Urals Energy Plc Regulatory News (UEN)

16 May 2006 16:41

Urals Energy Public Company Limited16 May 2006 Urals Energy Public Company Limited Proposed Equity Raising of a Minimum of $180 million Increased 2006 and 2007 Production Targets Operational Update Urals Energy ("Urals Energy"or the "Company") (LSE: UEN), a leading independentexploration and production company with operations in Russia which was admittedto trading on AIM in August 2005, announces a proposed equity raising intendedto raise a minimum of $180 million in connection with the Dulisma acquisitionand an operational update with increased 2006 and 2007 production targets. Proposed Equity Raising On 18 April 2006, Urals Energy announced the signing of a definitive Sale andPurchase Agreement for the $148 million acquisition of the Dulisminskoye Fieldtogether with the LTK transport facilities ("Dulisma"). The Company alsoannounced that it expected new equity to be the principal funding source for theacquisition and associated initial development program. Urals Energy intends to raise a minimum of $180 million to meet this fundingrequirement and related obligations. The equity raising will be effected througha private placement of new shares to institutional investors (the "Placement")to be arranged by Morgan Stanley Securities Limited. As previously announced, Urals Energy has made an initial $50 million payment inaccordance with the terms of the Dulisma Sale and Purchase Agreement. Financingfor this payment was provided by Morgan Stanley & Co. International Limited. Thebalance of the consideration is due on closing of the acquisition, estimated forJune 2006. The Placement is intended to enable the Company to complete theacquisition of Dulisma, fund the initial development program for theDulisminskoye Field, and to discharge its obligations to Morgan Stanley & Co.International Limited associated with the financing of the initial $50 millionpayment and certain associated costs. Urals Energy's independent reservoir engineers DeGolyer and MacNaughton ("D&M")estimated the Dulisminskoye Field will increase the Company's proved andprobable reserves to 225 million barrels and proved, possible and probablereserves to 369 million barrels and 1.8 trillion cubic feet of gas. The Companyestimates that its initial development investment will increase the field'sproduction to 12,000 bopd by the end of 2008. Urals Energy assumed operationaland financial control of the Field on 18 April 2006. Operational Update Increased Production Targets: Due to a combination of successful 2006 development drilling and the impact ofthe two recent acquisitions of Dulisma and Dinyu, the Company is revising upwardits 2006 and 2007 production targets from those communicated previously. Successful development drilling at Petrosakh and the initial impact of the OOODinyu acquisition boosted production at the end of 2005 to 9,000 bopd from 4,272bopd in the first half of 2005. As a result, Urals Energy's initial target ofachieving 10,500 bopd by the end of 2007 was revised and brought forward to12,000 bopd by the end of 2006 and 14,000 bopd by the end of 2007. Following the acquisition of Dulisma, the Company will be producingapproximately 10,000 bopd. With a 20 well development programme underway acrossall its assets and development of the Dulisma Field due to commence shortly,Urals Energy is further revising its production targets to a new target of13,000 bopd by the end of 2006 and 19,000 bopd by the end of 2007; more than 80%higher than its 2007 production target at the time of the IPO in August 2005. Production target Y/E 2006 Production target Y/E 2007 As at IPO - 10,500As at December 2005 12,000 14,000As at 16 May 2006, following Dulisma 13,000 19,000acquisition Development Programme: Urals Energy has previously announced a 2006 capital expenditure budget of $40million that includes drilling 20 development wells. Including the proposeddevelopment of the Dulisminskoye field, the 2006 capital budget has nowincreased to $66 million. The development programme is progressing according toplan across all areas. Sakhalin Island Development drilling onshore the Okruzhnoye Field is due to commence shortly,following the arrival of a mobile drilling rig. A total of three new developmentwells and three re-entries are planned. Management is now estimating a $1million per well drilling cost which represents approximately $1 million perwell less than the cost of the first two development wells drilled in 2005. Komi Republic and Timan Pechora In Komi, development drilling continues at Dinyu and the Company is on track todrill nine development wells. At Arcticneft, the Company is preparing for a four well development drillingprogram which is due to commence in the third quarter of the year At Urals Nord, preparations including rig mobilisation procedures have begunwith drilling of the potentially high impact Nadeshdinsky prospect in TimanPechora expected to commence in late 2006. Udmurtia The four well 2006 development programme at Chepetskoye NGDU continues inaccordance with the Company's plans. Results of East Okruzhnoye No. 1 On 2 March 2006 the Company announced that the East Okruzhnoye No. 1 explorationwell reached its total measured depth of 2,848 meters and that the logsindicated two potential oil bearing formations with low permeability. Welltesting was completed on 10 May 2006 and five different intervals within theBorsky and Pileng formations were evaluated. During testing the formationsfailed to produce commercial volumes of oil or gas. Further analysis of a recently conducted vertical seismic profile (VSP), logsand seismic re-interpretation indicate that the well location is probably low onstructure. An intensive 3D seismic re-processing and re-interpretation programon the area is now underway and the Company is currently planning to resumeoffshore drilling in summer 2007. As previously announced, the Company hassecured an extension of the Pogranichnoye Licence, which provides Urals Energyfive additional years to properly evaluate the prospectivity of this licensearea. First Quarter Crude Oil and Refined Products Selling and Netback Prices The Company announces the results of first quarter 2006 crude oil and refinedproducts selling prices. For the period, average volume-weighted gross sellingprices for domestic and refined products were $41.30 per barrel and for exportswere $57.70 per barrel. Netback prices after transportation, export taxes andVAT realized for the same period were $29.90 per barrel for domestic and refinedproducts and $30.40 per barrel for exports. Completion of Syndication of the US$100 million loan facility with BNP ParibasThe Company also announces that it has completed the syndication of a five yearUS$100 million loan facility underwritten by BNP Paribas with whom Urals Energyhas a long standing relationship. The ten banks forming the Urals Energysyndicate are BCEN, Commerzbank, HVB, Moscow Narodny, Natexis, Standard Bank,West LB, NordKap, Raiffeisen and Societe Generale. William R. Thomas, Chief Executive Officer, commented:"Urals Energy has successfully built up a very material production base ofalmost 10,000 bopd within a short space of time. This has been achieved throughsuccessful acquisitions and an aggressive development programme. We look forward to our next phase of growth which we expect will see productionalmost double by the end of 2007." 16 May 2006 Pelham PRJames Henderson/ Gavin Davis - 020 7743 6673 NOTES: 1. Background to Urals Energy Urals Energy is an independent exploration and production (E&P) company with its principal assets and operations in Sakhalin Island, Timan Pechora (including areas in the Nenets Autonomous Okrug and Komi Republic) and the Republic of Udmurtia, Russia. The Company was admitted to trading on AIM in August 2005. The Group is focused on the integration of its five recently acquired subsidiaries and the exploitation of their assets. In addition, it is actively seeking to continue to grow and diversify its reserve and production portfolio through exploration activities and the acquisition of additional E&P companies or assets by taking advantage of the ongoing rationalisation of E&P assets in Russia. The Group's six E&P subsidiaries have Proved and Probable reserves of 116 million barrels of oil equivalent (MMBOE) and produced approximately 6,237 barrels of oil per day (BOPD) during the second six months of 2005. The Group's two largest subsidiaries by reserves and production, Petrosakh and Arcticneft, own and operate refining assets with a total refining capacity of 5,300 BOPD, which provide the Group with the ability to maximise the value of the oil produced by choosing between the sale of oil or of refined products depending on market conditions, tax considerations and other factors. 2. In connection with the Placement, it is anticipated that Morgan Stanley Securities Limited, as stabilising manager, or any of its agents, may (but will be under no obligation to), to the extent permitted by applicable law, over-allot and effect other transactions with a view to supporting the market price of the ordinary shares of the Company at a level higher than that which might otherwise prevail in the open market. Morgan Stanley Securities Limited is not required to enter into such transactions and such transactions may be effected on any stock market, over-the-counter market or otherwise. Such stabilising measures, if commenced, may be discontinued at any time. Save as required by law or regulation, neither Morgan Stanley Securities Limited nor any of its agents intends to disclose the extent of any over-allotments and/or stabilisation transactions under the Placement. 3. In connection with the Placement, it is anticipated that Morgan Stanley Securities Limited, as stabilising manager, will enter into over-allotment arrangements with the Company, pursuant to which Morgan Stanley Securities Limited, or any of its agents, may subscribe, or procure subscribers for, additional ordinary shares of the Company up to a maximum of 10 per cent. of the total number of ordinary shares comprised in the Placement at the placing price. The over-allotment arrangements will be exercisable in whole or in part, upon notice by Morgan Stanley Securities Limited, at any time during the period commencing on the date of announcement of the placing price and ending on the 30th day after the date of allotment of the ordinary shares comprised in the Placement. Any ordinary shares made available pursuant to the over-allotment arrangements will rank pari passu with all other ordinary shares of the Company and will form a single class for all purposes with the other ordinary shares. This announcement is for information purposes only and does not constitute anoffer or an invitation to acquire or dispose of any securities of Urals EnergyPublic Company Limited. Morgan Stanley Securities Limited and its affiliatesare acting for the Company only in connection with the matters referred to inthis press release, and no one else, and will not be responsible to anyone otherthan the Company for providing the protections offered to their clients nor forproviding advice in relation to the matters referred to herein. This information is provided by RNS The company news service from the London Stock Exchange