Zoltav Resources Inc – ZOL – Final Results

Zoltav Resources Inc – ZOL – Final Results

Zoltav (AIM: ZOL), the Russia-focused oil and gas exploration and production company, announces final results for the year ended 31 December 2019.

Financial Summary

·    Revenues declined by 25% to RUB 1.2 billion (USD 19.38 million) (2018: RUB 1.6 billion (USD 25.52 million))

·    Total cost of sales was 5% lower at RUB 1.07 billion (USD 17.28 million) (2018: RUB 1.12 billion (USD 17.86 million))

·    Operational and G&A costs increased by 16% to RUB 241.6 million (USD 3.90 million) (2018: RUB 208 million (USD 3.32 million)), mostly driven by hiring experienced senior geotechnical personnel, buying licences for geological software and hiring new senior management

·    Other expenses increased significantly to RUB 118 million (USD 1.9 million) (2018: RUB 15 million) due to bringing the decommissioning and environmental restoration provision up to date and recognising the loss on damaged equipment which has been replaced

·    Non-current assets impairment charge of RUB 2.8 billion (USD 45.2 million) as a result of disappointing drilling results on the Karpenskoye field

·    Operating loss excluding the non-current assets impairment charge of RUB 180 million (USD 2.91 million) (2018: operating profit of RUB 313 million (USD 4.99 million))

·    Loss before tax of RUB 3.12 billion (USD 50.4 million) (2018: profit before tax of RUB 156 million or USD 2.49 million)

·    Net cash generated from operating activities decreased by 55% to RUB 276 million (USD 4.46 million) (2018: RUB 613 million (USD 9.78 million))

·    Total cash at the end of the period was RUB 4 million (USD 0.06 million) (2018: RUB 261 million (USD 3.76 million)) (Revolving loan facility of USD 9 million announced after year-end in July 2020)

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

 

2019: 1 USD = 61.9057 RUB

As at 31 December 2019: 1 USD = 64.7362 RUB

2018: 1 USD = 62.7078 RUB

As at 31 December 2018: 1 USD = 69.4706 RUB

Operational Summary

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

24.5 mmcf/d (0.69 mmcm/d) of gas (2018: 33 mmcf/d (0.94 mmcm/d))

246 bbls/d (31 t/d) of oil and condensate (2018: 301 bbls/d (38 t/d))

·    Overall, in 2019, Zoltav produced:

Natural gas: 9.0 bcf (253 mmcm) of gas or 1.5 mmboe (203 mtoe) (2018: 12.0 bcf (341 mmcm) or 2.0 mmboe (274 mtoe))

Oil and condensate: 89,618 bbls (11,416 t) of oil and condensate: (2018: 109,807 bbls (13,988 t))

·    Operations at Western Gas Plant continued without any shutdowns or COVID-19 related disruption

Safety and precautionary measures, such as additional cleaning and PPE equipment, have been implemented to reduce risk of infection

·    A programme of four side-track wells was initiated in May 2019:

Zhanovskoye Well 103 – put on production in August 2019

Karpenskoye Well 5D – encountered water cut and will require intervention

Zhanovskoye Well 8 – put on production in January 2020

Karpenskoye Well 19 – encountered water cut and will require intervention

·    A programme of two standalone vertical wells (Zhandovskoye Well 106 and Zhandovskoye 105) and construction of a 7.2 km looping pipeline was implemented in 2020 which, together with the contribution from the successful 2019 side-track wells, are expected to enable the Company to sustainably reverse the production profile on the West Bortovoy fields during the course of 2020

·    Feasibility study on East Bortovoy continued throughout 2019 and into 2020

Well operations and technical analysis have now been completed and the project has been successfully reviewed by an independent technical consulting firm

Project final investment decision is subject to financing

Lea Verny, Independent Non-executive Chairman, commented:

“2019 was a challenging year operationally but we expect to be able to sustainably reverse the declining production profile on the West Bortovoy fields during the course of 2020 with the two new standalone vertical wells drilled on the Zhdanovskoye field. On East Bortovoy, a project final investment decision is subject to successful negotiations of a financing package including agreeing binding terms for project finance from major Russian banks and other funding to support the project finance. Management remains in discussions with prospective providers of such finance and we will provide further updates when appropriate.

 

I would like to commend all the staff of our operating company, Diall Alliance, on the continued safe and efficient operation of the Western Gas Plant and our drilling activities, particularly in light of the challenges resulting from the COVID-19 global pandemic.”

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