Ruspetro: MET Relief for Tight Oil Becomes Law, 80% Tax Relief on Tight Oil Reserves

Ruspetro plc announces that a substantial reduction in the Russian Mineral Extraction Tax applicable to tight oil has been passed into law this week and will be applied to production from the Company’s qualifying reserves from 1 September 2013.

80% MET relief:

Due to the characteristics of our reservoirs, the Company estimates that 80% MET relief is applicable for production from approximately 74% of the Company’s Jurassic reserves. The 80% MET relief is estimated to be applicable to approximately 97% of the Company’s current crude oil production.

The 80% reduction in the MET rate will increase well head revenue per barrel for Ruspetro’s crude oil production from approximately US$22.40 to approximately US$39.10 at a gross price of US$100 per barrel. The increased well head revenue flows straight through to EBITDA and therefore has a much larger effect at this level.

To illustrate the benefit of this relief to the Company, this year’s first quarter EBITDA per barrel of production was US$3.61; if an 80% reduction in MET for crude oil had been applicable during this period the EBITDA per barrel of production would have been US$17.15, an almost 400% increase.

The law states that the relief will remain in place for 15 years.

Production Update:

For this first half of 2013 production has averaged 5,455 bopd (81% crude oil, 19% condensate), a 38% increase on H1 2012 production of 3,956 bopd.

Production for the second quarter of 2013 has averaged 5,002 bopd (85% crude oil, 15% condensate).

Tom Reed, Chief Executive Officer, commented:

“This is a very positive development for the Company which puts the business on a much more cash generative footing and creates a significant value opportunity for shareholders. The Company continues to make progress with its strategic review and will provide further updates in due course.”