Petroneft considers sale due to operational difficulties in Russia

Russia-focused oil and gas producer Petroneft Resources said on Friday it would conduct a strategic review including a potential sale of the entire firm or some assets, citing difficult operational conditions due to Russia’s invasion of Ukraine.

The company said drilling of up to five development wells at its Cheremshanskoye field in Russia had been delayed for the foreseeable future due to inability to secure financing for the programme.

Earlier this year the company announced the award for the provision of drilling services at the Cheremshanskoye field, Licence 67, to the drilling company SSK.

The company has been working with a Russian domestic bank on the potential financing of a significant portion of the costs for this drilling programme. Despite “encouraging earlier communications” the bank is no longer able to provide a loan facility due to the ongoing geopolitical situation.

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The company said it would continue to look for alternative financing avenues but at the same time “recognising that this is likely to be particularly challenging under the current circumstances”.

BDO, which has acted as the statutory auditor to the company since 2019, has also notified the company of its intention to resign as its policy is not to engage in any business involving companies with significant operations or assets in the Russian Federation. Petroneft said it is currently working to source an alternative auditor in respect of the company’s financial statements for the current year.

Separately, all fields at Licence 61 remain shut in due to the ongoing legal dispute with Nord Imperial regarding storage and transfer of oil by pipeline from Licence 61 to the Transneft entry point at Zavyalovo.

The directors of the company said they believe this was an appropriate time to conduct a review of the strategic options available to Petroneft and would consider all viable options within the context of the current geopolitical environment.

The strategic review would include engagement with all stakeholders, and could lead to the full or partial disposal of the company’s assets. However, it added there was no certainty that any changes will result from the review.