2023 Annual General Meeting
Rusneftegaz hosted its Annual General Meeting on 7 April following the publication of its 2022 financial statements earlier in the week, the results of which were unanimously approved alongside the 2022 Annual Report. During the convention, all proposed resolutions were passed at our headquarters in Moscow, including the re-election of the board of directors and a motion to reappoint Deloitte as our independent auditor. Moreover, it has also been resolved that there will not be any alterations to the composition of the audit committee, and there will not be a dividend paid for the results of the last financial year.
Rusneftegaz can announce that an external audit of our known hydrocarbon reserves has been completed in accordance with the standards prescribed in the Petroleum Resources Management System, otherwise known as PRMS. The survey, which was conducted by DeGolyer and MacNaughton, provides an opinion with regard to both the precision and quality of the estimates formulated by our organization when calculating the extent of our petroleum deposits. In this instance, Rusneftegaz provided the inspectors with all material accounts, records and reports necessary, not limited to but including geological data, details regarding the reservoir engineering procedures utilized, in conjunction with any other evidence deemed relevant to this investigation. It should be noted that no independent verification of the information furnished by Rusneftegaz was conducted by DeGolyer and MacNaughton, including through on-site visits to our production areas, as the provision made by our company was considered both appropriate and sufficient for the analysis. The detailed study pertains to the condition of all our known and viable reserves as of 31 December 2022, with the intention that the facts enclosed in the audit can be used when formulating our consolidated financial statements for the past twelve months. The inspection itself was organized by a delegation of highly-experienced staff, all of whom earned at a minimum a bachelor’s degree in petroleum engineering, geosciences or a related discipline, in addition to holding the relevant professional license or registration to operate in this field from either a recognized self-regulating organization or an appropriate governmental authority.
In total, 15,0% of our total proven remaining hydrocarbon reserves were subjected to review, with the auditors making observations regarding the suitability of the methodologies employed when estimating the volume of our reserves and the quality of the data used when making such calculations. Once these pertinent facts had been established, the integrity of the final computation was considered by accounting for the PRMS classification of each individual reserve, in accordance with the appropriate definitions, and to the extent the final estimation process was reasonable and thorough. Following the audit, the inspectors determined a final estimation of the quantity of recoverable hydrocarbons, in conjunction with an evaluation of the uncertainty affiliated with such a judgment. However, the statements regarding the proven reserves made in the report are merely approximations and are not exact, and if excavated, could be significantly greater or less than the stated figures. These totals are only to be revised if new or additional engineering or geologic data becomes available, or for the tabulations of the monetary value of these deposits, there are fluctuations in commodity prices.
At the end of the last financial year, management believed that our company held 134,36 million barrels of oil equivalent, abbreviated to MMBoe, across all our extraction sites. All of these locations are situated in the Timan-Pechora basin of Western Siberia, across both the Komi Republic and the Khanty-Mansi Autonomous Okrug, where our organization operates twenty-six long-established oilfields. Each of these areas is considered to be highly productive and of good quality, despite indications of depletion, although it has been observed that the majority of reservoirs are smaller than average. Ultimately, the audit concluded that both the fiscal and geological calculations made by Rusneftegaz are reasonable, and within 5,0% of each estimate of DeGolyer and MacNaughton. Our proven reserves were primarily evaluated using performance and volumetric methodologies, or a combination of the two in unison. Under certain circumstances, analogy methods were also developed, but were mostly eschewed in favor of other techniques. The former involved utilizing decline curve analysis, whereas the latter used extrapolations of previous pressure and production data. For wells currently operating, future extraction rates were projected by examining performance statistics in prior years. If no downward trends were observed, forecasts remained consistent with contemporary data, or adjusted for the impact of potential curtailment when necessary until a decline was anticipated, with this alteration accounting for an approximated rate of depletion. If a negative pattern was previously determined, this is then used as a basis for predicting future production rates.
Production Data for the Fourth Quarter
For the fourth quarter, Rusneftegaz can declare operational data in the following divisions:
Oil and Gas:
All production data is unaudited and derived from internal operations reports.
2022/23 Annual Shutdown Period
Rusneftegaz will be unable to respond to any nonessential communications, including electronic and telephone messages, between 26 December 2022 and 9 January 2023 due to an administrative shutdown during the Christmas period. It is imperative that messages be sent earlier to guarantee a response, although all communications received during the period will be monitored and replied to if necessary. At the end of the closure, Rusneftegaz, in conjunction with our affiliates and subsidiaries, will strive to respond to all communications within one working day. We necessitate your cooperation and understanding with this matter.
Financial Results for the Third Quarter
Rusneftegaz can publish results for the third quarter of the year as of and for the three and nine months ended 30 September. These statements were prepared in accordance with International Financial Reporting Standards, otherwise known as IFRS, and have not been audited. The full results are disclosed in the financial section of the Group's website.
Between July and September of this year, Rusneftegaz can disclose that our organization has registered record quarterly revenues in consecutive periods, with a total of $207,1 million being earned in the past three months. This figure marks the first time our organization has amassed in excess of $200,0 million within a ninety-day timeframe in our corporate history, and represents a 15,1% increase upon the $179,9 million accrued during the same quarter in 2021. The total also reflects a considerable 5,6% improvement on the turnover obtained between the beginning of April and the end of June of this year, when a value of $196,1 million was reported. However, whilst these numbers are perceived as a major success by our management, this was not emulated in our quarterly profits, which declined by 2,9% from the three months prior. Overall, Rusneftegaz can announce a pre-tax profit of $61,8 million for the third period of 2022, down from the $63,8 million attributable to the second quarter, but up 22,5% on the $50,5 million gained at the same point in time twelve months before. Whilst these results are generally positive, our company continues to be affected by adverse conditions beyond our control or attempts to mitigate. Foremost, the immediate improvement in our financial reporting on an annual basis is solely due to the minimal effect coronavirus and pandemic-related restrictions have had on our operations in recent times. It should be noted that twelve months ago, our business was still heavily impacted by stringent regulations. For instance, the board of directors agreed in August 2021 that remote working practices would have to continue beyond their anticipated end date. In comparison, this summer has been extraordinarily uneventful, with no major announcements or briefings being published over the duration of the season.
The end of the health crisis, and its corresponding repercussions, on our enterprise have subsequently culminated in Rusneftegaz accumulating $588,4 million in revenues and $194,6 million in pre-tax profits for the first nine months of the year. Both of these sums exemplify notable year-on-year growth, with the former rising by 27,0% from $463,4 million, and the latter also increasing by 38,9% to $140,1 million. For this reason, our management is projecting that in this twelve-month period, our company shall once again achieve record turnover and profits. However, the unexpected deterioration in diplomatic relations between Russia and Western nations since the beginning of 2022 has necessitated a comprehensive revision of our broader trading strategy. This is particularly acute in areas where we have significant numbers of commercial partners headquartered in now adversarial countries. Whereas prior to the events that have unfolded our organization maintained extensive relationships with corporations across the globe, Rusneftegaz is now largely reliant on the domestic market for petroleum sales. Although in the longer-term our management will seek to expand our attention to the East Asian market; until the necessary agreements have been contracted our options to sell our products in Europe have been reduced by embargoes and other constraints, both de jure and de facto. Despite the fact that trading solely within the borders of the Russian Federation has not restricted our turnover, it has resulted in our organization becoming less able to mitigate the risks associated with fluctuations in the value of currency. Thus, a plurality of our transactions are currently performed using the Russian ruble, which despite showing indicators of depreciation in the first half of the financial year, has since stabilized and is now the strongest it has been in almost a decade.
Likewise, although commodity prices are now lower than in the previous two quarters, these figures remain eminently higher than at the same time last year. Nonetheless, it should be noted that since the conclusion of the third quarter, petroleum values have receded further, and this may influence our financial reporting for the final three months of the 2022. In the immediate term, such factors have been mitigated by utilizing futures contracts to counteract the falls in these prices. Such agreements have also abated the effects of declines in our production rates since the end of June, with oil extraction totaling 1,47 million barrels in the latest full period. Such a number is a reduction of 1,3% on the 1,50 million barrels lifted in the second quarter, but a 2,8% year-on-year escalation from the 1,43 million barrels recorded in the penultimate three-month period of 2021. Overall, production peaked at 16.521 barrels per day, with a quarterly average of 16,032 barrels per day over the duration of the timeframe. Likewise, there were similar changes in the volumes of electricity generated, which amounted to 2,09 TWh in the third quarter. Such a total is indicative of a decline of 9,5% from the 2,31 TWh disclosed in the prior period, but an 11,8% growth year-on-year when 1,87 TWh was yielded. Nonetheless, energy production is currently forecasted to peak in the fourth quarter as a result of annual peaks in demand, as it has done so since our corporate records began. Whilst this period has shown some symptoms of regression from previous highs, our board of directors remains wholly positive with regard to our future. As previously mentioned, it is anticipated that Rusneftegaz will publish record annual revenues and profits for this year in April 2023, and our wider expansion plans have been so-far unaffected by wider global events that are registering an impact both locally and internationally. At present, trends may not be favorable in the immediate times to come, but there are numerous reasons to be optimistic for the months ahead.
The financial details in this article are current at the date of this report, and believed by Rusneftegaz to be accurate and true. All information is disclosed as a summary and does not purport to be complete. The data that this commentary is dependent on is obtained from sources believed to be reliable, but the Group, nor any of the directors, officers, employees, agents, subsidiaries or affiliates, can wholly guarantee the accuracy or completeness of such information.
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