Ruspetro: 2014 Results – Debt Down in Equity Swap, Ruble Devaluation Hurts, Plus Production Drop

Ruspetro plc, an independent oil and gas development and production company with assets in the Western Siberia region of the Russian Federation, announces today its results for the full year ended 31 December 2014, and an update on its operations to date.

Financial Highlights

– Revenues of US$55.1m (down 31% Y-o-Y) due primarily to a 26% decline in liquids production, and a 9% decline in the realized oil price Y-o-Y.

– Full year EBITDA (1) of US$9.5m vs. US$13.0m in 2013, driven mostly by the decline in production, and oil price, partially offset by Mineral Extraction Tax (“MET”) relief from September 2013. EBITDA per barrel of liquids was US$7.4 in both 2013 and 2014.

– Strengthened our partnership with Glencore by extending our export prepayment facility in March 2014 and entering into two domestic facilities in May 2014 and October 2014. 

– Net loss of US$262.9m vs. net loss of US$74.2m in 2013, driven mostly by the foreign exchange loss on US dollar denominated loans to the Group’s Russian subsidiaries (US$202.4m).  After eliminating the effect of foreign exchange losses from both years, 2014 loss was US$60.5m against US$48.6m in 2013. Secured a US$100.0m development facility and US$44.7m working capital facility from Otkritie to fund a refocused appraisal and development programme.

– Net debt decreased by US$152.3m from US$387.4m at the beginning of the year to US$235.1m end 2014.

Operational Highlights

– Oil production in 2014 averaged 3,523 bopd, a 14% decrease compared to 2013.  In January 2014, suspended production of gas and condensate in the Palyanovo field primarily to conserve gas while we engage in discussions to commercialise these gas reserves.

– The production performance of the Group’s first two horizontal wells was encouraging (ten day flow tests averaged 1,350 and 900 bopd for wells 214 and 251, respectively)

– Spudded our first multiple fractured horizontal well (214) (MFHW) in April 2014. 

–  in our second well (251), introduced for the first time in Russia innovative completion technology customized to our geological environment.

– Successful focus on safety in our operations including implementation of the EMEX system to manage HSE performance. One minor lost time injury in 2014.

– Extended the subsoil license for the Vostochno-Inginsky block until 2034.

Since the end of 2014, two MFHW (wells 212 and 216) have been drilled. Both encountered extensive sands (642m net oil sand within a horizontal section of 1149m in well 212, and 516m net oil sand within a horizontal section of 961m in well 216). These will be completed using our flexible fracturing system which allows us to optimise the location and size of the hydraulic fractures to the sand distribution encountered in the well. These two wells will come on stream in April/May 2015, respectively.

John Conlin, Chief Executive Officer, commented:

“Despite the challenging business environment 2014 has been a year of important progress for Ruspetro.  We have successfully introduced a new approach to fracturing our new generation horizontal wells. We have also introduced other key technologies to extract maximum insight into the subsurface, and hence de-risk our development programme in the future. Towards the end of the year we transformed our balance sheet and put in place a credit facility to fund our development activities. Given the current low and volatile oil price environment, this will be used cautiously to fund a modest appraisal and development programme in 2015, as the springboard for an accelerated push in the medium term.”