28th Jun 2016 13:59
LONDON (Alliance News) - Urals Energy Public Co Ltd Tuesday said it remained loss-making in 2015 and moved into a net debt position after a small rise in production failed to prevent revenue sliding as a result of lower prices, which also squeezed its margins.
Urals shares were down 19% to 1.51 pence per share on Tuesday afternoon.
The Russian oil producer reported a USD4.1 million loss in 2015 compared to the USD13.7 million loss booked in 2014, as revenues before excise and export duties declined 46% to USD31.4 million from USD58.2 million as a result of lower oil prices.
Although total production in the year was up 2.0% to 675,316 barrels from 662,215 barrels, the average oil price dropped and caused the netback per crude oil barrel, which is revenue minus all the costs associated with getting it to market, to drop to USD34.02 from USD40.90. The netback on refined petroleum products fell to USD51.06 per barrel from USD65.26.
"Relatively low world oil prices and foreign exchange rates in 2015 led to a decrease in average net back prices, both for crude oil export and domestic sales of petroleum (refined) products," said Urals.
The average oil price declined significantly to USD52 per barrel in 2015 from USD98 in 2014 and domestic prices for light oil products ranged between USD38 to USD95 per barrel compared to the range of USD61 to USD155 in 2014.
On a daily basis, production from the Petrosakh field averaged 1,155 barrels, whilst Articneft averaged 695 barrels. Notably, Petrosakh production has increased since then and is now running at 1,317 barrels a day, but production from Articneft has fallen to 676 barrels a day.
Production was broadly maintained through the year after Urals completed the drilling of two wells and started to drill a third well at Petrosakh in 2015, and because of a workover programme that was conducted on Articneft which helped lift yearly production from the field by over 5.0% year-on-year.
However, although Urals has managed to reduce costs thanks to a weaker rouble in the period, the fall in oil prices still ultimately hit the company's financial performance as gross profit declined 18% to USD7.1 million from USD8.7 million.
Cost of sales fell to USD20.1 million from USD35.8 million, almost solely driven by foreign exchange fluctuations, whilst general and administrative costs fell to USD3.9 million from USD8.7 million.
Earnings before interest, tax, depreciation, amortisation and other items fell 4.9% to USD7.7 million from USD8.1 million as the Ebitda margin was squeezed to 18.2% from 28.5%.
Urals also turned to a negative net working capital position of USD300,000 compared to a positive position of USD1.6 million, and Urals turned to net debt of USD2.2 million at the end of the year from a net cash position of USD4.4 million at the end of 2014.
Urals plans to continue its workover programmes on both its fields to maintain production and plans to enhance the margins at the Petrosakh refinery by increasing throughput by using imported crude.
The company said it will also seek economies where it believes it could "offset Russian rouble cost inflation" and all major capital expenditure decisions regarding undeveloped reserves at Articneft have been delayed until confidence in the market improves, with all the attention remaining on existing operations.
Urals said it is also assessing the likelihood of securing long term funding so it can continue developing production growth rather than maintaining it.
"The board remains confident that with this low risk approach, we will be in a strong position to grow the company as conditions in the oil markets inevitably adjust," said interim Chief Executive Leonid Dyachenko.
By Joshua Warner; [email protected]; @JoshAlliance
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