Regal Petroleum profit falls 3.3x in 1H13, production declining in 3Q13

Обзоры по компаниям и отраслям 25.09.2013 Natural gas producer Regal Petroleum (RPT LN) reported an 11% yoy decline in net revenue in 1H13, which was caused mainly by a 7% yoy decline in carbohydrates production to 1,525 boped, the company reported in its September 24 release. At the same time, the company’s COGS increased 26% yoy to USD 11.4 mln, caused by 21% growth in D&A charges and an increase in production taxes (by about 40%, we estimate). Regal’s EBITDA declined 23% yoy to USD 10.3 mln and net profit fell 3.3x yoy to USD 2.1 mln for the period. The company’s operating cash flow decreased 10% yoy to USD 16.6 mln, while capital expenditures increased 17% yoy to USD 13.0 mln in 1H13. It cash position was USD 26.8 mln as of end-June, down USD 1.7 mln YTD, and since then has been down by another USD 2.2 mln as of September 22. Regal’s carbohydrates output in 3Q-to-date stood at 1,388 boepd, 9% below the 1H13 average and roughly 7% below the 2Q13 average. Regal reiterated it failed to reach sufficient production levels on its new SV-53 and MEX-105 wells, highlighting both are candidates for hydraulic fracturing. The company also reported its SV-59 well has been drilled to a depth of 4,957 meters so far and it’s expected to reach its target depth of 5,470 meters by the year’s end. Alexander Paraschiy: Regal’s provided operational results reveal the company will most likely show consecutively declining production figures for each subsequent quarter this year. In the best case, its average 2013 output will be at 1,450 boepd, or 7% smaller yoy and 30% below our initial forecast. We see a high chance that Regal’s cash balance will increasingly deteriorate in the next quarters since the company had a series of unsuccessful drillings in 2013 and said it will further invest in the same fields, amidst a clear trend of declining gas prices in Ukraine. On the other hand, we don’t rule out the possibility of improved production closer to the year end if the company succeeds in the hydraulic fracturing of its SV-53 well, which it said will start soon.