Urals Energy FY losses narrow but revenue falls

28th Jun 2016 12:54

(ShareCast News) - Full-year revenues at oil company Urals Energy fell despite an increase in production as volatility in oil prices and foreign exchange markets took their toll.Urals Energy, which has operations in Russia, said gross profit after excise, export duties and value added tax (VAT) fell 18% for the year ending 31 December 2015 to $7.1m. Gross revenue before excise and export duties fell 46% to $31.4m.The AIM listed company's earnings before interest, tax, depreciation and amortisation (EBITDA) were down 5% to $7.7m, but net profit before and foreign exchange effects increased by 81% to $2.9m.The loss for the year narrowed to $4.1m from $13.7m.Production at Urals Energy's two sites, Arcticneft and Petrosakh, increased by 2% to 675,318 barrels.Current daily production at Arcticneft was 676 barrels per day compared with an average of 695 barrels per day for the twelve months ended 31 December 2015. At Petrosakh it is currently 1,317 barrels per day, 14% higher than an average of 1,155 barrels per day for the twelve months prior.In 2015 the company completed the drilling of two wells and started to drill a third well at Petrosakh which maintained stable production. Last year, it also re-entered existing wells in Arcticneft which resulted in a 5.3% increase in yearly production.Urals Energy acquired RK-Oil and BVN Oil in November 2015 which held licenses in the Komi region, north-west of Russia. The licenses indicated oil reserves of 2m tons, equivalent to 14.9m barrels and 4.6m tons, equivalent 34.3m barrels.Net loss before income tax fell 73% to $4.3m in 2015. The company said this was due to foreign exchange rate movements during 2015 and 2014. Without the foreign currency losses of $7.2m in 2015 and $17.7m in 2014, Urals Energy said its profit before income tax for the year would have increased in 2015 by $1.3m. A significant portion of foreign currency losses relate to inter-company loans denominated in US dollars.Operating profit increased by 188% to $3.37m for the year. The company said cost management in the period allowed the it to decrease the operating costs and selling, general and administrative expenses costs in the Russian Rouble equivalent by 8.2% and 5%, in addition to a decrease of 70% in US dollar denominated general and administrative costs.In June, the company was awarded a 25-year exploration and development licence for the South Dagi oil field on Sakhalin Island, following an auction by the Russian State Authorities with Russian State Registered reserves at around 17.7 million barrelsChairman Andrew Shrager said: "Our results show that the company has weathered a truly extraordinary period of volatility in the oil price and the foreign exchange markets. We have been able to maintain production, reduce costs substantially, particularly costs denominated in US dollars, and moderate the fall in our cash generation which can be seen in the modest fall in EBITDA."Our strategy continues to be to use our cash generation to invest in workovers to maintain production and to acquire licences. We now have a substantial portfolio of additional proven and probable reserves that can be developed as conditions improve."There has been little or no competition in acquiring licences as other companies tend to be either highly leveraged or not generating cash. We will continue to be cautious in 2016, maintain our production levels and seek potential acquisitions."Urals Energy's shares fell 9.33% to 1.70p at 1521 BST.