Volga Gas Posts Increased Revenues for '09

Volga Gas announced its annual results for the year ended December 31, 2009.

Operational Highlights

  • Development of the supra salt Uzenskaya oil field in the Karpenskiy License Area completed. Seven successful wells drilled, and drilling obligations have been fulfilled
  • Group production, all from the KLA, averaged 1,267 barrels of oil per day ("bopd"). Average sale price of $25.23 (2008: $25.18), increasing to $30.05 in 2H 2009
  • In the sub-salt Grafovskaya #1 well, a gross 300 meter oil and condensate column of low estimated permeability has been intersected at a depth of 4,000-4,300 meters. The potential reservoir and other deeper zones will be subject to further evaluation. The well has reached a depth of over 5,200 meters and drilling continues to explore deeper zones
  • First phase development drilling on Vostochny Makarovskoye ("VM") gas/condensate field completed. Two wells tested and are ready for production
  • Agreement to acquire a 75% interest in gas processing facilities for the VM field development signed in March 2010 and is moving towards completion
  • Combined Russian classification C1/C2 recoverable reserves of 68 million barrels of oil equivalent on Uzenskoye and VM

Financial Highlights

  • Revenues increased to $11.6 million (2008: $0.6 million); EBITDA profit of $3.0 million (2008: loss of $5.9 million); Profit before tax of $0.9 million (2008: loss of $10.1 million) after exploration expenses of $1.5 million (2008: $5.6 million)
  • Net cash inflow from operations in 2009 was $4.0 million (2008: outflow of $15.9 million)
  • Capital expenditure on exploration and development was $23.7 million (2008: $48.5 million)
  • Year end cash and bank deposits increased to $33.6 million (2008: $23.1 million) after net proceeds of a share placing of $26.6 million (2008: nil)

Current trading and outlook

  • Oil production since 1 January 2010 has averaged 1,163 bopd as unusually severe snow conditions caused disruptions to oil transportation by customers. Production capacity remains at 1,300 bopd and is expected to increase above 1,500 bopd after installation of water injection
  • Commencement of production from VM subject to completion of the gas plant acquisition and installation of additional facilities
  • Results from G-1 will be evaluated and the forward sub-salt exploration strategy will be established
  • Planned exploration/appraisal well in the Urozhainoye-2 license area in 2H 2010

Mikhail Ivanov, Chief Executive of Volga Gas commented, "2009 was an important year for Volga Gas. We have fulfilled the license commitments on our key Karpenskiy block and have achieved sustainable production that gives us positive operating cash flow. There is still much to accomplish, namely completion of the VM field development, evaluation of the G-1 well results and enhancement of our understanding of the sub-salt hydrocarbon resources in our license areas. We remain committed to delivering growing value to our shareholders."