News Column

Urals Energy PCL - Final Results

July 1, 2014

ENP Newswire - 01 July 2014

Release date- 27062014 - Urals Energy PCL (AIM: UEN), the independent exploration and production company with operations in Russia, is pleased to announce its audited financial results for the year ended 31 December 2013.

Operational highlights

Total production at Arcticneft reached 250,426 barrels (2012: 250,394 barrels).

Total production at Petrosakh reached 470,415 barrels (2012: 487,810 barrels).

Current daily production at Arcticneft is 680 BOPD - slightly lower than an average of 686 BOPD for the twelve months ended 31 December 2013.

Current daily production at Petrosakh is 1,168 BOPD compared with an average of 1,289 BOPD for the twelve months ended 31 December 2013.

In November 2013 the Company successfully completed the shipment of 198,537 bbls of crude oil from Arcticneft (2012: 231,594 bbls).

In November 2013 the Company received and reviewed the results of the Passive Seismic Spectroscopy and a separate Micro-Seismic survey, which had been carried out over a selected area in the Western block of Arcticneft. The results showed the possibility of increasing production at Arcticneft from the current horizons with limited capital and operational expenditure.

Financial highlights

In 2013 gross profit improved by 39% to US$12.4 million from US$8.9 million in 2012, and as a result, the Company achieved an operating profit of US$2.8 million for the period, compared with a US$0.1 million in 2012. Net loss of US$0.3 million in 2013 (2012: net profit of US$2.6 million) caused by exchange rate movements during both 2012 and 2013.

Without the foreign currency loss US$3.7 million in 2013 and the foreign currency gain of US$2.6 million in 2012, net profit for the year would have increased in 2013 by US$3.4 million.

EBITDA increased to US$ 10.5 million from US$ 7.7 million in 2012, an increase of 36%.

The Company continued to improve its net working capital position with positive net working capital on 31 December 2013 of US$2.0 million (2012: US$1.0 million negative working capital).

Successful implementation of cost reduction program in the previous periods and effective cost management in 2013 resulted in 8% decrease in cost of sales.

Significant improvement in net cash generated from operating activities allowed the Company to pay the outstanding interest amount of US$3.0 million to Petraco Oil Company Limited and finish 2013 with a net cash position of US$6.0 million (2012: net cash US$3.0 million).

Post-period end and outlook

The annual planned tanker shipment for export from Arcticneft to Petraco is expected in October / November 2014.

The Company has appointed a new Chief Geologist, who has undertaken reviews of both Petrosakh and Articneft. As a result, the Company believes that it will be possible to increase daily incremental production, after the successful implementation of this plan, by 6-7%, offsetting some of the decline in production last year.

At Articneft, the Company will commence a programme of re-entering existing wells which should allow better recovery at marginal incremental cost, instead of side tracking, which had been the Company's intention. Management in geological and production functions at both Petrosakh and Arcticneft will be reinforced with new hires, and all drilling activity will be contracted out to third party service providers, the selection of which is underway.

In May 2014 the Company entered into a secured short-term loan agreement with Petraco under which Petraco will advance the sum up to US$7.6 million. The proceeds of the Loan will be used to both progress its 2014 drilling plan and working capital financing.

During the 1st quarter of 2014 the Company performed a series of tests of catalytic equipment for potential instalment in Petrosakh. Preliminary results show that the equipment will allow an increase in the yield of certain light oil products from 20% to 60%. During the second part of the year the Company will evaluate offers of potential providers of equipment in order to make a final decision.

Recent works on well 112 at Petrosakh have been suspended due to prolonged and problematic drilling and unacceptable results to date. At present the near-term drilling program is being evaluated.

Before year-end the Company is expecting to issue a new reserve assessment report prepared by Miller and Lents, as well as a reserve report made in accordance with Russian standards.

The management has increased its activity in the M&A field and is evaluating a number of potential assets and licenses that may be of interest either in the form of a merger, acquisition, joint venture or a farm-out, and/or a preceding or unrelated divestiture of an existing asset.

Alexei Maximov, Chief Executive, commented: '2013 has been a challenging year for Urals Energy, even though the Company has successfully removed its legacy issues and entered a period of financial stability. The plans of the management were heavily disrupted by a hostile requisition of an EGM by Fire East and Alpcot and their backers, as well as the surfacing of an alleged 'debt repayment agreement' ('ADRA') believed by the Company to be concocted by Vyatcheslav Rovneiko in order to get away with not paying the London Court of International Arbitration award.

Both issues have taken their toll, in time and resources and required the full effort of the Board and management (in the latter part of 2013 and first quarter of 2014) in order to be resolved.

The Board received overwhelming support from its shareholders at the EGM, and the ill-driven attempt to take over the management of the Company with detrimental consequences to all the shareholders had been fended off.

The Board reiterates that it believes that the ADRA is a forgery, that the Company has no legal obligation whatsoever in this regard, and has initiated legal action and a criminal investigation of the ADRA and V. Rovneiko in Cyprus and Russia.

For the first time in many years the Company became debt free and was able to fully leverage its existing asset base. This enabled us to proceed with our plans to increase production at both of our assets and improve net backs at Petrosakh. We anticipate continued improvements in EBITDA which will allow us to consider farm-ins and acquisitions, as part of a controlled M & A strategy.

We are also pleased to have solidified our shareholder base and strengthened the Board with two new non-executive directors who are actively assisting management in pursuing new ways to grow the Company.'

The annual report and accounts for the year ended 31 December 2013 will today be posted to shareholders and will shortly be available from the Company's website in accordance with AIM Rule 20.


Urals Energy Public Company Limited

Alexei Maximov

Chief Executive Officer

Sergey Uzornikov

Chief Financial Officer

Tel: +7 495 795 0300

Allenby Capital Limited

Nick Naylor

Alex Price

Tel: +44 (0) 20 3328 5656

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Source: ENP Newswire

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