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Company in Mass Media

Rus’-Oil production company intends to purchase refining assets

05.10.2016. https://www.bfm.ru/news/335337

Finance Ministry has confirmed its oil price estimates of $40 USD a barrel. What is your own forecast for the year to come?

It’s hard to give any estimates, as the oil prices have little dependency on the economic factors now as they teach in business schools – it’s all about politics. I expect the price to fluctuate between 40 and 60 dollars a barrel. I’d rather have it at 60, as it opens many new opportunities. However, I am pretty sure the industry will feel quite comfortable at 40.

When you started the company three years ago, did you expect these estimates would ever be considered normal and optimistic?

Sergey Podlisetsky: I started in oil industry in 2011, when I started managing a small field in Orenburg Oblast. Oil was at 125 dollars a barrel back then. Today Rus’-Oil has several enterprises under its management, with an extensive geography, diverse features and structure, including Dulisma, Khortitsa, Gustorechenskoye, IrelyakhNeft. Many were purchased as troubled, exhausted assets, which we managed to pull back into commercial operation, regardless of the pricing conditions in the market. Definitely, oil price plunge could not but affect our business. We had to reduce our drilling programs, perhaps like many other companies. But we developed a cost-cutting program, which allows us to operate comfortably given the current prices. Unfortunately, you cannot step enter the same river twice. Everyone got used to living at 100-110 dollars a barrel. This was comfortable living, but we have to adjust to the new conditions. The government finds it hardest perhaps, as ministry extraction tax represents a great deal of the budget revenue. So we don’t really feel the price drop as much, probably at half the impact. But we took up some slacks, streamlined our technologies – and we go on.

What are the milestones in the company development you would single out in the last three years? How did it develop?

Sergey Podlisetsky: The milestones would probably be linked to the development of different kinds of deposits: first in the hard land, then oil fields in the taiga region, with challenging infrastructure issues, then deposits with falling production. This is important to understand what technologies and resources must be used, what specialists to hire.

If I understand correctly, the company is operating six projects at the time. Can you tell us about financial performance indicators as of the purchase date and today: how did they change?

Sergey Podlisetsky: Since these projects have different beneficiaries, publishing data that represents commercial secrets would require their approval. Nevertheless, I can say that production increased six-fold, everyone is happy with the revenue and EBITDA. So I hope people will continue trusting me with managing their resources. At least I can look the people right in the eye.

Six-fold production increase is quite impressive. And what are your further production estimates? Any plans you can announce?

Sergey Podlisetsky: Right now we have some 3.5 million tons a year. Hoping to reach 4 million next year.

And what about the reserves?

Sergey Podlisetsky: DeGolyer-audited reserves amount to 150 million tons. However, according to my own estimates, the reserves are up to 300 million, if we consider those prospective reserves I see as commercially viable.

Does that include the six sites you acquired in Khanty-Mansiysk autonomous district?

Sergey Podlisetsky: I took part in their acquisition, but so far no final decision has been made regarding passing these under my management. So I am not including those in my calculations. As far as I can tell, these sites are worth about 17-20 million tons.

Does Rus’-Oil plan to purchase any other assets?

Sergey Podlisetsky: We are constantly looking for new opportunities, including “green-field” ones, located in areas that would allow synergies with existing assets. We are also looking for market players who got tired of their assets and would like to dispose of them. So if any proposals appear, we will certainly consider them.

Are you also interested in refineries and gas stations?

Sergey Podlisetsky: We are looking at refining business. Gas stations for now are somewhere in the distant future. I am afraid gas stations will end up like they did in Europe, where they operate as appendices to some shopping malls. So we are not considering gas stations yet; refineries are Ok.

Summing up the production estimates for this year, what can you make public?..

Sergey Podlisetsky: As I mentioned before, our production estimates stand at 3.5 million tons a year. As for profits, I’d rather not comment, as this would require an inevitable discussion on how that is calculated.

Recently there was talk about you publishing reports according to IFRS.

Sergey Podlisetsky: Indeed, we are working on moving to IFRS reporting. This would be done in parallel with Russian Accounting Standards, but IFRS is more indicative for the business, so we decided to launch it in parallel. Perhaps this would attract foreign investors at some point in the future. Prime Minister Dmitry Medvedev delivered a big program speech at the International Investment Forum SOCHI-2016.

Did you hear anything of importance for you?

Sergey Podlisetsky: I am not a public person, and never tried to be one, so it’s the first time I found myself at an event like this. Listening to the speeches at the forum, you start revising your views. For example, regarding the tax legislation: you start understanding why the government is taking one measure or another. You start to understand there is no reason in arguing with the government – you have to work. Everyone is working in the same conditions, everyone finds it hard. But I can see we will stay afloat.

Thank you!