TIDMZOL

RNS Number : 8294N

Zoltav Resources Inc

04 October 2021

4 October 2021

Zoltav Resources Inc.

("Zoltav", the "Company" or the "Group")

Project Finance for East Bortovoy Development

Zoltav (AIM: ZOL), the Russia-focused oil and gas exploration and production company, announces an update regarding the Company's plans to commercialise the eastern fields of the Bortovoy Licence, Saratov.

Project Finance

Diall Alliance LLC ("Diall Alliance"), the Company's wholly owned Russian operating subsidiary which holds the Bortovoy Licence, has entered into two non-revolving credit facilities with PJSC Sberbank of Russia. The first loan represents a maximum facility amount of RUB 7,700,000,000 with a final repayment date of 25 September 2031 ("Loan 1") . The second loan represents a maximum facility amount of RUB 700,000,000 with a final repayment

date of 1   January 2024 ("Loan 2") . 

Loan 1 will be used to finance investment costs associated with the commercialisation of the eastern fields of the Bortovoy Licence (the "Project"), as well as to refinance Diall Alliance's other loans including the full repayment of the outstanding principal debt and accrued interest under the Promsvyasbank PJSC credit facilities entered into on 13 May 2019 and 16 March 2021. Interest on Loan 1 is payable quarterly at a rate of 9.9% per annum, fixed until 31 December 2023, and thereafter at the Central Bank of Russia interest rate +2.8% per annum.

Loan 2 will be used for the payment of VAT on capital expenditures within the framework of the Project. Interest on Loan 2 is payable monthly at a rate of 9.3% per annum.

Both loans are secured against 100% of the shares of Diall Alliance and all of its assets with a book value of at least RUB 10,000,000 per unit.

East Bortovoy Project Summary

The Project represents an expansion of the activities currently carried out by Diall Alliance, the main operating company, at the two currently producing fields at West Bortovoy.

The Bortovoy Licence area has nine fields with remaining gas reserves. Currently, only two fields, Zhdanovskoye and Karpenskoye have been developed. The Karpenskoye and Zhdanovskoye field reserves have been depleted by approximately 70% and 40% respectively and are expected to become uneconomical within approximately 2-3 years of further production.

The Project provides for a phased commissioning of five new fields, including: Pavlovskoye - February 2022; Lipovskoye - July 2022; Nepryakhinskoye - March 2023; Mokrousovskoye - 2028; and West Lipovskoye - 2030.

In order to produce, transport and process gas from the East Bortovoy fields, the Project requires the construction of a 206 km gas pipeline, as well as the capacity expansion of the existing Karpenskoye processing plant (the "Western Gas Plant") from 525 mmcm/year to 900 mmcm/year. Under the Project plan, the 900 mmcm annual processing capacity is expected to be reached in March 2023.

The Project is split into two stages:

Stage 1: construction of a gas pipeline and development of Pavlovskoye and Lipovskoye fields

Stage 2: construction of a gas pipeline extension and construction of facilities at the Nepryakhinskoye field involving the reconstruction of the Western Gas Plant with an increased capacity of 900 mmcm/year.

Total CAPEX of the Project, including historical costs, is estimated at approximately RUB 12.3 billion.

Effects of Project Finance on the Company

As noted in the Company's interim results announcement released on 30 September 2021, under the terms of the project finance there are conditions which will restrict intra group transfers and cash outflows from the Company's main operating subsidiary, Diall Alliance. This will require the Company to materially reduce its corporate overheads and streamline costs other than those related to the Project. As a consequence, it may be challenging for the Company to maintain its licence obligations with regards to the Koltogor Licences, its offshore corporate structure, and the listing of its ordinary shares on AIM. As announced on 30 September 2021, without project finance or alternative sources of capital , Diall Alliance would have been unable to service its current loans, including its credit payment due to Promsvyazbank at the end of October 2021, due to a cash shortfall expected to arise in Q4 2021.

Furthermore, as announced on 30 September 2021, the Company has been unable to repay or refinance the shareholder loan (announced on 14 July 2020 and extended most recently on 21 June 2021) (the "Shareholder Loan") and will need to seek authority to issue new ordinary shares pursuant to the agreed conversion terms of 27 pence per share (if such conversion is requested).

The Board and management will conduct a thorough and c omprehensive analysis of alternative options to enable the Company to finance or, if necessary, reduce the Company's corporate overheads. However, given the Company has for some time been unable to attract either public or bank finance, it is likely that the Company will be unable to maintain the listing of its ordinary shares on AIM beyond the next few months. Further information will be provided in due course.

Lea Verny, Chairman, commented

"The signing of project finance for East Bortovoy and the development of those fields is both exciting and critical for the Company to ensure its future prosperity. An indirect consequence of the project finance is that the Company will have to substantially reduce its costs. In light of this, it is important to the Board that we, together with management, evaluate all alternative options to finance corporate overheads and find a solution which will be in the best interests of the Company and its shareholders as a whole. We will provide further information regarding this in due course."

Enquiries:

 
 Zoltav Resources Inc.                        Tel. +44 (0)20 7390 
                                                             0234 
  Lea Verny, Non-executive Chairman         (via Vigo Consulting) 
 SP Angel Corporate Finance LLP (Nomad        Tel. +44 (0)20 3470 
  and Broker)                                                0470 
  John Mackay / Jeff Keating / Adam Cowl 
 Vigo Consulting                            Tel. +44 (0)20 7390 
  Ben Simons / Fiona Hetherington                   0234 
 

Market Abuse Regulation (MAR) Disclosure

The information contained within this announcement is deemed to constitute inside information as stipulated under the Market Abuse Regulation ("MAR") (EU) No. 596/2014, as incorporated into UK law by the European Union (Withdrawal) Act 2018, as amended. Upon the publication of this announcement, this inside information is now considered to be in the public domain.

About Zoltav

Zoltav is an oil and gas exploration and production company focused on Russia . The Company holds the Bortovoy Licence in the Saratov region of Southwestern Russia, a 3,215 sq km area along the northern margin of the Pre-Caspian basin, one of the largest hydrocarbon basins in the CIS. The Bortovoy Licence contains a number of productive gas fields in the west of the Licence and a processing plant. The Company is planning to commercialise the eastern fields of the Bortovoy Licence. For further information on Zoltav, or to sign up for our news alert service, visit: www.zoltav.com.

Glossary

 
 Bcm    Billion cubic metres 
 km     Kilometre 
 mmcm   Million cubic metres 
 RUB    Russian Ruble 
 

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October 04, 2021 02:00 ET (06:00 GMT)

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