Zoltav Resources: 2016 Results – Revenues Up 17%, Operating Profit Up 539%

Zoltav, the Russia-focused oil and gas exploration and production company, announces final results for the year ended 31 December 2016 showing a 17% increase in revenues and the Company’s first annual net profit. The Company has adopted RUB as its reporting currency going forward, reflecting its currency of operation.

Financial Highlights

·    Revenues from production increased by 17% to RUB 1,989 million (USD 29.7 million) (2015: RUB 1,697 million or USD 28.1 million) 

·    Zoltav delivered its first annual net profit of RUB 97 million (USD 1.4 million) (2015: RUB 247 million loss or USD 4.0 million loss) 

·    Operating profit increased 539% to RUB 441 million (USD 6.6 million) (2015: RUB 69 million or USD 1.1 million) 

·    Total cost of sales reduced by 1.5% to RUB 1,155 million (USD 17.2 million) (2015: RUB 1,172 million or USD 19.5 million) 

·    Significant reduction in G&A costs of 38% to RUB 299 million (USD 4.5 million) (2015: RUB 482 million or USD 7.9 million), mostly driven by staff reduction and optimisation of consultancy and administrative fees 

·    Reduced borrowings further through repayment of RUB 360 million of PJSC Sberbank debt (USD 5.4 million) reducing the principal amount to RUB 1,860 million (USD 30.7 million) at 31 December 2016  

·    Net cash generated from operating activities increased by 151% to RUB 719 million (USD 10.7 million) (2015: RUB 286 million or USD 4.3 million) 

·    Cash and cash equivalents at 31 December 2016 of RUB 294 million (USD 4.8 million) (31 December 2015: RUB 429 million or USD 5.9 million) 

·    The Group has sufficient liquidity to fund its investment programme on the Western Fields at Bortovoy and its development plans at Koltogor at least through to the end of 2018 

Operational Highlights – Bortovoy Licence

·    Zoltav operated the Western Gas Plant at Bortovoy at an increased capacity of 9,137 boe/d (1,296 toe/d) (2015: 8,853 boe/d (1,256 toe/d))

o  Average daily gas production increased by 2.4% to 47.7 mmcf/d (1.35 mmcm/d) (2015: 46.6 mmcf/d (1.32 mmcm/d))

·    Further operational performance enhancements achieved including efficient and continuous working of gas compressors and optimisation of current well stock production regime 

·    Commenced 3D seismic programme in September 2016 over Devonian structure in the North Mokrousovskoye field – interpretation expected to be completed in Q3 2017 

·    Zhdanovskoye Wells 19 and 103 were put into operation in early September 2016, two months ahead of schedule, providing an additional combined 386.2 mmcf (10.94 mmcm) of gas volume 

·    Zhdanovskoye Well 108 completed in January 2017 in line with the Company’s strategy to maintain full plant capacity

Operational Highlights – Koltogor Licences

·    Rosnedra, the federal government body, confirmed the discovery of the West Koltogor oil field on Koltogor Exploration Licence 10 and issued an E&P licence covering that area through to March 2036

·    The Company is currently considering different options for the commercialisation of the Koltogor assets including partnerships

Corporate Highlights

·    Changes to board composition during 2016 and post year-end:

o  Alastair Ferguson (Executive Chairman), Stephen Lowden (Senior Independent Non-executive Director) and Andrey Komarov (Executive Director) did not stand for re-election at the 2016 AGM (Andrey Komarov continues in an executive management position)

o  Lea Verny appointed as Independent Non-executive Director on 22 December 2016 and subsequently as Independent Non-executive Chairman on 22 March 2017 

·     Kirill Suetov appointed as Group Director of Finance on 1 January 2017

Lea Verny, Independent Non-executive Chairman, commented:

“The continuing efforts to generate operational efficiencies at the Western Gas Plant and to reduce costs across the Group have resulted in an outstanding set of financial results which show a 17% increase in revenues to RUB 1,989 million (USD 29.7 million) (2015: RUB 1,697 million or USD 28.1 million) and the Company’s first annual net profit of RUB 97 million (USD 1.4 million) (2015: RUB 247 million loss or USD 4.0 million loss).

“Our focus continues to be on both maintaining full plant capacity through the implementation of optimal production enhancement activities to increase economic effectiveness; and on generating the maximum value from our existing assets, where there is scope to significantly increase our reserves.”

The full annual report is available to download from the investor relations section of the Company’s website at www.zoltav.com.