Zoltav Resources: H1 2019 Results – Revenue Down 24%, Operating Profit Down 45%

Zoltav (AIM: ZOL), the Russia-focused oil and gas exploration and production company, announces results for the six months ended 30 June 2019.

Financial Summary

·    Revenues declined by 24% to RUB 632 million (USD 9.7 million) (H1 2018: RUB 831 million (USD 14 million))

·    Total cost of sales was 2% lower at RUB 533.9 million (USD 8.2 million) (H1 2018: RUB 547 million (USD 9.22 million))

·    Operational and G&A costs increased by 57% to RUB 133.7 million (USD 2.05 million) (H1 2018: RUB 88 million (USD 1.48 million)), mostly driven by hiring experienced senior geotechnical, buying licences for geological software and hiring new senior management

·    Operating profit dropped by 45% to RUB 105 million (USD 1.61 million) (H1 2018: RUB 191 million (USD 3.22 million))

·    Zoltav generated RUB 170 million (USD 1.61 million) of losses before tax (H1 2018: RUB 101 million or USD 1.73 million profit before tax)

·    Net cash generated from operating activities decreased by 49% to RUB 193 million (USD 2.96 million) (H1 2018: RUB 377 million (USD 6.35 million))

·    Total cash at the end of the period was RUB 330 million (USD 5.23 million) (H1 2018: RUB 315 million (USD 5.02 million))

Note: USD comparisons are provided in the above Financial Summary for illustrative purposes only and are calculated using an exchange rate of:

H1 2019: 1 USD = 65.1218 RUB

As at 30 June 2019: 1 USD = 63.0756 RUB

H1 2018: 1 USD = 58.3529 RUB

As at 30 June 2018: 1 USD = 57.6002 RUB

As at 30 December 2018: 1 USD = 69.4706 RUB

Operational Summary – Bortovoy Licence

·    Natural production decline from existing well stock on the west Bortovoy fields was steeper in H1 2019 than in preceding periods

·    Average net daily production (sold to customers) in H1 2019 was:

o  26 mmcf/d (0.74 mmcm/d) of gas (H1 2018: 34.9 mmcf/d (0.99 mmcm/d))

o  207 bbls/d (26 t/d) of oil and condensate (H1 2018: 335 bbls/d (46 t/d))

·    Overall in H1 2019, Zoltav produced:

o  4.7 bcf (632 mmcm) of gas or 0.7 mmboe (107 mtoe) (H1 2018: 6.3 bcf (179 mmcm) or 1.1 mmboe (144 mtoe))

o  37,389 bbls (4763 t) of oil and condensate: (H1 2018: 60,558 bbls (7,714 t))

·    Western Gas Plant continued to be operated efficiently with no shutdowns

·    One of two propane compressors was shut between March and June 2019 due to a technical deficiency causing the dew point to drop and decreased output of condensate from natural gas in the amount of 3,925 bbls (500 t)

·    Development programme is currently underway to reverse production decline during Q1 2020, including:

o  Zhdanovskoye Well 103 was spudded in May 2019 and put on production post period-end at the end of August 2019

o  Karpenskoye Well 5D was spudded post period-end in September 2019 and is anticipated to be put on production in December 2019

·    RUB 250 million capital commitment (RUB 137 million during H1 2019) towards a feasibility study on the East Bortovoy fields, anticipated to be completed by year-end

o  Includes a RUB 100 million budget overrun due to technical condition encountered in Nepriyakhinskoye Well 1

o  Preliminary evaluation continues to indicate that connecting the eastern fields to the existing Western Gas Plant is the most favourable option

Lea Verny, Independent Non-executive Chairman, commented:

“The development programme aimed at reversing the production decline from the West Bortovoy fields during Q1 2020 continued to advance throughout the period. Long-term development plans remain focused on connecting East Bortovoy fields to the Western Gas Plant. The work programme feeding into the technical and economic feasibility study being conducted on this opportunity continued throughout the period under review.”

Enquiries:

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.

About Zoltav

Zoltav is an oil and gas exploration and production company focused on Russia.

Zoltav holds the Bortovoy Licence in the Saratov region of South Western Russia, a 3,215 sq km area along the northern margin of the Pre-Caspian basin, one of the largest hydrocarbon basins in the CIS.

The Bortovoy Licence contains a number of productive gas fields in the west of the Licence, a processing plant and significant exploration prospectivity. It holds proven plus probable reserves under the Society of Petroleum Engineers’ Petroleum Resources Management System of 750 bcf of gas and 3.8 mmbbls of oil and condensate.

In 2018, Zoltav produced 12.0 bcf (341 mmcm) of gas or 2.0 mmboe (274 mtoe) and 66,558 bbls (7,715 t) of oil and condensate.

The Company is currently evaluating strategies to commercialise the eastern fields of the Bortovoy Licence.

For further information on Zoltav, or to sign up for our news alert service, visit: www.zoltav.com.