Petrosibir AB: Interim report January – June 2018
January – June 2018
- Total revenue: SEK 32 (20) million
- Operating result: SEK 4 (-2) million
- Result from equity investment SEK 7 (6)
- Net result: SEK 11 (4) million
- Earnings per share: SEK 0.36 (0.12)
Stockholm, 24 August 2018
Jan-Jun 2018 2017 | ||
Total production, bbl Bashkiria Komi Total barrels Average per day, bbl Bashkiria Komi Total barrels per day Jan Feb Mar Apr May Jun 14 155 12 731 13 622 13 123 13 498 12 614 31186 29726 30300 30244 27300 24086 45 341 457 1 006 1 463 42 457 455 1 062 1 517 43 922 439 977 1 417 43 367 437 1 008 1 446 40 799 435 881 1 316 36 700 420 803 1 223 | TOTAL 79 744 172 843 | TOTAL 76 910 173 405 |
252 587 441 955 | 250 315 425 958 | |
1 396 | 1 383 | |
Statement from CEO
Dear Shareholders,
I am pleased to announce results for the first half of 2018. The Company’s focus on operations is continuing to yield encouraging results. Our team’s constant efforts combined with favourable market conditions resulted in higher revenues and growing positive cash flow. The drilling and fraccing campaign in Komi added approximately 1,000 bopd in line with the targets, the active management of the existing wells in Bashkiria has helped us to slow down the natural production decline. We have just fracced two more wells in the Ayzovskoye field and will announce the results after the wells clean up and stabilise. The efforts to enhance production and profitability in both regions will be continued along with exploring M&A opportunities that will help to increase the shareholder value.
Pavel Tetyakov, CEO
Financial information January – June 2018
The consolidated financial information in this interim report has been prepared in accordance with IAS 34 and in accordance with the same accounting principles, IFRS, that were applied for the financial year 2017 and as they are described in the annual report for 2017.
Consolidated information
Revenue for the period January – June 2018 amounted to SEK 31,592 (20,479) thousand. The company’soperating costs amounted to SEK -27,109 (-22,731) thousand and the company shows an operating result of SEK 4,485 (-2,252) thousand. The average Brent oil price January – June was USD 71 per barrel compared to USD 51 the same period in 2017. Higher oil prices in combination with stable volumes led to higher revenue as well as higher production taxes, which are included in operating expenses, in 2018.
During the period Petrosibir has, in addition to selling its own produced oil, also purchased oil for resale. The gross revenue from the oil trading amounted to SEK 8,342 thousand and the cost of the traded oil amounted to SEK -7,983 thousand, i.e. a net result of SEK 359 thousand. The net amount is reported in revenue.
Excluding production taxes, which are dependent on the world oil price and produced volumes, the operating costs amounted to SEK -14,090 thousand during the period compared to SEK -13,786 thousand in the same period 2017. Operating costs are thus stable in both Russia and Sweden. The improved operating result is a result of higher oil prices, improved netbacks and continued cost control in the group.
Petrosibir’s share of the result from the equity investment in Ripiano Holdings amounted to SEK 6,970 (6,055) thousand for the period January – June 2018.
Non-current financial assets, SEK 137 million compared to SEK 118 million at December 31 2017, relates to the equity investment in Ripiano and the increase is an effect of Petrosibir’s share in Ripiano’s net income and ahigher exchange rate for the USD against the Swedish krona.
The company’s consolidated cash position at June 30, 2018 amounted to SEK 24,305 thousand compared to SEK 13,980 thousand at December 31 2017. The company thus had a positive cash flow for the period of SEK 10,325 thousand. During the period the company has made limited investments.
Shareholders’ equity per share at June 30, 2018 was SEK 10.18.
Bashkiria
January – June 2018
Revenue in the period amounted to SEK 31,592 (20,470) thousand. The operating costs amounted to
SEK – 24,316 (-19,425) thousand, leading to an operating result of SEK 7,276 (1,045) thousand. The operating margin amounted to 23% (5%).
During the period the average Brent price of oil was USD 71 per barrel compared to USD 51 per barrel in the same period 2017. Higher oil price combined with improved netback led to higher revenue in the period compared to prior year. The operations in Bashkiria produced 79,744 (76,910) barrels of oil during January – June 2018 and sold 83,490 (76,735) barrels of own produced oil.
Below are the income statements for the operations in Bashkiria for the period January – June 2018 and 2017, amounts in SEK thousand.
Bashkirian operations Jan-Jun | ||
Revenue own production Revenue oil trading, net Operating profit Operating margin | 2018 31 233 359 -13 567 -10 749 | 2017 20 470 0 -9 281 -10 144 1 045 5% |
7 276 23% | ||
In the first half of 2018 the company continued its efforts to stabilise production through pump regimes optimisation and water injection by improving pressure maintenance system. The new plunger-based pump will replace the complex and less efficient reversed ESP in September 2018.
The old Soviet well #54, re-entered in the last quarter of 2017, produced about 20 bopd in the first half of 2018, and it was decided to frac it along with well #9. Fraccing was executed in mid-August 2018, and the results will be communicated in due course once the wells clean up and stabilise.
Starting 2018 the company has initiated oil trading activities to utilise all of its Transneft quota. The trading generated an incremental income of approximately USD 1 per barrel of traded oil. Over the first six months of 2018 such trading resulted in SEK 359 thousand of additional profit.
Komi
Petrosibir owns 49% of the operations in the republic of Komi, a Russian region. Petrosibir’s wholly ownedsubsidiary Sonoyta Ltd owns 49% of Ripiano Holdings Ltd which in turn owns 100% of Dinyu LLC and CNPSEI LLC.
January – June 2018
Revenue in the period amounted to SEK 185,003 (149,358) thousand and the operating costs to SEK -169,958 (-137,967) thousand which resulted in an operating profit of SEK 16,045 (11,391) thousand which corresponds to an operating margin of 9% (8%). Petrosibir’s 49% share of the operating profit amounts to SEK 7,862 (5,582) thousand. During the period the export portion of the sales remained on a stable level of 85-90%. This in combination with a higher oil price and flat production volumes compared to the same period in the previous year led to a substantially higher revenue partially offset by simultaneous increase of export duties and production taxes resulting in higher operating costs compared to the same period in the previous year. The Komi operations shows a stable operating margin.
Ripiano Holdings showed a net profit for the period January – June 2018 of SEK 14,224 (12,357) thousand andPetrosibir’s 49% share of the net profit is SEK 6,970 (6,055) thousand.
Production during January – June 2018 amounted to 172,843 (173,405) barrels of oil which is equal to an average daily production of 955 (958) barrels.
Below are the income statements for the Komi operations for January – June 2018 and 2017, amounts in SEK thousand.
Komi operations Jan-Jun | ||
Revenue Operating profit Operating margin Petrosibir’s share of operating profit, 49% | 2018 185 003 -109 643 -59 315 | 2017 149 358 -87 022 -50 945 |
16 045 9% 7 862 | 11 391 8% 5 582 | |
The first part of the drilling campaign in the Sosnovskoye oil field (pad #1) was completed in the first half of 2018. Following the fraccing, cumulative production of the new six wells reached the target flow rates of 980 bopd. Further drilling opportunities are evaluated within Sosnovskoye (pad #2) and Dinyu-Savinoborskoye field for 2019.
Production in Dinyu-Savinoborskoye field has been under pressure since the end of 2017 when the water cut levels in the wells #30 and #53 more than doubled to 42% and 36% respectively. Workovers to slow down the watering out and reduce the water cuts and water injection to increase the pressure in the reservoir are scheduled for the second half of 2018.
The company keeps developing a new infrastructure project of oil treatment capacity increase on Sosnovskoye field and pipelines construction from Sosnovskoye and Yuzhno-Tebukskoye fields to save on transportation costs. Additionally, more gas generator sets are planned for installation over 2018 – 2019 enabling a higher generation of electricity for internal consumption and external sale.
Significant events occurring after the reporting period
In August 2018 amendments to the tax laws and export duties in the Russian oil industry have been ratified. In the period 2019 – 2023 export duties will be gradually reduced and production taxes gradually increased. Management is evaluating the possible impact on profitability of both the Bashkirian and Komi operations to be reflected in 2019 budget going forward.
Risk factors and uncertainties
A detailed account of the risks facing the company can be found in the 2017 annual report. During the period, there has been no major change in material risk factors or uncertainties for the group or the parent company. Risks include exploration risk, oil price risk, exchange rate risk, liquidity risk, credit risk, interest rate risk and political risk, among others.
