TIDMRPO
RNS Number : 9092L
RusPetro plc
30 April 2015
Ruspetro plc
30 April 2015
Ruspetro plc ("Ruspetro" or the "Company")
Annual Financial Report
London, 30 April 2015: Ruspetro plc (LSE: RPO) today announces,
as required by DTR 6.3.5(3), that its Annual Report has been
published and is now available on the Ruspetro website:
www.ruspetro.com. This follows the release on 16 April 2015 of the
Preliminary Results Announcement for the year ended 31 December
2014 (the 'Preliminary Announcement').
In compliance with LR9.6.1, the Company has today submitted the
Annual Report and Accounts for the year ended 31 December 2014 to
the National Storage Mechanism and this will shortly be available
for inspection at http://www.morningstar.co.uk/uk/NSM.
The Annual Report will be mailed to shareholders shortly and
delivered to the Registrar of Companies in due course. Copies of
the Annual Report will also be available from the Company's
registered office:
Ruspetro plc
4(th) Floor, 58 Grosvenor Street
London W1K 3JB
The appendix to this announcement contains additional
information which has been extracted from the Company's Annual
Report for the purposes of compliance with DTR6.3.5 and should be
read together with the Preliminary Announcement, which can be
downloaded from the Company's website at www.ruspetro.com. This
announcement should be read in conjunction with, and is not a
substitute for, reading the full Annual Report. Together these
constitute the information required by DTR 6.3.5(2) which is
required to be communicated to media in full unedited text. Page
references in the text below refer to page numbers in the Annual
Report.
Appendix
A: Audit Reports
The Preliminary Announcement published on 16 April 2015 included
a set of condensed, unaudited financial statements and management
commentary. The audited financial statements are contained in the
Annual Report. The independent audit reports of the Group and
Company are contained on pages 62 to 65 and 94 to 95.
B: Principal Risks and Uncertainties
The principal risks and uncertainties highlighted below are
considered to have the most significant relevant potential effect
on Ruspetro's business integrity, financial results and future
prospects at its current stage of development. Not all these risk
factors are within our direct control and those listed below are
not exhaustive. There may be risks and uncertainties that are
unknown to us and the list is expected to change. Many broad risks,
however, are outside Ruspetro's full control, for example, changes
in general economic conditions, including currency and interest
rate fluctuations, changes in government regulation and
macroeconomic issues. The Company's approach is to actively
understand and monitor the risks it is exposed to, and then to
manage those risks by using a practical and flexible framework
which provides a consistent and sustained approach to risk
assessment, so that their potential adverse effects are mitigated,
where possible.
The principal risks of the Group are summarised as follows:
Key risks Risk description Risk mitigation
---------------------- ----------------------------------- ---------------------------------
Health, safety, and environment
----------------------------------------------------------------------------------------------
Health and The Group conducts its Ensuring that best
safety business in a regulated HSE practices are
industry and may be subject in place is a focal
to claims and liabilities point in all our activities.
under environmental, health, The Company adopted
safety and other laws and a set of HSE policies,
regulations, which could appointed a HSE Director,
be material. and implemented a
system to collect,
process, and report
HSE information. A
renewed and updated
programme of HSE training
for our staff is currently
being developed.
---------------------- ----------------------------------- ---------------------------------
Operations, production and sales
----------------------------------------------------------------------------------------------
Reserves and Reserves estimates and Internationally proven
production production forecasts are appraisal and development
forecasts inherently uncertain; the techniques are utilised
Group's total reserves to maximise the economically
may decline in the future recoverable hydrocarbons
and the Group may not achieve for our reservoirs
estimated production levels. and rigorous probabilistic
methodologies are
in place for reserves
assessment. In addition,
appropriately risked
production forecasting
methodology is in
place for forecasting
and modelling purposes.
Competent persons
reports are prepared
and released periodically,
with the next one
planned for the end
of 2015.
---------------------- ----------------------------------- ---------------------------------
Operational Well and facility construction, The Company is focused
execution and production operations on putting in place
involve numerous operational a first-class operational,
risks. These may result engineering, drilling
in losses or additional and completion team,
expenditures and lead to and applying best
the Group not achieving global practices in
its planned production operational execution.
and financial targets. In addition, Ruspetro
has a rigorous procedure
of selecting contractors
and prefers to use
services of well known
international companies.
Importantly, insurance
of drilling and operational
risks is also in place.
---------------------- ----------------------------------- ---------------------------------
Licence rights The Group has the right Renewal of mineral
to explore and extract right licences is
oil and gas within part regulated by Russian
of the Krasnoleninsk field legislation. A plan
in Western Siberia. If for the renewal of
the Group's appraisal and licences is in place,
production licences are and a dedicated team
suspended, restricted, for managing licence
terminated or not extended obligations has been
prior to expiry, this would established. Matters
have a material adverse related to licence
effect on the Group. obligations are routinely
reviewed at Audit
Committee meetings.
---------------------- ----------------------------------- ---------------------------------
Transportation The Group relies on the Ruspetro's fields
route Transneft pipeline for are strategically
transportation of its crude located, with access
oil and does not have control to various transportation
over its functionality routes. Delivery through
or the cost of its service. the Transneft pipeline
system is the most
widely used option
for Ruspetro, while
rail and truck deliveries
are available as an
alternative to pipeline
sales. The cost of
Transneft services
is regulated by the
government and is
predictable. The relative
attractiveness of
alternative sales
routes is evaluated
on a monthly basis
and appropriate decisions
to use a certain route
are made accordingly.
---------------------- ----------------------------------- ---------------------------------
Insurance coverage The Group does not have Ruspetro has put in
the types of insurance place insurance arrangements
coverage customary in more in accordance with
developed countries for the regulations in
a business of its size the markets in which
and nature, and a significant it operates and given
event could materially current business needs.
impact its business. Decisions to increase
insurance coverage
are evaluated on an
ad hoc basis.
---------------------- ----------------------------------- ---------------------------------
Reliance on The Group relies on the The Company has implemented
third-party services of third parties, rigorous procedures
contractors the availability and quality for selecting contractors.
of which cannot be assured. Engineering, subsurface,
The oil industry is intensely and drilling and completion
competitive and the Group teams ensure that
may not be able to compete the performance of
effectively with much larger contractors is properly
competitors. monitored and managed.
---------------------- ----------------------------------- ---------------------------------
Procurement Lack of effectiveness in Ruspetro operates
negotiating and managing effective policies,
purchases and contracts procedures and controls
could increase costs for in relation to prior
Ruspetro and/or cause delays approval of counterparties
to project completions and competitive procurement
and operations. The vetting within strict levels
of counterparties, in particular of delegated authority
for business ethics and with the objective
integrity as well as financial of achieving arm's-length,
and operating capability, transparent purchasing.
represents an associated Specifically, Contracts
risk area. Committees consisting
of key Company executives
are established in
the field and Moscow
offices. They, our
Board and the Audit
Committee monitor
carefully and undertake
close, regular scrutiny
of the effectiveness
of the Company's counterparty
policies.
---------------------- ----------------------------------- ---------------------------------
Protection Damage, theft or interference A security strategy
of Company to Ruspetro's assets in that includes improved
property the field can stop or limit training, processes
production resulting in and procedures for
reduced cash flow and increased security personnel
costs. and improved surveillance
technology has been
developed and implemented.
In addition, the system
of infield oil pipelines
and infrastructure
is designed to prevent
oil theft.
---------------------- ----------------------------------- ---------------------------------
Business integrity The Company is subject Internal policies
to the United Kingdom Bribery based on the United
Act 2010. Its failure to Kingdom Bribery Act
comply with the laws and 2010 are in place
regulations thereunder and the Company is
could result in penalties focused on ensuring
that harm its reputation their implementation.
and have a material adverse
effect on the Group's business.
---------------------- ----------------------------------- ---------------------------------
Financial
----------------------------------------------------------------------------------------------
Oil prices The Group may be adversely Thanks to its relatively
affected by a substantial small size, the Company
or extended decline in can quickly evaluate
prices for crude oil. changes in macroeconomic
environment and adjust
its operations if
necessary. Although
Ruspetro does not
currently hedge its
oil price exposure,
hedging options are
evaluated quarterly
based on production
forecast, pricing
and other business
needs. In addition,
the Company's oil
is of comparatively
better quality than
the Urals blend, which
allows Ruspetro to
receive a premium
for sales via rail
or truck. When we
make investment decisions,
we strive to do so
after careful consideration
of various oil price
scenarios.
---------------------- ----------------------------------- ---------------------------------
Currency fluctuations Fluctuations in currency The majority of Company's
exchange rates (particularly revenues are denominated
RUB/US$) may materially in US$ or linked to
and adversely affect the international US$-based
Group's financial position. oil prices. On the
other hand, all material
service contracts
are denominated in
RUR or have caps on
the RUR/US$ exchange
rate. Therefore, the
Company's costs expressed
in US dollars decrease
as the ruble depreciates,
and vice versa. The
Company currently
manages its foreign
exchange exposure
without engaging in
long-term currency
hedging contracts,
and this practice
is reconsidered periodically
as circumstances change.
---------------------- ----------------------------------- ---------------------------------
Debt facility If the Group's development The Group's medium-term
covenants plan does not succeed, planning is being
the Group will be unable done with careful
to comply with its current consideration of debt
debt facility covenants facility covenants,
or with their other requirements. and performance against
covenants is evaluated
on a monthly basis
with the necessary
adjustments made in
a timely manner. In
addition, covenants
are based on cumulative
four quarterly periods,
which may smooth the
impact of short-term
fluctuations.
---------------------- ----------------------------------- ---------------------------------
Long-term funding The Group must make significant Ruspetro's status
capital expenditures to as a UK publicly traded
increase its revenues, company with strong
cash flows and production local Russian shareholders
levels. The inability to is of advantage in
finance these and other accessing domestic
expenditures in the longer and international
term could have a material sources of finance.
adverse effect on the Group's
business.
---------------------- ----------------------------------- ---------------------------------
Human resources
----------------------------------------------------------------------------------------------
Key technical The Group is dependent Long-term incentive
and management on senior management personnel programmes are in
skills and on maintaining a highly place for key personnel
qualified and skilled core to attract and retain
workforce. key management and
staff. All new employees
are interviewed by
executives to ensure
that interests are
aligned and the right
candidates are selected.
Evaluations of management
and staff are performed
twice a year, with
relevant actions taken
thereafter.
---------------------- ----------------------------------- ---------------------------------
Shareholders and free float
----------------------------------------------------------------------------------------------
Free-float The Company's ordinary Further to UKLA guidance,
obligation shares may be delisted several options are
from the Official List currently under consideration
if the Company does not to ensure sufficient
establish or maintain a free float in the
sufficient free float in Company's shares,
its shares. including the sale
of shares by significant
shareholders and the
issue of new shares.
A broker has been
retained to advise
on the most effective
ways to meet the requirements
for free-float in
the Company's shares
and help in executing
any necessary transactions
---------------------- ----------------------------------- ---------------------------------
Dominant shareholders Certain shareholders have The Company treats
significant influence over its shareholders equally
the Company. Their interests and carefully manages
may not be aligned with its relationships
those of the other shareholders, with key shareholders.
and such concentrated ownership Relationship agreements
of the Company could affect are in place with
the market price and liquidity Limolines Transport
of its shares. Limited, Makayla Investments
Limited, Mastin Holdings
Limited and Nervent
Limited to limit their
influence on operations.
Additionally, four
of the eight directors
are independent and
management engages
directly with investors
to increase transparency
and liquidity.
---------------------- ----------------------------------- ---------------------------------
Political and regional
----------------------------------------------------------------------------------------------
Sanctions compliance Non-compliance with EU Most of the materials,
or US sanctions or export machinery and equipment
restrictions, an expansion used in the Company's
of EU and/or OFAC sanctions operations or provided
programmes or a significant by key contractors
expansion of the Group's are sourced locally
dealings with any parties or from non-sanctioned
subject to sanctions could jurisdictions (such
adversely impact the Group's as China). In addition,
business. existing and new contractors
are evaluated taking
into consideration
existing sanctions
and advice from an
external legal counsel.
---------------------- ----------------------------------- ---------------------------------
Regional political Political and governmental The Company's assets
Instability instability in Russia and are located in Western
the region could adversely Siberia, which limits
affect the value of the the risks of operational
Group's investments in distractions due to
Russia. political instability.
In addition, export
sales are carried
out without the use
of export pipelines.
---------------------- ----------------------------------- ---------------------------------
Regional economic Economic instability in Our domestic sales
instability Russia and the region could netback is linked
adversely affect the value to the prevailing
of the Group's investments international oil
in Russia. price and is not impacted
by regional economic
stability. In addition,
Ruspetro carefully
monitors the prevailing
economic environment
to ensure that necessary
operational adjustments
are implemented.
---------------------- ----------------------------------- ---------------------------------
Russian legal The Russian legal system The Legal framework
framework and Russian legislation in Russia was actively
continue to develop, and developed throughout
this may create an uncertain the 1990s and 2000s,
environment for investment and recently became
and for business activity. more stable. Licences
and key contracts
with governmental
organisations (e.g.
land leases) are generally
long-term and renewed
in advance to the
extent possible. In
addition, our main
contractors are internationally
recognised companies
capable of adapting
if the legal environment
changes. Some contacts
are signed subject
to English law to
avoid ambiguity.
---------------------- ----------------------------------- ---------------------------------
Russian taxation The Russian taxation system Ruspetro engages in
is still in the process ongoing dialogue on
of developing and is subject the current and future
to frequent changes that tax regime with the
could have an adverse effect relevant ministries
on the Group. of the Russian government.
In addition, Ruspetro
enjoys certain tax
breaks mandated for
fixed periods of 10-15
years. These are committed
and less likely to
change.
---------------------- ----------------------------------- ---------------------------------
C: Statement of Directors' Responsibilities in relation to Group Financial Statements
Company law requires the Directors to prepare financial
statements for each financial year. Under that law, the Directors
have prepared the financial statements of the Group and those of
the Company in accordance with International Financial Reporting
Standards ('IFRSs') as adopted by the European Union ('EU') and
applicable law.
Under company law, the Directors must not approve the financial
statements unless they are satisfied that they give a true and fair
view of the state of affairs of the Group and the Company and of
their profit or loss for that period. In preparing these financial
statements, the Directors are required to:
-- select suitable accounting policies and then apply them consistently;
-- make judgements and accounting estimates that are reasonable and prudent;
-- state whether IFRSs as adopted by the EU have been followed,
subject to any material departures disclosed and explained in the
Group and Parent financial statements respectively; and
-- prepare the financial statements on the going concern basis
unless it is inappropriate to presume that the Company will
continue in business.
The Directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the Group's and the
Company's transactions and disclose with reasonable accuracy at any
time the financial position of the Group and the Company and enable
them to ensure that the financial statements and the Directors'
Remuneration Report comply with the Companies Act 2006. They are
also responsible for safeguarding the assets of the Group and the
Company and hence for taking reasonable steps for the prevention
and detection of fraud and other irregularities.
Under applicable law and regulations, the Directors are also
responsible for preparing a Strategic Report, Directors' Report,
Directors' Remuneration Report and Corporate Governance statement
that complies with that law and those regulations.
The Directors are responsible for the maintenance and integrity
of the corporate and financial information included on the
Company's website. Legislation in the UK governing the preparation
and dissemination of financial statements may differ from
legislation in other jurisdictions.
Responsibility statement of the Directors' in respect of the
Annual Report and Accounts
We confirm that to the best of our knowledge:
-- the financial statements, prepared in accordance with IFRSs
as adopted by the EU, give a true and fair view of the assets,
liabilities, financial position and profit or loss of the Company
and the undertakings included in the consolidation taken as a
whole;
-- the Strategic Report includes a fair review of the
development and performance of the business and the position of the
Company and the undertakings included in the consolidation taken as
a whole together with a description of the principal risks and
uncertainties that they face; and
-- the Annual Report, taken as a whole, is fair, balanced and
understandable and provides the information necessary for
shareholders to assess the Company's performance, business model
and strategy.
Alexander Chistyakov John Conlin
Executive Chairman Chief Executive Officer
About Ruspetro
Ruspetro plc is an independent oil and gas development and
production company, with assets in the Western Siberia region of
the Russian Federation. Our mission is to unlock the tight oil
reservoirs in our asset base while building a leading regional
independent E&P company in a safe and environmentally
responsible manner for the long-term benefit of our
shareholders.
Enquiries
Ruspetro plc
John Conlin, Chief Executive Officer +44 (0) 2073 181630
Alexander Betsky, Finance Director +44 (0) 2073 181630
Finlay Thomson, Investor Relations +44 (0) 7976 248471
FTI Consulting
Ben Brewerton, George Parker +44 (0) 2037 271000
This information is provided by RNS
The company news service from the London Stock Exchange
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