Volga Gas plccontent.volgagas.com/media/40687/VGAS-Presentation... · Volga Gas plc INTERIM RESULTS...
Transcript of Volga Gas plccontent.volgagas.com/media/40687/VGAS-Presentation... · Volga Gas plc INTERIM RESULTS...
Volga Gas plc
INTERIM RESULTS
SEPTEMBER 2015
Andrey Zozulya, CEO
Tony Alves, CFO
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.
Disclaimer
1
Where we operate
Source: Incotec
Source: Incotec
Urozhainoye-2
Dobrinskoye
Dobrinskoye
2
Business overview
Production
Gas & condensate production in two fields: Vostochny Makarovskoye and Dobrinskoye
Oil production from one field: Uzenskoye
H1 2015 average production: 2,624 boe/d (H1 2014: 4,419 boe/d)
Significant disruption to regional market for condensate impacted sales/production volumes
Gas Processing Plant
Continues to operate consistently at 500 mcm/d (17.7 mmcf/d) subject to regional market conditions
Effective available capacity is 750 - 1,000 mmcm/d (26.3 - 35.3 mmcf/d)
Field development
Drilling to bring two new wells (VM#3 and VM#4) on stream at VM
Positive results from development wells VM#4 tested at high flow rates (> 300 mcm/d)
VM#3 exhibits good reservoir section and good production rates expected
These wells conclude development drilling for the field
Strategy
Priority will be to focus on completing development and achieving higher levels of production and cash generation
Staged Amine/LPG project at the gas plant to enhance future revenues from the gas stream
Future exploration potential in the Karpenskiy licence area
* Management estimate as at 31 December 2014. Source – as per Miller & Lents reserve report of 1 August 2012, less subsequent production
3
Financial highlights of H1 2015
Revenue US$7.9 million (H1 2014: US$23.2 million) Reduced production and sales because of market disruption during H1 2015
Lower oil prices and RUR devaluation impact on US$ reported gas price
EBITDA negative US$0.3 million (H1 2014: +US$11.2 million) Mineral Extraction Taxes equal to 39% of revenues (H1 2014: 21%)
Operational gearing of fixed costs on lower sales volumes
Pre-tax loss of US$1.6 million (H1 2014: profit of US$8.1 million) Exceptional expense of US$0.4 million relating to fraudulent transfer of group funds. The majority of the funds
transferred have been recovered or are expected to be recovered shortly. The expense relates to amounts
that management believes may not be recovered.
Net cash flow from operations of negative US$1.0 million (H1 2014: +US$11.0 million) Cash generation reflecting EBITDA but with working capital outflow
Net cash US$11.5 million at 30 June 2015 (31 Dec 2014: US$15.8 million) Cash used in capital expenditure decreased to $2.1 million (H1 2014: US$2.5 million)
After payment of final dividend of US$1.0 million in June 2014 in respect of 2014
Full year 2015 capital expenditure expected to be US$10-11 million Completion of development drilling on VM field
4
Vostochny–Makarovskoye gas/condensate field
2P reserves* of 126 bcf of gas and 7.5 million barrels of condensate (28.4 mmboe)
Three production wells drilled, completed and hooked up to the Dobrinskoye gas plant, 5 km
from the field site
Successful sidetrack of VM#4 well estimated to add productive capacity of over 2,300 boe/d
Well to be on stream during October 2015
New VM#3 well completed and >100 metres of pay logged
Currently being tested before hook-up by end of 2015
Current drilling completes 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 Initial plan to raise throughput to 750 mcm/d (26.5 mmcf/d), subject to condensate market conditions
VM field site office VM#1 well workover in operation VM#1 wellhead and flow line
5
* Management estimate as at 31 December 2014. Source – as per Miller & Lents reserve report of 1 August 2012, less subsequent production
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
Remaining works to establish 35 mmcf/d physical capacity, increase in condensate storage and
upgrade to safety flare systems. These works have been completed.
Current logistics for handling chemicals and waste products likely to constrain throughput to 750 mcm/d (26.5 mmcf/d)
Further development of the plant planned in two stages:
1. Installation of Amine-based sweetening => Reduction of costs and allows full capacity utilisation
2. Second stage LPG (propane/butane) extraction project currently under evaluation for 2017 development
6
Oil production from shallow supra-salt fields
UZENSKOYE FIELD
2P reserves* of 4.2 mmbbls
Produced over 2 million barrels to date
Current production capacity 400 bopd
Production currently choked back to prevent water cut
Secondary reservoir planned to be developed in 2016
7
* Management estimate as at 31 December 2014. Source – as per Miller & Lents reserve report of 1 August 2012, less subsequent production
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
UZENSKOYE
• Discovered in 2007/8
• Developed 2008/9
• Produced > 2 mmbbls
Source: Wood Mackenzie
SOBOLEVSKOYE
• Single well produced
in 2013-2014
• Sidetrack to develop
additional undepleted
pool.
MIRONOVSKAYA
• 3 supra-salt prospects
mapped.
• Total C3 Prospective
Resources of 25 mmbbls.
8
Monthly average production rates Jan 2014 – Aug 2015 (boepd)
9
0
1000
2000
3000
4000
5000
6000
Jan-13 Jul-13 Jan-14 Jul-14 Jan-15 Jul-15
VM/Dob Gas
VM/Dobrinskoye condensate
Uzen/Sobol Oil
Monthly revenues and cash margins ($k, Jan 2013 – Aug 2015)
Monthly revenue by product (US$ 000) Monthly revenue and cash margins (US$ 000)
10
0
1000
2000
3000
4000
5000
6000
Jan-13 Jul-13 Jan-14 Jul-14 Jan-15 Jul-15
Gas
Condensate
Oil
-1000
0
1000
2000
3000
4000
5000
6000
Jan-13 Jul-13 Jan-14 Jul-14 Jan-15 Jul-15
MET
Production Costs
Cash Margin (before G&A)
Summary and Outlook
Upstream development of VM gas field is effectively completed
New wells (VM#3, VM#4) expected to enable 100% increase in production capacity
Short term planning 50% in field output (effective operational capacity of gas plant is 750 mcm/d – 26.5 mmcf/d)
Disruption to regional market for condensate has impacted sales/production volumes and remains a risk
Gas Processing Plant
Effective available capacity is 750 - 1,000 mmcm/d (26.3 - 35.3 mmcf/d)
Aim to upgrade to amine-based sweetening
Enable significant cost savings and full 35.3 mmcf/d capacity utilisation
=> improved revenue and profitability
Longer term plan to install LPG capture => further significant increase in revenues and in profit margin expected
Finance
Strong position at start of 2015 enabled Volga Gas to complete development and remain net cash positive
Well placed to benefit from recovery in oil prices/Russian Rouble
Plan to raise moderate levels of debt to fund incremental capex on gas plant upgrade
Current trading and outlook
Production during July/August averaged 3,474 boepd, current run rate ~4,300 boepd
Anticipate > 6,000 boepd when the two new VM wells come on stream (4Q 2015 – 1Q 2016)
Financial performance in US$ driven by oil prices, RUR rates and Mineral Extraction Taxes
Operating costs and G&A primarily RUR denominated
Future oil exploration and development potential in the Karpenskiy licence area
11
Key share data
Debt – $nil as at 30 June 2015
Cash – $11.5 million as at 30 June 2015
VGAS share price, UK p
12 month min 55p | max 118p | at 21/09/15 55p
Shares in issue: 81,017,800
Market capitalisation: £45m
www.volgagas.com
VGAS share price chart
Source: London Stock Exchange
Major shareholders (as disclosed)
Baring Vostok Private Equity Funds III & IV 58.66%
Quorum Funds 5.98%
Nicholas Mathys 5.55%
BNP Paribas Investment Partners 4.12%
Blackrock Investment Management 3.81%
JP Morgan Asset Management 3.41%
Management/Directors 2.10%
12
13
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 2012.
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 2012. 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 2009. 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.