Zoltav Resources: 2017 1H Results – Production Down 10%, Revenues Up 33%

Zoltav (AIM: ZOL), the Russia-focused oil and gas exploration and production company, announces results for the six months ended 30 June 2017. The full report is available to download from the Investor Relations section of the Company’s website at www.zoltav.com.

Financial Highlights

· Zoltav delivered a 33% increase in net profits to RUB 69 million (USD 1.19 million) (H1 2016: RUB 52 million or USD 0.74 million)

· Revenue decreased by 8% to RUB 924 million (USD 15.98 million) (H1 2016: RUB 1,003 million or USD 14.28 million), due to a 10% decline in daily production

· Operating profit decreased by 12% to RUB 202 million (USD 3.49 million) (2016: RUB 230 million or USD 3.28 million)

· EBITDA was broadly maintained at RUB 420 million (USD 7.26 million) (H1 2016: RUB 430 million or USD 6.12 million)
o Cost efficiencies helped improve the EBITDA margin by 2% to 45% of revenue

· Reduced borrowing by a further RUB 150 million (USD 2.59 million) of the principal amount (RUB 1,860 million or USD 30.66 at 31 December 2016) – in line with all covenants

· Total cash at period end was RUB 348 million (USD 5.89 million) (at 31 December 2016: RUB 294 million or USD 4.85 million)

Operational Highlights – Bortovoy Licence

· Western Gas Plant produced an average of 7,480 boe/d (1,021 toe/d) (H1 2016: 8,270 boe/d (1,128 toe/d))
o 10% decline in production as a result of the underperformance of Karpenskoye Well 117 and Zhdanovskoye Well 108
o Drilling programme for Western Fields reviewed and plans implemented to restore Western Gas Plant to full capacity by year end
o Plans include drilling of sidetracks from existing well stock, with first two sidetracks expected to be operational by year end

· Company focused on further increasing efficiency at the Western Gas Plant to partially offset the negative impact from Wells 117 and 108
o Eliminated necessity for two planned plant shutdowns which occurred in H1 2016
o Implemented zero-based budgeting programme resulting in a further 30% reduction in expenses

· Interpretation of 3D seismic data acquired over the Devonian structure in the North Mokrousovskoye field expected to be completed by March 2018

Operational Highlights – Koltogor Licences

· Company considering options for the commercialisation of the Koltogor Licences including potential partnerships

Corporate Highlights

· Lea Verny, previously Independent Non-executive Director, replaced Marcus Rhodes as Independent Non-executive Chairman on 22 March 2017

· Eduard Sleyn appointed as Group CEO (non-board position) on 15 May 2017

· Kirill Suetov appointed as Group Director of Finance (now CFO) (non-board position) on 1 January 2017

Lea Verny, Independent Non-executive Chairman, commented:

“Zoltav’s operational priorities remain that of using the Western Gas Plant at Bortovoy to its full capacity – to which it is expected to return by the end of 2017 – as well as driving EBITDA and operating cash flow through operational efficiencies. That the Company was able to achieve a materially improved net profit in the first half, despite reduced production levels, is an encouraging signal of what can be achieved when production is normalised by the end of the year.

In the longer term, Zoltav believes there is substantial potential for the development of the deeper, Devonian structures at Bortovoy. Interpretation of 3D seismic data acquired over the Devonian structure in the North Mokrousovskoye field is ongoing and expected to be completed by March 2018.”

Note:

– USD:RUB conversions for H1 2017 at a rate of 1:59.0855 (based on 30 June 2017 exchange rate) and 1:57.8366 (average for H1 2017)
– USD:RUB conversions for H1 2016 at a rate of 1:64.2575 (based on 30 June 2016 exchange rate) and 1:70.2282 (average for H1 2016)
– USD:RUB conversions for 31 December 2016 at a rate of 1:60.6569 (based on 31 December 2016 exchange rate)
Market Abuse Regulation (MAR) Disclosure

Certain information contained in this announcement would have been deemed inside information for the purposes of Article 7 of Regulation (EU) No 596/2014 until the release of this announcement.