Shareholder Q&A 2013

  • Shareholder Q&A - February 2013

    Q. There are a number of holders that are not happy with the current board but the majority are supportive of them but need to know that Urals Energy is now a growth story and how the board intends to put that strategy in place?

    A. There are plans to drill two new wells at Petrosakh and one new well at ArcticNeft in 2013. At ArcticNeft the Company has entered into a contract to carry out a passive seismic study for the identification of potential hydrocarbon pools with Geodynamics Worldwide Srl. The technology will be utilised with the aim of increasing the efficiency of drilling via detailed interpretation of hydrocarbons within a specific area.  Possible additional wells maybe drilled in the future, based on success of the planned 2013 drilling programme.  The aim of further drilling is to increase production at both sites.

    In addition and as mentioned in the update on strategy and trading announcement on 7 February 2013, the Board are also looking at ways of utilising the upside potential in downstream and marketing opportunities at the Company's existing assets; and, evaluating possible acquisitions and joint venture targets.

    Q. I was dismayed to read that having spent so much time and effort in clearing debt the Company is now talking about acquisitions and potentially increasing the equity. Surely in the short term the Company should be focusing on exploiting the existing resources and generating positive cash flows to improve the share price and strengthen the current assets on the balance sheet?

    A. The management team are currently working on maximising the existing assets and are looking to increase output through the 2013 drilling programme, which in turn will have a positive effect on cash flow.

    Whilst there are currently no specific targets for an acquisition, if and when targets are found, the Board will look to structure the deal to leverage off its existing assets so far as possible (although there can be no guarantee on whether any acquisitions will in fact be completed and how any such acquisitions will be funded).

    Q. The market capitalisation of the Company is low compared to others in the sector, how does the Board propose to increase this to give shareholders true value?

    A. The Board shares the frustration of its shareholders and there are of course a number of macro economic factors that effect the market capitalisation of the Company. The Board are committed to making sure the market understands the turnaround story and that now the legacy issues are over the foundations for growth are in place. The Board has announced its 2013 drilling programme and looks forward to updating the market on the success of this later in the year. In time the Board fully expects a full re-rating of the business.

    Q. We would like to know why the recent independent valuation of Petrosakh asset was never made public?

    A. As part of the agreement with Petraco, following the repayment by Urals Energy after the Taas loan assignment, Petraco was required to release one of Company's assets.  Although one was formally required, the Urals Energy Board convinced Petraco to waive the valuations requirement resulting in a significant cost saving to the Company. 

    Q. Are the present management invested in the company, if so at what price?

    A. Andrew Shrager, Non Executive Chairman, currently holds 0.0207% of the issued shared capital. 75,000 of his shares were purchased at the float price of £2.40 and on the 24th of January 2013, 450,000 shares were bought at 6.5p per share.

    Alexei Maximov, Chief Executive, currently holds 1.92% of the issued share capital, 439,000 shares were bought at the float price of £2.40, but he has been receiving shares since 2011 as granted stock options since joining the Board in 2009.

    Leonid Y. Dyachenko, Executive Director, currently holds 2.33% of the issued share capital, the majority of his stock was bought at the float price of £2.40, but he has been receiving shares since 2006 as granted stock options.

    Aleksey V. Ogarev, Executive Director, currently holds 1.40% of the issued share capital, the majority of his stock was bought at the float price of £2.40, but he has been receiving shares since 2006 as granted stock options.

  • Shareholder Q&A - March 2013

    Q. What is happening to pursue the arbitration award against our former Director?

    A. Urals Energy is currently considering its options in relation to the arbitration. As stated in the operational update dated 7 February 2013, the Company has formally demanded payment from Mr Rovneiko and is committed to using all appropriate means to collect the outstanding amount.

    Q. Why is our asset still frozen with such a small debt and apparent goodwill with creditor?

    A. No assets are currently "frozen" by Petraco, rather Articneft is held as security for the repayment of the interest to Petraco (approximately US$3.0m) which is to be repaid before the end of 2013. This is a term of the loan restructuring agreement reached with Petraco in 2010 and since the release of the pledge is linked to the full discharge of all debts due to Petraco, there is no obligation for Petraco to release the pledge earlier than contractually required. Petraco holding Articneft as a security pledge does not effect Urals Energy's production or sales at Articneft and the early repayment of this interest would divert cash flow away from other areas.

    Q. Do you feel that a company with a market cap of $18.6 million warrants eight directors on the board and can endure the salaries that these directorships attract? Can you please explain why Mrs Srenger is still on the BODs even though we have all but paid off the Petraco debt? Surely it does not make sense to have one of your biggest customer on your board, privy to market sensitive information, when debt has been all but cleared?

    A. There are seven directors currently on the Board and the recent appoints received overwhelming support from shareholders at the recent AGM. Not all are executive directors of the Company and there are currently four non-executive directors, which is good from a corporate governance prospective. In addition, each brings a useful set of unique skills to the Company which over time will add value.

    In relation to Mrs Srenger, the loan restructuring agreement entitles Petraco to have a representative on the Board until the interest has been paid. That said, Urals Energy believes that having its biggest customer on the Board should be seen as a positive since it keeps the relationship between the two companies copasetic. Mrs Srenger is excluded from all discussion regarding business with Petraco and any potential conflicts of interest that may arise. 

    Q. When does the management expect the company to become profitable?

    A. The management cannot comment on profitability to the market, but notes that past and future profitability forecasts can be found in the latest research note produced by Allenby Capital.

    This note can be accessed here: http://www.allenbycapital.com/research/urals.html

    Q. Does Urals Energy have money in Cypriot banks, and will it be affected by the taxes imposed on money held in Cypriot banks?

    A. Urals Energy does not hold any cash in Cyprus so will not be affected by the tax levy's currently being imposed.

  • Shareholder Q&A - April 2013

    Q. On 1 June 2012 and 7 June 2012 the Company had announced that preparatory work had begun on Well #53, located in the Petrosakh Field. What is the status of this well?

    A. Urals has completed preparatory work on Well #53 which was successful; the next phase of the development drilling campaign is scheduled to commence in the summer. 

    Q. With the share price sitting at a post suspension low, has the Company considered a share buy back scheme to add shareholder value?

    A. The Board does not consider that a share buy back scheme would be a good use of Urals' funds at the present time. Instead, the Board consider that Urals' cash is better utilised on further drilling and maximising its current asset base.

    Q. Would the Company consider hedging its oil sales from Arcticneft?

    A. Arcticneft currently produces 30,000 tonnes of oil which is relatively low volume to consider hedging at the moment; this would be considered if the volumes were to increase dramatically. However, Urals is presently contractually signed with Petraco for sales with the selling price tied to market rates.

    Q. How does Urals Energy plan to reduce its overhead to increase its average free cashflow per barrel?

    A. As reported in the 2012 half year results, Urals has successfully finished the cost reduction program, which resulted in 21% and 12% decrease in selling, general and administrative expenses and cost of sales respectively.

    Q. Can you please advise the winter window in which you are able to mobilise and relocate well and drilling equipment on Kolguev Island. Is the location of your well-pads dependant upon winter/ ice roads in muskeg areas?

    A. Urals is one of the most northern producers in the world with its work on Kolguev Island. The project is well connected by roads and is not dependent on winter conditions for internal relocation of equipment. The well-pads are connected by normal roads on the island which can be used all year round; in addition any new well-pads will be located on these roads too.

  • Shareholder Q&A - May 2013

    Q. Has the M 8.2 earthquake in the Sea of Okhotsk on May 24 2013 effected operations at Sakhalin?

    A. Urals Energy confirms that the earthquake has not interrupted or effected operations at Sakhalin. Work at the project continues as normal. 

    Q. When will Urals Energy publish its financial results for the year ended 31 December 2012?

    A. In accordance with the AIM Rules Urals Energy has until the end of June to publish its results for the year ended 30 December 2012.

    Q. What is Urals Energy's thought on the current share price of the Company?

    A. The Board shares the frustration of its shareholders and there are of course a number of economic and bureaucratic factors that effect the share price of the Company. The management team are currently working on maximising the existing assets, and are looking to increase output through the 2013 drilling programme and will update the market on the success of this later in the year. 

    Q. Is there an update on the passive seismic study at Arcticneft; has it started and when can we expect results?

    A. The Company entered into a contract to carry out a passive seismic study for the identification of potential hydrocarbon pools with Geodynamics Worldwide Srl. The technology will be utilised with the aim of increasing the efficiency of drilling via detailed interpretation of hydrocarbons within a specific area. The results are expected to be finalised by Autumn 2013.

    Q. What is the current status of Well #51 at Petrosakh, on the eastern coast of Sakhalin Island? Has Urals Energy considered and evaluated recommendations from several respected oil service companies?

    A. The Board of Urals Energy took the strategic decision to temporarily put Well #51 at Petrosakh on conservation due to difficult drilling conditions. Currently, additional work is not planned for the foreseeable future and may be linked to successful work on other wells. The Company will update the market more fully in our Full Year Results in the very near future.

  • Shareholder Q&A - June 2013

    Q. With the recent short term loan agreed will you be releasing information as drilling progress is made or only when an actual flow rate has been confirmed?

    A. Information will be released once drilling is finished and actual flow rate has been confirmed. 

    Q. Why is the loan amount £7m?

    A. This is the amount management assessed to be the probable cost of Urals' immediate drilling programme and general working capital financing requirements.

    Q. When will the 2012 Annual Report including Directors' statement be added to the website?

    A. The 2012 Annual Report has been available on the Urals Energy website since the 6 June 2013 and can be found on the Annual & Interim Reports page:

    Annual & Interim Reports

    For ease of access a new dedicated link to the 2012 Annual Report has been added to the news section of the website.

  • Shareholder Q&A - July 2013

    Q. Could I please ask why can the board not give regular progress reports on the 2013 drilling plan announced, why only contact on flow rate confirmation?

    A. Urals considers that it is more appropriate to update shareholders following the achievement of key milestones in its drilling plan since this will provide them with a more meaningful appreciation of progress than would otherwise be achieved. It would be neither appropriate nor helpful to shareholders to make a regulatory announcement of every minor development, instead Urals makes announcements at appropriate times in accordance with the AIM Rules. 

    Q. Why has the house broker Allenby Capital not issued a new broker note since the last set of final results?

    A. A detailed research note on Urals Energy was issued on Wednesday 24 July 2013 and this can be viewed at the URL listed below:

    www.allenbycapital.com/research/uralsenergy240713.pdf 

    Q. What options are the BOD now considering for the recovery of monies owed to the company by Mr Rovneiko, or have the BOD decided to just give up on this?

    A. As previously announced and included in this Q&A forum, Urals Energy is currently considering all available options in relation to the arbitration but it would be inappropriate to comment on any one of those options over the others.

Shareholder Q&A - October 2013 relating to the EGM (PDF)

Shareholder Q&A - November 2013 (PDF)

 

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