2012 Interims

Volga Gas plc
INTERIM RESULTS
2012
Mikhail Ivanov, CEO
Tony Alves, CFO
DISCLAIMER
This presentation is for information only and does not constitute an offer or invitation for the sale or purchase of
securities. Any information or documentation provided as part of the presentation is confidential and is intended
solely for use during the presentation and as a personal record thereafter. Any information or documentation
provided as part of the presentation may not be reproduced or circulated or used for any other purpose.
In particular, no information provided during the presentation may be taken, transmitted or distributed, directly
or indirectly, in or into the United States of America, its territories or possessions or passed to US Persons (as
defined in Regulation S of the United States Securities Act of 1933 (as amended)), United States residents,
corporations or other entities, save pursuant to an applicable exemption. Distribution of this information in the
United States may constitute a violation of Unites States securities law.
Certain forward-looking statements may be contained in the Presentation Materials. Although the Company
believes that the expectations reflected in such forward-looking statements are reasonable, no assurance can
be given that such expectations will prove to be accurate. Accordingly, results could differ from those projected
as a result of, among other factors, changes in economic and market conditions, changes in the regulatory
environment and other business and operational risks.
The information provided during the presentation has not been independently verified. No representation or
warranty, express or implied, is given as to the accuracy, fairness or completeness of the information or
opinions contained in the presentation and no liability is accepted for any such information or opinions (which
should not be relied upon) or for any loss howsoever arising, directly or indirectly, from any use of the
information provided.
1
OVERVIEW
2
Key share data
Major shareholders (as disclosed)
Baring Vostok Nominees (Baring Vostok PEF III) ...................................... 48.9%
Dehus Dolmen Nominees (Baring Vostok PEF IV) ...................................... 9.8%
BNP Paribas Investment Partners ………………………….……………………4.0%
Blackrock ………………………………………………………………………….. 3.0%
Management/Directors …………………………………………………..………. 2.2%
Debt – $10.0 million (non-interest bearing) as at 30 June 2012
Cash – $13.3 million as at 30 June 2012
VGAS share price chart
VGAS share price, UK p:
min 37 | max 569 | at 18/09/12 93p
Shares in issue: 81,017,800
Market capitalisation: £75 m
www.volgagas.com
Source: London Stock Exchange
Where we operate
Dobrinskoye
Urozhainoye-2
Dobrinskoye
Source: Incotec
Urozhainoye-2
Source: Incotec
Interim financial highlights

Revenues of US$13.3 million (H1 2011 US$14.0 million).

EBITDA of US$4.3 million (H1 2011 US$5.3 million).

Loss of US$5.6 million (H1 2011: net profit of US$3.0 million)


After exploration expense of US$7.4 million (H1 2011: US$ 21k)
Net cash flow from operations of US$2.8 million (H1 2011 US$3.8 million).

Net of US$1.15 million loan repayment by offset of gas sales (H1 2011: US$ 1.7
million)

US$13.3 million in cash at 30 June 2012 (US$10.1 million at 31 December 2011).

US$10.0 million of bank debt at 30 June 2012 (US$4.2 million owed to Trans Nafta as
at 31 December 2011)
5
Operational highlights
UZEN

Average production during H1 2012 was 932 bopd (H1 2011: 1,150 bopd) with market and
weather-related disruption during March and April 2012

Production between 1 July and 31 August has averaged 1,300 bopd, with a strong performance in
August

Uzen still producing from 4 wells – sidetrack on Uz #9 in January was unsuccessful
VM

Successful workover of well #30.

Three wells tied-in to the gas plant, all capable of full time production

First sale of VM gas made in August 2012 (small volume).
DOBRINSKOYE

Production solely from well #26, constrained during April-June.

Sidetrack on Dob. Well #22 was drilled in H1 2012, completed in August.
GAS PLANT UPGRADE

Upgrade project close to completion. US$5.1 million total cost to date – in line with budget.
UROZHAINOYE 2 LICENCE

Yuzhno-Romanovskaya-1 exploration well was unsuccessful. US$7.4 million write off

Acquired Sobolevskaya oil discovery well for workover during H2 2012. Potential oil production.
6
Monthly revenues and cash margins ($k, Jan 2010-Aug 2012)
Monthly revenue and cash margins (US$ 000)
Monthly revenue by product (US$ 000)
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OIL PRODUCTION
UZENSKOYE OIL FIELD
8
Shallow supra-salt production
•
Eight wells tested oil and five placed on production
•
Light (45 API) sweet crude oil. Water cut < 1%. High
permeability reservoir (0,6 Darcy)
•
C1 initial recoverable reserves of 8.9 mmbbl as at 1 January
2012
•
Field facilities constructed in 2008, upgraded in 2009 and full
time production commenced in October 2008
•
Produced to date ~ 1.3 mmbbl
•
Average production H1 12: 932 bopd (H1 11 1,147 bopd)
•
July/August 2012 average 1,300 bopd
•
3D seismic was conducted and a number of leads were
identified
Uzenskoye field : performance and economics
2500
Uzenskoye field: sales price comparison (US$/bbl)
Uzenskoye field: daily oil production (barrels per day)
Sales Price (ex-VAT)
140
Urals minus export tax
2000
Urals
120
Net Revenue post MET
100
1500
80
1000
60
40
500
20
0
Jan-09
Jul-09
Jan-10
Jul-10
Jan-11
Jul-11
Jan-12
0
Jan-09
Jul-12
May-09
Sep-09
Jan-10
May-10
Uzenskoye oil sale prices
RUB/tonne (cum VAT)
16000
14000
12000
10000
8000
6000
4000
2000
0
Jan-09
Jul-09
Jan-10
Jul-10
Jan-11
Jul-11
Jan-12
Jul-12
Sep-10
Jan-11
May-11
Sep-11
Jan-12
May-12
Sep-12
GAS/CONDENSATE
PRODUCTION
&
DEVELOPMENT
11
Dobrinskoye field – acquired in April 2011

GND acquisition included the Dobrinskoye gas field and the Gas Processing Unit, both at 100%
interest

Dobrinskoye C1 reserves of 31 bcf of gas and 1.4 million barrels of condensate

H1 2012 production averaged 3.5 mmcf/d (H1 2011 3.8 mmcf/d) of gas and 327 bpd (H1 2011: 623 bpd) of
condensate

Producing from a single well (#26) while the other well (#22 was being sidetracked)

Well # 22 sidetrack recently completed and to be put on production shortly
Dobrinskoye gas plant
GPU is to be used to process gas from the VM field

Originally constructed purely for the Dobrinskoye field, the GPU has been upgraded to process the gas from VM and
to increase its throughput capacity

Upgrade project is largely completed and VM gas is to start flowing imminently

Capital cost of upgrade to date is ~US$5.5m

Remaining works to establish 35 mmcf/d capacity is increased condensate storage and upgrade to safety flare
systems.

GPU is currently certified to operate at 250 mcm/d (9 mmcf/d)
Vostochny-Makarovskoye : gas/condensate field development
Location

Located in Zhirnovsk district of the Volgograd oblast
in the northern part of the Volga highlands

Well developed local infrastructure with good road
access and connections into regional oil and gas
pipelines

The VM licence area lies approximately 5km from
the gas processing unit (“GPU”) on the Dobrinskoye
gas field
Development status

Three production wells drilled, tested and ready for
production

Test production commenced in July 2010 on initial
wells

Re-completed and tested #30, a suspended
exploration well, during H1 2012

Expected production capacity 15-20 mmcf/d and
plan to start full time production imminently
EXPLORATION
15
Karpenskiy, Pre-Caspian and Urozhainoye-2 Licence Areas
UROZHAINOYE-2
LICENCE
YUZHNY ERSHOVSKOYE
•Sobolevskaya #1 well –
workover of oil discovery
seeking to re-establish
production
• Grafovskaya#1 sub-salt
exploration well drilled and
tested.
• Non-commercial hydrocarbon
shows
YUZHNY MOKROUSOVSKOYE
• New supra-salt and intra-salt
prospects evaluated
• Total C3 Prospective
Resources of 187 mmboe
• Well planned in 2011
PRE-CASPIAN LICENCE
• 80 sq km of 3-D seismic
• Significant sub-salt
exploration targets
• Shallow prospects
identified
• Plan to drill Mirnaya #1
exploration well in Q4
2012
UZENSKOYE OIL FIELDS
• Discovered in 2007/8
• Developed 2008/9
• Producing c1,350 bopd
Source: Wood Mackenzie
16
OUTLOOK & SUMMARY
17
Outlook




Continued steady oil production at Uzenskoye

Production has averaged 1,300 bopd in July and August 2012

Expect to average 1,100 bopd in H2

No further development planned in 2012
Vostochny Makarovskoye/Dobrinskoye

Full time production imminent on completion of upgrade of gas processing unit

VM wells and infrastructure ready to start flowing

GPU throughput temporarily constrained to 250 mcm/d (9 mmcf/d)
Capital expenditure programme

H2 2012 capex of $5.0m – $7.0m

Conclusion of gas plant upgrade

Exploration well on Pre-Caspian licence
Finance


$10m loan facility from Raiffeisen
Acquisition strategy