Re-assuring update from Ruspetro

25 January 2013

Ruspetro Balance Sheet Strengthening, Funded Investment Plan

Ruspetro plc (“Ruspetro” or the “Company”) is pleased to announce today a number of updates on its operations and actions that it believes will enhance the Company’s balance sheet and allow the Company to pursue a well-funded investment plan at this important phase of field development. As follows:

– Strengthening of Ruspetro’s balance sheet including: 

o An expected offering of senior secured notes (“Notes”) (details of which are in a separate announcement also made today);

o A corporate and security credit rating expected later today from Standard and Poor’s;

o Proposed conversion of Limolines Transport Limited’s (“LTL” or “Limolines”) outstanding shareholder loan into new ordinary shares in the Company, at the IPO price of 134 pence per share subject to the successful Notes offering; and

o A new revolving facility at an initial level of US$50 million extended to the Company by Sberbank post repayment of the existing Sberbank facility from the proceeds of the Notes.

– An update on near term production: 

o Heat exchange system expected to come on-line in February 2013 enabling condensate production to increase from the current level of 1,400 bopd towards 4,000 bopd and bring total crude and condensate production from 6,500 bopd to approximately 9,000 bopd; and

o Given the cash generative nature of condensate production, 9,000 bopd of combined production is equivalent to approximately 12,000 bopd of crude oil only production in well head revenue terms.

– An updated development plan setting out: 

o Average crude and condensate production planned for 2013 of 10,000 bopd, with a target 2013 exit rate of 13,000 bopd, followed by target exit rates of 20,000 bopd in 2014 and 31,000 bopd in 2015

o Plans to drill 29 wells in 2013 and 48 wells in 2014

The contemplated revolving facility from Sberbank, combined with the offering of Notes and the conversion of the Limolines shareholder loan, once completed, provides funding for our business plan enabling the Company to maintain the pace of developing its reserves. It is expected that net proceeds from the Notes offering, above the amount required to repay the Sberbank loan, will be used primarily for financing field development.

Commenting on today’s updates, Don Wolcott, Chief Executive of Ruspetro remarked:

“We are delighted to announce our plans for strengthening of our balance sheet through a range of actions today, including the Notes offering, Limolines loan conversion and the new Sberbank facility. These will simplify our capital structure and raise new funds that can be deployed in to the field. Our business is now operating cash flow positive and we believe that our strategic development plan will put the business on a firm trajectory for growth in 2013 and beyond.”

SBM TAKE – The conversion price of the loan notes at a price equivalent of 134p is a real vote of confidence in the company and an indication of the true value of RPO. Should management be successful in reaching their production targets for 2013 & 2014 then however you look at it, the current share price is a total nonsense. 

One v important point – RPO has finally achieved cash flow positivity from operations from previously burning cash most of 2012.