TIDMUEN
RNS Number : 4118U
Urals Energy Public Company Limited
18 January 2017
Dissemination of a Regulatory Announcement that contains inside
information according to REGULATION (EU) No 596/2014 (MAR).
18 January 2017
Urals Energy Public Company Limited
("Urals Energy", the "Company" or the "Group")
Post year-end trading update and proposed capital reduction,
share consolidation and dividend policy
The board (the "Board") of Urals Energy PCL (AIM: UEN), the
independent exploration and production company with operations in
Russia, provides a post year-end update on trading for the year
ended 31 December 2016 and the outlook for 2017. The Board also
provides details of an intended capital reduction and share
consolidation and a proposed dividend policy for the Company.
Post year end trading update
The Group's total oil production in 2016 was 756,690
barrels.
Over 2016, Group production excluding almost four months of
production from our new subsidiary, Arctic Oil (which was acquired
on 5 September 2016), was 716,873 barrels, which represents an
increase of 6.1% over the Group's total production of 675,317
barrels in 2015.
At the end of 2016, the total volume of commercial crude
produced on Kolguev Island was approximately 155,000 barrels. As
announced previously, the Company plans to make two cargo
deliveries from our Kolguev sea terminal this year, most likely in
or around June 2017 and during October 2017.
Improvements in the quality of our refined products via the use
of new additives and an increased competitiveness of our products
in the local market on Sakhalin Island has resulted in sales
volumes at Sakhalin (in tons) increasing by 12.7% in the fourth
quarter of 2016, when compared to the same period in 2015.
At the end of 2016, additional changes to Russian tax
legislation were approved by the Russian government. These provide
for an increase in Mineral Extraction Tax, but with a simultaneous
decrease in Export Duty for 2017, plus an increase in diesel and
diesel fractions excise tax. The Board has evaluated the influence
of these changes on the financial position of the Group's
subsidiaries. Having considered various scenarios, the Board
believes that the new changes should have a positive impact on
Arcticneft and Arctic Oil, as an increase in Mineral Extraction Tax
should be more than offset by a decrease in Export Duty. At
Petrosakh, given that approximately 28% of refined products are
subject to excise changes, the Board anticipates that the changes
in the tax legislation are likely to increase the tax burden on
this subsidiary, but the extent of this increase will be highly
dependent on changes in the retail prices of oil products in the
local market.
As noted in earlier announcements, the Company is preparing
development plans for approval by the Russian Federal Authorities
for its operations: i) at Kolguyev Island, following the
acquisition of Artic Oil; ii) for our two companies in Komi (BVN
Oil and RK-Oil); and iii) for the South Dagi licence on Sakhalin
Island. These plans, once approved, will involve a considerable
step up in our drilling programme, which this year currently
envisages just two new wells and a continuing workover
programme.
The Board has started to investigate potential partnerships to
finance and share risk in the execution of our development plans,
but this will take time.
Proposed capital reduction, share consolidation and dividend
policy
The Board intends to commence the process to seek approval from
the shareholders, by way of special (75% majority) resolution, and
the sanction of the Cyprus Court, in order to perform a capital
reduction by way of cancelling amounts credited in the Company's
share premium account and writing-off the Company's accumulated
losses.
At present, the Company has a large share premium reserve, as a
result of earlier share issues at substantial premiums. On the
other hand, it has substantial accumulated losses in its profit and
loss balance, mostly due to the large write-offs incurred after
2008. While this large loss remains, it will not be possible to
reward shareholders with dividends from the improved performance of
the Company. The effect of the proposed capital reduction, if
approved and finalised, will be to offset the Company's accumulated
losses against its capital reserve, but still leave a balance of
positive capital reserves, to allow the Company to pay dividends in
due course.
The Board also intends to commence the process to seek approval
from shareholders in order to consolidate the Company's share
capital. The Board believes that a share consolidation may assist
in reducing the volatility in the Company's share price and enable
a more consistent valuation of the Company. The Board also believes
that the bid/offer spread on shares priced at low absolute levels
can be disproportionate to the share price and therefore to the
detriment of shareholders. At this stage, the extent to which the
Company's shares will be consolidated has not been finalised.
Subject to shareholder approval of the capital reduction, it
would be the Board's intention to propose a dividend policy that is
linked to the Group's EBITDA, which the Board believes is the best
indicator of the Group's cash generation, but subject to
adjustments if there are large negative swings in exchange rates
and other factors which might affect its reported profit for the
year.
Further announcements in respect of the above matters will be
made in due course as appropriate.
Andrew Shrager, Chairman, commented: "With the recovery in the
oil price to a range of $50 to $60 per barrel, we believe that now
is the right time to start making preparations for a significant
step up in the development of our reserves, both those that are
long-held and those resulting from our recent acquisitions and new
licence awards. The Development Plans are the first step in this
process and we hope to have these approved during the course of
this year. We will proceed with caution, keeping sufficient
flexibility in the plans to avoid the risk of over expansion in
what is likely to remain a volatile oil market".
- Ends -
For further information, please contact:
Urals Energy Public Company Limited
Andrew Shrager, Chairman Tel: +7 495 795 0300
Leonid Dyachenko, Chief Executive
Officer
Sergey Uzornikov, Chief Financial
Officer
www.uralsenergy.com
Allenby Capital Limited
Nominated Adviser and Broker
Nick Naylor / Alex Brearley Tel: +44 (0) 20 3328
5656
www.allenbycapital.com
This information is provided by RNS
The company news service from the London Stock Exchange
END
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