Russia's Zoltav secures $115mn in project financing
Russia-focused junior Zoltav has secured two loan facilities worth 8.4bn rubles ($115mn) to develop a group of gas fields in the Saratov region, the company said in a London stock exchange notice on October 4.
Russian state lender Sberbank is providing two non-revolving credit facilities to the company worth 7.7bn rubles and 700mn rubles respectively, with repayment dates of September 25, 2031, and January 1, 2024.
The first loan will go towards commercialising the eastern gas fields at the Bortovoy licence in Saratov, while the second will be used to pay VAT on the project's capital expenditure. Only two fields in the licence, Zhdanovskoye and Karpenskoye, have so far been developed, and their reserves have been 70% and 40% depleted respectively. Production is expected to become uneconomical within two to three years.
There are a further seven fields at Bortovoy that have not been exploited. Zoltav aims to commission five of these between 2022 and 2030. The Pavlovskoye field is scheduled for launch in February 2022, Lipovskoye in July 2022, Nepryakhinskoye in March 2023, Mokrousovskoye in 2028 and West Lipovskoye in 2030.
As part of the project, Zoltav said it would build a 206-km pipeline and expand the capacity of the Karpenskoye gas processing plant from 525mn to 900mn m3/year. The overall capital spend is estimated at 12.3bn rubles.
Zoltav chairman Lea Verny said securing financing for the project was "both exciting and critical for the company to ensure its future prosperity," but warned that "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," she said.
Zoltav noted that it might not be able to fulfil its licence obligations at the Koltogor licences in light of the cost cuts, as well as maintain its offshore corporate structure and its listing in London. Without the project financing, the company said it would have been unable to service its current loans, including credit payments to Russia's Promsvyazbank due at the end of this month. It has also been unable to repay or refinance a shareholder loan.