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Urals Energy Closes Acquisition of Russian Producer Arctic Oil.


13 September 2016 - Cyprus-based, Russia-focused exploration and production company Urals Energy plc (AIM: UEN) has closed the purchase of the entire share capital of Arctic Oil Co Ltd. from Russian State owned oil company JSC Zarubezhneft's JSC ArcticMorNefteGazRazvedka subsidiary, the company said.

The company will pay AMNGR a cash consideration of RUB 100m (USD 1.56m), equivalent to USD 0.09 per barrel of recoverable reserves, on a cash free/debt free basis.

The acquisition will be made by Urals Energy's subsidiary, JSC Arcticneft.

ANK's sole asset is the central part of the Peschanoozerskoe oil field on Kolguyev Island.

The eastern and western parts of the Peschanoozerskoe field are already owned by Arcticneft.

ANK produces 340 bbls/day and has recoverable reserves registered with the Russian State Authorities of 16 m barrels of C1 plus C2, equivalent to 2P.

These reserves figures have not been reviewed in accordance with the AIM Guidance Note for Mining, Oil and Gas Companies and the company plans to have a review of ANK's asset within the Peschanoozerskoe oil field undertaken, in addition to the company's other assets, in accordance with an appropriate Standard in an updated Competent Person's report to be undertaken later this year.

For the year ended 31 December 2015, ANK recorded audited loss before tax of approximately Russian Rouble 56m on sales of approximately Russian Rouble 180m.

In respect of ANK's reported losses, the board believes that Urals Energy will be able to reduce ANK's selling costs and general and administrative costs post-acquisition, as the operations of the two companies are combined.

The audited total assets of ANK as at 31 December 2015 were approximately RUB 360m, with non-current assets being approximately RUB 138m.

Given that Urals Energy is acquiring ANK on a cash free/debt free basis, the directors view non-current assets as being the most appropriate indication of the value of the assets being acquired.

By acquiring ANK, Urals Energy will be able to achieve significant economies of scale through combining the operations of ANK with its existing operations on Kolguyev Island.

The consideration will be adjusted for any net working capital at closing, which is expected to be on 31 August 2016.

In addition Urals Energy has agreed that, in the event that the company decides to sell its newly combined operations on Kolguyev Island within two years, then the company will pay AMNGR the equivalent to 20% of the increase in value of the company's combined operations on Kolguyev Island over USD 6m, less any capital expenditure incurred in the intervening period.

The board of Urals Energy anticipates that the majority of the current contractors at ANK will not have their contracts extended as they expire over coming months, thus providing short term cost savings.

Urals Energy Public Company is an oil and gas exploration and production company with its principal assets and operations in Sakhalin Island, Timan Pechora, and Republic of Komi and Udmurtia and East Siberia, Russia.

Country: Russia

Sector: Petroleum/Natural Gas/Coal

Target: Arctic Oil Co Ltd

Buyer: Urals Energy

Vendor: JSC ArcticMorNefteGazRazvedka

Deal size in USD: 1.56m

Type: Corporate Acquisition

Financing: Cash

Status: Closed

Buyer advisor: , ,

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Publication:M & A Navigator
Geographic Code:4EXRU
Date:Sep 13, 2016
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