Volga Gas reports bumper 2016 results

Russia-focussed oil and gas exploration and production group Volga Gas announced its preliminary unaudited annual results for the year ended 31 December on Tuesday.

The AIM-traded firm said that during 2016, its operational and financial performance dramatically improved in comparison with 2015, nearly doubling its oil, gas and condensate production and revenues while achieving a return to profitability and a significant strengthening of its financial position.

While the recovery in oil prices and the Russian rouble during 2016 were clearly beneficial, the main driver was reportedly in the performance of the group's assets.

In addition, the commencement of exports of condensate enabled production to continue uninterrupted through the year.

The successful drilling on the Vostochny Makarovskoye field in 2015 and the workovers on the Uzen oil field early in 2016 allowed average production from the group's fields to rise by 99% to 6,507 barrels of oil equivalent per day, from 3,278 boepd in 2015, while in December 2016 total production averaged 8,060 boepd.

On the financial front, gross revenues were up 122% to $39.4m, and netback revenues after export taxes and transport costs were up 102% to $35.4m.

The company reported a ten-fold increase in EBITDA to $9.6m, and it swung to a profit before tax of $1.9m, from a loss of $4.6m in 2015, after abnormal operating expenses of $1.8m compared to $3.4m in the prior year.

Net cash flow from operations was $13m, from $1.2m.

Total cash, net of borrowings, rose to $15.8m at year-end, from $6.8m year-on-year, after utilising $4.6m for capital expenditure, compared to $8.7m in 2015.

Total borrowings, comprising bank debt, at 31 December were $3.9m, rising from nil year-on-year.

The company said it would resume distributions to shareholders with a total of $0.062 per share of dividends proposed.

“We have been really pleased with the sound performance of Volga Gas main producing assets in 2016 and with the solid improvements in the financial performance and position of the group,” said chief executive Andrey Zozulya.

“Management looks forward to delivering higher production in 2017 than in 2016 and to achieving our targets to improve the profitability and sustainability of our business for the longer term and to delivering growing returns for our shareholders.”

Zozulya said he remained excited about the group's assets and positive about the potential for growth, both in reserves and production from Volga’s licences.

“We will also continue to seek value accretive opportunities, beyond our existing licence areas, building a focused exploration and production business.”