Volga Gas Cites Positive Operating Cash Flow for 1H

Volga Gas, the oil and gas exploration and production group operating in the Volga Region of European Russia, has announced its half yearly results for the six months ended June 30, 2009.


  • First period of positive EBITDA and positive operating cash flow.
  • Revenues of $3.4 million in H1 2009 (H1 2008: $0.1 million).
  • $14.6 million in cash as at June 30, 2009 and no debt.
  • Equity Placing raised a further US$27m ($26.6m net of expenses) and completed on July 7, 2009.

Results of Operations

For the six months ended 30 June 2009 the Group recorded turnover of US $ 3.4 million (H1 2008: US $ 0.1 million) and an operating loss of US $0.66 million (H1 2008: loss of US $ 6.27 million). Included in the operating loss for H1 2009 were exploration expenses of US $0.48 million (H1 2008: US $3.92 million) and depletion and depreciation of US$ 0.35 million (H1 2008: $0.02 million). EBITDA, calculated as operating income before exploration expense, depletion and depreciation was positive US $0.17 million (H1 2008: negative $2.33 million) The loss after tax for the six months ending June 30, 2009 was US$ 0.63 million (1H 2008: US $5.05 million).

All oil sales are made at the field facilities and are sold to domestic customers. Net oil sales prices achieved during the six months to June 30,  2009 increased steadily through the period from US $10.16 per barrel in January 2009 to US $26.43 per barrel in June 2009, while the average realization for the six months to June 30, 2009 was US $18.15 per barrel. For the six months to June 30, 2009, the average rate of Mineral Extraction Tax was US $7.74 per barrel while the production costs were US $0.98 per barrel and the unit Depletion and Depreciation charge was $1.84 per barrel. Comparative figures for 1H 2008 are not meaningful given the immaterial level of production during 1H 2008.

Sales are recorded net of VAT, however VAT receipts on sales are being retained while the Group recovers accumulated VAT on past capital expenditure. The remaining balance of unrecovered VAT is recorded on the Group Balance Sheet as Other non-current assets and as at June 30, 2009 amounted to US $ 7.1 million (December 31, 2008 US $ 7.2 million).

Capital Expenditure

For the six months ended June 30, 2009, the Group incurred capital expenditures of US $ 9.5 million (H1 2008: US $ 7.9 million). The majority of capital expenditure in 2009 was incurred in supra-salt development and exploration drilling in the KLA and on the VM development with the remainder on 3-D seismic in the Pre-Caspian License area.

Cash Position

The Group's net cash balances at June 30, 2009 were US $14.6 million (December 31, 2008: US $23.1 million), with no debt. The decrease in cash is primarily due to investment in oil and gas tangible and intangible assets, the expensing of certain oil and gas exploration and evaluation activities partly offset by net income from oil production and positive working capital movements. On July 7, 2009, the Company completed a Placing of new Ordinary Shares to raise additional net funds of US $26.6 million.