17 Apr 2013 11:00
Ruspetro plc (RPO LN)
Annual General Meeting - Chief Executive Officer's Statement
London, 17 April 2013 - At today's AGM the Chief Executive Officer, Don Wolcott, opened the meeting with the following statement:
Welcome to Ruspetro's AGM. Thank you for coming today.
I would like to give you an overview of the past year and tell you how we intend to build value for our shareholders in the coming period.
Although I am disappointed that we did not meet our year-end production target last year, we did achieve a great deal. We created a business that efficiently develops, produces and sells hydrocarbons.
Let me touch on some of the key objectives we had set out for the year.
During the year, we increased the size of our team considerably in order to be able to gain the expertise and management capability necessary to triple our drilling program, build-out the required infrastructure, increase our production and improve our understanding of the field. We were able to bring key people into the Company with both international and local business backgrounds who were able to deliver on our fast paced rollout. They have roles and responsibilities throughout the business, in operations, in our subsurface department and in the finance, legal, human resources and HSE departments.
At the time of the IPO last year, the immediate challenge was to accelerate drilling activity in the western portion of the field. In 2011 there were more than 11 successful wells drilled in sequence underpinning the view this area held promise. With the existing rig, well locations were drilled to the west. At the same time a new rig was mobilized, on Pad 19, located directly on the eastern edge of the 2011 drilling area. New wells in this area were disappointing as the permeability was found to be tight and the reservoir more compartmentalized. The full extent of the compartmentalization was not fully understood until after seismic reprocessing results were delivered early this year.
However with this better understanding, we can now re-approach the area using drilling and completion technologies that are more appropriate for the geology and that will be more productive and efficient.
During 2012, we constructed the infrastructure and processing capacity necessary to sell up to 9,000 boepd of stabilised condensate and 15,000 boepd of crude oil. We put in place the necessary in-field power lines, pipelines, roads and pads to continue to expand production of both crude oil and condensate.
In the north of the field, we discovered 171 million boe of gas and condensate. The potential to commercialise this with available sales points has enabled us to develop a gas monetisation strategy.
Waterflooding - wells in the Pad 21 area are beginning to respond to the waterflood program initiated in 2012 with four conversions. We will be converting four more wells to water injectors this year to build on the success of this program. This is slowing the decline of our crude production and enhancing output significantly from the targeted producing wells.
One outstanding objective is to restructure our debt and extend its maturity. The Company is currently in discussions with Sberbank. Sberbank is our major creditor and we have a long and productive relationship with the bank and are therefore confident that we will reach a resolution in the near future.
Our plans for this year are focused on building shareholder value and closing the gap between market and fundamental value. The first step is to restructure our debt. This will give us time to continue our development. Secondly, we will monetise our gas by developing the processing plant and pipeline needed to sell the gas and the associated liquid petroleum gas products now being produced in the north of the field. This will also enhance the efficiency of our condensate production.
Commercialising the gas will give us a large increase in our revenues which will facilitate the third step to enable the development of our crude oil production at a drilling rate that will significantly accelerate output and build cash flows.
In line with this program, our drilling this year will focus on further characterizing the gas/condensate formation in the north of the field and, for crude oil, appraising the Pad 23 area to the west of the highly productive Pad 21. Waterflooding activities will continue to support our existing production by maintaining reservoir pressure and increasing recovery.
In conclusion, we gained valuable insights into the characteristics of the field in 2012, marking it out as a year of delineation for Ruspetro. Although there have been some disappointments, our better understanding of the field and our program as outlined here will enable us to capitalize on the field's vast potential. Proved reserves now stand at 234 million boe, a 35% increase from 2011 and probable reserves now stand at 1.6 billion boe, an increase of 17% in the same period.
The program we have embarked on will enable us to begin to close the significant gap between the current enterprise value of the Company and the fundamental value of the asset base. By executing this plan we intend to restore and create value for our shareholders.