Davy Research |
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Petroneft
(USc) (PTR LN)
Production remains stable at 2,200 bopd; development of Arbuzovskoye field remains in-line with guidance
29 June 2012
Caren Crowley
| Closing Price: | 6p | Rating: | Outperform | 09/08/10 |
FACTS: Petroneft has published results for the 12 months to end 2011 and has provided an update on production from Licence 61 in the Tomsk region of Western Siberia.
ANALYSIS: For the last financial year, Petroneft reported average production of 2,049 bopd and a net loss of $18m including a $5m impairment charge owing to the poor performance of the Lineynoye field. Cash from operations was $6m, with good working capital management. Net debt at end December 2011 was $28.6m after capex of $52m in the year. In May 2012, as previously announced, Petroneft secured a $15m loan facility from Arawak.
The operational update reported that Petroneft's production remains stable at 2,200 bopd exclusive of wells temporarily undergoing transient pressure testing. The testing is designed to understand and prevent the poor production performance from Pad 2 on the Lineynoye field from reoccurring. The discovery well on the Arbuzovskoye field has been producing 350 bopd since mid-May with little or no production decline. This rate is with artificial lift but before fracture stimulation. The flow rate compares favourably with initial production rates of 50-400 bopd from wells drilled on the Lineynoye field. As per previous guidance, up to ten development wells will be drilled on Arbuzovskoye in 2012 with the first of these to commence production in Q3 2012.
At a corporate level, Petroneft reports that management has initiated discussions with a range of strategic investors about possible farm-outs, long-term off-take agreements and potential equity or asset investments to strengthen the group's financial position.
DAVY VIEW: The stabilisation in Petroneft's production is encouraging while the development of the Arbuzovskoye field should deliver growth. The financial results for 2011 do demonstrate a need for scale, for which production from Arbuzovskoye will help to solve.