"Since the Annual General Meeting on 11 September we have continued to make good progress on re-financing the Company and I hope to be able to update shareholders in detail on this point in the coming weeks," i expect we should hear by month end .
if re financing deal is finalised and reasonable you guys could have just hit the nail on the head. I 'm prepared to hold on -but then probably not as in as big a hole with this one as others -good luck too those who continue to hold - let the transfer of wealth begin
Hi Harkins, good find, this article, written by people who seem to know what they are talking about confirms both the risk and the rewards that PTR offers. The current SP indicates the significant risks that the current management are facing, as there can be no way the company will trade its way out of the current cashflow crisis without new financing or a farm in deal. Significant upsides exist, but also significant risks.
October 02, 2013
PetroNeft Resources Has A Hiatus With Its Arbuzovskoye Drilling As It Sort Its Funding Issues
Until April this year AIM listed PetroNeft Resources, which is focused on Russia seemed to be progressing well with what Oilbarrel has dubbed Plan Bwith its acreage in Siberia.
In April the Arbuzovskoye 105 well tested at an initial rate 160 bopd with no obvious water cut. The well was shut in for pressure build up testing before being put into long term production. This was the sixth well to come good in what was to be a ten well programme.
We called the drilling on the Arbuzovskloye well Plan B because investors who have followed PetroNefts story for the past couple of years will recall that there were serial disappointments in the flagship Lineynoye oil field in Western Siberia. Output in the third quarter 2012 fell to below 2,000 bopd, far short of guidance. The shares, which had once been 30p sank to around 6p by year end 2012.
To offset this setback, the company, which is owner and operator of Licences 61 and 67, Tomsk Oblast, Russian Federation, adopted a strategy of developing discoveries made elsewhere on its core acreage of these two concessions. Specifically PetroNeft accelerated the development of one such field, the 13 million barrel Arbuzovskoye field, to make good the shortfall from Lineynoye.
After the J1-1 discovery well confirmed the reservoir qualities of the eastern part of the Arbuzovsokye field, which is about 10 kms east of the Lineynoye, last autumn, the 101 well delivered.
This was followed by the 102 well which had an initial flow rate of 540 bopd, the highest rate achieved on Licence 61 (Lineynoye and Arbuzovskoye) without fracking, and taking overall output, including the less than 2,000 bopd from Lineynoye to over to 2,700 bopd at one point.
Then there were, in quick succession, triumphs with the 109 and 111 wells which appeared to confirm the good reservoir qualities and continuity seen on log and core data and this raised hopes that the Arbuzovskoye field would avoid the problems seen at Lineynoye. Then came the 112 and 105 wells both of which were successful and one of which became a water well.
It has been notable that with each well result at Arbuzovskoye the company has been at pains to stress there have been no significant water cuts. This is because as the company drilled deeper and deeper at Lineynoye the proportion of water rose sharply against that of oil and this curtailed overall production and caused the under-performance.
The company has said that that overall average initial production rates from the first five wells in the current programme have exceeded targets of 150-200 bopd a well. This should mean that all other things being equal overall production should be above 3,000 bopd.
But after April new drilling stopped. In the companys interim results for the first half of 2013, which were released recently the group said production for the six months was 2,464 bopd. Output is currently running at 2,500 bopd, with the Arbuzovskoye wells accounting for just around 1,000 bopd.
What has gone wrong? Well in a long term sense probably nothing.But there is a short term funding problem.
PetroNeft has a facility with Macquarie Bank and the Bank is not happy to continue any longer than it has to. It does not want to operate in Russia, according to Paul Dowling the CFO at PetroNeft.
In October 2012 a revised borrowing base was agreed with Macquarie, which amongst other things led to the start of monthly repayments of US$650,000 on March 31 2013.
The Macquarie loan matures in May 2014 at which time a final payment of US$8.4 million (in addition to the US$4 million restricted cash held by Macquarie).
PetroNeft has found it difficult to fund these repayments from its own resources and continue its drilling programme.
However, to support the companys development aspirations it appointed financial advisers Evercore Partners L
Something of a relief that despite the disappointing results, there has been no large scale dumping of shares. Although showing a 7-10% drop today, its on miniscule volume. Presumably, shareholders either can't afford to sell or remain optimistic that the good times are just around the corner!
I would have thought the gross profit would approximate to the netback. This is showing at 10% and if avge sales price is 43 dollars it would imply a return of 4 dollars per barrel ..
Maybe gross profit calculation includes some items which shouldn't be in a netback calculation but cost of sales usually reflects the cost of getting the stuff out of the ground and transporting to point of sale ( probably including some depreciation in fairness) and I 4 dollars is all that is available to cover overheads then a huge volume of production would be needed to fund further drilling and exploration before any profit arises.
This is all reflected in the share price to a large extent with a mkt cap of circa 20 million stg and the company has a sizeable pipeline infrastructure built so overall despite the poor returns it could be a takeover target .
Petronefts interim results report production steady at a rate of
a little under 2,500 b/d. The group's focus is on increasing its
production profile and re-financing its current debt. A
successful conclusion to both issues should lead to a matching
improvement in equity value.
Production steady at just under 2,500 b/d
Production averaged 2,464 b/d over the first six months of the year, up 13% on the
previous period. Q2 oil pricing was lower than expected but has since recovered with
strong realisations achieved in the third quarter. Average oil prices in the first half were
$42.5 per barrel. Efforts to sustain production through water injection seem to be
Development drilling to re-start
There are plans to drill at least three more development wells on the Arbuzovskoye field.
Separately, plans are in place to drill additional wells at West Linenoye, Tungolskoye and
Results and finances
The group reported a loss of $10.6m for the six months. Of this, $6.4m was an exchange
loss on intra-group loans. Gross profit was a just under $2m. Administrative costs were
$3.4m, resulting in an operating loss of $1.5m before currency movements. Finance
charges were $1.75m.
At present, the group has net cash of $13.6m. Discussions are underway to re-finance
the group and move away from its current Macquarie facility which involves a monthly
payment of $0.65m. The re-financing will lead to a greater availability of working capital
and facilitate the re-start of the development programme on the Arbuzovskoye field as
well as other locations.
Solg SolomonGold are expecting results from an ongoing drilling programme in Ecuador too. It could be any day maybe even today. Unless the results are dire they normally have a bit of a surge after a result. I say normally as the sp dropped after the last result but had a spike a couple of days later.
as always DYOR and good luck
I would keep an eye on NMG Noricum Gold. They have a gold mine with gold in it. Had a spike this morning and I think will probably drop back for a better entry point.
Look into the infrastructure already there, roads, holes and gold. Probably a better bet than this.
I don't think there was much bad that we didn't already know in the report. I totally agree with your last sentence and look forward to the company increasing production. When that happens I am confident that we will see an increase. I have a resonable stake in the company and it will not take a big increase to have me back in profit. I'm disappointed that the sp couldn't break the 4p resistance a couple of weeks ago but i think we are more likely to recover and prosper than go down the pan. Maybe a 60/40 chance. You are probably right that I see the bits that I want to see. Time will tell.
Shipright, i think you are seeing what you want to see!. There are some good points in the accounts but many issues that create concerns, not least the increased losses and the crucial cashflow, which is the main issue for any small company. This firm owes a lot of money to creditors in addition to main financiers.This will have a negative impact upon any re-financing or farm out discussions. As always with PTR there is the hope of better things to come but still a lot of risks involved. However, I think the SP is realistic at current levels and is unlikely to fall significantly, with major upside potential still a distinct possibility.
I'd appreciate what drove your point of view on this, while I note that the loss was heavily influenced by the exchange loss, I can't help but notice that Gross margin is in decline and that they only have 130k in the bank.
On the positive side debt has significantly dropped since 2012 and they seem to be making some progress on understanding the engineering based challenges related to their wells.
Just to be clear on my position; I've been watching for over a year now and have been looking for a right time to jump in and I do view Petroneft as a good opportunity provided they sort the debt facility out and get their production over the magic 3000 bopd mark.
No, but looking up the word Natlata brings up unconnected hits in Algeria and Russia (a place name I think). Would be good if Russian. Explains why the SP went up recently. Hopefully the Russians know a thing or three.
Ain't it funny (or sad) that even this good news can't bring us to life? We're all just too beaten down by PTR
I called Davy the Corporate broker and the shares are traded on the NYSE but very rarely. The volume was 15000 at .074 $ and its of no great significance. (shame) The H1 results should be out on 27th Sept.
I see we have another late reported trade of 450k this morning and also 500k reported at 4p as an uncrossing trade, so it certainly seems like there's some accumulation going on from those close to the action.
is it not DAVY valued PTR around 33p? with farm out news hopefully by end of the year, and re-financing by end of the year too. not to mention oil price is much higher and we are producing 2500 (not too high but still profitable).
we could see double digit sp by end of the year imho
Petroneft Resources the Irish explorer with a specific operational focus on Siberia is planning to re-commence drilling activity later this year, depending on successful outcomes of current debt re-financing talks and farm-out discussions.
The Dublin-based exploration firm, which has of late been concentrating on building up oil production from existing wells in order to pay down debt said, yesterday, that production levels at its Tomsk-based Arbuzovskoye field have remained steady at 2,500 barrels of oil per day (bopd) and production at its Lineynoye field also remains very stable, with little decline evident.
It added that the company has also benefited from strong realised oil prices in recent months.
In March, Petroneft began making monthly repayments of $650,000 to Macquarie Bank and continues to do so; with its current debt standing at $13.6m.
The company is in talks with Macquarie over re-financing its debt and claims to be making particularly good progress.
It is also in continued talks with parties regarding the farming-out of part of its Licence 61 asset, in the Arbuzovskoye field.
At the companys AGM in Dublin yesterday, chief executive Dennis Francis said management appreciated shareholders continued patience and support, while negotiations are completed.
The operational update reassures that production is stable and that good progress is being achieved in Petronefts efforts to re-finance and farm-out. The successful conclusion of refinancing should be a catalyst to re-start the production growth and monetise the reserves and resources on Licence 61 in Western Siberia.
Pressure support working
Judging by preliminary data, a pressure support programme at Arbuzovskoye appears to
be achieving the desired effect. This mirrors a similar programme on the previously
developed Linenoye field to the west. As a result, production is steady at 2,500 b/d.
Re-financing will allow development and appraisal drilling to recommence
While the current net debt of $13m is being adequately serviced with scheduled monthly
repayments of $0.65m, drilling activity has had to accommodate the re-payment
schedule. It is hoped that a new financing package will be more flexible. This will allow
drilling on several prospects in the immediate future, wells on West Linenoye and the
re-start of Arbuzovskoye development drilling; drilling at Tungolskoye and Sibrayevskoye
is anticipated next year. The re-financing will also be more supportive of achieving a high
With pressure support working, good product pricing being achieved and a re-financing
package expected in the coming weeks rather than months, we think the outlook has
improved for the group. Evidence that drilling activity leads to improved production
should be reflected in stock price performance.
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