Friday, April 29th, 2011
A regular meeting of the Board of Directors of OAO TATNEFT was held in Kazan (Republic of Tatarstan) on April 29, 2011. The Board of Directors summed up the budget of the Company for three months of 2011 and approved the budget for May.
The Board discussed the results of financial and economic activities of OAO Tatneft in 2010.
The amount of 25 million 863.5 thousand tons of crude oil was produced in the fields of the Company in the past year with a surplus of 13 thousand tons versus 2009. Over the plan production amounted to 483 thousand tons of crude oil. The first million tons of crude oil was produced from the licensed fields of subsidiaries outside Tatarstan in the Russian Federation since the beginning of the development. The works are continued on fulfillment of contractual obligations under the projects outside the Russian Federation.
283.7 thousand tons of natural gas liquids were produced and delivered during the reporting period, while the volume of associated petroleum gas amounted to 770 million cubic meters. Pilot operations at Ashalchinskoye field were continued. The output of extra-viscous oil amounted to 27,200 tons, while the total production from the beginning of development amounted to over 65 thousand tons.
761 wells were equipped with systems of dual completion and production of two or more layers. Additional oil production since the beginning of operation of the system amounted to 1 million 896 thousand tons. 226 injection wells are operated with application of the dual injection technology. A number of chain drives at the Company’s producing wells increased by 12% up to 1,247 units. 55 sidetracking jobs of lateral and lateral horizontal wellbores were completed and 7 bottom hole splitters with an average production rate of 9.7 tons per day, as well as 33 horizontal wells with an average production rate of 10.3 tons per day were put into operation. 56 small diameter wells were drilled.
Mean time before failure of the wells increased by 30 days and reached 1,041 days. This is still the highest index among major oil companies in the country.
The second phase of the comprehensive energy saving program, which has been in operation since early 2000, was completed in 2010. More than 2 million tons of reference fuel or 21% of the Company’s energy requirements have been saved since the beginning of the program implementation.
Nizhnekamsk thermal power plant and Almetyevsk heating systems created “Tatneft-Energosbyt” Company, which joined TATNEFT group of companies.
A significant event was commissioning of the first stage of the TANECO complex, where the first petroleum refined products were received. Nizhnekamsk SSC tire factory started production of 10 tire models in the reporting year and manufactured 110,000 pieces of solid steel cord products. The Russian-German joint venture to produce glass fiber was
commissioned in the territory of Alabuga special economic zone.
The amount of 28.8 billion rubles was spent for implementation of the investment program in crude oil production, petrochemicals production and filling stations during the past year.
The Board of Directors heard the information about the results of the joint work of OAO TATNEFT and scientific organizations of the Academy of Sciences of the Republic of Tatarstan.
The Board of Directors considered implementation of social projects and the strategy for implementing the socially responsible business of TATNEFT. The Board of Directors highly commended the work of the Executive Directorate of the Company in this field.
A decision was taken at the meeting to recommend to the annual general meeting of OAO TATNEFT shareholders to approve payment of dividends for 2010 in the amount of 502% of the share par value both for preferred and ordinary shares. The Board of Directors approved the agenda for the annual general shareholders’ meeting.
The Board also reviewed a number of other issues of OAO TATNEFT activity.
Thursday, April 28th, 2011
In Q1 2011, Rosneft’s revenues increased by 36.3% year-on-year, to USD 20,123 mln. The increase was due to higher crude oil and petroleum product prices as well as due to the growth in sales volumes by 4.9%.
Rosneft’s EBITDA amounted to USD 6,653 mln in Q1 2011, which is 1.5 times more compared with Q1 2010. The increase was mainly driven by revenue growth. However, it was tempered by the rise in transportation and electricity tariffs, real strengthening of the rouble against the USD and growth of tax payments.
In Q1 2011, net income was USD 3,942 mln, up 58.2% compared with USD 2,492 mln in Q1 2010. Rosneft continued to generate material free cash flow, which increased by more than 6 times year-on-year and reached a record high of USD 3,291 mln. As a result, the Company’s net debt decreased to USD 11.1 bln.
In Q1 2011, Rosneft’s average daily crude oil output (including production by subsidiaries and share in production by affiliates) increased by 2.9% year-on-year, to 2,355 th. barrels per day, which is 2% higher than planned. The Company’s Vankor field was the main growth driver. Other growth contributors were Yuganskneftegaz, Samaraneftegaz, Verkhnechonsk field in the Eastern Siberia and Sakhalin-1 project.
Petroleum product output by Rosneft was 11.8 mln tonnes in Q1 2011, which is 2.5% less year-on-year. The decline resulted from lower refinery throughput at the Tuapse Refinery following the decommissioning of a crude distillation unit in the end of 2010.
Rosneft maintained tight control over costs. SG&A costs fall by 15.8% quarter-on-quarter to USD 2.0 per barrel of production. Unit lifting costs declined by 1.3% quarter-on-quarter to USD 2.95. Unit refining costs rose to USD 2.2, or by 3.1% despite the real rouble appreciation of 9.3%.
The Company’s success in cost cutting was muted by increases in tax payments, transportation and electricity tariffs. In Q1 2011, total accrued taxes and export duties rose to USD 8,688 mln, which is USD 2,122 mln higher year-on-year. Transportation costs were up due to the increase in pipeline transportation tariffs by 13.5% year-on-year and growth of rail transportation tariffs by 8.0%. Average electricity tariffs for Rosneft grew by 27% year-on-year due to lower volumes of power purchases at the regulated market and higher tariffs at the unregulated market.
Commenting on the results, Rosneft’s President Eduard Khudainatov said: “The price environment on the international market was very supportive in Q1, allowing us to achieve record high financial results. Strict cost control and further optimization of business processes remained our priorities in the quarter and made their contribution to the growth rates. We also achieved further progress in upgrading our refining capacities”.
Wednesday, April 27th, 2011
The 15th Uzbekistan International Oil & Gas Exhibition and Conference (OGU) will take place on 17-19 May 2011 in the UzExpocentre and InterContinental Hotel in Tashkent, Uzbekistan.
The regional and international oil and gas industry will converge at OGU for the country’s leading oil and gas event. The exhibition and conference is an important place for the domestic oil and gas sector to develop strategic partnerships and engage in business opportunities with international energy companies.
In 2011, the exhibition is expected to attract a global audience of over 8,000 trade visitors from around 30 countries. Takes place over a show space of 8,500sqm, over 200 exhibitors will showcase the latest developments, and technologies in the regional and international oil and gas industry.
This year, around 200 exhibitors from domestic and international oil and gas companies will be featured at the UzExpocentre Centre in Tashkent. The exhibition will be an important hub for local operators to meet with global suppliers, to do business and grow the country’s oil and gas market.
OGU is supported by some of the biggest players in the global oil and gas industry, and is officially supported by the national oil and gas company, Uzbekneftegaz. Their participation ensures relevant issues, and the latest developments affecting the industry are addressed through presentations by representatives from Uzbekneftegaz.
The two-day OGU conference will feature around 70 speakers comprising international regulatory agents, directors of major oil and gas companies, and representatives from the Uzbek Government, such as the Ministry of Economy and the Ministry of External Economical Relationship, Investment and Trade. Around 500 delegates are expected to attend the event.
A roundtable discussion will form part of the programme, and will be co-organised with the Centre for Political Studies under NHC Uzbekneftegaz. Around 80 participants, made up of representatives of event sponsors, will facilitate discussion on ‘Prospects for the Central Asian Oil and Gas Sector in Relation to Current Global Challenges’.
Speaking at the OGU this year are key players from the international oil and gas industry, such as Faouzi Bensarsa, Energy Counsellor, European Commission and Directorate of the General Development and Cooperation Department of EuropeAid; Dr. Bertrand Malmendier, Chairman of the Centre for Social‐Conservative Politics in the European Union; Dilmurod Turdiyev, the First Deputy Minister from the Ministry of Economy of the Republic of Uzbekistan; Shavkat Tulyaganov, the Deputy Minister from the Ministry of External Economical Relationship, Investment and Trade of the Republic of Uzbekistan; Shokir Faizullayev, Chairman, Vice‐Chairman of the Board of Directors “Uzbekneftegaz”; Dr. David Robson, Chairman, President and Chief Executive Officer of Tethys Petroleum Limited; and Robert Brunck, Chairman of CGGVeritas.
Having gained an UFI approved status in 2009, OGU has evolved from strength to strength, benefitting from 30% growth in the same year, despite the global economic downturn.
This year, OGU is sponsored by a host of leading oil and gas companies such as CGGVeritas, Delta Oil Company, Lukoil, Mubadala, Repsol, Technip, Tenaris, Tethys Petroleum, Uzbekneftegaz, Wartsila and WorleyParsons.
OGU 2012 will take place on the 15-17 May at the UzExpocentre and InterContinental Hotel in Tashkent, Uzbekistan.
Wednesday, April 27th, 2011
New pump design, variable speed drive software, and power monitoring capabilities optimize production and well economics
Baker Hughes announced today three technology innovations designed to enhance the operating range and reliability of electrical submersible pumping (ESP) systems and to reduce operating expenses associated with ESPs. A new pump design, a “smart” variable speed drive (VSD), and power monitoring capabilities give oil and gas companies a range of options to optimize production and well economics.
The Centrilift FlexPump™ ESP design covers a wider operating range and delivers higher efficiencies in challenging downhole applications, including wells producing gas-laden or solids-laden fluids. Patent-pending thrust balancing technology in the pump stage diffuser expands the FlexPump operating range by acting as a relief valve for high-pressure applications—forcing the impeller into downthrust at higher flow rates to decrease upthrust wear. Twenty-five percent wider openings in the mixed-flow FlexPump than in radial type pumps, combined with an optimized fluid flow path, improve ESP reliability by reducing gas locking conditions and pump plugging due to sand, debris, scale or paraffin entrained in the fluid.
The Centrilift Electrospeed Advantage™ next-generation VSD, designed specifically for ESP systems, features a “smart” software suite to constantly monitor the downhole ESP system and automatically make adjustments to its operating parameters to improve uptime, efficiency, and reliability. The new design also includes seamless integration with Baker Hughes’ Vision™ monitoring and automation services as well as downhole sensors.
The Centrilift PowerMonitor™ module further enhances ESP system efficiency to lower producers’ power costs and maximize system run life. The PowerMonitor module is installed on the input to the VSD and provides critical information on the quantity and quality of the power supply. The PowerMonitor device achieves better than 99 percent accuracy for measurements such as line voltage, phase voltage / current, and harmonics. The data is then used to optimize ESP system operating parameters to lower power costs—the largest cost associated with artificial lift.
“These technology advancements are designed to expand the technical capabilities of ESP systems to enhance production and, at the same time, optimize costs associated with artificial lift,” says Neil Harrop, president of completions and production for Baker Hughes. “As the industry-leading artificial lift provider, we continue to push the technology boundaries to help improve overall reserve recovery in oil fields around the world.”
Wednesday, April 27th, 2011
NewTech Services (NTS) and Varel International announce the creation of a 50-50 joint venture company focused on manufacturing, assembling, servicing and sales of oil and gas drill bits for the Russian CIS market and beyond. The joint venture, Varel NTS, will establish a state-of-the art PDC manufacturing and service facility in Kurgan, Russia, creating an alliance between Varel’s high technology engineering and manufacturing and the strength of NTS in drilling technology, infrastructure, market knowledge and customer requirements. NTS will also continue to support sales distribution and services of Varel’s advanced oil and gas roller cone products.
“In this first phase of the venture, Varel will provide support through the transfer of our proven, repeatable technology. In addition to our commitment to establishing the physical manufacturing equipment and technology, we will continue this collaboration by providing analytical resources through our proprietary programs, GeoScience™ formation analysis and SPOT™ cutting structure design,” said Mike Reese, PDC vice president Varel International. He continued, “These focused solutions tools will prepare products for local field implementation and significantly improve performance.”
Mark Sadykhov, president of NewTech Services added, “We are taking the initiative through this agreement to introduce cutting-edge application technology to the one of largest oil and gas regions of the world. CIS countries comprise a land ripe with vast opportunity and we are pleased to be merging our cultures together to bring technology into the region, broaden the talent base and assist the local economy. This effort represents the first time advanced Western PDC bit technology has been transferred into Russia and other countries.”
Per the agreement, Varel will coordinate the manufacturing efforts with NTS championing the sales and services enterprise. In addition, Varel will provide ongoing administrative and technology support from the company’s Eastern Hemisphere locations.
Thomas Seeney of Varel has been appointed Varel CIS Regional Manager. He will be supported by senior staff members in Kurgan who are currently training at Varel’s Eastern Hemisphere base in Tarbes, France. The new facility, centrally located to facilitate rapid bit delivery across Russia, will increase global Varel PDC drill bit production by approximately 20 percent.
“This capacity will allow Varel NTS to provide Kurgan produced PDC bits to markets external to Russia, helping meet the rapidly growing demand for Varel products in both the Eastern and Western Hemispheres,” explained Seeney.
Reese concluded, “We are fortunate to have found a partner in NTS. They are well versed in the drill bit business, so we did not have to battle a learning curve. The plans are in place and we are very well poised for the execution of successful operations.”
Tuesday, April 26th, 2011
In its annual recognition of the most noteworthy commodities and export finance deals, Euromoney publication, Trade Finance Magazine, awarded a “Deal of the Year” to the $1.5 billion syndicated loan secured by Gazprom Neft. Trade Finance Magazine stated in their article on the deal featured in the March 2011 edition that ”this jumbo, five-year, structured loan facility repriced the entire market for Russian corporates and tested appetites for Russian risk.”
The agreement to provide a five-year $1.5 billion secured loan was concluded on 30 June 2010. The Bank of Tokyo-Mitsubishi UFJ, Ltd., Natixis and Société Générale Corporate & Investment Banking acted as initial mandated lead arrangers, bookrunners and underwriters. The transaction was the first underwritten deal in Russia since the beginning of the financial crisis. In February 2011, Gazprom Neft signed an agreement to decrease the loan interest rate from Libor +2.1% to Libor +1.6% per annum.
“The Trade Finance Magazine award indicates the recognition by the international finance community of Gazprom Neft management’s efforts in optimising the company’s loan portfolio. The approach of Gazprom Neft and its financiers resulted in a total of 16 banks taking part in the $1.5 billion five-year syndicated loan, making it the most unique deal the Russian market has witnessed since 2008″, commented Vadim Yakovlev, First Deputy CEO and CFO of Gazprom Neft.
Tuesday, April 26th, 2011
OAO Tatneft (the “Company”) published today on its web-site (http://www.tatneft.ru/eng) the audited consolidated financial statements for the year ended December 31, 2010 prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) (the “Financial Statements”) and related Management Discussion and Analysis of Results of Operations (the “MD&A”).
Selected financial highlights below are based on the respective U.S. GAAP financial statements of the Company. These highlights do not replace the Financial Statements or the MD&A and all interested persons are encouraged to read these documents for full understanding of 2010 U.S. GAAP results. Russian Ruble amounts below have been translated into U.S. Dollars, for revenue and net income at the average exchange rate during the respective reporting period, and for balance sheet items at the exchange rate on the last day of the respective reporting period.
The Company’s consolidated revenues in 2010 were 468,032 million Rubles (US$ 15,411 million) as compared to 380,648 million Rubles (US$ 12,000 million) in 2009. The consolidated net income attributable to Group shareholders for 2010 was 46,673 million Rubles (US$ 1,537 million) as compared to 54,372 million Rubles (US$ 1,714 million) in 2009.
Total consolidated assets of the Company increased from 495,742 million Rubles (US$ 16,394 million) as of December 31, 2009, to 567,179 million Rubles (US$ 18,608 million) as of December 31, 2010.
Total consolidated liabilities of the Company increased from 182,235 million Rubles (US$ 6,026 million) as of December 31, 2009, to 216,633 million Rubles (US$ 7,107 million) as of December 31, 2010.
Total consolidated shareholders’ equity increased from 313,507 million Rubles (US$ 10,367 million) as of December 31, 2009, to 350,546 million Rubles (US$ 11,501 million) as of December 31, 2010.
The Company’s representatives will discuss the U.S. GAAP financial highlights for 2010 on a conference call on April 26, 2011 at 4:00 PM Moscow time, 1:00 PM British Summer Time, 8:00 AM Eastern Daylight Time.
To participate in the conference call, please dial any of the following numbers and ask to be connected to “Tatneft 2010 U.S. GAAP results conference call”, or use PIN 8827037338 (for participants) or 7909003832 (listen only):
Local: – Russia, Moscow: +7 495 745 9627
Local: – UK, London: +44 (0)20 7026 5966
Local: – USA, New York: +1 718 354 1151
National free phone – Russia: 8 800 500 2663
National free phone – Russia: 8 800 200 7727
National free phone – Russia: 8 800 500 2663
National free phone – UK: 0800 376 9220
National free phone – USA/CAN: 1866 241 0064
The conference call replay will be available within 10 days after the call by dialing any of the numbers above and using PIN 8609738203.
A copy of the Financial Statements has been submitted to the National Storage Mechanism and will shortly be available for inspection at: www.Hemscott.com/nsm.do.
Tuesday, April 26th, 2011
Polarcus Limited is pleased to announce that the Company has received a Letter of Intent from Wintershall Norge ASA for a 500 square kilometer 3D seismic acquisition project over PL577 in the Norwegian North Sea, offshore Norway. The project, subject to the execution of a service contract, will be acquired during the 2011 summer season and is expected to run for approximately 20 days.
Monday, April 25th, 2011
IBM today announced that Gazprom Neft, one of Russia’s leading oil companies, is using IBM DB2 database software to power its accounting system across its oil product delivery enterprises. As a result, Gazprom Neft expects to reduce operational risks, decrease the deadlocks by 40 times compared with the previous version of the database and double the speed of the accounting documents approval.
Gazprom Neft was looking for new ways to increase the performance and availability of its business accounting software. In addition to measuring financial performance, their accounting software also tracks fuel and lubricants shipments to and from oil facilities and gas stations, and processes gas station shift and inventory reports.
As the company grew, its previous database software could not keep up with the number of users, causing interruptions, delays and downtime to its accounting systems during peak periods of use. The company turned to IBM Business Partner ALP Group for help, and evaluated database software from Oracle and other vendors.
Gazprom Neft chose IBM DB2 based on its ability to manage massive amounts of information without interruptions or delays and deliver higher value for the cost than competing database software. The company also cites ease of use, low maintenance, simple migration and quick skills transfer in choosing DB2.
“Any delays in business reporting are undesirable. As to database access failures and information processing errors, they entail substantial financial risks,” explained Igor Stepanenko, head of IT at IT and Production Efficiency Department, Regional Sales Directorate, Gazprom Neft. “Therefore ensuring reporting stability is an important business priority for us.”
“Gazprom Neft requires software that is easy to deploy, is optimized for specific workloads and helps them meet their business goals,” emphasized Sergey Likharev, head of information management at IBM Russia and CIS. “The new database management system will help Gazprom Neft rapidly adapt to its changing needs as the company continues to grow.”
Gazprom Neft is one of the world’s top 20 oil companies and among the top five oil producers and refiners in Russia. The company spans more than 40 facilities across Russia and the Commonwealth of Independent States (CIS).
About Gazprom Neft
For information about Gazprom Neft, visit http://www.gazprom-neft.ru/.
For more information about IBM and its products, visit http://www.ibm.com.
About ALP Group
For more information about ALP Group, its solutions and services, visit http://www.alp.ru.
Monday, April 25th, 2011
President of Rosneft Eduard Khudaynatov and Head of Lukoil Vagit Alekperov signed an agreement on long-term cooperation between their companies. Deputy Prime Minister Igor Sechin was present during the signing ceremony.
Capitalizing on the successfully developing cooperation between the two companies and striving for improved profitability of existing projects, Rosneft and Lukoil agreed to combine efforts in the following areas:
Exploration, development and transportation of hydrocarbons on the license areas in the Nenets Autonomous District
Exploration on Rosneft’s license areas on the Russian Arctic shelf and development of the already discovered fields in accordance with the Russian law
Development of the market for locally produced petroleum products, petrochemicals, gas derivatives and motor oils
Joint marketing of associated and natural gas from Bolshekhetskaya and Vankor fields;
reciprocal deliveries of petroleum products, liquefied gases and petrochemical products to distribution and production facilities of both companies
Joint search for ways to improve marketing of petrochemicals, gas and oil derivatives in Russia and abroad
Joint use of the existing logistical infrastructure, including crude oil, petroleum and petrochemical products export facilities
Preparation and execution of petroleum products transportation projects, including the construction of a petroleum products pipeline to the “Moscow product ring” and the “South” project.
Speaking about the signed agreement, President of Rosneft Eduard Khudaynatov remarked: “It goes without saying that with the existing fiscal environment, infrastructural constraints and the growing proportion of difficult reserves, we need to expand our cooperation and combine efforts to improve efficiency of our projects.”
In his turn the Head of Lukoil Vagit Alekperov said: “We expect that the long-term cooperation with Rosneft will help our company to gain access to large new hydrocarbon reserves in Russia”.
By 15 May 2011 the Parties will have to establish joint teams for the above areas and by August 1 draw up a shortlist of projects, assess efficiency and find mutually acceptable mechanisms for their cooperation.
Key joint projects of Rosneft and Lukoil:
1. Joint gas transportation from the Vankor field and the Bolshekhetskaya Depression.
On 12 April 2011, Lukoil and Rosneft signed an agreement, according to which Rosneft would transport gas from the Vankor field and adjoining license areas to Lukoil’s infrastructure. Then Lukoil would pump gas via its infrastructure to the Gazprom gas transportation system. Currently, Lukoil and Rosneft are building sections of their respective gas lines and infrastructure.
2. OOO Priazovneft
Rosneft and Lukoil each own a 42.5% share in Priazovneft. Another 15% belongs to Krasnodar province authorities. Priazovneft is engaged in developing the Temryuksko-Akhtarsk license area located on the Azov Sea off-shore. In 2008, the Novoye oil field was discovered in this area with the following total recoverable reserves: C1 oil reserves – 0.87 million tons, C2 oil reserves – 2.25 million tons; C1 gas reserves – 319 million cubic meters; C2 gas reserves – 820 million cubic meters. Seismic work is currently underway.
3. OOO Caspian Oil Company (KNK)
Rosneft and Lukoil each own 49.9% in the company; Another 0.2% belongs to Gazprom. In 2008, the Zapadno-Rakushechnoye oil field was discovered in the northern section of the Caspian sea. In 2010, an assessment well was drilled on the Ukatnaya structure and a non-commercial reservoir discovered.