Strategic, Financial, Operational Update

 

Caspian Sunrise  PLC

("Caspian Sunrise" or the "Company")

 

Strategic, Financial, Operational and shareholding update

 

Introduction

The Board of Caspian Sunrise is pleased to provide the following strategic, financial and operational update together with details of new shares to be issued and a reorganisation of the shareholding of the Oraziman family.

 

Shareholders are also directed to the responses to shareholder questions, which will be posted later today to

www.caspiansunrise.com/investors/responsestoshareholdersquestions.

 

Background

While the past few years have been difficult it seems clear that the Group has turned the corner both operationally and financially. Accordingly, we are now in a position to return to a more managed approach to the development of the Group's assets.

 

Financial position

Our financial position is materially better in than in recent times. This better financial position provides the opportunity to increase the pace at which we seek to develop our assets, and in particular BNG.

 

Oil prices

The continued strong oil price provides the backdrop to our financial position. At $70 plus per barrel the price achieved on international market is now approximately four times greater than at the low point of 2020.  Additionally, the rapid recent increase in domestic prices to approximately $19 per barrel is approximately three times the price received for most of 2020.

 

Increased production

The additional revenue from the production at our first horizontal well 154 provides a significant boost to operating cashflows. We expect this to further improve as production levels at Well 154 increase and from October as the South Yelemes wells resume production.

 

Increased proportion of production to be sold internationally

We are now close to repaying all the historic local oil trader funding provided with respect for domestic sales. Once done we expect a greater share of our total production to be eligible for international rather than domestic sales.

 

We own our equipment

In recent years we have opportunistically acquired drilling equipment at what we consider to be low prices. This significantly reduces both the drilling costs and the delays in relying on third party equipment.

 

As important as the reduced cost is the flexibility that owning our own equipment provides. We therefore expect to become far more efficient in undertaking drilling activities.

 

No external debt

Despite the extremely tight financial position over the past few years the Group has, with the exception of the amounts due to the Oraziman family, no external debt.

 

To further improve the ability to develop assets the Oraziman family have, subject to independent shareholder and regulatory approval, agreed to convert their entire debt of approximately $6.2 million to Caspian Sunrise shares to be issued at a price of 3.2p per share. A General Meeting will be convened in due course to seek the confirmation of independent shareholders to the terms of such a conversion.

 

Dividends

It has been a long-held objective of the group to be a regular payer of dividends. Accordingly, at the General Meeting referred to above, shareholders will also be asked to approve a capital reduction required to allow the payment of dividends.

 

BNG

 

Operational update

Production from the BNG Contract Area is currently running at the rate of 1,950 bopd, with 100% coming from 8 wells on the MJF structure. Included in this production is a contribution from New Well 154 of approximately 700 bopd.

 

Work so far this year on the existing four Deep Wells has not resulted in any material oil flows.

 

Operational plans

 

Next MJF well

Following the success of our first horizontal well, Well 154, we now plan to drill a horizontal side track from a depth approximately 2,200 meters from existing Well 153.  The side-track is planned to be approximately 200 meters in length.

 

We shall use one of our RT50 rigs with the drilling expected to be complete by the end of August 2021.

 

Deep Well A8

Also in August 2021, we plan to re-commence drilling A8 from the current 4,500 meter depth to the original planned depth of 5,300 meters, targeting a possible structure the Devonian. This drilling work is expected to take approximately two months and will be undertaken using our G40 rig.

 

However, we are first clearing a large quantity of dust from the well before drilling recommences to check for oil flows at the current 4,500 meter depth.

 

New Deep Well 802

In September 2021, we plan to spud a new Deep Well 802, targeting structures in the Devonian. This will be the fifth deep well at BNG and the second on the Yelemes structure

 

The well has a planned Total Depth of 5,300 meters and will be drilled using our RT50 rig. As we have already acquired the casing for the well and will be using or own rig the additional costs are expected to be limited to $5 million.

 

Drilling is expected to take six months to complete.

 

A5

Deep Well A5 was the first deep well drilled on the BNG Contract area and is the one we still believe may have the greatest production levels, once flowing.

 

We plan to drill a new side-track at this well from a depth of 3,850 meters to 4,500 meters commencing in October 2021 provided we have access to new drill pipes.

 

The side-track will be drilled using our G40 rig and once started is expected to take three months to complete.

 

Deep Wells A6 & 801

The chemicals used earlier in the year at deep Wells A6 and 801 did not produce the results we hoped for. We are working with international experts to identify chemicals better suited to work in extremely high temperatures. It will only be when we have confidence in the results of this investigative work that we will look to re-frack both Deep Wells A6 and 801.

 

3A Best

At 3A Best the responsibility to fund the next stage of development will rest with our new partners once the updated licence is issued.

 

Caspian Explorer

The initial charter for the Caspian Explorer since its acquisition in October 2020, is due to end in August 2021. While there has been interest in both multiple future operational charters and also in acquiring the Caspian Explorer outright to date none of this interest has translated into a contract.

 

The income from the first charter more than covers the operating costs since acquisition and the Board continue to regard the Caspian Explorer as a valuable asset with the expectation it will generate meaningful cash for the rest of the Group in the years to come.

 

New rig

We have agreed to acquire a further workover rig for a consideration of $750,000 with the consideration to be settled in Caspian Sunrise shares to be issued at a price of 2.844p per share. The new rig will be used initially for workovers on the MJF structure where some of the earlier wells are showing signs of decline.

 

Using an exchange rate of £1 - $1.39, would results in 18,972,164 new shares to be issued to the rig owner.

 

We have also agreed to issue 562,500 shares, credited as fully paid, to staff below board level as reward for their work on the successful horizontal well.

 

Application will made to London Stock Exchange for these shares to be admitted to trading on AIM ("Admission"), and dealings in the new ordinary shares are expected to commence on or around 12 August 2021. The new shares will, when issued, rank pari passu in all respects, and carry the same rights as the existing Ordinary Shares. Following Admission the total number of ordinary shares in issue will be 2,110,771,664.

 

Oraziman family shareholdings

 

Akku Investments

In December 2020, the Company announced the intention of Aibek Oraziman and Aidana Urazimanova, the adult children of Kuat Oraziman, to pool their shares in Akku Investments, a new Kazakh registered entity. 

 

After further investigation they have decided to retain their separate beneficial ownerships but have appointed Akku Investments to act as the discretionary manager of these holdings, including deciding how the shares are to be voted at General Meetings.

 

Kuat Oraziman

The Company has also been informed that Kuat Oraziman, the CEO of the Company, has gifted for zero consideration the 41,485,330 shares equally to Aibek Oraziman and Aidana Urazimanova and accordingly Kuat Oraziman no longer holds any shares in the Company.

 

At today's date the Oraziman family continue to hold 903,429,585 shares representing 42.80% of the shares in issue following the issue of the new rig consideration shares and the staff reward shares referred to above.

 

The beneficial holdings of each member of the Oraziman family are now:

 

Aibek Oraziman (non-executive director) #                           528,476,278 shares 25.04%

Aidana Urazimanova                                                              374,953,307 shares 17.76%

 

# Included in the above are 57,369,124 shares held by the late Mr Rafik Oraziman, which are going through probate.

 

Following the proposed debt conversion referred to above and which is conditional on independent shareholder and regulatory approval the Oraziman family would own 1,042,253,483 shares representing 46.33 per cent of the total shares in issue.

 

 

Comment

 

Clive Carver, non-executive chairman said

 

"The improvement in the Group's financial position allows a return to a more expansive approach to the development of the Group's assets.

 

The success of our first horizontal well demonstrates what we believe may be possible on the two shallow structure at BNG, namely the MJF and South Yelemes, both of which should have full international licences by October 2021, with the ability to sell the majority of oil produced by refence to international rather than domestic prices.

 

The intention to clear the way for the commencement of dividend payments is expected to lead to an increase in the interest in the Group's shares from investors seeking a regular dividend return.

 

We therefore look forward to moving out of a difficult period into one where we can look forward to further operational success."

 

 

Contacts:

 

Caspian Sunrise PLC

 

Clive Carver

Chairman                                                                                +7 727 375 0202

 

WH Ireland, Nominated Adviser & Broker

 

James Joyce                                                                            +44 (0) 207 220 1666

James Sinclair-Ford

 

Qualified person

 

Mr. Asslybek Umbetov, a member Association of Petroleum Engineers, has reviewed and approved the technical disclosures in this announcement.

 

This announcement has been posted to:

www.caspiansunrise.com/investors

 

The information contained within this announcement is deemed by the Company to constitute inside information under the Market Abuse Regulation (EU) No. 596/2014.