2010 Share Comp - Write-ups

Company name : Urals Energy
Website : http://www.uralsenergy.com/
Share epic : UEN
Shares in issue : 179,648,549
Current price : 7p - 7.5p

Urals Energy Public Company Limited, a Cyprus-based holding company admitted to trading on the AIM, is an independent oil company with its operating assets located in Russia. Urals Energy’s main exploration and production operations are in Timan Pechora and on Sakhalin Island.

After a period of the shares being in suspension whilst it divested some of its assets to resolve debt issues (discharge of $630 million debt).

It is now positioned to recommence development programmes on two producing fields, Arcticneft and Petrosakh.

UEN’s Petrosakh asset is a vertically integrated oil complex, incorporating upstream, mid-stream and downstream activities. Acquired at the end of 2004, it has seen only maintenance and some development input from the firm, largely because UEN was concentrating money and effort on the newer acquisitions.

UEN acquired 97.2% the Petrosakh properties from an Alpha Group subsidiary (Alpha Eco) in Dec 2004 for a consideration of $45m. Production from the two reservoirs (the older (Miocene age) Borsky and the younger (Paleocene) Pileng reservoir) at Petrosakh’s onshore field, the Okruzhnoye, has fluctuated in the past between 2,000 and 5,000bopd. DeGolyer & MacNaughton Dec 07 study estimated total proved, probable, and recoverable OOIP (unrisked possible & probable) onshore reserves at Petrosakh could amount to almost double this 1P+2P +3P (74mmbls) estimation to about 130mmbbls.

UEN acquired 100% of the Arcticneft properties from Lukoil and an affiliate in July 2005. The final consideration, after a series of negotiations and settlements amounted to $38.5m.

Production comes from two of the three block delineated multiple small reservoirs on the Peshanoozerkoye Field and has fluctuated in the past round 1,300 to 1,500bopd. Current production amounts to ~950bopd, while field life is expected to last for about another 32 years. The reservoirs are constantly pressurized, by water injection wells (of which there are three in operation) so as to maintain cumulative output of the entire field at more or less steady rates. But there is also room for much further development, as not all the horizons or even reservoirs have been fully explored, activities which can lead to a possible production output reaching 3,000bopd.

The current reserve count stands at Proved (1P) ~22 Mmbls, Probable (2P) –21Mmbls. Therefore the 3P count is approximately 43Mmbls, with Possible (unrisked) resources (P50) – 20.5Mmbls. (However P50 (possible) figure is arrived by inclusion of a mostly gas bearing prospect within the license area of 49.1Bcf (equivalent to almost 9Mmbls) but as there is no local market, what little production there is consumed by UEN for own electricity generation needs
Average daily total production for the period, six months ended Junes, is 4,251 BOPD
Net debt was $33.3 million at 17 December 2009

The Company operates its Russian holdings and directs the management of their operations through its Moscow subsidiary, OOO Urals Energy (a Russian limited liability company). In addition, the Company maintains its head office in Nicosia, Cyprus.