Urals Energy Public Company Limited Working capital update (9114E)
23 October 2018 - 9:32PM
UK Regulatory
TIDMUEN
RNS Number : 9114E
Urals Energy Public Company Limited
23 October 2018
Dissemination of a Regulatory Announcement that contains inside
information according to REGULATION (EU) No 596/2014 (MAR).
23 October 2018
Urals Energy Public Company Limited
("Urals Energy", the "Company" or the "Group")
Working capital update
Further to the announcements made on 15 October 2018 and 10
October 2018, the board of Urals Energy (AIM:UEN), the independent
exploration and production company with operations in Russia,
provides the following update on the Group's working capital
position and other matters.
The Company's announcements of 15 October 2018 and 10 October
2018 cautioned that unless a solution to the Group's current
working capital deficit can be put in place by the end of this
month, then the Board will have to take steps to protect the
interests of the Group's creditors. The board will shortly appoint
an independent firm of accountants to perform a short-term working
capital review and a review of any transactions by its 98.56% owned
subsidiary, JSC Petrosakh, since 30 June 2018 that are outside of
the ordinary course of business (the "Accountants' Review").
As stated in the Company's announcement of 10 October 2018, the
proceeds from the next tanker shipment from Arcticneft this year
will be of critical importance to the Group's shorter to
medium-term working capital position. The tanker is expected to
arrive at Kolguev Island on or around 27 October 2018. The board
estimates that the Group will receive the proceeds from this
shipment on or around the middle of November 2018. The Board notes
that local weather conditions may have a significant influence on
the achievement of the above timings.
The estimated volume to be shipped from Arcticneft is around
20,000 tons of special light crude oil (equivalent to 157,400
barrels). The gross price per barrel for the coming tanker shipment
will be based on an average of the quotations for 'Brent DTD' over
a period after the date of the bill of lading. The proceeds from
the coming tanker shipment will be subject to deductions for export
tax and other duties, the repayment of the pre-export short term
loan finance arrangement (as announced on 10 September 2018),
transport costs and demurrage costs.
The Group has a number of pressing payment obligations which
need to be made by the end of November 2018, some of which are very
significant in the context of the Group's current working capital
position. In particular, the payment of Arcticneft's accumulated
mineral extraction tax liabilities and the payments associated with
the logistical resupply of Articneft (food and spare parts) and its
wages for October 2018, represent a significant aggregate payment
obligation.
As indicated in the Company's announcement of 10 October 2018,
the Group had originally earmarked funds in order to satisfy its
short-term payment obligations. However, due to the unauthorised
actions of Mr Kononov, as detailed in the Company's announcement of
15 October 2018, the board estimates that even after the net cash
inflow from the coming tanker shipment the Group will continue to
face a working capital deficit of approximately US$3 million.
The renewal of certain of the Group's loan facilities over the
coming months is also critical to the Group's medium-term future
and the support of the Group's banks will be essential in this
process.
The board is in dialogue with Mr Kononov, via his legal
advisers, regarding actions to reverse the Group's working capital
deficit. Such actions could involve measures to effectively reverse
the transactions authorised by Mr Kononov and/or the return of a
certain amount of working capital from the Kholmsk commercial
seaport (further details of which can be found in the Company's
announcement of 15 October 2018). Alternatively, Mr Kononov, or an
entity connected with him, could provide interim financial support
to the Group. The board caveats, however, that whilst discussions
are ongoing, no definitive agreement has been reached with Mr
Kononov in respect of any of the potential remedial actions
described above (and there can be no guarantee that any such
agreement will ultimately be reached) and that such actions may
take time to implement. Thus far, there has not been progress on
alternative third-party financing solutions.
The Group's working capital position remains highly constrained
and is subject to a number of variables, several of which are
described above. The board believes that the Accountants' Review is
an essential step in determining the financial requirements of the
Group, although, in the event that the Group fails to reach
agreement on potential solutions to the Group's current working
capital deficit (as described above), an outcome of the
Accountants' Review could ultimately be that the board is required
to take actions to protect the interest of creditors, which could
result in part or all of the Group entering into an insolvency
process.
Further announcements will be made as appropriate.
- Ends -
For further information, please contact:
Urals Energy Public Company Limited
Andrew Shrager, Chairman Tel: +7 495 795 0300
Leonid Dyachenko, Chief Executive
Officer
Allenby Capital Limited
Nominated Adviser and Broker
Nick Naylor / Alex Brearley Tel: +44 (0) 20 3328
5656
www.allenbycapital.com
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END
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