LONDON (Alliance News) - Volga Gas PLC on Friday said production has continued to steadily rise since the start of the year and is running at a substantially higher rate than last year whilst the price it is paid for its oil and gas has also soared by around 50%.
The Russian producer said average production in the first five months of 2016 averaged 5,932 barrels of oil equivalent per day, more than double production a year earlier of only 2,669 barrels per day. Notably, production suffered from market disruptions and extended shut-ins last year which contributed to the lower level of extraction.
Production has continued to move in the right direction as the company was producing an average of 6,229 barrels of oil equivalent per day in May, 5.0% higher than the first five months of 2016 and 2.3 times higher than production in the first five months of 2014.
The main gas and condensate field, Vostochny Makarovskoye, was drilled in 2015 as it began connecting new wells to the processing plant. The three wells that have been drilled are currently producing enough gas to suffice the plant capacity of 750,000 cubic metres of gas per day, equal to 26.5 million standard cubic feet, but another two wells will eventually come online.
At the producing oilfield, Uzenskoye, workover operations have been conducted and expectations are for production to rise to over 650 barrels per day from the current 450 barrels per day.
The rise in oil prices since the middle of January has also had a significant impact on the price recieved by Bolga for its production, rising 50% between January and May alone.
Brent hit a low of only USD27 per barrel in the middle of January but has steadily risen to new yearly highs since then. On Friday Brent was trading at USD51 per barrel.
Volga is not paid those prices for its oil, but the price it does receive tracks international prices and is adjusted for export taxes and transport costs.
In January, Volga was only being paid USD16 per barrel but that soared to USD27 per barrel in May.
That, in turn, has significantly improved financial results in the first five months of 2015 compared to a year earlier.
"Mainly as a result of higher production rates and development of condensate exports which have enabled continuous production through periods of disrupted domestic markets, the group's revenue and earnings before interest, tax, depreciation and amortisation numbers in the first five months of 2016 are ahead of those experienced in the equivalent period in 2015," said Volga.
Volga also has fewer drilling commitments which has allowed capital expenditure to be reduced, and the company said its cash balance at the end of May had risen to USD8.8 million from USD6.7 million at the end of 2015, with zero debt on the balance sheet.
However, Volga is hoping to secure a new debt facility to provide additional flexibility to fund future development work.
Volga shares were untraded at 33.25 pence per share on Friday.
By Joshua Warner; joshuawarner@alliancenews.com; @JoshAlliance
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