacity: increase in condensate storage and other minor upgrades expected to be completed shortly Testing of Redox-based gas sweetening continuing Results to date are encouraging Potential for significant cost reduction in gas sweetening costs with minimal changes to existing plant configuration Eliminates the need to handle chemical waste products Construction of LPG plant Capture of propane/butane flared from condensate stabilisation or included in sales gas stream Low capex cost (US$4.0m budget), 8

10 Oil production from shallow supra-salt fields UZENSKOYE FIELD Produced over 2 million barrels to date Current production capacity 800 bopd doubled since 1 January 2016 with successful workover operations Shallower (Albian) reservoir to be developed with horizontal wells First horizontal well to be drilled in 2Q 2017 Aim to increase production to the range of 1,500 to 2,000 bpd. * Management estimate as at 31 December Source as per Miller & Lents reserve report of 1 August 2012, less subsequent production 9

11 Uzen Drilling Activity Well 101 Horizontal Albian: - Well-site prepared - Necessary equipment purchased (pipes, screens, wellhead etc.) - Mobilization delayed due to early spring roads, expected to complete by 15 th April - Drilling rig & equipment installation in April - Spud date 29 th April - Expected drilling 41 days / 2669m - Estimated cost of US$3m, ex-vat 10

12 Exploration: Karpenskiy Licence YUZHNY ERSHOVSKOYE Grafovskaya#1 sub-salt exploration well drilled and tested. Non-commercial hydrocarbon shows YUZHNY MOKROUSOVSKOYE Novaya supra- and intra-salt prospect. C3 Prospective Resources of 189 mmboe SHALLOW OIL TARGETS UZENSKOYE Discovered in 2007/8 Developed 2008/9 Produced > 2 mmbbls Source: Wood Mackenzie 11

13 Geology Strategy Karpenskiy site 1. Karpenskiy Geology study project - Feb-Apr Seismic re-interpretation 2D km: 1 phase , 9 km - Mar-Dec 2017; 2 phase ,1 km - Jul-17 Jun-18 Lukashevskoe North-Starshinovskoe 3. Evaluation of potential resources: Lukashevskoe site, North-Starshinovskoe; Results Apr

14 Monthly average production rates Jan 2015 Feb 2017 (boepd) 13

15 Monthly revenues and cash margins (Jan 2015 Feb 2107) Monthly revenue by product (US$ 000) Monthly revenue and cash margins (US$ 000) 14

16 Summary and Outlook Upstream development of VM gas field is completed Current wells expected to sustain production of 1.0 million m3/day plus condensate. Sufficient wells to effectively drain the known reserves in the field Condensate export sales mitigate risk of regional domestic market constraints Gas Processing Plant Operating sustainably at 1000 mmcm/d (35.3 mmcf/d) Testing of Redox gas sweetening Potential cost savings on chemicals consumption by using regenrarable reagents Significant reduction/elimination of waste products Increased condensate storage capacity and other LPG project in construction mid-2017 => further significant increase in revenues and in profit margin expected Future oil exploration and development potential in the Karpenskiy licence area Workovers on existing wells during H revived production capacity back up to ~800 bpd from ~400 bpd Horizontal well development of undeveloped shallower Albian reservoir to start in 2Q 2017 Geological studies to generate an inventory of high impact exploratory prospects to provide future reserves and production 15

17 Summary and Outlook Finance Higher production, assisted by exports of condensate, enabled a significant recovery in profits and cash flow compared to 2015 Basis set for continued improvement in financial performance Cash balance increased to US$19.7 million by 31 December (net cash US$15.8m) and has increased further subsequently Return to dividend distributions Current trading and outlook Production during 1Q 2017 averaged >8,000 boepd Financial performance in US$ driven by oil prices, RUR rates and Mineral Extraction Taxes Expect to increase production with oil development and LPG capture 16

18 Key share data Major shareholders (as disclosed) Baring Vostok Private Equity Funds III & IV 58.66% Nicholas Mathys 13.10% Baring Vostok Investments PCC Ltd 5.93% Blackrock Investment Management 3.81% JP Morgan Asset Management 3.41% BNP Paribas Investment Partners 3.37% Management/Directors 2.20% Debt $3.9 as at 31 December 2016 Cash $19.8 million as at 30 June 2016 VGAS share price chart VGAS share price, UK p 12 month min 32p max 61p at 31/03/17 54p Shares in issue: 81,017,800 Market capitalisation: 44m Source: London Stock Exchange 17

19 Glossary and technical information GLOSSARY bbl barrel bopd barrels of oil per day bpd barrels per day boepd or boe/d barrels of oil equivalent per day, in which 6,000 cubic feet of natural gas is equated to one barrel of oil LPG liquid petroleum gases mcm/d thousands of cubic metres per day mmcf/d millions of standard cubic feet per day OIL, GAS AND CONDENSATE RESERVES There has been no external reassessment of reserves subsequent to the Miller and Lents reserve study of The reserves and production numbers herein exclude all volumes related to the Sobolevskoye field which was not included in the Miller and Lents reserve study of The numbers for Sobolevskoye are estimated by management not to be material in the context of Group reserves. The above reserve estimates, prepared in accordance with reserve definitions prepared by the Oil and Gas Reserves Committee of the SPE, have been reviewed and verified by Mr. Mikhail Ivanov, Chairman 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 Mr. Mikhail Ivanov holds a M.S. Degree in Geophysics from Novosibirsk State University. He also has an MBA degree from Kellogg School of Management (Northwestern University). He is a member of the Society of Petroleum Engineers. 18