TIDMVGAS
RNS Number : 4925A
Volga Gas PLC
30 September 2020
30 September 2020
Volga Gas plc
('Volga Gas' or 'the Company' or 'the Group')
INTERIM RESULTS
Volga Gas, the oil and gas exploration and production group
operating in the Volga region of Russia, announces its interim
results for the six months ended 30 June 2020.
COVID-19 IMPACT
-- Operations were quickly adapted to minimise the risk of
Covid-19 infections to staff, contractors and customers, as
detailed in the Preliminary announcements of 2019 results.
-- Since the start of the pandemic, we are pleased to report
that none of the Group's members of staff or contractors have been
tested positive for Covid-19.
-- Apart from the impact on global oil prices and a seven day
production impact caused by temporary reduction in demand for
condensate, the impact of Covid-19 on the business has not been
significant.
OIL, GAS AND CONDENSATE PRODUCTION
-- Group production averaged 3,593 boepd in H1 2019 (H1 2019: 5,634), a 36% decrease.
-- Gas and condensate production were 8.8 mmcf/d, and 1,437 bpd,
respectively (H1 2019: 20.0 mmcf/d, a 56% decrease and 1,525 bpd, a
6% decrease).
-- LPG production contributed a further 188 boepd (H1 2019 352 boepd).
-- Oil production averaged 4 93 bopd (H1 2019: 419 bopd), a 18 % increase.
FINANCIAL RESULTS
-- Revenues decreased 49% to US$13.4million (H1 2019: US$26.3
million). Revenues net of selling expenses decreased 43% to US$13.3
million (H1 2019: US$23.4 million).
-- EBITDA decreased 67% to US$3.1 million (H1 2019: US$9.3 million).
-- The Group is recognising a US$7.8 million asset impairment
charge (H1 2019: US$3.2 million) primarily reflecting the decline
in oil prices between 1 January and 30 June 2020. [].
-- With increased unit DD&A charges resulting from the
reserve revision recognised in 2019 in addition to the above
mentioned charges, the Group is reporting an operating loss of
US$8.1 million (H1 2019: operating loss of US$2.6 million).
-- Loss before tax of US$7.9 million (H1 2019: loss before tax
of US$3.0 million) and net loss after tax of US$8.0 million (H1
2019: net loss of US$2.5 million.
-- Cash flow from operations was US$ 3.2 million (H1 2019:
US$9.7 million) before working capital outflow of US$0.6 million
(H1 2019: outflow of US$0.7 million) and payment of US$1.0 million
in income taxes (H1 2019: US$1.6 million).
-- Cash used in capital expenditure was US$4.6 million (H1 2019:
US$3.3 million) was primarily utilised in the slim hole drilling
campaign.
-- Cash balance decreased to US$10.6 million as at 30 June 2020
(31 December 2019: US$14.1 million).
-- There were no outstanding borrowings as at 30 June 2020 (31 December 2019: nil).
DEVELOPMENT & EXPLORATION ACTIVITY
-- In light of the significant reduction in commodity prices
experienced during 1H 2020, the Board of Volga Gas decided to focus
activity on development of the Uzen field and surrounding prospects
using its cost effective slim hole drilling rigs.
-- 11 new oil production wells were drilled (8 of which have
been completed for production) in the proved areas of the Uzen
field, both in the mature Aptian reservoir (where there remain
small pockets of untapped oil) and in the less developed and
shallower Albian reservoir;
-- 3 exploration and appraisal wells close to the Uzen field.
These confirmed the presence of oil in a previously unevaluated
Upper-Aptian reservoir and also confirmed hydrocarbons in a
separate geological block to the east of the existing field as well
as a separate structure to the North of Uzen;
DIVID
-- In light of the current outlook and the need to target its
financial resources towards stabilizing and rebuilding future
production levels, the Board has decided to suspend cash dividends
for the time being.
POST PERIOD UPDATE
-- During July and August 2020, Group production averaged 3,954
boepd. Management guidance of 4,000 boepd for the remainder of
2020.
-- At 31 August 2020, the Group net cash balance was at US$12.1
million. The Group remains debt free.
OUTLOOK
-- Full year production guidance of 3,850 boepd.
-- Slim hole development drilling campaign on the Uzen field and
adjacent structures is to continue with the aim of further
increasing oil production.
-- Exploration on three of the undrilled prospects within its
Karpensky Licence is planned during H2 2020.
-- Capital expenditure plans for H2 2020 total US$ 3.1 million.
FORMAL SALE PROCESS
-- As announced on 28 September 2020, the Company is continuing
to engage in active discussions with a number of parties regarding
the sale of the Company (or its entire business and assets). There
can be no certainty that an offer will be made, nor as to the terms
on which any offer will be made.
Andrey Zozulya, Chief Executive Officer of Volga Gas, said:
"Whilst the financial results are dominated by an additional
impairment charge on the holding value of the Group's assets as a
result of the reduction in international oil prices, I am pleased
that the Group's operations have remained resilient in the face of
the Covid-19 pandemic and continue to generate positive net cash
flow. Management would like to pay tribute to the hard work and
professionalism of our employees and contractors in maintaining a
safe and effective operating environment in this period.
"We are pleased to report continued progress with the slim hole
drilling operations, which have more than reversed the declines in
oil production from the mature wells on the Uzen field, and look
forward to providing the results of the new exploratory wells that
will be drilled between now and the end of 2020."
For further information, please contact:
Volga Gas plc
Andrey Zozulya, Chief Executive Officer +7 903 385 9889
Vadim Son, Chief Financial Officer +7 905 381 4377
Tony Alves, Investor Relations consultant +44 7824 884 342
FTI Consulting +44 (0)20 3727 1000
Alex Beagley , Fern Duncan
S.P. Angel Corporate Finance LLP +44 (0)20 3470 0470
Richard Morrison, Richard Hail, Soltan Tagiev
Editors' notes:
Volga Gas is an independent oil and gas exploration and
production company operating in the Volga region of Russia. The
company has 100% interests in its four licence areas.
The information contained in this announcement has been reviewed
and verified by Mr. Andrey Zozulya, Director and Chief Executive
Officer of Volga Gas plc, for the purposes of the Guidance Note for
Mining, Oil and Gas companies issued by the London Stock Exchange
in June 2009. Mr. Andrey Zozulya has a degree in Geophysics and
Engineering from the Groznensky Oil & Gas Institute and is a
member of the Society of Petroleum Engineers.
The potential indicative management resource estimates are
conceptual in nature and are based on mapping and interpretation of
seismic data carried out by the Group's in house geological and
technical departments. There has been no independent determination
of a resource to SPE standards and the Company cautions that there
is a risk further exploration will not result in the delineation of
a resource or reserve. The data should therefore not be relied upon
until the Company can confirm such estimate to a Standard
This announcement contains inside information as defined in EU
Regulation No. 596/2014 and is in accordance with the Company's
obligations under Article 17 of that Regulation.
Glossary
Bopd Barrels of oil per day
Boepd Barrels of oil equivalent per day, in which 6,000 cubic
feet of natural gas is equated to one barrel of oil
Bpd Barrels per day
mcf thousands of standard cubic feet
mcm thousands of standard cubic metres
mcm/d thousands of standard cubic metres per day
m(3) standard cubic metre
mmcf/d millions of standard cubic feet per day
mmcm/d millions of standard cubic metres per day
RUR Russian Rouble
Interim Management Report
Volga Gas and its subsidiaries (together, the "Group") are
involved in the production of and exploration for oil and gas in
five licence areas in the Volga Region of Russia.
During H1 2020, Volga Gas total production averaged 3,593 boepd
compared to H1 2019, production of 5,634 boepd. The main influences
in the decline in production were reduction in gas and condensate
output from the VM and Dobrinskoye fields following the incursion
of formation water into the main production wells that occurred
during early 2019. There was also a period during April 2020 when
market demand was curtailed for condensate as a result of the
impact of Covid-19.
During H1 2020, international oil prices fell significantly,
mainly as a result of Covid-19. The Urals oil price fell below
US$20 per barrel during April 2020, but since then recovered to
above US$40 per barrel and averaged US$39 per barrel (average of
approximately US$66 per barrel during H1 2019).
As a consequence, net realisation for Volga Gas' oil and
condensate sales decreased by 33% to US$27.77 per barrel (H1 2019:
US$41.33 per barrel). There were no exports of oil and condensate
in H1 2020 (H1 2019: 34% of the total sales of liquids).
The Russian Ruble exchange rate in H1 2020 was weaker than in H1
2019. Consequently the average gas sales price in H1 2020 was
US$1.86 per mcf (H1 2019: US$1.95/mcf).
As a result of both lower sales volumes and lower prices, net
revenues for H1 2020 were 43% lower than those reported in H1 2019,
after taking into account transport costs and taxes paid on
exports. EBITDA for H1 2020 was 67% lower than for H1 2019. Lower
production costs were offset by rates of Mineral Extraction Taxes
that remained relatively high in spite of the drop in oil
prices.
As a further consequence of the decline in oil prices during H1
2020, an asset impairment charge of US$7.8 million has been taken
in H1 2020 (H1 2019: US$3.2 million) as well as a US$64,000 asset
write off (H 1 2109: write offs of US$1.9 million).
Higher unit rates of depletion, depreciation and amortisation
based on lower reserves in the gas and condensate fields led to the
Group to report an operating loss for H1 2020 of US$8.1 million (H1
2019: operating loss of US$2.6 million). Included in the operating
loss in H1 2020 were additional legal expenses of US$0.8 million
arising from an investigation conducted by the Group's external
legal advisors as a requirement for completion of the audit of the
Group's accounts for the year ended 31 December 2019.
Production Operations
Gas and condensate production - Dobrinskoye and VM fields
The Dobrinskoye and VM fields are managed as a single business
unit. Production from the fields is processed at the gas plant
located next to the Dobrinskoye field, extracting the condensate
and processing the gas to pipeline standards before input into
Gazprom's regional pipeline system via an inlet located at the
plant.
During H1 2020, as in the full year 2019, gas and condensate
production was derived from three wells on the VM field and the
Dobrinskoye #26 well. Following the incursion of water into the VM
wells announced in July 2019, production from the field has been
managed conservatively in order to preserve the economic production
life. Nevertheless, the current outlook is that the field is in the
final 2-3 years of its production life.
While the actual production in H1 2020 reflected the impact of
some scheduled plant downtime and maintenance operations undertaken
on the Gazprom pipeline into which the sales gas is delivered, as
well as a brief interruption to sales as a result of market
disruption caused by Covid-19, the overall impact to production for
H 1 2020 as a whole was not significant.
Average production of gas, condensate and LPG for H1 2020 were
8.8 mmcf/d, 1,437 bpd and 188 boepd respectively (H1 2019: 20.0
mmcf/d, 1,525 bpd and 352 boepd respectively). The comparative
reductions in production volumes reflect field capacity
declines.
It is notable that while overall production has declined
sharply, the ratio of condensate to gas has increased dramatically.
This is believed to be an effect of the lower pressure in the field
reservoir and was anticipated by the independent reservoir
engineers.
The netback gas sales price in Ruble terms during H1 2020 was
RUR 4, 221 per thousand cubic metres excluding VAT (H1 201 9 : RUR
4,163). The Ruble weakened during H1 2020 with the collapse of
international oil prices. Consequently, the average selling price
for gas for H1 2020 equated to US$1.86 per mcf (H1 2019:
US$1.95/mcf). After selling expenses, the net realisation for gas
was US$1.80 per mcf (H1 2019: US$1.84 per mcf).
In contrast to H1 2019, when approximately 63% of condensate was
sold to export customers, there were effectively no exports during
H1 2020.
Unit production costs on the gas-condensate fields and gas plant
were approximately US$3.0 7 per boe (H1 2019: US$3.63), reflecting
cost reductions implemented in H1 2020 and weakening of the Ruble
in which costs are denominated.
Oil production - Uzenskoye field
While this is still a minor proportion of total Group
production, the Group's oil production is beginning to be
re-built.
During H1 2020, oil production averaged 493 bopd (H1 2019: 419
bopd). While the mature wells on the Uzen field continue on their
sharp decline trajectory, new production from slim hole wells have
been contributing to overall oil production since November 2019 and
currently constitute more than half of the total oil
production.
Unit production costs on the Uzen oil field were approximately
US$7.7 9 per barrel (H1 2019: US$7.46).
Development
VM and Dobrinskoye Fields
As detailed in the 2019 Interim Report and the 2 01 9 Annual
Report, the production capacity and estimates of remaining reserves
in the VM and Dobrinskoye fields were materially downgraded during
2019. Following the significant drop in oil prices during H1 2020,
the Board decided to defer any further investment in the fields
beyond the minimum necessary to preserve operational integrity.
Gas plant
The Redox based gas sweetening process continues to operate
efficiently. Further minor upgrades to the operation initiated
during 2019 were completed during H1 2020. Processing capacity at
the plant is currently well in excess of wellhead capacity.
LPG plant
The LPG plant has been operating efficiently. Upgrades to the
plant, including new heat exchanger and a turbo expander, which
were sanctioned early in 2019 were completed before the end of that
year.
Uzen oil field
The focus of investment during 2020 has been on a continuation
of the slim hole drilling programme, which commenced during 2019,
within the oil resources in and around the Group's Uzen field in
the Karpenskiy licence area. This campaign was conducted using two
rigs, one owned by the Group and one rented. The operations are all
conducted by the in-house drilling department, in which the
management has been carefully building up expertise in all key
activities to deliver safe and efficient drilling operations.
In summary, the key activities of H1 2020 comprised el even new
oil production wells, eight of which have been completed for
production. There were drilled in the proved areas of the Uzen
field, both in the mature Aptian reservoir, where there remain
small pockets of untapped oil, and in the less developed and
shallower Albian reservoir.
In parallel, the Group developed a method of drilling wider bore
slim well ("fat slim holes") to fit 4 inch casing, which is
suitable for installation of electrical submersible pumps and for
fracking. These have already been successfully applied to three
wells (Uz-33, Uz-31, Uz-19).
The benefit of this activity has been to offset the sharp
declines in production from the Group's mature conventionally
drilled wells. As outlined above, oil production in H1 2020
averaged 493 barrels per day, which compared to 419 bopd for H1
2019, a 17.7% increase. Currently more than 50% of Uzen field
production is from slim hole wells, having commenced in November
2019.
Exploration activity around the Uzen field
During H1 2020, three exploration and appraisal wells were
drilled in the vicinity of the Uzen fields into reservoirs that are
not currently included in the Group's reserve estimates.
Two of these wells targeted the Upper Aptian reservoir in the
main Uzen complex. Oil was first encountered in this unevaluated
horizon by a slim hole well drilled during 2019. These wells, plus
the original well have all been completed and are in
production.
An additional exploration well in a separate geological block to
the east of the existing field confirmed hydrocarbons although it
was found to be gas rather than oil in that location. An additional
well is planned on the same structure to establish the potential
for oil in this structure.
Drilling has been concluded on the North-Uzen structure. The
well recently reached its final target at a depth of 1,350 metres.
Evidence of oil was found by logging and core sampling. The
commercial significance of this will be evaluate after open hole
flow testing which will be conducted shortly.
Management expects this activity to add new reserves and an
independent reserve estimate in accordance with SPE standards is
planned to be conducted for the 2020 year end.
Exploration strategy
During H1 2020, the Group also made technical preparations for
its forthcoming exploratory drilling, including upgrades to mud
circulation systems, coring, logging, open and cased hole testing.
These new wells are planned to test separate structures with
potential recoverable oil, estimated by management, of 0.3 to 8.1
million barrels. The combined unrisked resources in these prospects
are estimated by management to total approximately 14 million
barrels.
Management believes that slim hole drilling could be employed
also at the Muradymosky licence in Bashkiriya. In present
circumstances, the Board has decided to confine the Group's
activities to its core operational areas.
Financial Review
Results of Operations
For the six months ended 30 June 2020, Group revenues were
US$13.3 million (H1 2019: US$23.6 million) driven by lower volumes
lower prices for oil and condensate. Production costs were
approximately 40% lower than in H1 2019, mainly as a result cost
savings initiatives as well as lower volume related expenses. The
cost savings were achieved primarily through reductions in the
workforce both directly employed by the Group and contractors
partly as a result of reduced activity levels at the Group's gas
processing plant. However, Mineral Extraction Tax rates increased
in spite of lower oil prices as a result of increases in the MET
rates formula. Consequently, MET represented 38.2% of revenues (H1
2019: 27.4%)
Depletion and Depreciation decreased as a result of lower
production volumes. Nevertheless, gross profits for H1 2020
decreased to US$2.6 million (H1 2019: US$8.2 million.
Exports of oil and condensate were at zero level during H1 2020
(H1 2019: 63% of volume). As a consequence selling expenses were
just US$0.1 million in H1 2020 (H1 2019: US$3.0 million). During H1
2020, selling expenses effectively only comprised transportation
costs and fees associated with gas sales.
Write off of development assets and impairment charges
Following the reduction in oil and condensate pricing an
impairment test conducted on the basis of economic assumptions
pertaining on 30 June 2020 indicated additional impairments to the
carrying value of the Group's PP&E. An impairment charge of
US$7.8 million has been included in the Income Statement for H1
2020 (H1 2019: US$3.2 million). There was a write off of US$64,000
of development assets in H1 2020 (H1 2019: US$1.9 million). The
write off in H1 2019 related mainly to an unsuccessful sidetrack
well to Uzen #4 and VM #2 .
Income
Administrative expenses of US$2.7 million in H1 2020 (H1 2018:
US$2.7 million) included approximately US$0.8 million of legal fees
relating to an investigation carried out by the Company's legal
counsel at the request of the former auditor. These additional
expenses offset the significant reduction in overheads enacted by
management. Consequently, the Group recorded an operating loss of
US$8.1 million (H1 2019: profit of US$2.6 million).
Net interest income was US$100,000 (H1 2019: US$147,000). After
recording other net gains of US$39,000 (H1 2019: other net losses
of US$0.5 million), the Group reported loss before tax of US$7.9
million (H1 2019: loss before tax of US$3.0 million).
For the period, there was a current tax provision of US$0.4
million (H1 2019: US$1.9 million) offset by a deferred tax credit
of US$0.4 million (H1 2019: credit of US$1.4 million), leading to a
net loss after tax of $8.0 million for H1 2020 (H1 2019: net loss
after tax of $2.5 million).
EBITDA, calculated as operating profit before exploration
expenses, depletion and depreciation, asset write offs and
impairment charges was US$3.1 million (H1 2019: US$9.4 million) as
below:
2020 2019
----------------------------------------- --------- ----------
Operating (loss)/profit (8,082) (2,633)
Write off of development assets and
impairments 7,820 5,097
Depletion Depreciation and Amortization 3,323 6, 858
----------------------------------------- --------- ----------
EBITDA 3,061 9,3 22
Realisations and profitability
While the Group operates as a single business segment,
management estimates the relative profitability by cash generating
unit as follows:
H1 2020 H1 2019
US$'000 Oil Gas, condensate Oil Gas & condensate
& LPG
----------------------------- -------- ---------------- --------- -------------------
Revenue 2,769 10,609 3,581 22,764
( 1,263 ( 3,842
MET ) ) (2,063) (5,160)
( 556 ( 2,767
Depreciation ) ) (414) (6,512)
( 701 ( 1,677
Production costs ) ) (583) (3,452)
Selling expenses ( 9 ) ( 103 ) (34) (2,941)
----------------------------- -------- ---------------- --------- -----------------
Gross profit net of selling
expenses 240 2,220 488 4,699
The unit realisations are summarised in the following table:
Net Realisation H1 2020 H1 2019
---------------------------- -------- --------
Oil & condensate (US$/bbl) 27.77 41.32
LPG (US$/bboe) 23.27 24.12
Gas (US$/mcf) 1.80 1.84
---------------------------- -------- --------
Unit Costs are summarised in the following table:
Unit cost data 2020 2019
------------------------------------------ ------ -------------------
Production costs 3. 73 3.97
Selling costs 0.18 2.93
MET 8.02 7.11
Depletion, depreciation and amortisation 5.22 6.82
------------------------------------------ ------ -------------------
The changes in unit costs have occurred for the following
reasons:
-- Cost reductions in gas and condensate production facilities
as well as weakness in the Ruble;
-- MET rates have increased with as further upward revisions to
the MET rate formula in spite of lower benchmark oil prices;
-- Unit Depletion, depreciation and amortization ("DD&A")
rates reflect a lower depletion pool following the impairment
charges taken at 31 December 2019.
Cash flow
Cash flow from operating activities before working capital
movements in H1 2020 was US$3.2 million (H1 2019: US$9.7 million),
reflecting EBITDA. After net working capital outflow of US$0.6
million in H1 2020 (H1 2018: net outflow of US$0.7 million), and
income tax payments of US$1.0 million (H1 2018: US$1.6 million),
net cash flow from operations was US$1.6 million (H1 2019: US$7.5
million).
Capital Expenditure
For the six months ended 30 June 2020, the Group incurred
capital expenditures of US$4.1 million (H1 2018: US$3.3 million),
primarily on the slim hole drilling activities with minor
maintenance expenditure on the gas plant. With settlements of
accounts payable for capital expenditure, cash used in the purchase
of PP&E during H1 2020 was US$4.6 million (H1 2019: US$3.3
million). There was no expenditure on exploration and evaluation,
during H1 2020 (H1 2019: US$163,000).
Cash Position and Balance Sheet
There were no cash flows in financing activities during H1 2020
(H1 2019: cash outflow of US$7.4 million). The Group had cash
balances at 30 June 2020 of US$10.6 million (31 December 2019:
US$14.1 million), and no borrowings (31 December 2019: nil).
Dividends
The Directors did not recommend a final dividend in respect of
the year ended 31 December 2019. Given the recent operational
developments and the need to preserve the Group's financial
position, the Directors do not propose to declare an interim
dividend for 2020. During H1 2019, equity dividends of US$5.2
million were paid, being a final dividend declared in respect of
2018.
Outlook
Management expects gas, LPG and condensate production from the
VM field for the remainder of 2020 to be maintained at rates
similar to those achieved in the first 8 months of the year of
approximately 3,200 boepd. Meanwhile, additional new slim hole
wells are expected to enable oil production to be sustained at
approximately 600 bopd for the remainder of 2020.
International oil prices appear to have stabilised at current
levels and if this continues for the remainder of the year, sales
prices should approximate the average realisations for the first 8
months: US$31.44 per barrel for oil and US$26.80 for
condensate.
Principle Risks and Uncertainties
The risks described on pages 12-14 of the 2017 Annual Report, a
copy of which can be obtained from www.volgagas.com , remain
extant.
Forward-Looking Statements
Certain statements in this interim report are forward-looking.
Although the Group believes that the expectations reflected in
these forward-looking statements are reasonable, it can give no
assurance that these expectations will prove to have been correct.
Because these statements involve risks and uncertainties, actual
results may differ materially from those expressed or implied by
these forward-looking statements.
VOLGA GAS plc
IFRS CONDENSED CONSOLIDATED INTERIM FINANCIAL INFORMATION
(UNAUDITED)
AS OF AND FOR THE SIX MONTHSED 30 JUNE 2018
Group Interim Income Statement (Unaudited)
(presented in US$000, except for profit per ordinary share and
number of shares)
Six months ended 30 June Notes 2020 2019
---------------------------------------- ------ ------------- -----------
Revenue 13,378 26,345
Cost of sales 4 (10,806) (18,183)
---------------------------------------- ------
Gross profit 2,572 8,162
Selling Expenses (112) (2,975)
General and administrative expenses 5 (2,658) (2,723)
Impairments charge (7,820) (3,157)
( 1,940
Write off of development assets 6 (64) )
---------------------------------------- ------
(2, 633
Operating profit/(loss) (8,082) )
Interest income 100 147
Other net gains/(losses) 6 39 (492)
---------------------------------------- ------
(2, 978
Profit/(loss) before tax (7,943) )
Provision for deferred tax 405 1, 886
Provision for current tax (413) (1,382)
---------------------------------------- ------
Profit/(loss) attributable to equity (2, 474
holders (7,951) )
Basic and diluted profit/(loss) per ordinary
share (in US dollars) (0.0984) (0.0306)
Weighted average number of shares
outstanding 80,818,452 80,833,822
Group Interim Statement of Comprehensive Income (Unaudited)
(presented in US$000)
Six months ended 30 June Notes 2020 2019
---------------------------------- ------- --------- --------
(2, 474
Profit/(loss) for the Period (7,951) )
Other comprehensive income:
Currency translation differences (4,547) 5,17 9
-------------------------------------------
Total comprehensive income for
the period (12,498) 2, 705
The accompanying notes are an integral part of this condensed
consolidated interim financial information.
Group Balance Sheet (Unaudited)
(presented in US$000)
As at 30 June 31 December
Notes 2020 2019
------------------------------------ ------ -------------------- --------------------
Assets
Non-current assets
Intangible assets 7 2,985 3,374
Property, plant and equipment 7 22,858 33,957
Deferred tax assets 1,692 1,459
------------------------------------ ------
Total non-current assets 27,535 38,790
Current assets
Cash, cash equivalents and bank deposits 10,623 14,116
Inventories 362 594
Other receivables 1,785 1,752
------------------------------------ ------
Total current assets 12,770 16,462
Total assets 40,305 55,252
------------------------------------ ------ -------------------- --------------------
Equity and liabilities
Equity
Share capital 1,485 1,485
Currency translation and other reserves (87,642) (83,095)
Accumulated profit 121,966 129,917
------------------------------------ ------ -------------------- --------------------
Total equity 35,809 48,307
Long term liabilities
Asset retirement obligation 296 315
Deferred tax liabilities
------------------------------------ ------ -------------------- --------------------
Total long term liabilities 296 315
Current liabilities
Accounts payable 8 4,200 6,630
------------------------------------ ------
Total current liabilities 4,200 6,630
Total equity and liabilities 40,305 55,252
------------------------------------ ------ -------------------- --------------------
The accompanying notes are an integral part of this condensed
consolidated interim financial information.
Group Interim Cash Flow Statement (Unaudited)
(presented in US$000)
Six months ended
30 June
Notes 2020 2019
-------------------------------------------- -------- --------------- ----------------
Profit/(loss) for the period before (2, 978
tax (7,943) )
Less adjustments for:
Depreciation, depletion and amortization 3,323 6,858
Write-off of development assets and
impairment 7,884 5, 097
Inventory write-off 23 (93)
Foreign exchange differences (50) 611
Other non-cash operating losses/(gains) (27) 224
-------------------------------------------- --------
Total effect of adjustments 11,153 12,6 97
Net cash flow before working capital
movements 3,210 9,719
(Increase)/decrease in trade and
other receivables (237) 296
Decrease in payables 9 (544) (1,306)
(Increase)/decrease in inventory 141 330
-------------------------------------------- --------
Working capital changes (640) (680)
Income taxes paid (1,003) (1,591)
Net cash from operating activities 1,567 7,448
-------------------------------------------- -------- --------------- ----------------
Cash flows from investing activities
Purchase of intangible assets (exploration
& evaluation) - (64)
Purchase of property, plant and equipment (4,552) (3,259)
Net cash used in investing activities (4,552) (3,323)
-------------------------------------------- -------- --------------- ----------------
Cash flows from financing activities
Dividends paid - (5,237)
Purchase of own shares - (356)
Loans repaid - (1,782)
Net cash provided/(used) by financing
activities - (7,375)
-------------------------------------------- -------- --------------- ----------------
Effect of exchange rate changes on cash
and cash equivalents (508)
------------------------------------------------------
Net (decrease)/ increase in cash and
cash equivalents (3,493) (2,810)
------------------------------------------------- --- --------------- ----------------
Cash and cash equivalents at beginning
of the period 14,116 15,186
Cash and cash equivalents at end of
the period 10,623 12,376
------------------------------------------------- --- --------------- ----------------
The accompanying notes are an integral part of this condensed
consolidated interim financial information.
Group Interim Statement of Changes in Equity (Unaudited)
(presented in US$000)
Share Currency Accumulated Total
Capital Translation Profit Equity
Reserves
---------------------------------- ------------- -------------------- ---------------------- --------------
Opening equity at 1 January
2020 1,485 (83,095) 129,917 48,307
Profit for the period - (7,951) (7,951)
Currency translation differences - (4,547) - (4,547)
----------------------------------
Closing equity at 30 June
2020 1,485 (87,642) 121,966 35,809
---------------------------------- ------------- -------------------- ---------------------- --------------
Opening equity at 1 January
2019 1,485 (89,189) 145,330 57,626
Profit for the period - - (2,474) (2,474)
Dividends paid - - (5,237) (5,237)
Buyback of shares - - (356) (356)
Currency translation differences - 5,179 - 5,179
----------------------------------
Closing equity at 30 June (84,01
2019 1,485 0 ) 137, 263 54, 738
---------------------------------- ------------- -------------------- ---------------------- --------------
The accompanying notes are an integral part of this condensed
consolidated interim financial information.
Notes to the IFRS Condensed Consolidated Interim Financial
Statements (Unaudited)
(presented in US$000 unless otherwise stated)
1. General information
Volga Gas plc (hereinafter referred to as "Company" or "Volga")
is a public liability company registered in England and Wales with
registered number 05886534 and quoted on the AIM market of London
Stock Exchange plc. The principal activities of the Company and its
subsidiaries (hereinafter jointly referred to as the "Group") are
the acquisition, exploration and development of hydrocarbon assets
and production of hydrocarbons in the Volga Region of the Russian
Federation. The Company's registered office is at 6(th) floor, 65
Gresham Street, London EC2V 7NQ. This condensed consolidated
interim financial information was approved for issue on 27
September 2019.
2. Basis of presentation
This condensed consolidated interim financial information for
the half-year ended 30 June 2020 has been prepared in accordance
with IAS 34, 'Interim financial reporting'. The condensed
consolidated interim financial information should be read in
conjunction with the annual financial statements for the year ended
31 December 2019, which have been prepared in accordance with IFRSs
as adopted by the European Union.
Selected explanatory notes are included to explain events and
transactions that are significant to an understanding of the
changes in the Financial Position and performance of the group
since the last annual consolidated financial statements.
This condensed consolidated interim financial information does
not comprise statutory accounts within the meaning of section 434
of the Companies Act 2006. Statutory accounts for the year ended 31
December 2019 were approved by the board of directors on 4
September 2020 and are to be delivered to the Registrar of
Companies by 30 September 2020. The report of the auditor on those
accounts was qualified. The basis for qualified opinion was that
the auditor, KPMG LLP, was unable to obtain audit evidence or
explanations, satisfactory to its own requirements, in respect of
payments made to sales agents to provide consultancy services and
act on behalf of the Group in certain transactions with a major gas
purchaser. Full details are included in the Audit Report on pages
26 to 31 of the Company's Annual Report and Accounts for the year
ended 31 December 2019.
Except as described below, the accounting policies applied are
consistent with those of the annual financial statements for the
year ended 31 December 2019, as described in those annual financial
statements.
Going-concern basis. The group meets its day-to-day working
capital requirements through its cash resources. After making
enquiries, the directors have a reasonable expectation that the
Group has adequate resources to continue in operational existence
for the foreseeable future. The Group therefore continues to adopt
the going concern basis in preparing its consolidated interim
financial statements.
Exchange rates. The official rate of exchange of the Russian
ruble to the US dollar ("USD") at 30 June 2020 and 31 December 2019
was 69. 9513 and 61. 9057 Russian Rubles to USD 1.00, respectively.
Any re-measurement of Russian Ruble amounts to US dollars or any
other currency should not be construed as a representation that
such Russian Ruble amounts have been, could be, or will in the
future be converted into other currencies at these exchange
rates.
Taxation. Taxes on income in the interim periods are accrued
using the tax rate that would be applicable to expected total
annual earnings.
Segmental reporting follows the Group's internal reporting
structure. No geographic segmental information is presented as all
of the Group's operating activities are based in the Russian
Federation.
Management has determined therefore that the operations of the
Group comprise one class of business, being oil and gas
exploration, development and production and the Group operates in
only one geographic area - the Russian Federation.
3. Accounting policies
The accounting policies adopted in the preparation of these
condensed interim consolidated financial statements are consistent
with those applied and disclosed in the consolidated financial
statements for 2019.
4. COST OF SALES
Cost of sales is analysed as follows:
2020 2019
Six months ended 30 June US$ 000 US$ 000
------------------------------------------ -------- --------
Production expenses 2,378 4,035
Mineral extraction taxes 5,105 7,223
Depletion, depreciation and amortization 3,323 6,925
------------------------------------------
10,806 18,183
------------------------------------------ -------- --------
5. GENERAL AND ADMINISTRATIVE EXPENSES
General and administrative expenses are analysed as follows:
2020 2019
Six months ended 30 June US$ 000 US$ 000
---------------------------------- -------------------------- --------------------------
Salaries 1,135 1,608
Taxes other than payroll and MET 19 21
Audit fees 196 167
Legal and Consultancy 867 455
Other 440 473
----------------------------------
Total general and administrative
expenses 2,658 2,723
---------------------------------- -------------------------- --------------------------
6. OTHER GAINS AND LOSSES, NET
Six months ended 30
June
2020 2019
US$ 000 US$ 000
----------------------------------- ---------------------- --------
Foreign exchange loss 50 ( 611)
Other expense ( 11) 119
-----------------------------------
Total other net income/(expenses) 39 (492)
----------------------------------- ---------------------- --------
7. PROPERTY PLANT AND EQUIPMENT AND INTANGIBLE ASSETS
Property, Intangible
plant and assets
equipment
US$ 000 US$ 000
As at 1 January 2020 33,957 3,374
Additions 4,018 -
Depreciation and amortisation (3,323) -
Write offs of development assets (7,884) -
and impairments
Exchange adjustment (3,910) (389)
----------------------------------
At 30 June 2020 22,858 2,985
---------------------------------- ---------------------- ----------------------
As at 1 January 2019 45,109 3,304
Additions 3,609 163
Depreciation and amortisation (6,858) -
Write offs of development assets -
and impairments (5,1 23 )
Exchange adjustment 4, 274 340
----------------------------------
At 30 June 2019 41, 011 3,807
---------------------------------- ---------------------- ----------------------
The write off of development assets and impairments comprised
the write off of US$64,000 (H1 2019: US$1,944,000) of development
assets and impairment charges of US$7,820,000 (H1 2019:
US$3,153,000). A final assessment of asset impairment will be made
at the 2020 year end on conclusion of an updated independent
evaluation of reserves.
The impairment test conducted for the purpose of the balance
sheet as at 30 June 2020 was based on the assumptions detailed in
Note 4(a) of the accounts for the year ended 31 December 2019, with
the exception of the oil price and Ruble exchange rate. The oil
price assumptions have been adjusted to match forecasted average
prices of $42/bbl in the second half of 2020. After that, the price
curve has been applied. An exchange rate of RUR69.95 to US$1.00 was
used for the entire forecast period of the impairment testing
model.
8. ACCOUNTS RECEIVABLE
30 June 31 December
2020 2019
US$ 000 US$ 000
Prepayments 230 280
Trade receivables 437 875
VAT recoverable 480 430
Other 638 167
---------------------------
Total accounts receivable 1,785 1,752
--------------------------- ---------------------- ------------
9. ACCOUNTS PAYABLE
30 June 31 December
2020 2019
US$ 000 US$ 000
Customer advances 332 1,538
Trade payables 486 993
Taxes other than profit tax 1,865 3,140
Other 1,517 959
-----------------------------
Total accounts payable 4,200 6,630
----------------------------- ---------------------- ------------
10. CONTINGENCIES AND COMMITMENTS
The Group has fulfilled all exploration commitments on existing
licences. As at 30 June 2020, the Group had contracted to spend
US$0.8 million on its remaining capital expenditure programme for
2020, comprising continuing drilling operations on Uzen. The Group
has no other material commitments or further capital expenditures
during the year ending 31 December 2020.
11. RELATED PARTY TRANSACTIONS
The Group is controlled by Baring Vostok Private Equity Fund
III, Baring Vostok Private Equity Fund IV and Baring Vostok
Investments PCI, which own 64.6% of the Company's shares as at 30
June 2018.
Related party transactions are disclosed in Note 23 to the
accounts for the year ended 31 December 2019. There were no
material related party transactions in the six months to 30 June
2020 nor in the six months to 30 June 2019.
STATEMENT OF DIRECTORS' RESPONSIBILITIES
The directors confirm that this consolidated interim financial
information has been prepared in accordance with IAS 34 as adopted
by the European Union and that the interim management report
includes a fair review of the information required by DTR 4.2.7R
and DTR 4.2.8R, namely:
-- an indication of important events that have occurred during
the first six months and their impact on the set of financial
statements, and a description of the principal risks and
uncertainties for the remaining six months of the financial year;
and
-- material related-party transactions in the first six months and any material changes in the related-party transactions described in the last annual report.
The directors of Volga Gas plc are as listed in the Volga Gas
plc Annual Report for the year ended 31 December 2019.
By order of the Board
Andrey Zozulya Vadim Son
Chief Executive Chief Financial
Officer Officer
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END
IR PPUQUBUPUGQB
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