Volga Gas plc
Annual Report  
and Accounts 2015
Volga Gas plc  Annual Report and Accounts 2015 Introduction
Volga Gas plc is an 
independent oil and gas 
exploration and production 
company focused on the Volga 
Region of Russia. It has 100% 
interests in four oil and gas 
exploration and production 
licences in the Saratov and 
Volgograd regions.
Contents Introduction
01 Overview of 2015
02 Volga at a Glance
Strategic Report
04 Chairman’s Statement
06 Chief Executive’s Report
08 Operational Review
10 Financial Review
12 Principal Risks and Uncertainties
Corporate Governance 
14 Board of Directors
16 Corporate Governance Statement
18 Report of the Directors
21 Directors’ Remuneration Report
Financial Statements
23 Independent Auditor’s Report
24 Group Income Statement
24  Group Statement of  
Comprehensive Income
25 Group Balance Sheet
26 Group Cash Flow Statements
27 Company Balance Sheet
28	 Company	Cash	flow	Statements
29  Group and Company Statements of 
Changes in Shareholders’ Equity
30  Notes to the IFRS Consolidated 
Financial Statements
Notice of Meeting and Other Items
46 Notice of Meeting
48 Glossary of Technical Terms
IBC Corporate Directory 01 Volga Gas plc  |  Annual Report and Accounts 201 5
Strategic Report
Overview of 201 5
• Concluded successful 
development drilling 
operations on the  
VM	field
• Increased throughput 
of gas at the processing 
plant by 50% in 
December 2015
• Development of  
export channels 
for condensate
• Maintained positive net 
cash balances and 
remained debt free
Overview Development drilling on the VM field
 – Completed drilling operations on VM#3 
and VM#4 wells.
 – Estimated productive capacity of both 
wells in excess of expectations.
 – Sufficient	to	sustain	planned	plateau	of	 
1 million cubic metres per day of total 
production.
Increased throughput at the Dobrinskoye 
gas processing plant
 – 50% increase in output to 750,000 cubic 
metres per day achieved in December 
2015.
 – Plans for further increase after 
construction of amine based gas 
sweetening plant.
Development of export routes for 
condensate
 – During 2015 there were periods when 
the local domestic market was unable 
to take our condensate production.
 – Export routes developed to provide 
additional	commercial	flexibility	to	
the business.
Net cash position remained positive 
throughout 2015
 – Capital expenditure managed to 
remain maintain positive cash 
balances through the year. 
 – Reduced revenue and cash 
generation with weak oil prices and 
devaluation of the Ruble.
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Black Sea
Moscow
Russia
Ukraine
Belarus
Vostochny 
Makaroyskoye
Karpensky
Urozhainoye-2
Dobrinskoye
Strategic Report
Volga at a Glance
Our assets are located in an established oil and 
gas	province.	The	area	benefits	from	the	existing	
rail, road and pipeline infrastructure and proximity 
to Russia’s main energy markets. 03 Volga Gas plc  |  Annual Report and Accounts 201 5
Dobrinskoye gas processing plant
2015 Progress
Completed various minor upgrades 
mandated by regulatory authorities. 
Increased throughput to 750,000 cubic 
metres (26.5 million cubic feet) per day.
2016 Objectives
Improve	cost	efficiency	of	the	current	plant	
operations. Progress plans for conversion to 
amine based gas sweetening and for 
eventual increase in throughput to one 
million cubic metres (35.3 million cubic feet) 
per day.
Vostochny	Makarovskoye	(“VM”)	gas/condensate	field
2015 Progress
Commenced drilling operations on the 
VM#3 and VM#4 wells. Both wells with 
estimated productivity in excess of plan. 
VM#4 brought on line in December 2015.
2016 Objectives
Complete tie-back of well VM#3, planned 
workover on VM#2.
Dobrinskoye	gas/condensate	field
2015 Progress
Managed production from the two  
existing wells.
2016 Objectives
Continue to maintain production from the 
two existing wells to maximise long-term 
extraction of gas and condensate.
Uzenskoye	and	Sobolevskoye	oil	fields
2015 Progress
Managed Uzenskoye production for the 
seventh year but with continued decline. 
Attempted sidetrack drilling on VM#8 and 
Sobolevskoye wells but without success.
2016 Objectives
Maintain	production	profile	and	seek	to	
maximise extraction of oil from existing 
wells. Finalising plans for development of 
undeveloped shallower reservoir in Uzen.
Commercial
2015 Progress
Commenced exports of condensate to 
broaden the commercial options of the 
business	in	light	of	market	difficulties	
experienced earlier in 2015.
2016 Objectives
Seek	to	improve	the	cost-effectiveness	of	
exports and develop further export 
channels.
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Strategic Report
Chairman’s Statement
Mikhail Ivanov
Chairman
Dear Shareholder,
As anticipated by my predecessor in the 
2014 Annual Report, 2015 was a challenging 
year for the oil and gas industry worldwide, 
for Russia, and no less challenging for Volga 
Gas. The collapse in oil prices and in the 
value	of	the	Russian	Ruble	had	significant	
impact	on	the	financial	statements	and	the	
performance of the Company as reported in 
US Dollars. Furthermore, changes to the 
production tax formulae that came into 
effect	in	2015	meant	that	a	greater	
proportion of gross revenue was paid out in 
taxes than in previous years.
However, on an operational level, the results 
of 2015 were satisfactory. The development 
drilling on the Vostochny Makarovskoye 
(“VM”)	field	was	successfully	concluded	
during	the	year,	which	will	enable	this	field,	
the Group’s principal producing asset, to 
reach and sustain the planned plateau 
production rate of one million cubic metres 
per day of gas plus associated condensate. 
With	production	from	the	first	of	the	two	
new wells coming only in December 2015, 
this drilling activity did not make a 
significant	contribution	to	the	production	
for the full year. However, during mid 
December 2015, new production from the 
VM#4 well enabled total output from the 
VM	and	Dobrinskoye	fields	to	reach	the	
intermediate target rate of 750,000 cubic 
metres per day of gas plus 180 tonnes per 
day of condensate, in total approximately 
5,700 barrels of oil equivalent per day. This 
production is the core of stable production 
which provides the main cash generation 
engine for the Group.
The next strategic development to be 
undertaken is the further enhancement of 
the	existing	gas	processing	facilities,	first	to	
introduce	a	more	efficient	process	for	the	
sweetening of the gas and secondly to 
capture for sale the liquid petroleum gases 
(“LPG”)	that	are	currently	vented	and	flared.	
The	former	is	intended	to	achieve	significant	
cost savings and enable higher production 
rates of over one million cubic metres per 
day of gas, while the latter will provide an 
additional	and	potentially	highly	profitable	
product stream.
Meanwhile, however, the Group continues  
to	face	a	number	of	significant	challenges,	
not the least of which is the general 
economic situation in Russia, where the 
dramatic fall in international oil prices has 
had	a	significant	impact	on	the	domestic	
economy	as	well	as	on	the	profitability	and	
cash generation from our production.
While the Group remains in a healthy 
financial	position	with	positive	net	cash	
balances, the Board has made the strategic 
decision to preserve liquidity and to reduce 
capital expenditures to a minimal level. This 
means that the strategic investments 
outlined earlier will need to be deferred 
until cash generation recovers to a 
sustainably higher level than currently being 
experienced	or	acceptable	external	finance,	
consistent	with	a	prudent	financial	strategy,	
can be arranged.
Volga	Gas	continues	to	benefit	from	low	
operating	costs	and,	with	its	fields	based	
close to market, is able to operate 
profitability	even	with	significantly	reduced	
oil and gas prices. During 2015 there were 
periods when local market conditions  
made	it	difficult	to	sell	our	condensate	
production and during these periods, gas 
and condensate production had to be 
suspended. Towards the end of 2015, the 
Group developed channels for exporting 
condensate and consequently there are 
alternatives, albeit less economically 
attractive, to sales solely into the local 
domestic market.
The	Group	holds	significant	proven	reserves	
in	its	three	principal	fields.	These	reserves	
form the basis of sustainable production 
with growth potential in the near term. 
These assets provide a platform for the 
Group to grow in the future, both through 
successful exploration and by selective  
value accretive acquisitions. The Board 
believes that Volga Gas has a strong asset 
base	and	the	financial	and	operational	
capability to develop and extend these 
assets to provide long-term value growth 
for our shareholders.
Finally, I would like to pay tribute to my 
predecessor as Chairman, Aleksey Kalinin, 
for his leadership of the Company since its 
foundation and appreciation for his 
continued service as a non-executive 
director. I also welcome my successor as 
Chief	Executive	Officer,	Andrey	Zozulya,	
who assumed that position in May 2015.  
He has had to take up his responsibilities  
at a very challenging time in our industry 
and	has	the	full	support	and	confidence	of	
the Board as he manages the future 
development of the business.
Mikhail Ivanov
Chairman Volga Gas plc  |  Annual Report and Accounts 201 5 05
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Strategic Report
Chief Executive’s Report
As the Chairman has noted, Volga Gas faced 
significant	challenges	during	2015,	with	
market factors constraining gas and 
condensate	production	during	the	first	half	
of the year, declines in production from the 
mature oil wells, dramatic reductions in 
international oil prices and higher rates of 
production taxes. Each of these factors has 
had	an	impact	on	the	financial	performance	
of the Group.
There was, however, continued operational 
progress during the year. Development 
drilling	on	our	main	field,	Vostochny	
Makarovskoye (“VM”) was successfully 
concluded and towards the end of 2015, we 
increased the rate of production from the 
VM	and	Dobrinskoye	fields	by	50%.	
However, this late lift in production did not 
make a material contribution to the Group’s 
full year’s average daily production which 
was severely impacted by lower production 
earlier in the year.
Another factor in the Group’s overall 
production in 2015 was the continuing 
decline in oil production from the mature 
Uzenskoye	field.	However,	Volga	Gas	 
had made very good returns from these 
assets	and	management	has	identified	
opportunities to revive oil production both 
by further development of proven reserves 
and by exploration for new reserves. As part 
of this strategy, a number of operations 
were carried out during 2015, as detailed in 
the Operational Review, on pages 08 and 09. 
Unfortunately, these did not result in 
immediate success, but I am optimistic that 
the	strategy	will	yield	significant	levels	of	oil	
production in the future.
Andrey Zozulya
Chief	Executive	Officer
Summary and Outlook
 – Upstream development of VM gas field is effectively 
completed
 – New wells (VM#3, VM#4) expected to enable 100% increase in production 
capacity
 – Field	output	has	increased	by	50%,	fully	utilising	the	current	effective	
operational capacity of the gas plant of 750 mcm/d (26.5 mmcf/d)
 – Gas Processing Plant
 – Effective	available	capacity	is	750–1,000	mmcm/d	(26.3–35.3	mmcf/d)
 – Seeking	to	improve	operational	efficiency	in	the	current	plant
 – Aim	to	upgrade	to	amine-based	sweetening	to	enable	significant	cost	savings	
and full 35.3 mmcf/d capacity utilisation
 – Longer	term	plan	to	install	LPG	capture	=>	further	significant	increase	in	
revenues	and	in	profit	margin	expected
 – Finance
 – Strong position at start of 2015 enabled Volga Gas to complete development 
and remain net cash positive
 – Well	placed	to	benefit	from	recovery	in	oil	prices/Russian	Rouble
 – Considering raising moderate levels of debt to fund incremental capex on 
gas plant upgrade
 – Current trading and outlook
 – Production during 1Q 2016 averaged 5,550 boepd, current run rate of over 
6,000 boepd
 – Exports of condensate have enabled production to be maintained at full 
operational levels
 – Financial performance in US$ driven by oil prices, RUR rates and Mineral 
Extraction Taxes
 – Operating costs and G&A primarily RUR denominated 07 Volga Gas plc  |  Annual Report and Accounts 201 5
Following my appointment as Chief 
Executive on 5 May 2015, I decided it would 
be	most	effective	if	I	were	to	be	based	close	
to the operations in the city of Saratov, 
rather than in Moscow. Since then, I have 
initiated a restructuring of the operational 
teams with the aim of improving the 
effectiveness	of	our	operational	capabilities.	
In addition, following an incident that led to 
a loss of funds from certain of our bank 
accounts, detailed below, I decided to 
improve the online security and make 
changes	to	the	financial	management	in	 
the operating companies. I believe that  
with these changes implemented, the  
Group is well placed to develop successfully 
in the future.
2016 objectives and medium-term 
strategy
Having successfully completed the drilling 
of	the	VM#3	and	VM#4	wells,	the	VM	field	is	
now	effectively	fully	developed	and	is	
expected	to	be	able	to	deliver	sufficient	
production to maintain a production plateau 
of 1 million m
3
 per day (35.3 million cubic 
feet per day – “mmcf/d”). However, based on 
its	current	configuration,	we	believe	the	gas	
processing plant is capable of sustaining 
production at a rate of 750,000 m
3
 per day 
(26.5 mmcf/d). Following extensive technical 
evaluation and consideration of alternatives, 
it	has	been	decided	that	the	most	effective	
solution for the longer term is to re-
configure	the	gas	plant	to	utilise	an	amine	
based gas sweetening process. We believe 
that this can be achieved with a modest 
investment, recently estimated at 
approximately US$8 million. If successful, 
this	would	significantly	reduce	the	costs	of	
chemicals consumed in gas processing and 
allow the gas plant to process the targeted 
1 million m
3
 per day (35.3 mmcf/d) of gas. A 
more ambitious plan, to install equipment to 
capture and sell liquid petroleum gases 
(“LPG”), would be a follow-on project which 
could add a valuable further income stream.
Meanwhile, however, the Board of Volga  
Gas	has	decided	to	preserve	the	financial	
strength of the Group and defer capital 
expenditures while oil prices remain at  
very low levels. For the time being,  
capital expenditure will be limited to 
completing payments for ongoing  
projects and necessary items to maintain 
producing assets.
A new commercial initiative that has been 
implemented is the development of a 
channel for exports of our condensate 
production. A small number of cargoes were 
exported in November and December 2015. 
It is our aim to provide a viable alternative 
for sales in the event that the local domestic 
market for condensate closes, as it did 
during a number of weeks in 2015.
Finance
In spite of the challenges mentioned above, 
the Group managed to maintain positive net 
cash	flow	from	operations,	although	as	a	
result of the capital expenditure incurred 
during	2015,	there	was	a	net	cash	outflow	of	
US$9.0 million. This includes a sum 
equivalent to approximately US$0.7 million 
lost from certain Group bank accounts as a 
result of unauthorised transfers in an 
apparent cyberattack. The Group remained 
in a net cash position and the closing cash 
balance at 31 December 2015 was US$6.8 
million with no debt.
Further development and exploration 
expenditures in 2016 and beyond have been 
deferred	until	the	Board	is	confident	that	
these can be funded from operating cash 
flow.	In	addition,	the	Group	may	consider	a	
moderate level of borrowing to be 
appropriate	to	fund	significant	value	
accretive investments such as the upgrade 
to amine processing at the gas plant.
Current trading and outlook
During January and February 2016,  
Group production averaged 5,632 barrels  
of oil equivalent per day, in line with 
management’s plan. The gas plant is 
consistently operating at planned capacity 
of 750,000 m
3
 per day, with condensate 
output running at over 1,700 barrels per day, 
the majority of which is being sold to export 
markets. International oil prices have 
recovered from the low levels seen in 
January, as has the Ruble. Oil production is 
now a minor part of the Group’s output and 
has	suffered	moderate	disruption	as	the	
mild	winter	caused	difficulties	in	
transportation of oil sales.
In the current environment, and at current 
production rates, management expects the 
Group’s	financial	performance	in	2016	to	
improve on that of 2015. Meanwhile, new 
capital expenditure commitments have 
been reduced to minimal levels – below 
US$1.5 million.
Andrey Zozulya
Chief	Executive	Officer
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  Statements 08 Volga Gas plc  |  Annual Report and Accounts 201 5
contracted Eurasia Drilling to complete this 
well and to drill a sidetrack to the VM#4 
well, and a new rig was mobilised during 
February 2015.
The initial operation was on VM#4, a well 
that was originally drilled in 2008-2009 but 
which intersected a low permeability zone in 
the target horizon. A productive target was 
identified	with	a	bottom-hole	location	
approximately 500 metres from the original 
well. By May 2015, drilling on the VM#4 
sidetrack was concluded, the deviated well 
section having intersected a total reservoir of 
40	metres.	Based	on	flow	testing,	
management estimated that this well could 
be	the	most	productive	on	the	VM	field,	
being	capable	of	sustaining	a	flow	rate	of	up	
to 350 mcm/d (12.4 mmcf/d). The tie back of 
this well was undertaken and in December 
2015 the well was put in production. After a 
short build-up, by 16 December 2015, the 
combined daily output of gas from four wells, 
VM#1, VM#2, VM#4 and Dobrinskoye #22, 
produced 755,000 m
3
 per day of sales gas.
On conclusion of the drilling on VM#4, the rig 
was mobilised to the VM#3 location and in 
August 2015, the well reached the planned 
target depth. In this well, the top of the 
reservoir section was found higher than 
anticipated and total pay of close to 100 
metres was logged. In addition, the well  
was drilled deeper than the original plan,  
and	a	high	specification	logging	operation	
undertaken to gather data that may be used 
for	future	development	of	the	field.
Given	the	strong	flow	rates	from	VM#4,	and	
that	current	well	capacity	is	sufficient	to	fully	
utilise available plant capacity, the tie-back  
of the VM#3 well has been deferred to the 
springtime of 2016, when the operations can 
be concluded more conveniently.
Based on this successful drilling and with 
continuing management of the existing well 
stock including, as appropriate, acid wash 
treatments, it seems likely that no further 
drilling will be required to produce the VM 
field	at	the	target	plateau	rate	of	1.0	
mmcm/d (35.3 mmcf/d).
Gas processing plant
Since December 2015, the Dobrinskoye gas 
processing plant has been consistently 
operating at rates of over 750,000 m
3
 per 
day (26.5 million cubic feet per day), a 50% 
increase above the normal operating rates 
achieved in 2014 and most of 2015. While 
produced simultaneously from the wells and 
once the storage capacity at the gas plant is 
full, it is necessary to cease production.) In 
addition, during July, Gazprom was 
undertaking extensive maintenance to the 
local gas pipeline network and for this 
period, there were limitations to the volume 
of gas that could be accepted in the 
pipeline. For these reasons production 
during 2015 averaged 12.5 mmcf/d of gas 
and 784 bpd of condensate (2014: 15.5 
mmcf/d of gas and 966 bpd of condensate).
Gas continues to be sold to Trans Nafta under 
contract	at	a	fixed	Ruble	contract	gas	sales	
price. The Ruble price increased from RUR 
3,887 per thousand cubic metres (“mcm”) to 
RUR 4,201 per mcm in July 2015. However, 
with the devaluation of the Ruble during 
2015, the US Dollar equivalent of the price 
declined further during 2015. Historically, 
condensate was sold entirely into the local 
domestic market. However, with the periods 
of low domestic demand which impacted  
our business during 2015, it was decided to 
develop new commercial channels for 
exporting condensate. During November and 
December 2015, a number of cargoes of 
condensate were sold to export customers in 
the Baltic region. While realisations were less 
than we would normally achieve in the 
domestic market, exports provide a viable 
alternative sales route for our production. 
We continue to work on these sales and on 
improving the realisations.
The average gas sales price for 2015 was  
the equivalent of US$1.51 per thousand 
cubic feet, net of VAT (2014: US$2.15). 
During 2015 the average condensate sales 
price was US$23.89 per barrel (2014: 
US$45.07 per barrel).
Average unit production costs on the 
gas-condensate	fields	declined	to	US$5.06	
per boe in 2015 (2014: US$6.49). The decline 
in	the	Ruble,	in	which	effectively	all	the	costs	
are	denominated,	partly	offset	higher	costs	
associated with chemicals consumed in gas 
processing and higher costs of waste disposal 
as	well	as	other	inflationary	cost	increases.
During 2015, the main development activity 
was the drilling of the VM#3 and VM#4 
production wells. The VM#3 well had 
commenced drilling in 2014, however, the 
local drilling contractor was unable to 
overcome	mechanical	difficulties	and	the	
operations were suspended after various 
attempts. Subsequently, the Group 
Operations overview
The overall level of production in 2015, at 
3,278 boepd, was 23% below the 4,244 
boepd achieved in 2014. The principal 
reason for this was that in periods during 
January, February, and again in May and 
June 2015, the local market for our 
condensate	was	effectively	closed	and	
production of gas and condensate had to  
be suspended for a period of close to six 
weeks. In addition, we experienced 
continued declines in oil production  
from	the	mature	Uzen	field.
However, in the periods when the 
condensate market was functioning 
normally, production from the VM and 
Dobrinskoye	fields	was	exactly	as	planned.	
Furthermore with the successful completion 
of the drilling operations on the VM#3 and 
VM#4 wells, the production capacity on  
the	VM	field	increased	significantly	and,	 
in December 2015, the VM#4 well was 
brought into production, leading to an 
immediate increase of 50% in gas and 
condensate production.
As a consequence of the lower production  
in	2015,	significantly	lower	oil	prices	and	 
the devaluation of the Ruble, revenues  
were down by 56% in US Dollar terms.  
The increase in formula rates of Mineral 
Extraction Taxes put further pressure on 
EBITDA which, although still positive, was 
down by 94% compared to the 2014 level. 
Full details are discussed in the Financial 
Review on page 10.
Gas/condensate production
The	Dobrinskoye	and	VM	fields	are	managed	
as a single business unit. Production from the 
fields	is	processed	at	the	gas	plant	located	
next	to	the	Dobrinskoye	field,	extracting	the	
condensate and processing the gas to 
pipeline standards before input into 
Gazprom’s regional pipeline system via an 
inlet located at the plant. Since November 
2013, production has normally been running 
at	levels	that	reflect	the	capacity	of	the	
existing	wells	in	the	two	fields,	that	is	
approximately 500,000 m
3
 per day (17.8 
mmcf/d) of gas and 120 tonnes per day (1,050 
barrels per day(“bpd”)) of condensate.
During January and February 2015, and 
again during May and June 2015, production 
of gas and condensate had to be 
temporarily suspended since it was not 
possible to sell the condensate produced in 
the local market. (Gas and condensate are 
Strategic Report
Operational Review 09 Volga Gas plc  |  Annual Report and Accounts 201 5
the physical process plant and pipelines 
were designed to operate at 1 million m
3
  
per day, the need to dispose of bulky spent 
chemicals used in gas sweetening is the 
principal constraint on the operations.
During 2015, a number of technical and 
feasibility studies were conducted, including 
consideration of alternative sweetening 
chemical processes and a more ambitious 
project to simultaneously install amine 
sweetening and LPG extraction. Given the 
financial	constraints,	it	was	decided	that	
these investments should be deferred until 
a	significant	recovery	in	cash	generation	
could	be	confidently	expected.
Oil production
Having completed its seventh year of full 
time production, the Yuzhny Uzenskoye oil 
field	is	the	Group’s	longest	established	field.	
It continues to produce under natural 
reservoir pressure drive although water cut 
has risen. As the oil has been produced, the 
oil-water contact in the reservoir has risen 
and since the start of 2013, wells at the edge 
of	the	field	have	exhibited	some	water	cut	
and were shut in. As a consequence, oil 
production	from	the	field	has	been	managed	
at anticipated declining production rates.
During 2015, a sidetrack from the currently 
non-producing Uzen #8 well was drilled with 
the intention of producing oil from a 
potentially bypassed “attic” in the Aptian 
reservoir. Unfortunately this operation was 
not successful owing to mechanical 
difficulties,	although	at	the	equivalent	of	
US$0.4 million, the cost was modest.
There	remain	significant	proved	undeveloped	
reserves in the shallower Albian reservoir. 
Following a technical study carried out during 
2015, it appears that a viable development 
plan for this reservoir would be to drill two 
horizontal production wells. The cost of each 
of these wells is currently estimated to be 
US$2.0 million and would expect to develop 
over 2 million barrels of reserves at a capital 
cost of $4.00 per barrel of reserves. Along 
with other discretionary capital expenditure, 
however, this investment has been 
temporarily deferred.
Also during 2015, a sidetrack to the 
Sobolevskaya-11 well on the Urozhainoye-2 
licence was drilled. This well, which was 
originally drilled by a previous licencee, had 
been produced by Volga Gas during 2013 
and 2014 but was depleted. The sidetrack 
was intended to access a potential small 
undeveloped oil reserve. Mechanical 
difficulties	with	the	drilling	prevented	this	
sidetrack from reaching the intended target 
and the operations have been suspended. 
Further operations on this have been 
deferred pending evaluation.
The Group’s oil production, whilst of modest 
scale,	has	been	very	profitable	for	the	Group	
and	a	useful	contributor	of	cash	flow.	
Exploration
The	Group	has	identified	a	number	of	
exploration targets in the Karpenskiy 
Licence Area at shallow horizons of between 
1,000 and 2,000 metres depth. These 
provide low cost opportunities to add 
potentially material oil reserves.
During December 2015, an exploration well 
was drilled on one of these targets, the 
Yuzhno Mironovskaya prospect. This well 
was drilled to a total vertical depth of 940 
metres within a time of 21 days, a record 
drilling rate for the Group. After running 
logs, the principal and secondary target 
zones in the Cretaceous post-salt Albian and 
Aptian formations were found to be water 
bearing and the well was plugged and 
abandoned.	With	the	efficient	well	drilling,	
the total cost of this well was limited to 
approximately US$0.6 million.
The	Group	has	fulfilled	all	its	licence	
commitments on the Karpenskiy Licence 
Area and further drilling in the area is 
discretionary. Nevertheless future 
development of the oil potential in the 
Group’s licences is a key element of 
management’s medium-term strategy.
Oil, gas and condensate reserves as  
of 1 January 2016
During 2012, an independent evaluation of 
the Group’s oil, gas and condensate reserves 
was conducted by Miller and Lents Ltd. 
The independent assessment of the 
reserves and net present value of future net 
revenue (“NPV”) attributable to the Group’s 
three	principal	fields,	Dobrinskoye,	
Vostochny Makarovskoye and Uzenskoye, as 
at 1 August 2012, was prepared in 
accordance	with	reserve	definitions	set	by	
the Oil and Gas Reserves Committee of the 
Society of Petroleum Engineers (“SPE”). 
The above table shows the Proven and 
Probable reserves as evaluated by Miller & 
Lents as at 1 August 2012, adjusted by 
management for subsequent production.
Andrey Zozulya
Chief	Executive	Officer
Oil, gas and condensate reserves 
Oil & 
condensate
(mmbbl)
Gas
(bcf)
Total
(mmboe)
As at 31 December 2014
Proved reserves 13.428 147.1 37.894
Proved plus probable reserves 14.732 158.0 41.020
Production: 1 January – 31 December 2015 0.439 4.5 1.196
As at 31 December 2015
Proved reserves 12.989 142.6 36.698
Proved plus probable reserves 14.293 153.5 39.824
Notes:
1. There has been no external reassessment of reserves 
subsequent to the Miller and Lents reserve study of 
2012.
2.  The above reserve estimates, prepared in accordance 
with	reserve	definitions	prepared	by	the	Oil	and	Gas	
Reserves Committee of the SPE, have been reviewed 
and	verified	by	Mr	Andrey	Zozulya,	Director	and	Chief	
Executive	Officer	of	Volga	Gas	plc,	for	the	purposes	
of the Guidance Note for Mining, Oil and Gas 
companies issued by the London Stock Exchange in 
June	2009.	Mr	Zozulya	holds	a	degree	in	Geophysics	
and Engineering from the Groznensky Oil & Gas 
Institute and is a member of the Society of Petroleum 
Engineers. 
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Strategic Report
Financial Review
and producing assets (2014: US$ 5.6 million) 
and US$0.6 million was incurred on 
exploration	(2014:	nil).	The	most	significant	
components of the capital expenditure in 
2015 relate to successful drilling on the VM 
field	with	additional	sums	on	unsuccessful	
drilling on the Uzenskoye and Sobolevskoye 
fields	and	on	the	Yuzhny	Mironovskaya	
exploration prospect. The unsuccessful 
expenditure has been expensed.
Balance sheet and financing
As at 31 December 2015, the Group held 
cash and bank deposits of US$6.8 million 
(2014: US$15.8 million) with no debt. All  
of the Group’s cash balances are held in 
bank accounts in the UK and Russia and  
the majority of the Group’s cash is held in  
US Dollars.
As at 31 December 2015, the Group’s 
intangible assets decreased to US$2.9 
million (2014: US$3.7 million). Property, 
plant and equipment, decreased to US$48.3 
million (2014: US$57.8 million), primarily 
reflecting	the	impact	of	foreign	exchange	
adjustments. The carrying value of the 
Group’s assets relating to its main cash 
generating units have been subject to 
impairment testing. The result of the 
impairment tests, including sensitivity 
analysis around the central economic 
assumptions as detailed in Note 4(b) to the 
Accounts, showed no requirement for 
impairment, although as noted above there 
were	impairments	and	write-offs	relating	to	
unsuccessful operations.
On 9 July 2014 the capital reduction 
approved by shareholders at the Company’s 
Annual General Meeting on 6 June 2014 
became	effective	following	confirmation	 
by	the	High	Court,	the	filing	of	the	Court	
Order and a Statement of Capital with 
Companies	House	and	the	fulfilment	of	
certain minor undertakings given to the 
Court. As a result, the Share Premium 
Account of the Company, amounting to 
US$165.9 million, was cancelled and the 
equivalent sum credited to the Company’s 
Profit	and	Loss	Account,	thereby	creating	
distributable reserves.
For the year ending 31 December 2015, the 
Group recorded a currency retranslation 
expense of US$15.3 million (2014: US$49.0 
million) in its Other comprehensive income, 
relating to the devaluation of the Ruble 
against the US Dollar.
asset impairment expenses, mainly arising 
from unsuccessful drilling activities, of 
US$3.0 million (2014: nil) the Group 
recorded an operating loss for 2015 of 
US$5.0	million	(2014:	operating	profit	of	
US$12.8 million).
Including net interest income of US$0.1 
million (2014: US$0.2 million) and other  
net gains of US$0.3 million (2014: US$3.3 
million) the Group recognised a loss before 
tax	of	US$4.6	million	(2014:	profit	before	tax	
of US$16.3 million) and reported net loss 
after	tax	of	US$4.1	million	(2014:	net	profit	
after tax of US$13.1 million) after a deferred 
tax credit of US$0.6 million (2014: deferred 
tax charge of US$3.2 million).
Included in Other gains and losses in 2015 
was a foreign exchange gain of US$1.0 
million arising from US Dollar cash balances 
held by Russian subsidiaries which have the 
Ruble as functional currency (2014: US$3.3 
million loss on foreign exchange) and a loss 
of approximately US$0.7 million equivalent 
arising from unauthorised withdrawals from 
bank accounts held by the Group’s Russian 
operating subsidiaries (2014: nil).
Cash flow
Group	cash	flow	from	operating	activities	
was US$1.2 million (2014: US$16.2 million). 
Net working capital movements contributed 
cash	inflow	of	US$0.8	million	in	2015	(2014:	
US$0.6 million). With higher capital 
expenditures	in	2015,	the	net	outflow	from	
investing activities was US$8.7 million (2014: 
US$5.5	million).	Net	cash	outflow	from	
financing	activities	was	US$1.0	million	(2014:	
outflow	of	US$3.0	million),	in	both	cases	
related to payment of equity dividends.
Dividend
In July 2014, the Board announced  
the adoption of a policy to distribute 
approximately 50% of consolidated  
net	profit	after	tax	as	a	cash	dividend.	
Dividends of US$0.05 per ordinary share 
were declared in respect of the year  
ended 31 December 2014. In light of the 
material reduction in the oil price, adverse 
financial	conditions	prevailing	in	Russia	 
and the losses incurred, the Board is not 
recommending a dividend in respect of  
the year ended 31 December 2015.
Capital expenditure
During 2015 capital expenditure of US$10.4 
million was incurred (2014: US$5.6 million), 
of which US$9.8 million was on development 
Results for the year
In 2015, the Group generated US$17.8 
million in turnover (2014: US$39.4 million) 
from the sale of 438,910 barrels of crude oil 
and condensate (2014: 603,950 barrels) and 
4,545 million cubic feet of natural gas (2014: 
5,671 million cubic feet). 
The average price realised for liquids  
was the equivalent of US$25.16 per barrel 
(2014: US$45.07 per barrel). Oil and 
condensate sales were primarily made into 
the domestic market during the period, 
although during November and December 
2015 approximately 12,000 barrels of 
condensate, a little less than 2% of the total 
liquids sales, were exported to customers in 
Lithuania (2014: nil). Our oil and condensate 
sales	prices	in	the	domestic	market	reflect	
international prices after adjusting for 
export taxes and transportation costs.
The gas sales price during 2015 averaged 
US$1.49 per thousand cubic feet (2014: 
US$2.15 per thousand cubic feet), the  
fall being entirely attributable to the 
devaluation of the Ruble. The sales price of 
gas in Rubles increased by 8.1% in July 2015 
(9.5% in July 2014). Production activities 
generated	a	gross	profit	of	US$2.2	million	in	
2015 (2014: US$16.9 million).
In 2015, the total cost of production 
decreased to US$7.4 million (2014: US$9.5 
million),	primarily	reflecting	the	effect	of	
devaluation on our predominantly Ruble 
denominated costs. Production based taxes 
were US$5.9 million (2014: US$8.3 million) 
reflecting	lower	volumes	and	the	impact	of	
lower oil prices and Ruble exchange rates  
on Mineral Extraction Tax (“MET”) rates. 
However, with formula changes coming into 
effect	on	1	January	2015,	MET	paid	in	2015	
represented 35% of revenues (2014: 21.2% 
of revenues).
Operating and administrative expenses  
in 2015 were US$3.4 million (2014:  
US$4.2 million).
The	Group	experienced	a	significant	
reduction	in	EBITDA	(defined	as	operating	
profit	before	non-cash	charges,	including	
exploration expense, depletion and 
depreciation) to US$0.9 million (2014: 
US$17.4 million) as a result of the lower 
revenues	partly	offset	by	lower	expenses.
After incurring exploration and evaluation 
expenses of US$0.6 million (2014: nil) on 
unsuccessful exploration drilling and other  11 Volga Gas plc  |  Annual Report and Accounts 201 5
The Group’s committed capital expenditures 
are	less	than	expected	cash	flow	from	
operations and cash-on-hand and such 
expenditures can be managed in light of the 
sharp reduction in international oil prices 
and the devaluation of the Ruble. The Group 
may consider additional debt facilities to 
fund the longer-term development of its 
existing licences and operational facilities  
as appropriate. 
The	Group’s	financial	statements	are	
presented on a going concern basis, as 
outlined in note 2.1 to the Accounts.
Tony Alves
Chief	Financial	Officer
Five year financial and operational summary
Sales volumes 2015 2014 2013 2012 2011
Oil & condensate (barrels) 438,910  603,950  547,257  529,501  546,817 
Gas (mcf) 4,545  5,671  3,128  1,193  1,348 
Total (boe) 1,196,410  1,549,117  1,068,585  728,334  771,479 
Operating Results (US$ 000) 2015 2014 2013 2012 2011
Oil and condensate sales 11,041  27,220  26,067  25,526  25,425 
Gas sales 6,786  12,203  8,554  2,769  3,146 
Revenue 17,827  39,423  34,621  28,295  28,571 
Production costs (6,016) (7,805) (5,946) (3,776) (3,126)
Production based taxes (5,877) (8,344) (8,095) (8,951) (9,537)
Depletion, depreciation and other (2,369) (4,656) (2,611) (2,280) (2,641)
Other (1,327) (1,709) (1,799) (1,562) (991)
Cost of sales (15,589) (22,514) (18,451) (16,569) (16,295)
Gross profit 2,238  16,909  16,170  11,726  12,276 
Selling expenses (319) –  –  –  – 
Exploration expense (635) – (2,519) (8,475) (200)
Write-off	of	development	assets (2,950) – (1,439) (188) (5,612)
Operating, administrative & other expenses (3,377) (4,157) (4,029) (8,969) (5,991)
Operating profit/(loss) (5,043) 12,752  8,183 (5,906) 473 
Net realisation 2015 2014 2013 2012 2011
Oil & condensate (US$/barrel) 25.16  45.07  47.63  48.21  46.50 
Gas (US$/mcf) 1.49  2.15  2.73  2.32  2.33 
Operating data (US$/boe) 2015 2014 2013 2012 2011
Production and selling costs 5.29  5.04  5.56  5.18  4.05 
Production based taxes 4.91  5.39  7.58  12.29  12.36 
Depletion, depreciation and other 1.98  3.01  2.44  3.13  3.42 
EBITDA calculation (US$ 000) 2015 2014 2013 2012 2011
Operating	profit/(loss) (5,043) 12,752  8,183 (5,906) 473 
Exploration expense 635  –  2,519  8,475  200 
DD&A and other non-cash expense 5,319  4,656  4,050  5,413  8,253 
EBITDA 911  17,408  14,752  7,982  8,926 
EBITDA per boe 0.76  11.24  13.81  10.96  11.57 
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Strategic Report
Principal Risks and Uncertainties
The Group is subject to stringent 
environmental laws in Russia with regards to 
its oil and gas operations. Failure to comply 
with such laws and regulations could subject 
the Group to material administrative, civil,  
or criminal penalties or other liabilities. 
Additionally, compliance with these laws 
may, from time to time, result in increased 
costs to the Group’s operations, impact 
production, or increase the costs of 
potential acquisitions. 
The Group liaises closely with the Federal 
Service of Environmental, Technological  
and Nuclear Resources of the Saratov  
and Volgograd Oblasts on potential 
environmental impact of its operations and 
conducts environmental studies both as 
required by, and in addition to, its licence 
obligations	to	mitigate	any	specific	risk.	The	
Group’s operations are regularly subject to 
independent environmental audit.
The Group did not incur any material costs 
relating to the compliance with 
environmental laws during the period.
Risk of operating oil and gas properties
The oil and gas business involves certain 
operating hazards, such as well blowouts, 
cratering,	explosions,	uncontrollable	flows	
of	oil,	gas	or	well	fluids,	fires,	pollution	and	
releases of toxic substances. Any of these 
operating hazards could cause serious 
injuries, fatalities, or property damage, 
which could expose the Group to liabilities. 
The settlement of these liabilities could 
materially impact the funds available for the 
exploration and development of the Group’s 
oil and gas properties. The Group maintains 
insurance against many potential losses and 
liabilities arising from its operations in 
accordance with customary industry 
practices, but the Group’s insurance 
coverage cannot protect it against all 
operational risks.
Foreign currency risk
The Group’s capital expenditures and 
operating costs are predominantly in 
Russian Rubles (“RUR”) while a minority of 
administrative costs are in US Dollars, Euros 
and Pounds Sterling. Revenues are 
predominantly received in RUR so the 
operating	profitability	is	not	materially	
exposed to moderate short-term exchange 
rate movements. The functional currency of 
the Group’s operating subsidiaries is the 
RUR and the Group’s assets and liabilities 
are predominantly RUR denominated. As 
of	insufficient	demand	for	the	Group’s	gas	is	
considered low. Gas sales have generally 
been conducted as expected, subject to 
occasional constraints during pipeline 
maintenance operations. However, the 
Group is studying the feasibility of 
construction of a separate pipeline to 
connect with a facility owned by a nearby 
upstream operator.
Oil and gas production taxes
The Group’s sales generated from oil  
and gas production are subject to Mineral 
Extraction Taxes, which form a material 
proportion of the total costs of sales.  
The rates of these taxes are subject to 
changes by the Russian government. 
Changes	to	rates	which	come	into	effect	
during 2015 materially increased the rates 
on crude oil, condensate and natural gas. 
With oil prices at low levels and Russian 
Government budgets under pressure, there 
are risks of further adverse changes to 
production taxes.
Exploration and reserve risks
Whilst the Group will seek to apply the latest 
technology to assess exploration licences, 
the exploration for, and development of, 
hydrocarbons is speculative and involves a 
high degree of risk. These risks include the 
uncertainty that the Group will discover 
sufficient	commercially	exploitable	oil	or	gas	
resources in unproven areas of its licences. 
Unsuccessful	exploration	efforts	may	result	
in impairment to the balance sheet value of 
exploration assets.
During 2012, the Group commissioned a 
reserve evaluation based on reporting 
standards set by the Society of Petroleum 
Engineers. If the actual results of producing 
the	Group’s	fields	are	significantly	different	
to expectations, there may be changes in 
the future estimates of reserves. These may 
impact the balance sheet carrying values of 
the Group’s Intangible Assets and the 
Group’s Property, Plant and Equipment.
Environmental risk
The oil and gas industry is subject to 
environmental hazards, such as oil spills, gas 
leaks, ruptures and discharges of petroleum 
products and hazardous substances. These 
environmental hazards could expose the 
Group to material liabilities for property 
damages, personal injuries, or other 
environmental harm, including costs  
of investigating and remediating 
contaminated properties. 
The Group is subject to various risks relating 
to political, economic, legal, social, industry, 
business	and	financial	conditions.
The following risk factors, which are not 
exhaustive, are particularly relevant to the 
Group’s business activities:
Volatility of oil prices
The supply, demand and prices for oil are 
influenced	by	factors	beyond	the	Group’s	
control. These factors include global and 
regional demand and supply, exchange rates, 
interest	and	inflation	rates	and	political	
events.	A	significant	prolonged	decline	in	oil	
and	gas	prices	could	impact	the	profitability	
of the Group’s activities. Additionally, the 
Group’s production is predominantly sold in 
the domestic Russian markets which are 
influenced	by	domestic	supply	and	demand	
factors, the level of Russian export taxes and 
regional transportation costs.
All of the Group’s revenues and cash  
flows	come	from	the	sale	of	oil,	gas	and	
condensate. If sales prices should fall below 
and remain below the Group’s cost of 
production for any sustained period, the 
Group may experience losses and may be 
forced to curtail or suspend some or all of  
the Group’s production, at the time such 
conditions exist. In addition, the Group would 
also have to assess the economic impact of 
low oil and gas prices on its ability to recover 
any losses the Group may incur during that 
period and on the Group’s ability to maintain 
adequate reserves.
The Group does not currently hedge its crude 
oil production to reduce its exposure to oil 
price volatility as the structure of taxes 
applied to oil and condensate production in 
Russia	effectively	reduce	the	exposure	to	
international market prices for oil.
Market risks
The Group’s revenues generated from oil and 
condensate production have typically been 
from sales to local domestic customers. 
There have been periods when the local 
market has been unable to purchase 
condensate, causing temporary suspension 
of production and loss of revenues. The 
Group has developed arrangements to sell oil 
and condensate into regional export markets 
to mitigate this risk. Gas sales are made, via 
an intermediary, into the domestic market via 
the Gazprom pipeline network. The region  
in which the Group operates is reliant on 
external gas supplies. Consequently the risk  13 Volga Gas plc  |  Annual Report and Accounts 201 5
the Group’s presentational currency is the 
US	Dollar,	the	significant	devaluation	of	 
the RUR against the US Dollar negatively 
impacts	the	Group’s	financial	statements.
Business in Russia
Amongst the risks that face the Group in 
conducting business and operations in 
Russia are:
 – Economic instability, including in other 
countries or the global economy that 
could lead to consequences such as 
hyperinflation,	currency	fluctuations	and	
a decline in per capita income in the 
Russian economy.
 – Governmental and political instability 
that could disrupt, delay or curtail 
economic and regulatory reform, 
increase centralised authority or result  
in nationalisations.
 – Social instability from any ethnic, 
religious, historical or other divisions that 
could lead to a rise in nationalism, social 
and	political	disturbances	or	conflict.
 – Uncertainties in the developing legal and 
regulatory environment, including, but 
not	limited	to,	conflicting	laws,	decrees	
and regulations applicable to the oil and 
gas industry and foreign investment.
 – Unlawful or arbitrary action against the 
Group and its interests by the regulatory 
authorities, including the suspension or 
revocation of their oil or gas contracts, 
licences or permits or preferential 
treatment of their competitors. 
 – Lack of independence and experience of 
the	judiciary,	difficulty	in	enforcing	court	
or arbitration decisions and governmental 
discretion in enforcing claims.
 – Unexpected changes to the federal and 
local tax systems.
 – Laws restricting foreign investment in 
the oil and gas industry.
Legal systems
Russia, and other countries in which the 
Group may transact business in the future, 
have or may have legal systems that are less 
well developed than those in the United 
Kingdom. This could result in risks such as:
 – Potential	difficulties	in	obtaining	
effective	legal	redress	in	the	court	of	
such jurisdictions, whether in respect of  
a breach of contract, law or regulation, 
including an ownership dispute.
 – A higher degree of discretion on the part 
of governmental authorities.
 – The lack of judicial or administrative 
guidance on interpreting applicable rules 
and regulations.
 – Inconsistencies	or	conflicts	between	and	
within various laws, regulations, decrees, 
orders and resolutions.
 – Relative inexperience of the judiciary and 
courts in such matters.
In certain jurisdictions, the commitment of 
local	business	people,	government	officials	
and agencies and the judicial system to abide 
by legal requirements and negotiated 
agreements may be more uncertain, creating 
particular concerns with respect to licences 
and agreements for business. These may be 
susceptible to revision or cancellation and 
legal redress may be uncertain or delayed. 
There can be no assurance that joint 
ventures, licences, licence applications or 
other legal arrangements will not be 
adversely	affected	by	the	jurisdictions	in	
which the Group operates.
Liquidity risk
At 31 December 2015 the Group had US$6.8 
million of cash and cash equivalents of which 
US$2.0 million was held in bank accounts in 
Russia. The Group intends to fund its ongoing 
operations and development activities from 
its cash resources and cash generated by its 
established operations. At 31 December 2015 
the Group has budgeted capital expenditures 
of less than US$1 million primarily for the 
continuing development of gas and 
condensate production and approximately 
US$1.5 million of accounts payable relating to 
capital expenditures incurred in the year 
ended 31 December 2015. The Board 
considers	that	the	Group	will	have	sufficient	
liquidity to meet its obligations. All current 
and planned capital expenditures are 
discretionary and may be deferred or 
cancelled in the light of the Group’s cash 
generation and liquidity position.
Through its ordinary course activities, the 
Group is exposed to legal, operational and 
development risk that could delay growth in 
its cash generation from operations or may 
require additional capital investment that 
could place increased burden on the Group’s 
available	financial	resources.	
The Group is also exposed to fraudulent 
transfers of funds from its bank accounts. 
During the year ended 31 December  
2015, the Group enhanced its protections 
and	procedures	after	suffering	such	
fraudulent transfers.
Capital risk
The Group manages capital to ensure that it 
is able to continue as a going concern whilst 
maximising the return to shareholders. The 
Group is not subject to any externally 
imposed capital requirements. The Board 
regularly monitors the future capital 
requirements of the Group, particularly  
in respect of its ongoing development 
programme. Management expects that  
the	cash	generated	by	the	operating	fields	
will	be	sufficient	to	sustain	the	Group’s	
operations and committed capital 
investment for the foreseeable future and 
has a policy of maintaining a minimum level 
of liquidity to cover forward obligations. 
Further short-term debt facilities may be 
arranged	to	provide	financial	headroom	 
for future development activities.
Tony Alves
Chief	Financial	Officer
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Board of Directors
Corporate Governance
Mikhail Ivanov Non-Executive Chairman
Mr	Ivanov	was	Chief	Executive	Officer	of	the	Company	from	its	foundation	until	5	May	2015.	
Mr Ivanov was also a Partner and Director of Oil and Gas Projects at Baring Vostok Capital 
Partners. He has a long history of involvement in the oil sector. He worked for over ten  
years at Schlumberger, the international oil services company, where he served as head of 
its Iran operations and was responsible for business development in Russia. Prior to joining 
Shlumberger, he founded and headed two companies that focused on oil production and 
service. Mr Ivanov holds an MS degree in Geophysics from Novosibirsk State University and 
an MBA from the Kellogg School of Management of Northwestern University. He is an 
elected member of the Society of Petroleum Engineers.
Appointed to the Board: 25 July 2006
Appointed as Chairman: 5 June 2015
Committee membership: n/a
Andrey Zozulya Chief	Executive	Officer,	Executive	Director
Mr	Zozulya	is	a	Russian	citizen	and	has	over	20	years’	experience	in	the	oil	sector	in	Russia	
both with major oil and oil service companies, including over ten years with Schlumberger. 
He also has experience of operating in the Saratov region in which Volga Gas’ operations  
are based. He has a degree in Geophysics and Engineering from the Groznensky Oil & Gas 
Institute and is a member of the Society of Petroleum Engineers.
Appointed to the Board: 5 May 2015
Committee membership: n/a
Antonio Alves Chief	Financial	Officer,	Executive	Director
Mr Alves has had experience with the independent oil and gas industry for over 20 years  
as one of the leading equity analysts covering the sector. Prior to joining Volga Gas, he was 
head of oil and gas research for KBC Peel Hunt and was closely involved with the Company’s 
2007 IPO. He previously held positions with Investec Securities, The Bell Group International 
and Schroders. He read Mathematics at Cambridge University between 1977 and 1983 both 
as an undergraduate and a post-graduate research student.
Appointed to the Board: 28 January 2009
Committee membership: n/a
Michael Calvey Non-Executive Director
Mr Calvey is a Senior Partner of Baring Vostok Capital Partners and a Director of Baring 
Private Equity International and is on the Boards of several of Baring Vostok’s portfolio 
companies. He began working in Moscow in 1994 as one of the members of the consulting 
committee of the First NIS Regional Fund. He is a member of the investment committees of 
three Baring Vostok funds. He is also a member of the Investment Committees of the Baring 
Asia and Baring India funds. Before 1994, Mr Calvey lived in London and New York, where he 
worked at the European Bank for Reconstruction and Development (“EBRD”) and Salomon 
Brothers. At EBRD he was responsible for investments in the energy sector of Central and 
Eastern Europe. At Salomon Brothers Mr Calvey worked on mergers and acquisitions and 
capital market projects in the oil and gas sector. He is a member of the Boards of the 
Atlantic Council and the Emerging Markets Private Equity Association.
Appointed to the Board: 29 September 2006
Committee membership: : Audit, Nomination 15 Volga Gas plc  |  Annual Report and Accounts 201 5
Stephen Ogden Non-Executive Director
Mr Ogden is a Non-Executive Director of the West African shopping mall operator 
Persianas. He was previously a Non-Executive Director of United Confectioneries  
(Russia), Heineken Russia and Metropolis Media (former Yugoslavia). Mr Ogden was Chief 
Financial	Officer	of	the	Bochkarev	Brewery	in	St	Petersburg	from	1997	to	2002.	Prior	to	
becoming	Chief	Financial	Officer	of	Bochkarev,	Mr	Ogden	was	an	auditor	with	KPMG	and	
PricewaterhouseCoopers, and Financial Controller of CS First Boston (Moscow). Mr Ogden 
has a joint honours degree in economics & politics from Durham University, England, and is  
a	qualified	British	chartered	accountant	(“FCA”).	
Appointed to the Board: 14 March 2007
Committee membership: Audit, Nomination, Remuneration
Aleksey Kalinin Non-Executive Director
Mr Kalinin served as Chairman of the Board from 14 March 2007 until 5 June 2015, 
remaining as a Non-Executive Director. Mr Kalinin is a Senior Partner of Baring Vostok 
Capital Partners. He joined Baring Vostok in 1999 from Alfa Capital, where he served for six 
years as the Director of the Department for Direct Investments. Aleksey represents the 
interests of Baring Vostok’s funds on the Board of Directors of a wide range of portfolio 
companies. He has a doctorate from the Moscow Power Engineering Institute, where he 
conducted	scientific	research,	lectured	for	12	years	and	served	as	the	Director	of	the	Youth	
Center	for	Scientific	and	Technical	Creativity.
Appointed to the Board: 29 September 2006
Committee membership: Remuneration
Vladimir Koshcheev Non-Executive Director
Mr Koshcheev currently acts as President of Joint Stock Company “NPO POG”. Until 2009  
he was President of Pervaya Investizionno–Stroitelnaya Company LLC, Spinaker LLC. He has 
been Chairman of CJSC AKSM since 2002. Mr Koshcheev was President of Privolzhskaya 
Neftyanaya Company LLC between 2003 and 2005 and was previously a shareholder in and 
acted as President of Vesla. Mr Koshcheev received a specialist diploma from Moscow State 
Technical University in 1978 and he is a member of the Russian Academy of Natural Sciences.
Appointed to the Board: 29 September 2006
Committee membership: n/a
Ronald Freeman Non-Executive Director
Mr Freeman is a member of the Executive Committee of the Atlantic Council of the United 
States (Washington DC), and a past independent director on the boards of Sberbank, 
Severstal, and Troika Dialog. From 1973 to 1991 and from 1997 until his retirement from 
Citigroup as co-head of European Investment Banking in 2000, he was an investment  
banker	specialising	in	financing	and	mergers	and	acquisition	for	companies	in	the	oil	and	 
gas industry with Salomon Brothers, now a unit of Citigroup. From 1991 to 1997, he was 
head of the Banking Department of the European Bank for Reconstruction and 
Development (London).
Appointed to the Board: 14 March 2007
Committee membership: Audit, Nomination, Remuneration
 S t r a te gic  
  Report
 C or p ora t e 
  Governance
Financial 
  Statements 16 Volga Gas plc  |  Annual Report and Accounts 201 5
Corporate Governance Statement
Corporate Governance
Introduction
The Board’s overriding objective is to ensure 
that the Group delivers long-term capital 
appreciation for its shareholders. 
Compliance
As Volga Gas plc is quoted on the AIM 
market of the London Stock Exchange,  
it is neither required to comply with the 
2014 UK Corporate Governance Code that 
was published by the Financial Reporting 
Council (the “Code”) nor issue a statement 
of compliance with it. Nevertheless, the 
Board fully supports the principles set  
out in the Code and seeks to follow  
these as best practice wherever this is 
appropriate having regard to the size of  
the Company, the resources available to it 
and the interpretation of the Code in the 
Quoted Companies Alliance Corporate 
Governance Code for Small and Mid-sized 
Quoted Companies. 
Details are provided below of how the 
Company applies the elements of the Code 
that are deemed appropriate.
Board of directors
Role of the Board
The Board’s role is to provide leadership to 
the Group within a framework of prudent 
and	effective	controls	which	enables	risk	to	
be assessed and managed. The Board sets 
the Group’s strategic aims and ensures that 
the	necessary	financial	and	human	
resources are in place for the Group to meet 
its objectives, and reviews management’s 
performance in meeting these objectives. 
The Board sets and monitors the Group’s 
values and standards and ensures that the 
Group’s obligations to shareholders and 
other stakeholders are understood and met.
The Board has a formal schedule of matters 
reserved for its approval, including:
 – Strategic and policy considerations
 – Annual budget, including capital 
expenditure
 – Interim	and	final	financial	statements
 – Dividend policy, share buy-backs or other 
distributions
 – Management structure and 
appointments
 – Mergers, acquisitions, disposals
 – Capital raising
 – Significant	changes	in	accounting	policies
 – Appointment or removal of directors or 
the company secretary
Board composition
The Board currently comprises two 
executive directors and six non-executive 
directors, of whom three are deemed to be 
independent and three non-independent:
 – Mikhail Ivanov – Non-Executive Chairman
 – Andrey	Zozulya	–	Executive	Director	and	
CEO
 – Tony Alves – Executive Director, CFO and 
Company Secretary
 – Michael Calvey – Non-Executive
 – Ronald Freeman – Independent Non-
Executive
 – Aleksey Kalinin – Non-Executive
 – Vladimir Koshcheev – Independent 
Non-Executive 
 – Stephen Ogden – Independent Non-
Executive
There is a clear division of responsibilities 
between the executive and non-executive 
directors.
Board balance and independence
The Board recognises that Messrs Kalinin and 
Calvey are not independent by virtue of their 
direct management responsibilities for the 
limited partnerships comprising Baring 
Vostok Private Equity Funds III and IV, the 
Company’s controlling shareholder 
(”Controlling Shareholder”). However, in light 
of the value, experience and contacts which 
they	afford	to	the	Company	at	this	stage	of	
its development and by virtue of the 
Relationship Agreement, which, inter alia, 
ensures that the Controlling Shareholder 
does	not	exercise	undue	influence	over	the	
Company or prevent it from acting 
independently of the Controlling 
Shareholder, the Board believes that the 
continued presence of Messrs Kalinin and 
Calvey	on	the	Board	is	beneficial	for	the	
Company. Mr Kalinin also serves as Chairman 
of the Board and was not considered to be 
independent on his appointment.
Notwithstanding under the provisions of 
the 2014 UK Corporate Governance Code as 
a Smaller Company the Company meets the 
requirements to have at least two 
independent non-executives on the Board.
All directors are permitted access to 
independent professional advice in the 
course of execution of their duties, at the 
Company’s expense.
 
The Board has established the following 
committees:
Audit Committee
The Audit Committee was established in 
March 2007 and comprises three directors: 
Mr Ogden – Chairman
Mr Freeman
Mr Calvey
The Audit Committee is responsible for 
selecting the Group’s independent auditors, 
pre-approving all audit and non-audit related 
services, reviewing with management and 
the independent auditors the Group’s 
financial	statements,	significant	accounting	
and	financial	policies	and	practices,	audit	
scope and adequacy of internal audit and 
control systems. The Audit Committee keeps 
the independence and objectivity of the 
auditor under review and a formal statement 
of independence is received from the 
external auditor each year. The audit 
committee meets at least twice each year.
Remuneration Committee
The Remuneration Committee was also 
established in March 2007 and comprises 
three directors:
Mr Freeman – Chairman
Mr Ogden
Mr Kalinin
The Remuneration Committee is responsible 
for reviewing the performance of the 
directors and for determining compensation 
of the Company’s key employees, including 
the	chief	executive	officer,	chief	financial	
officer,	and	other	key	personnel	as	may	 
be determined from time to time by  
the Remuneration Committee. The 
Remuneration Committee meets at  
least twice each year.
The Directors’ Remuneration Report is set 
out on pages 21 and 22.
Nomination Committee
The Nomination Committee was established 
in March 2007 and comprises three 
directors:
Mr Freeman – Chairman
Mr Ogden
Mr Calvey 17 Volga Gas plc  |  Annual Report and Accounts 201 5
The Nomination Committee is responsible 
for reviewing the structure, size and 
composition of the Board, making 
recommendations to the Board concerning 
plans for succession for both executive and 
non-executive directors including the Chief 
Executive and other senior management, 
preparing a description of the role and 
capabilities required for a particular 
appointment and identifying and 
nominating	candidates	to	fill	Board	
positions as and when they arise.
Board meetings
The Board met four times during the year 
ended 31 December 2015 (2014: four times) 
with the following attendance:
2015 2014
Mikhail Ivanov 4 4
Andrey	Zozulya	
(attended all 
meetings since 
appointment) 2 –
Tony Alves 4 4
Michael Calvey 4 4
Ronald Freeman 4 3
Aleksey Kalinin 4 4
Vladimir Koshcheev 4 3
Stephen Ogden 4 4
Indemnification of directors
In accordance with the Company’s Articles 
of Association and to the extent permitted 
by the law of England and Wales, directors 
are granted an indemnity from the Company 
in respect of liabilities incurred as a result  
of	their	office.	In	respect	of	those	matters	
for which the directors may not be 
indemnified,	the	Company	maintained	a	
directors’	and	officers’	liability	insurance	
policy	throughout	the	financial	year.	This	
policy has been renewed for the next 
financial	year.
Re-election of directors
The Company requires that all directors 
stand for re-election at intervals of no more 
than three years. Accordingly Messrs 
Freeman, Kalinin and Ogden will retire at 
the forthcoming AGM and will seek 
re-election by shareholders.
Internal controls
The directors acknowledge their 
responsibility for the system of internal 
controls for the Group and for reviewing its 
effectiveness.	Any	system	of	internal	
control can only provide reasonable, and not 
absolute,	assurance	that	material	financial	
irregularities will be detected or that the 
risk of failure to achieve business objectives 
is eliminated.
The Group’s risk and controls framework 
covers all material risks and controls 
including	those	of	an	operational,	financial,	
and compliance nature. Internal control 
procedures consist, inter alia, of formal 
delegations of expenditure authority by the 
Board to executive management, and 
controls relating to key stages of 
transactions including supplier approval, 
contract signature, and payment release.
In response to an unauthorised withdrawal 
of cash from Group bank accounts in an 
apparent cyberattack, management 
performed a remediation and improvement 
of internal controls around the Group’s cash 
handling procedures and security, including 
IT control processes.
The directors consider that the frequency  
of Board meetings and level of detail 
presented to the Board for its consideration 
in relation to the operations of the Group 
provide an appropriate process to identify, 
evaluate	and	manage	significant	risks	
relevant to its operations on a continuous 
basis, and this process is considered to be in 
accordance with the revised guidance on 
internal control published in October 2005 
(‘Turnbull Guidance’). 
In addition to formal Board meetings, 
management	prepare	detailed	financial	 
and operational reports on a monthly basis 
which is disseminated and discussed within 
the Board.
Investor relations
The Company places considerable 
importance on communication with 
shareholders and engages them on a wide 
range of issues. The Group has an ongoing 
programme of dialogue and meetings 
between the executive directors and 
institutional investors, fund managers and 
analysts. At these meetings a wide range  
of relevant issues including strategy, 
performance, management and governance 
are discussed within the constraints of the 
information already made public.
The Company is equally interested in the 
views and concerns of private shareholders 
and to this end ensures that the executive 
directors present the Company at forums 
where private investors are present.
Shareholders have the opportunity to meet 
and question the Board at the Annual 
General Meeting which will be held on  
10 June 2016, at which the Chairman, the 
Chairman of the Audit Committee and all 
executive directors are expected to be 
available. The notice of the AGM is posted  
to all shareholders at least 21 working days 
before the meeting. Financial and other 
information is available on the Company’s 
website (www.volgagas.com). 
By order of the Board
Tony Alves
Company Secretary
31 March 2016
 S t r a te gic  
  Report
 C or p ora t e 
  Governance
Financial 
  Statements 18 Volga Gas plc  |  Annual Report and Accounts 201 5
Report of the Directors
Corporate Governance
The directors present their report together 
with the Group’s audited consolidated 
financial	statements	for	the	period	from	 
1 January 2015 to 31 December 2015.
Results and dividend
The Group’s results are set out on pages 23 
to 28 and show net loss of US$4.1 million for 
the year ended 31 December 2015 (2014: 
net	profit	of	US$13.1	million).	On	10	June	
2015	the	Company	paid	a	final	dividend	of	
US$0.0125 per ordinary share in respect of 
the year ended 31 December 2014. The 
directors do not propose to pay a dividend 
in respect of the year ended 31 December 
2015 (2014: $0.05 per ordinary share). 
Principal activities, business review  
and future developments
Volga Gas is a public limited company 
registered in England and Wales with 
registered number 5886534, was 
incorporated in the United Kingdom on 25 
July 2006 and admitted to trading on the 
AIM market of the London Stock Exchange 
on 25 April 2007. Volga Gas operates 
primarily through subsidiary companies as 
set out in Note 2.2 to the accounts. The 
principal activity of the Group is the 
exploration, development and production 
of	its	gas,	condensate	and	oil	fields	in	the	
Volga Region of European Russia. During 
the year, the Group owned 100% interests in 
four licence areas in the Saratov and 
Volgograd regions: Karpenskiy, Vostochny-
Makarovskoye, Dobrinskoye, and 
Urozhainoye-2.
The Group’s business strategy is to maximise 
the economics of production from the 
Vostochny Makarovskoye, Dobrinskoye  
and	Uzenskoye	fields	and	to	explore	the	
potentially prospective structures on the 
Group’s licence areas. The Group also 
evaluates acquisition opportunities as part 
of its overall strategy of growing value for 
its shareholders. 
Highlights of the Group’s activities for the 
period ended 31 December 2015 are:
 – Successful development drilling 
concluded on the Vostochny 
Marakovskoye	(“VM”)	field.
 – Significant	increase	in	production	from	
the	field	achieved	in	December	2015.
 – Establishment of export channels for 
condensate sales.
The Group’s activities are described in 
greater detail in the Chief Executive’s 
Report on page 6 and in the Operational 
Review on pages 8 and 9. The principal risks 
associated with the Group’s activities are set 
out in the Risks and Uncertainties section in 
pages 12 and 13.
Key performance indicators
Given the nature of the business and that 
the	Group	has	only	three	operating	fields,	
the directors are of the opinion that further 
analysis using KPIs is not appropriate for  
an understanding of the development, 
performance or position of our business at 
this time. The directors are of the opinion 
that	the	Operational	Review	on	pages 8	
and 9	provides	the	relevant	information.
Going concern
Having made appropriate enquiries and 
having examined the major areas that could 
affect	the	Group’s	financial	position,	the	
directors	are	satisfied	that	the	Group	has	
adequate resources to continue in operation 
for the foreseeable future. Accordingly they 
consider it appropriate to adopt the going 
concern	basis	in	preparing	the	financial	
statements as described in note 2.1.
Directors
The directors who served during the year 
were:
Aleksey Kalinin, Chairman – Non-Executive 
Mikhail	Ivanov,	Chief	Executive	Officer	–
Chairman
Michael Calvey, Non-Executive  
Tony	Alves,	Chief	Financial	Officer
Ronald Freeman, Non-Executive  
Vladimir Koshcheev, Non-Executive
Stephen Ogden, Non-Executive  
Andrey	Zozulya,	Chief	Executive	Officer	
 
On	5	May	2015,	Mr	Zozulya	was	appointed	as	
a	director	and	as	Chief	Executive	Officer.	At	
the Annual General Meeting on 5 June 2015, 
Mr Kalinin relinquished Chairmanship of the 
Company and Mr Ivanov was appointed as 
Chairman. Messrs Calvey, Ivanov and 
Koshcheev	will	retire	by	rotation	and	offer	
themselves for re-election in accordance 
with the Company’s Articles of Association.
Directors’ interests
The directors serving during the year had 
the	following	beneficial	interests	in	the	
shares of the Company:
Ordinary shares of 1p each
31 December
2015
31 December
2014
Mikhail Ivanov 1,000,000 1,000,000
Andrey	Zozulya – –
Tony Alves 25,000 25,000
Michael Calvey
1
– –
Ronald Freeman 55,000 55,000
Aleksey Kalinin
1
– –
Vladimir 
Koshcheev 419,210 419,210
Stephen Ogden 205,000 205,000
  
1 Mr Calvey and Mr Kalinin are Co-Managing Partners 
of Baring Vostok Capital Partners Limited, a related 
party to Baring Vostok Nominees Limited and Dehus 
Dolmen Nominees Limited. As such Mr Calvey and Mr 
Kalinin	have	an	indirect	beneficial	interest	in	the	
Company.
Substantial shareholders
On 31 March 2016 the following parties had 
notifiable	interests	of	3%	or	greater	in	the	
nominal value of the Company’s issued 1p 
ordinary shares:
Number of 
shares Percentage
Baring Vostok 
Nominees Ltd
1
39,620,000 48.90
Dehus Dolmen 
Nominees Ltd
2
7,906,889 9.76
Mr. Nicholas 
Mathys 4,938,000 6.09
Quorum Fund Ltd 4,841,961 5.98
BNP Paribas 
Investment 
Partners S.A. 3,336,860 4.12
BlackRock 
Investment 
Management 
(UK) Limited 3,094,791 3.82
JP Morgan Asset 
Management 
(UK) Limited 2,761,720 3.41
1 Baring Vostok Nominees Ltd is a nominee vehicle 
which holds the interests of the limited partnerships 
which comprise Baring Vostok Private Equity Fund III.
2 Dehus Dolmen Nominees Ltd is a nominee vehicle 
which holds the interests of the limited partnerships 
which comprise Baring Vostok Private Equity Fund IV. 19 Volga Gas plc  |  Annual Report and Accounts 201 5
Options granted
An Executive Share Option Plan was adopted 
by the Company in July 2008 following which 
options over a total of 1,706,196 shares were 
granted to Mikhail Ivanov and to Tony Alves. 
During 2015 no further options (2014: nil) 
were eligible for vesting. The details of  
these option grants are disclosed in the 
Remuneration Report below.
Interests in contracts
There were no contracts or arrangements 
during the period in which a director of the 
Company was materially interested and 
which	were	significant	in	relation	to	the	
business of the Group.
Creditors payment policy and practice
The Group aims to pay all its creditors 
promptly. For trade creditors it is the 
Group’s policy to:
(i) agree the terms of the payment at the 
start of the business with that supplier;
(ii) ensure that suppliers are aware of the 
terms of the payment; and
(iii)pay in accordance with contractual and 
other obligations
Political and charitable contributions
No political or charitable contributions were 
made in the year (2014: nil). 
Employment policies
The Group is committed to pursuing an 
equal opportunities employment policy, 
covering recruitment and selection, training, 
development, appraisal and promotion.  
The Group recognises the diversity of 
its employees, its customers, and the 
community at large and seeks to use 
employees’ talents to the fullest. This 
approach extends to the fair treatment of 
people with disabilities, in relation to their 
recruitment, training and development. Full 
consideration	is	given	to	staff	members	who	
become disabled during employment.
Employee communication
The	Group	is	committed	to	effective	
communications, which it maintains through 
regular	information	releases	and	staff	
briefings.	Formal	communications	with	
employees take place through these 
channels. With respect to the Group’s 
operations in Russia and the recruitment  
of Russian employees, announcements, 
contracts, interviews and advertisements 
are conducted in the English and Russian 
languages, as applicable.
Health, safety and the environment
The Group’s policy and practice is to comply 
with health, safety and environmental 
regulations and requirements of the 
countries in which it operates, to protect  
its employees, contractors, assets and  
the environment.
The Group closely monitors its environmental 
obligations under the terms of its licence 
agreements. In particular, portions of the 
Karpenskiy Licence Area are located in the 
Saratovskiy Federal Nature Reserve and 
Tulipannaya Steppe Natural Sanctuary, which 
are protected by Russian environmental law. 
In accordance with Russian environmental 
law, all economic activity within the 
protected area is approved by the Russian 
government. The Group has ensured that all 
its activities minimise the impact on this 
sensitive environment.
UK Bribery Act
The Company has adopted Anti-Corruption 
and Anti-Bribery Policies and a framework 
of adequate procedures for managing the 
Volga Gas Group’s responsibilities in relation 
to the UK Bribery Act 2010.
Share capital
The Company has authorised ordinary share 
capital of 330,720,100 shares of 1p each. 
Under a special resolution by the 
shareholders of the Company on 5 June 
2015 the directors have authority to allot 
shares up to an aggregate nominal value of 
£1,000,000 of which £150,000 could be 
issued non pre-emptively, in accordance 
with sections 570 and 573 of the Companies 
Act 2006. This authority will expire the 
earlier of (i) 15 months from the passing of 
the Resolution, or (ii) the conclusion of the 
Annual General Meeting of the Company to 
be held in 2016.
Capital risk management
The Group’s objectives when managing the 
balance of equity and debt capital are (a) to 
safeguard the Group’s ability to continue  
as a going concern, (b) provide returns  
for	shareholders	and	benefits	for	other	
stakeholders and (c) to maintain an optimal 
capital structure to reduce the cost of 
capital. In order to maintain or adjust the 
capital structure, the Group may adjust the 
amount of dividends paid to shareholders, 
return capital to shareholders, issue new 
shares or sell assets to reduce debt. To date 
the Group has been funded entirely by 
equity capital other than a US$10 million 
facility that was drawn in 2012 and repaid  
in full in 2013.
Corporate Governance
The Company’s statement on Corporate 
Governance can be found in the Corporate 
Governance	Statement	on	pages 16	and 17	
of	these	financial	statements	and	form	part	
of this report by reference.
Statement of disclosure of information 
to auditor
As at the date of this report the serving 
directors	confirm	that;
 – so far as the directors are aware, there is 
no relevant audit information of which 
the Company’s auditor is unaware; and
 – they have taken all steps that they ought 
to have taken as directors in order to 
make themselves aware of any relevant 
audit information and to establish that 
the Company’s auditor is aware of that 
information.
Auditor
The Group’s auditor, KPMG LLP has indicated 
its	willingness	to	continue	in	office	and	a	
resolution concerning its reappointment  
will be proposed at the next Annual  
General Meeting.
 S t r a te gic  
  Report
 C or p ora t e 
  Governance
Financial 
  Statements 20 Volga Gas plc  |  Annual Report and Accounts 201 5
Statement of Directors’ responsibilities 
in respect of the Annual Report, 
Strategic Report, Directors’ Report and 
the Financial Statements
The directors are responsible for preparing 
the Annual Report, Strategic Report and  
the	Directors’	Report	and	the	financial	
statements in accordance with applicable 
law and regulations. 
Company law requires the directors to 
prepare Group and Parent Company 
financial	statements	for	each	financial	year.	
As required by the AIM Rules for Companies 
of the London Stock Exchange they are 
required	to	prepare	the	Group	financial	
statements in accordance with IFRSs as 
adopted by the EU and applicable law  
and have elected to prepare the Parent 
Company	financial	statements	on	the	 
same basis. 
Under company law the directors must not 
approve	the	financial	statements	unless	
they	are	satisfied	that	they	give	a	true	and	
fair	view	of	the	state	of	affairs	of	the	Group	
and	Parent	Company	and	of	their	profit	or	
loss for that period. In preparing each of the 
Group	and	Parent	Company	financial	
statements, the directors are required to: 
 – select suitable accounting policies and 
then apply them consistently; 
 – make judgements and estimates that are 
reasonable and prudent; 
 – state whether they have been prepared 
in accordance with IFRSs as adopted by 
the EU; and 
 – prepare	the	financial	statements	on	the	
going concern basis unless it is 
inappropriate to presume that the Group 
and the Parent Company will continue  
in business.
The directors are responsible for keeping 
adequate accounting records that are 
sufficient	to	show	and	explain	the	Parent	
Company’s transactions and disclose with 
reasonable accuracy at any time the 
financial	position	of	the	Parent	Company	
and	enable	them	to	ensure	that	its	financial	
statements comply with the Companies  
Act 2006. They have general responsibility 
for taking such steps as are reasonably  
open to them to safeguard the assets of the 
Group and to prevent and detect fraud and 
other irregularities. 
The directors are responsible for the 
maintenance and integrity of the corporate 
and	financial	information	included	on	 
the Company’s website. Legislation in  
the UK governing the preparation and 
dissemination	of	financial	statements	may	
differ	from	legislation	in	other	jurisdictions.
Electronic communications
The maintenance and integrity of the Volga 
Gas plc website (www.volgagas.com) is the 
responsibility of the directors; the work 
carried out by the auditor does not involve 
consideration of these matters and 
accordingly, the auditor accepts no 
responsibility for any changes that may have 
occurred	to	the	financial	statements	since	
they were initially presented on the website.
The Company’s website is maintained in 
compliance with Rule 26 of the AIM Rules 
for Companies.
Legislation in the United Kingdom 
governing the preparation and 
dissemination	of	financial	statements	may	
differ	from	legislation	in	other	jurisdictions.
On behalf of the Board
Tony Alves
Chief	Financial	Officer
31 March 2016
Report of the Directors continued
Corporate Governance 21 Volga Gas plc  |  Annual Report and Accounts 201 5
Directors’ Remuneration Report
In common with the Board’s commitment  
to compliance with the appropriate aspects 
of the 2014 UK Corporate Governance Code, 
the Company has adopted the Principles of 
Good Governance relating to directors’ 
remuneration. The Company discloses 
certain information relating to directors’ 
remuneration in this report, which is  
not audited.
Remuneration Committee
The Company established a Remuneration 
Committee in April 2007, as set out in the 
Corporate Governance statement on 
page 16.
The Remuneration Committee advises the 
Board on Group compensation policy as it 
relates to executive directors and other key 
members of management, and may obtain 
advice from independent remuneration 
consultants appointed by the Company.  
The Remuneration Committee comprises 
Ronald Freeman (Chairman), Stephen  
Ogden and Aleksey Kalinin, who are all 
non-executive directors. Executive directors 
may be invited to attend meetings of the 
Remuneration Committee but do not vote on 
their own remuneration or incentives. The 
Remuneration Committee meets as required.
Remuneration policy
The Company’s policy is to maintain levels of 
compensation for the Group that are 
comparable and competitive with peer 
group companies, so as to attract and retain 
individuals of the highest calibre, by 
rewarding them as appropriate for their 
contribution to the Group’s performance.
Executive directors’ employment 
agreement and terms of appointment
The terms of each executive director’s 
appointment are set out in their service 
agreements. Each executive director 
agreement is based on similar terms, with 
no	fixed	duration.	Each	service	agreement	
sets out details of basic salary and share 
options as applicable.
All executive director employment 
agreements can be terminated either by the 
director concerned or by the Company on 
giving	six	months’	notice	during	the	first	24	
months of service and thereafter by giving 
three months’ notice. 
The executive directors do not participate  
in any Group pension scheme and their 
remuneration is not pensionable. The 
executive directors are eligible for  
payment of cash bonuses and participation 
in any share-based incentive plan the  
Board implements.
Basic salaries
The basic salary of each executive director  
is established by reference to their 
responsibilities and individual performance.
Non-executive directors’ terms, 
conditions and fees
The non-executive directors have been 
engaged under the terms of their letters  
of appointment. These engagements are  
for two years and can be terminated  
upon one month’s notice by either party. 
Reappointment is subject to the Company’s 
Articles of Association which provide that 
one third of the directors shall be required 
to retire each year.
Fees
The fees paid to non-executive directors  
are determined by the Board and reviewed 
periodically	to	reflect	current	rates	and	
practice commensurate with the size of the 
Company and their roles.
The remuneration of the non-executive 
directors is a matter for the chairman of  
the	Board	and	the	Chief	Executive	Officer.	 
In the event of the appointment of an 
independent non-executive chairman his 
remuneration would be a matter for the 
chairman of the Remuneration Committee 
and	the	Chief	Executive	Officer.
Audited information – Directors’ detailed emoluments
Salary
US$ 000
Pension
Contribution
US$ 000
Share Based
Compensation
US$ 000
Fees
US$ 000
Aggregate 
Remuneration 
for the Year
31 December
2015
US$ 000
Aggregate
Remuneration
for the Year 
31 December
2014
US$ 000
Executive directors
M. Ivanov 165 – – 70 235 400
A.	Zozulya 130 – – – 130 –
A. Alves 300 – – – 300 310
Non-executive
M. Calvey – – – – – –
R. Freeman – – – 50 50 50
A. Kalinin – – – – – –
V. Koshcheev – – – – – –
S. Ogden – – – 50 50 50
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Directors’ interests in the share capital 
of the Company
The directors’ interests in the share capital 
of the Company are disclosed in the Report 
of the Directors on page 18. There has been 
no change in the interest of any director 
between 1 January 2016 and the date of 
this report.
Directors’ share options
The Company adopted an Executive Share 
Option Plan (“ESOP”) on 14 July 2008, which 
was subsequently amended on 17 December 
2008. Under the terms of this Plan, up to a 
maximum of 2,843,661 shares (equivalent to 
approximately 5% of the then issued share 
capital) may be allocated and subject to 
performance criteria and vesting periods as 
specified	by	the	Remuneration	Committee.	
During 2008, the Company granted  
options to acquire 1,137,464 ordinary shares 
to Mikhail Ivanov under the terms of the 
ESOP. The options may be exercised at a 
price of 405p per share and vest in equal 
portions on May 2010, 2011 and 2012 and 
will remain outstanding until May 2017.  
On 17 December 2008, Tony Alves was 
granted options to acquire up to 568,732 
ordinary shares in the Company at an 
exercise price of 100p per share. The 
options vested over a period of up to  
four years subject to the satisfaction of 
performance conditions related to the 
market price of the Company’s shares. The 
vested options will remain exercisable until 
eight years from the date of grant. During 
2015, options over no further shares 
became eligible for vesting (2014: nil).
By order of the Board
Tony Alves
Company Secretary
31 March 2016
Directors’ Remuneration Report continued
Corporate Governance 23 Volga Gas plc  |  Annual Report and Accounts 201 5
Independent Auditor’s Report 
to the Members of Volga Gas plc
We	have	audited	the	financial	statements	of	Volga	Gas	plc	for	the	year	ended	31	December	2015	which	comprise	the	Group	Income	
Statement, the Group Statement of Comprehensive Income, the Group and Parent Company Balance Sheets, the Group and Parent 
Company	Cash	Flow	Statements,	the	Group	and	Parent	Company	Statements	of	Changes	in	Equity	and	the	related	notes.	The	financial	
reporting framework that has been applied in their preparation is applicable law and International Financial Reporting Standards (“IFRSs”) 
as	adopted	by	the	EU	and,	as	regards	the	Parent	Company	financial	statements,	as	applied	in	accordance	with	the	provisions	of	the	
Companies Act 2006. 
This report is made solely to the Company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our 
audit work has been undertaken so that we might state to the company’s members those matters we are required to state to them in an 
auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other 
than the Company and the Company’s members, as a body, for our audit work, for this report, or for the opinions we have formed. 
Respective responsibilities of directors and auditor 
As explained more fully in the Directors’ Responsibilities Statement set out on page 19 the directors are responsible for the preparation of 
the	financial	statements	and	for	being	satisfied	that	they	give	a	true	and	fair	view.	Our	responsibility	is	to	audit,	and	express	an	opinion	on,	
the	financial	statements	in	accordance	with	applicable	law	and	International	Standards	on	Auditing	(UK	and	Ireland).	Those	standards	
require us to comply with the Auditing Practices Board’s Ethical Standards for Auditors. 
Scope of the audit of the financial statements 
A	description	of	the	scope	of	an	audit	of	financial	statements	is	provided	on	the	Financial	Reporting	Council’s	website	at	 
www.frc.org.uk/auditscopeukprivate.
Opinion on financial statements 
In our opinion: 
 – the	financial	statements	give	a	true	and	fair	view	of	the	state	of	the	group’s	and	of	the	parent	company’s	affairs	as	at	31	December	2015	
and of the Group’s loss for the year then ended; 
 – the	group	financial	statements	have	been	properly	prepared	in	accordance	with	IFRSs	as	adopted	by	the	EU;	
 – the	Parent	Company	financial	statements	have	been	properly	prepared	in	accordance	with	IFRSs	as	adopted	by	the	EU	and	as	applied	in	
accordance with the provisions of the Companies Act 2006; and 
 – the	financial	statements	have	been	prepared	in	accordance	with	the	requirements	of	the	Companies	Act	2006	and,	as	regards	the	group	
financial	statements,	Article	4	of	the	IAS	Regulation.	
Opinion on other matters prescribed by the Companies Act 2006 
In	our	opinion	the	information	given	in	the	Strategic	Report	and	the	Directors’	Report	for	the	financial	year	for	which	the	financial	
statements	are	prepared	is	consistent	with	the	financial	statements.
Matters on which we are required to report by exception 
We have nothing to report in respect of the following matters where the Companies Act 2006 requires us to report to you if, in our opinion: 
 – adequate accounting records have not been kept by the parent company, or returns adequate for our audit have not been received from 
branches not visited by us; or 
 – the	Parent	Company	financial	statements	and	the	part	of	the	Directors’	Remuneration	Report	to	be	audited	are	not	in	agreement	with	
the accounting records and returns; or 
 – certain	disclosures	of	directors’	remuneration	specified	by	law	are	not	made;	or	
 – we have not received all the information and explanations we require for our audit. 
Adrian Wilcox (Senior Statutory Auditor) 
for and on behalf of KPMG LLP, Statutory Auditor 
Chartered Accountants 
15 Canada Square
London
E14 5GL
1 April 2016
The	accompanying	notes	on	pages	30	to	45	are	an	integral	part	of	these	financial	statements.
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Group Income Statement
(presented in US$ 000)
Financial Statements
Year ended 31 December Notes 2015 2014
Continuing operations
Revenue 17,827 39,423 
Cost of sales 5 (15,589) (22,514)
Gross profit 2,238 16,909 
Selling expenses 5 (319) – 
Operating and administrative expenses 5 (3,377) (4,157)
Exploration and evaluation expense 5(b) (635) – 
Write	off	of	development	assets 5(c) (2,950) – 
Operating (loss)/profit (5,043) 12,752 
Interest income 6 117 245 
Interest expense – – 
Other gains and losses – net 7 306  3,290 
(Loss)/profit for the year before tax (4,620) 16,287 
Deferred income tax 8 559 (3,229)
Current income tax 8 (3) –
(Loss)/profit for the year before non-controlling interests (4,064) 13,058 
Attributable to:
The owners of the Parent Company (4,064) 13,058 
Basic	and	diluted	(loss)/profit	per	share	(in	US	Dollars) 9 (0.05) 0.16 
Weighted average number of shares outstanding 81,017,800 81,017,800
The Company has elected to take the exemption under section 408 of the Companies Act 2006 to not present the Parent Company income 
statement. The loss for the Parent Company for the year was US$ 102,956,000 (2014: US$1,472,000) after an impairment charge on 
investments in subsidiaries of US$101,759,000 (2014: nil).
Group Statement of Comprehensive Income
(presented in US$ 000)
Year ended 31 December Notes 2015 2014
(Loss)/profit for the year attributable to equity shareholders of the Company (4,064) 13,058 
Other comprehensive income items that may be reclassified to profit and loss:
Currency	translation	differences (15,301) (48,955)
Total comprehensive (expense) for the year (19,365) (35,897)
Attributable to:
The owners of the Parent Company (19,365) (35,897) 25 Volga Gas plc  |  Annual Report and Accounts 201 5
Group Balance Sheet
(presented in US$ 000)
At 31 December Notes 2015 2014
Assets
Non-current assets
Intangible assets 10 2,867 3,746 
Property, plant and equipment 11 48,290 57,819 
Other non-current assets 12 155 68 
Deferred tax assets 8 1,098 706 
Total non-current assets 52,410 62,339
Current assets
Cash and cash equivalents 13 6,769 15,767 
Inventories 14 1,067 1,099 
Other receivables 15 1,449  918 
Total current assets 9,285 17,784 
Total assets 61,695 80,123 
Equity and liabilities
Equity
Share capital 16 1,485 1,485 
Share premium (net of issue costs) 16 – – 
Other reserves 17 (86,117) (70,816)
Accumulated	profits/(losses) 140,037 145,114 
Equity attributable to the shareholders of the parent 55,405 75,783 
Non-current liabilities
Asset retirement obligation 146 189
Deferred tax liabilities 1,995 2,478
Total non-current liabilities 2,141  2,667
Current liabilities
Trade and other payables 19 4,149 1,673
Total current liabilities 4,149  1,673
Total equity and liabilities 61,695 80,123
Approved by the Board of Directors on 31 March 2016 and signed on its behalf by
Tony Alves
Chief	Financial	Officer
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Group Cash Flow Statements
(presented in US$ 000)
Financial Statements
Year ended 31 December Notes 2015 2014
(Loss)/profit for the year before tax (4,620) 16,287 
Adjustments	to	(loss)/profit	before	tax:
Depreciation 2,369  4,683 
E & E expense 635 – 
Write	off	of	development	assets 2,950  – 
Other non-cash expenses –  – 
Foreign	exchange	differences (942) (5,297)
Operating cash flow prior to working capital 392 15,673 
Working capital changes
(Increase)/decrease in trade and other receivables (1,144) 1,621 
Increase/(decrease) in payables 1,893 (971)
Decrease/(increase) in inventory 22 (77)
Cash flow from operations 1,163 16,246 
Income tax paid (3) – 
Net cash flow generated from operating activities 1,160 16,246 
Cash flows from investing activities
Expenditure on exploration and evaluation 10 (554) – 
Purchase of property, plant and equipment 11 (8,117) (5,520)
Net cash used in investing activities (8,671) (5,520)
Cash flows from financing activities
Equity dividends paid (1,013) (3,038)
Net cash outflow from financing activities (1,013) (3,038)
Effect	of	exchange	rate	changes	on	cash	and	cash	equivalents (474) (2)
Net increase/(decrease) in cash and cash equivalents (8,998) 7,686 
Cash and cash equivalents at beginning of the year 13 15,767  8,081 
Cash and cash equivalents at end of the year 13 6,769 15,767
The	accompanying	notes	on	pages	30	to	45	are	an	integral	part	of	these	financial	statements. 27 Volga Gas plc  |  Annual Report and Accounts 201 5
Company Balance Sheet
(presented in US$ 000)
Company registration number: 05886534
At 31 December Notes 2015 2014
Assets
Non-current assets
Investments 20 50,475 152,234 
Intercompany receivables 22 4,735  4,606 
Total non-current assets 55,210  156,840 
Current assets
Cash and cash equivalents 13 4,529  6,786 
Other receivables 15 22 31 
Total current assets 4,551  6,817 
Total assets 59,761  163,657 
Equity and liabilities
Equity
Share capital 16 1,485 1,485 
Share premium (net of issue costs) 16 – –
Share grant expense reserve 17 5,233  5,233 
Accumulated	profit/(loss) 18 51,597  155,566 
Total equity  58,315  162,284 
Current liabilities
Intercompany payables 1,357  1,357 
Trade and other payables 19 89 16 
Total current liabilities 1,446  1,373 
Total equity and liabilities 9,761  163,657 
 
Approved by the Board of Directors on 31 March 2016 and signed on its behalf by
Tony Alves
Chief	Financial	Officer
The	accompanying	notes	on	pages	30	to	45	are	an	integral	part	of	these	financial	statements.
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Company Cash Flow Statements
(presented in US$ 000)
Financial Statements
Year ended 31 December Notes 2015 2014
Loss for the period before tax (102,956) (1,472)
Adjustments to loss before tax:
Impairment expense 101,759 –
Operating cash flow prior to working capital (1,197) (1,472)
Working capital changes
(Increase)/decrease in receivables (118) (2)
Increase/(decrease) in payables 71 6 
Cash flow from operations (1,244) (1,468)
Income tax paid –  – 
Net cash flow generated from operating activities (1,244) (1,468)
Cash flows from investing activities
Decrease in intercompany receivables – 11,091 
Net cash from investing activities – 11,091 
Cash flows from financing activities
Equity dividends paid (1,013) (3,038)
Net cash used in financing activities (1,013) (3,038)
Effect	of	exchange	rate	changes	on	cash	and	cash	equivalents –  – 
Net (decrease)/increase in cash and cash equivalents (2,257) 6,585 
Cash and cash equivalents at the beginning of the year 6,786 201 
Cash and cash equivalents at end of the year 4,529 6,786 
 
The	accompanying	notes	on	pages	30	to	45	are	an	integral	part	of	these	financial	statements. 29 Volga Gas plc  |  Annual Report and Accounts 201 5
Group Statement of Changes in Shareholders’ Equity
(presented in US$ 000)
Notes
Share 
Capital
Share 
Premium
Currency 
Translation 
Reserves
Share Grant 
Reserve
Accumulated 
Profit/(Loss) Total Equity
Opening equity at 1 January 2015 1,485 – (76,049) 5,233 145,114 75,783
Loss for the year – –  –  – (4,064) (4,064)
Transactions with owners
Equity dividends paid – –  –  – (1,013) (1,013)
Total transactions with owners – –  –  – (1,013) (1,013)
Currency	translation	differences – – (15,301) –  – (15,301)
Total comprehensive income – – (15,301) – (4,064) (19,365)
Closing equity at 31 December 2015 1,485 – (91,350) 5,233 140,037 55,405 
Opening equity at 1 January 2014 1,485  165,873 (27,094) 5,233 (30,779) 114,718 
Profit	for	the	year –  –  –  –  13,058 13,058 
Transactions with owners
Equity dividends paid –  –  –  – (3,038) (3,038)
Cancellation of share premium account 16 – (165,873) –  – 165,873  – 
Total transactions with owners – (165,873) –  – 162,835 (3,038)
Currency	translation	differences –  – (48,955) – – (48,955)
Total comprehensive income –  – (48,955) –  13,058 (35,897)
Closing equity at 31 December 2014 1,485  – (76,049) 5,233 145,114 75,783 
Company Statement of Changes in Shareholders’ Equity
(presented in US$ 000)
Notes
Share 
Capital
Share 
Premium
Share Grant 
Reserve
Accumulated 
Profit/(loss) Total Equity
Opening equity at 1 January 2015 1,485 –  5,233 155,566 162,284 
Loss for the year –  –  – (102,956) (102,956)
Equity dividends paid –  –  – (1,013) (1,013)
Closing equity at 31 December 2015 1,485 – 5,233  51,597  58,315 
Opening equity at 1 January 2014 1,485 165,873 5,233 (5,797) 166,794 
Loss for the year – – – (1,472) (1,472)
Equity dividends paid –  –  – (3,038) (3,038)
Cancellation of share premium account 16 – (165,873) –  165,873 – 
Closing equity at 31 December 2014 1,485 – 5,233 155,566 162,284 
The	accompanying	notes	on	pages	30	to	45	are	an	integral	part	of	these	financial	statements.
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Notes to the IFRS Consolidated Financial Statements
For the year ended 31 December 201 5
(presented in US$ 000)
Financial Statements
1. General information
Volga Gas plc (the “Company” or “Volga”) is a public limited company registered in England and Wales with registered number 5886534. The 
Company was incorporated on 25 July 2006. The principal activities of the Company and its subsidiaries (the “Group”) are the acquisition, 
exploration and development of hydrocarbon assets and production of hydrocarbons in the Volga Region of the Russian Federation. Its 
registered	office	is	40	Dukes	Place	London	EC3A	7NH.	The	Company’s	shares	are	admitted	to	trading	on	the	AIM	market	of	the	London	
Stock Exchange.
These	Group	consolidated	financial	statements	were	authorised	for	issue	by	the	Board	of	Directors	on	31	March	2016.
2. Summary of significant accounting policies
The	principal	accounting	policies	applied	in	the	preparation	of	these	consolidated	financial	statements	are	set	out	below.	These	policies	
have been consistently applied to all the years presented, unless otherwise stated.
2.1 Basis of preparation
Both	the	Parent	Company	financial	statements	and	the	Group	financial	statements	have	been	prepared	in	accordance	with	International	
Financial Reporting Standards (“IFRSs”), as adopted by the European Union (“EU”), International Financial Reporting Interpretations 
Committee	(“IFRIC”)	interpretations,	and	the	Companies	Act	2006	applicable	to	companies	reporting	under	IFRS.	The	consolidated	financial	
statements have been prepared under the historical cost convention and in accordance with applicable accounting standards.
The	preparation	of	financial	statements	in	conformity	with	IFRSs	requires	the	use	of	certain	critical	accounting	estimates.	It	also	requires	
management to exercise its judgement in the process of applying the Group’s accounting policies. The areas involving a higher degree of 
judgement	or	complexity,	or	areas	where	assumptions	and	estimates	are	significant	to	the	consolidated	financial	statements	are	disclosed	
in note 4.
No income statement is presented for Volga Gas plc as permitted by Section 408 of the Companies Act 2006.
The	Group’s	business	activities,	together	with	the	factors	likely	to	affect	its	future	development,	performance	and	position	set	out	in	the	
Strategic	Report	in	pages	4	to	13;	the	financial	position	of	the	Group,	its	cash	flows,	liquidity	position	and	borrowing	facilities	are	described	
in	the	Financial	Review	on	pages	8	to	9.	In	addition,	the	Group’s	objectives,	policies	and	processes	for	measuring	capital,	financial	risk	
management	objectives,	details	of	financial	instruments	and	exposure	to	credit	and	liquidity	risks	are	described	in	note	3.	Having	reviewed	
the	future	cash	flow	forecasts	of	the	Group,	the	directors	have	concluded	that	the	Group	will	continue	to	have	access	to	sufficient	funds	in	
order to meet its obligations as they fall due for at least the foreseeable future and thus continue to adopt the going concern basis of 
accounting	in	preparing	the	annual	financial	statements.
Disclosure of impact of new and future accounting standards
(a) New and amended standards and interpretations:
There	are	no	IFRSs	or	IFRIC	interpretations	that	are	effective	for	the	first	time	for	the	financial	year	beginning	on	1	January	2015	that	have	a	
material impact on the Group. 
In accordance with the transitional provisions of IFRS 10, the Group reassessed the control conclusion for its investees at 1 January 2015. No 
modifications	of	previous	conclusions	about	control	regarding	the	Group’s	investees	were	required.
(b)	Standards,	amendments	and	interpretations	to	existing	standards	that	are	not	yet	effective	and	have	not	been	early	adopted	by	the	
Group.	The	following	new	standards,	amendments	to	standards	and	interpretations	have	been	issued,	but	are	not	effective	for	the	
financial	year	beginning	1	January	2015	and	have	not	been	early	adopted:
 – IFRS 9: Financial Instruments 
 – IFRS 15: Revenue from Contracts with Customers 
 – IFRS 16: Leases 
The Group is yet to assess the full impact of these new standards and amendments but does not expect them to have a material impact on 
the	financial	statements,	with	the	main	effect	being	the	requirement	for	additional	disclosures.
2.2 Consolidation
(a) Subsidiaries
The	consolidated	financial	statements	include	the	financial	statements	of	the	Company	and	its	subsidiaries.	Subsidiaries	are	entities	
controlled by the Group. The Group controls an entity when it is exposed to, or has rights to, variable returns from its involvement with the 
entity	and	has	the	ability	to	affect	those	returns	through	its	power	over	the	entity.	In	assessing	control,	the	Group	takes	into	consideration	
potential voting rights that are currently exercisable. The acquisition date is the date on which control is transferred to the acquirer. The 
financial	statements	of	subsidiaries	are	included	in	the	consolidated	financial	statements	from	the	date	that	control	commences	until	the	
date that control ceases. Losses applicable to the non-controlling interests in a subsidiary are allocated to the non-controlling interests 
even	if	doing	so	causes	the	non-controlling	interests	to	have	a	deficit	balance.
Investments	in	subsidiaries	are	accounted	for	at	cost	less	impairment.	Cost	is	adjusted	to	reflect	changes	in	consideration	arising	from	
contingent consideration amendments. Cost also includes direct attributable costs of investment. 
Inter-company transactions, balances and unrealised gains on transactions between Group companies are eliminated; unrealised losses are 
also eliminated unless the cost cannot be recovered.  31 Volga Gas plc  |  Annual Report and Accounts 201 5
2. Summary of significant accounting policies continued
The	Company	and	its	subsidiaries	outside	the	Russian	Federation	maintain	their	financial	statements	in	accordance	with	IFRSs	as	adopted	by	the	
EU. The Russian subsidiaries of the Group maintain their statutory accounting records in accordance with the Regulations on Accounting and 
Reporting	of	the	Russian	Federation.	The	consolidated	financial	statements	are	based	on	these	statutory	accounting	records,	appropriately	
adjusted	and	reclassified	for	fair	presentation	in	accordance	with	International	Financial	Reporting	Standards	as	adopted	by	the	EU.
A list of the Company’s subsidiaries is provided in Note 20.
2.3 Segment reporting
Segmental reporting follows the Group’s internal reporting structure. 
Operating	segments	are	defined	as	components	of	the	Group	where	separate	financial	information	is	available	and	reported	regularly	to	
the chief operating decision maker (“CODM”), which is determined to be the Board of Directors of the Company. The Board of Directors 
decides	how	to	allocate	resources	and	assesses	operational	and	financial	performance	using	the	information	provided.	
The	CODM	receives	monthly	IFRS	based	financial	information	for	the	Group	and	its	development	and	production	entities.	There	were	three	
development and production entities during both 2013 and 2014. Management has determined that the operations of these production 
and	development	entities	are	sufficiently	homogenous	(all	are	concerned	with	upstream	oil	and	gas	development	and	production	activities)	
for	these	to	be	aggregated	for	the	purpose	of	IFRS	8,	“Operating	Segments”.	The	Group	has	other	entities	that	engage	as	either	head	office	
or in a corporate capacity or as holding companies. Management has concluded that due to application of the aggregation criteria that 
separate	financial	information	for	segments	is	not	required.	
No geographic segmental information is presented as all of the companies operating activities are based in the Russian Federation.
Management has determined therefore that the operations of the Group comprise one class of business, being oil and gas exploration, 
development and production and the Group operates in only one geographic area – the Russian Federation.
The Group’s gas sales, representing a substantial proportion of revenues are made to a single customer. Details are provided in Note 3.1 (b).
2.4 Foreign currency translation
(a) Functional and presentation currency
Items	included	in	the	financial	statements	of	each	of	the	Group’s	entities	are	measured	using	the	currency	of	the	primary	economic	
environment	in	which	the	entity	operates	(“the	functional	currency”).	The	consolidated	financial	statements	are	presented	in	US	Dollars,	
which is the Company’s functional and the Group’s presentation currency.
The functional currency of the Group’s subsidiaries that are incorporated in the Russian Federation is the Russian Rouble (“RUR”). It is the 
Management’s	view	that	the	RUR	best	reflects	the	financial	results	of	its	Cyprus	subsidiaries	because	they	are	dependent	on	entities	based	
in Russia that operate in an RUR environment in order to recover their investments. As a result, the functional currency of the subsidiaries 
continues to be the RUR.
(b) Transactions and balances
Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the 
transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year-end 
exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the income statement. 
Foreign exchange gains and losses that relate to cash and cash equivalents, borrowings and other foreign exchange gains and losses are 
presented in the income statement within “Other gains and losses”.
(c) Group companies
The	results	and	financial	position	of	all	the	Group	entities	(none	of	which	has	the	currency	of	a	hyper-inflationary	economy)	that	have	a	
functional	currency	different	from	the	presentation	currency	are	translated	into	the	presentation	currency	as	follows:
(i) assets and liabilities for each balance sheet item presented are translated at the closing rate at the date of that balance sheet;
(ii) income and expenses for each income statement are translated at average exchange rates (unless this average is not a reasonable 
approximation	of	the	cumulative	effect	of	the	rates	prevailing	on	the	transaction	dates,	in	which	case	income	and	expenses	are	
translated at the rate on the dates of the transactions); and
(iii)	all	resulting	exchange	differences	are	recognised	in	other	comprehensive	income.
The major exchange rates used for the revaluation of the closing balance sheet at 31 December 2015 were:
 – GBP 1.517: US$ (2014: 1. 5532)
 – EUR 1.091: US$ (2014: 1. 2148)
 – US$ 1:72.883 RUR. (2014: 56.258)
2.5 Oil and gas assets
The	Company	and	its	subsidiaries	apply	the	successful	efforts	method	of	accounting	for	Exploration	and	Evaluation	(“E&E”)	costs,	in	
accordance	with	IFRS	6	“Exploration	for	and	Evaluation	of	Mineral	Resources”.	Costs	are	accumulated	on	a	field-by-field	basis.	
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2. Summary of significant accounting policies continued
Capital	expenditure	is	recognised	as	property,	plant	and	equipment	or	intangible	assets	in	the	financial	statements	according	to	the	nature	
of	the	expenditure	and	the	stage	of	development	of	the	associated	field,	i.e.	exploration,	development,	production.
(a) Exploration and evaluation assets
Costs directly associated with an exploration well, including certain geological and geophysical costs, and exploration and property 
leasehold acquisition costs, are capitalised as intangible assets until the determination of reserves is evaluated. If it is determined that a 
commercial discovery has not been achieved, these costs are charged to expense after the conclusion of appraisal activities. Exploration 
costs such as geological and geophysical that are not directly related to an exploration well are expensed as incurred.
Once commercial reserves are found, exploration and evaluation assets are tested for impairment and transferred to development assets. 
No depreciation or amortisation is charged during the exploration and evaluation phase.
(b) Development assets
Expenditure on the construction, installation or completion of infrastructure facilities such as platforms, pipelines and the drilling of 
development wells into commercially proven reserves, is capitalised within property, plant and equipment. When development is 
completed	on	a	specific	field,	it	is	transferred	to	producing	assets	as	part	of	property,	plant	and	equipment.	No	depreciation	or	amortisation	
is charged during the development phase.
(c) Oil and gas production assets
Production	assets	are	accumulated	generally	on	a	field	by	field	basis	and	represent	the	cost	of	developing	the	commercial	reserves	
discovered	and	bringing	them	into	production	together	with	E&E	expenditures	incurred	in	finding	commercial	reserves	and	transferred	
from the intangible E&E assets as described above. 
The	cost	of	production	assets	also	includes	the	cost	of	acquisitions	and	purchases	of	such	assets,	directly	attributable	overheads,	finance	
costs capitalised and the cost of recognising provisions for future restoration and decommissioning.
Where	major	and	identifiable	parts	of	the	production	assets	have	different	useful	lives,	they	are	accounted	for	as	separate	items	of	
property, plant and equipment. Costs of minor repairs and maintenance are expensed as incurred.
(d) Depreciation/amortisation
Oil and gas properties are depreciated or amortised using the unit-of-production method. Unit-of-production rates are based on proved and 
probable reserves, which are oil, gas and other mineral reserves estimated to be recovered from existing facilities using current operating 
methods. Oil and gas volumes are considered produced once they have been measured through meters at custody transfer or sales 
transaction	points	at	the	outlet	valve	on	the	field	storage	tank.
(e) Impairment – exploration and evaluation assets
Exploration	and	evaluation	assets	are	tested	for	impairment	prior	to	reclassification	to	development	tangible	assets,	or	whenever	facts	and	
circumstances indicate that an impairment condition may exist. An impairment loss is recognised for the amount by which the exploration 
and evaluation assets’ carrying amount exceeds their recoverable amount. The recoverable amount is the higher of the exploration and 
evaluation assets’ fair value less costs to sell and their value in use. For the purposes of assessing impairment, the exploration and 
evaluation	assets	subject	to	testing	are	grouped	with	existing	cash-generating	units	of	production	fields	that	are	located	in	the	same	
geographical region.
(f) Impairment – proved oil and gas production properties
Proven oil and gas properties are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount 
may not be recoverable. An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable 
amount. The recoverable amount is the higher of an asset’s fair value less costs to sell and value in use. The cash generating unit applied for 
impairment	test	purposes	is	generally	the	field,	except	that	a	number	of	field	interests	may	be	grouped	together	where	the	cash	flows	of	
each	field	are	interdependent,	for	instance	where	surface	infrastructure	is	used	by	one	or	more	field	in	order	to	process	production	for	sale.	
(g) Decommissioning
Provision is made for the cost of decommissioning assets at the time when the obligation to decommission arises. Such provision represents 
the estimated discounted liability (the discount rate used currently being at 10% per annum) for costs which are expected to be incurred in 
removing	production	facilities	and	site	restoration	at	the	end	of	the	producing	life	of	each	field.	A	corresponding	item	of	property,	plant	
and equipment is also created at an amount equal to the provision. This is subsequently depreciated as part of the capital costs of the 
production facilities. Any change in the present value of the estimated expenditure attributable to changes in the estimates of the cash 
flow	or	the	current	estimate	of	the	discount	rate	used	are	reflected	as	an	adjustment	to	the	provision	and	the	property,	plant	and	
equipment.	The	unwinding	of	the	discount	is	recognised	as	a	finance	cost.
2.6 Other business and corporate assets
Property, plant and equipment not associated with exploration and production activities are carried at cost less accumulated depreciation. 
These assets are also evaluated for impairment when circumstances dictate.
Notes to the IFRS Consolidated Financial Statements 
continued
Financial Statements 33 Volga Gas plc  |  Annual Report and Accounts 201 5
2. Summary of significant accounting policies continued
Land is not depreciated. Depreciation of other assets is calculated on a straight line basis as follows:
Machinery and equipment 6–10 years
Office	equipment	in	excess	of	US$5,000	 3–4	years
Vehicles and other 2–7 years
2.7 Financial assets
The	Group	classifies	its	financial	assets	in	the	following	categories:	
(a) Financial assets at fair value through profit or loss
Financial	assets	at	fair	value	through	profit	or	loss	are	financial	assets	held	for	trading.	This	category	comprises	derivatives	unless	they	are	
effective	hedging	instruments.	The	Group	had	no	financial	assets	in	this	class	as	at	31	December	2015	or	31	December	2014.
(b) Loans and receivables
Loans	and	receivables	are	non-derivative	financial	assets	with	fixed	or	determinable	payments	that	are	not	quoted	in	an	active	market.	This	
category comprises trade and other receivables, term bank deposits and cash and cash equivalents in balance sheet.
2.8 Inventories
Crude oil inventories are stated at the lower of cost of production and net realisable value. Materials and supplies inventories are recorded 
at average cost and are carried at amounts which do not exceed the expected recoverable amount from use in the normal course of 
business. Cost comprises direct materials and, where applicable, direct labour plus attributable overheads based on a normal level of 
activity and other costs associated in bringing inventories to their present location and condition.
2.9 Trade and other receivables
Trade	and	other	receivables	are	recorded	initially	at	fair	value	and	subsequently	measured	at	amortised	cost	using	the	effective	interest	
method, less provision for impairment. A provision for impairment of trade receivables is established when there is objective evidence that 
the Group will not be able to collect all amounts due according to the original terms of the receivables. The amount of the provision is the 
difference	between	the	asset’s	carrying	amount	and	the	present	value	of	estimated	future	cash	flows,	discounted	at	the	original	effective	
interest rate.
2.10 Cash and cash equivalents
Cash and cash equivalents include cash in hand, and deposits held at call with banks.
2.11 Share capital
Ordinary	shares	are	classified	as	equity.
Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from the proceeds.
2.12 Trade payables
Trade	payables	are	recognised	initially	at	fair	value	and	subsequently	measured	at	amortised	cost	using	the	effective	interest	method.	
2.13 Current and deferred income tax
The tax expense for the period comprises current and deferred tax. Tax is recognised in the income statement, except to the extent that it 
relates to items recognised in other comprehensive income or directly in equity. In this case the tax is also recognised in other 
comprehensive income or directly in equity, respectively. 
The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the end of the reporting period 
in the countries where the Company’s subsidiaries operate and generate taxable income. Management periodically evaluates positions 
taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation. It establishes provisions where 
appropriate on the basis of amounts expected to be paid to the tax authorities. 
Deferred	income	tax	is	recognised,	using	the	liability	method,	on	temporary	differences	arising	between	the	tax	bases	of	assets	and	
liabilities	and	their	carrying	amounts	in	the	consolidated	financial	statements.	However,	the	deferred	income	tax	is	not	accounted	for	if	it	
arises from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction 
affects	neither	accounting	nor	taxable	profit	or	loss.	Deferred	income	tax	is	determined	using	tax	rates	(and	laws)	that	have	been	enacted	
or substantially enacted by the end of the reporting period and are expected to apply when the related deferred income tax asset is 
realised or the deferred income tax liability is settled. 
Deferred	income	tax	assets	are	recognised	to	the	extent	that	it	is	probable	that	future	taxable	profit	will	be	available	against	which	the	
temporary	differences	can	be	utilised.
Deferred	income	tax	assets	and	liabilities	are	offset	when	there	is	a	legally	enforceable	right	to	offset	current	tax	assets	against	current	tax	
liabilities and when the deferred income taxes assets and liabilities relate to income taxes levied by the same taxation authority on either 
the	same	taxable	entity	or	different	taxable	entities	where	there	is	an	intention	to	settle	the	balances	on	a	net	basis.
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2. Summary of significant accounting policies continued
2.14 Employee benefits
(a) Share-based compensation
The fair value of the employee services received in exchange for the grant of the options is recognised as an expense. The total amount to 
be expensed over the vesting period is determined by reference to the fair value of the options granted, excluding the impact of any 
non-market	vesting	conditions	(for	example,	profitability	and	sales	growth	targets).	Non-market	vesting	conditions	are	included	in	
assumptions about the number of options that are expected to vest. The option plan currently in place for certain of the directors is an 
equity settled share option plan.
The Company measures the equity instruments granted to employees at the fair value at grant date. The fair value of fully-vested shares is 
expensed immediately. The fair value of shares with vesting requirements is estimated using the Black-Scholes option pricing model. This 
value is recognised as an expense over the vesting period on a straight-line basis. The estimate is revised, as necessary, if subsequent 
information	indicates	that	the	number	of	equity	instruments	expected	to	vest	differs	from	previous	estimates.
(b) Social obligations
Wages, salaries, contributions to the Russian Federation state pension and social insurance funds, paid annual leave, sick leave and bonuses 
are accrued in the year in which the associated services are rendered by the employees of the Group.
2.15 Revenue recognition
Revenue comprises the fair value of the consideration received or receivable for the sale of oil and gas in the ordinary course of the Group’s 
activities. Revenue is shown net of value added tax, returns, rebates and discounts and after eliminating sales within the Group. Revenue 
from the sale of oil or gas is recognised when the oil/gas is delivered to customers and title has transferred. In 2015 and 2014 , the Group’s 
revenue related to sales of crude oil and condensate collected directly by or delivered to customers and gas sales made at the entry to the 
gas distribution system.
2.16 Prepayments
Prepayments	are	carried	at	cost	less	provision	for	impairment.	A	prepayment	is	classified	as	non-current	when	the	goods	or	services	relating	
to	the	prepayment	are	expected	to	be	obtained	after	one	year,	or	when	the	prepayment	relates	to	an	asset	which	will	itself	be	classified	as	
non-current upon initial recognition. Prepayments to acquire assets are transferred to the carrying amount of the asset once the Group has 
obtained	control	of	the	asset	and	it	is	probable	that	future	economic	benefits	associated	with	the	asset	will	flow	to	the	Group.	Other	
prepayments	are	written	off	to	profit	or	loss	when	the	goods	or	services	relating	to	the	prepayments	are	received.	If	there	is	an	indication	
that the assets, goods or services relating to a prepayment will not be received, the carrying value of the prepayment is written down 
accordingly	and	a	corresponding	impairment	loss	is	recognised	in	profit	or	loss	for	the	year.	
2.19 Provisions
Provisions for environmental restoration, restructuring costs and legal claims are recognised when: the Group has a present legal or 
constructive	obligation	as	a	result	of	past	events;	it	is	probable	that	an	outflow	of	resources	will	be	required	to	settle	the	obligation;	and	the	
amount has been reliably estimated. Restructuring provisions comprise lease termination penalties and employee termination payments. 
Provisions are not recognised for future operating losses. 
Where	there	are	a	number	of	similar	obligations,	the	likelihood	that	an	outflow	will	be	required	in	settlement	is	determined	by	considering	
the	class	of	obligations	as	a	whole.	A	provision	is	recognised	even	if	the	likelihood	of	an	outflow	with	respect	to	any	one	item	included	in	the	
same class of obligations may be small. 
Provisions are measured at the present value of the expenditures expected to be required to settle the obligation using a pre-tax rate that 
reflects	current	market	assessments	of	the	time	value	of	money	and	the	risks	specific	to	the	obligation.	The	increase	in	the	provision	due	to	
passage of time is recognised as interest expense.
3. Financial risk management
3.1 Financial risk factors
The	Group’s	activities	expose	it	to	a	variety	of	financial	risks:	market	risk	(including	foreign	exchange	risk,	price	risk,	and	cash	flow	interest	
rate	risk),	credit	risk,	and	liquidity	risk.	The	Group’s	overall	risk	management	programme	focuses	on	the	unpredictability	of	financial	markets	
and	seeks	to	minimise	potential	adverse	effects	on	the	Group’s	financial	performance.	
(a) Market risk
(i) Foreign exchange risk
The Group is exposed to foreign exchange risk arising from currency exposures, primarily with respect to the RUR. Foreign exchange risk 
arises from future commercial transactions, recognised assets and liabilities.
Notes to the IFRS Consolidated Financial Statements 
continued
Financial Statements 35 Volga Gas plc  |  Annual Report and Accounts 201 5
3. Financial risk management continued
At 31 December 2015, if the US Dollar had weakened/strengthened by 5% against the RUR with all other variables held constant, post-tax 
profit	for	the	year	would	have	been	US$56,000	(2014:	US$289,000)	higher/lower,	mainly	as	a	result	of	foreign	exchange	gains/losses	on	
translation	of	RUR	denominated	trade	payables	and	financial	assets.	At	31	December	2015,	if	the	US	Dollar	had	weakened/strengthened	by	
5%	against	the	Euro	(“EUR”)	with	all	other	variables	held	constant,	post-tax	profit	for	the	year	would	have	been	US$1,000	(2014:	US$1,000)	
higher/lower,	mainly	as	a	result	of	foreign	exchange	gains/losses	on	translation	of	EUR	denominated	interest	charges	and	financial	liabilities.	
At 31 December 2015, if the US dollar had weakened/strengthened by 5% against the Pound Sterling (“GBP”) with all other variables held 
constant,	post-tax	profit	for	the	year	would	have	been	US$3,000	(2014:	US$15,000)	higher/lower,	mainly	as	a	result	of	foreign	exchange	
gains/losses	on	translation	of	GBP	denominated	trade	payables	and	financial	assets.
If the US Dollar had weakened/strengthened by 5% against the RUR with all other variables held constant, shareholders equity would have 
been US$2.3 million (2014: US$2.9 million) higher/lower, as a result of translation of RUR denominated assets. The sensitivity of 
shareholders equity to changes in the exchange rates between US dollar against GBP or EUR is immaterial.
The	following	table	shows	the	currency	structure	of	financial	assets	and	liabilities:
At 31 December 2015
Rubles
US$ 000
US Dollars
US$ 000
Euros
US$ 000
Sterling
US$ 000
Total
US$ 000
Financial assets
Cash and cash equivalents 1,089 5,622 14 44 6,769 
Total financial assets 1,089  5,622 14 44  6,769 
Financial liabilities (before provision for UK taxes) 3,217  –  –  – 3,217
 
At 31 December 2014
Rubles
US$ 000
US Dollars
US$ 000
Euros
US$ 000
Sterling
US$ 000
Total
US$ 000
Financial assets
Cash and cash equivalents 3,167  12,405 15  180  15,767 
Total financial assets 3,167  12,405 15  180  15,767 
Financial liabilities (before provision for UK taxes) 1,149  –  –  – 1,149
 
Group	companies	utilised	short-term	foreign	exchange	forward	contracts	in	2014	to	effect	sales	of	RUR	against	USD.	No	forward	foreign	
exchange contracts were used in 2015.
(ii) Price risk 
The	Group	is	not	exposed	to	price	risk	as	it	does	not	hold	financial	instruments	of	which	the	fair	values	or	future	cash	flows	will	be	affected	
by changes in market prices. The Group is not directly exposed to the levels of international marker prices of crude oil or oil products, 
although	these	clearly	influence	the	prices	at	which	it	sells	its	oil	and	condensate.	Mineral	Extraction	Taxes	(“MET”)	are	calculated	by	
reference	to	Urals	oil	prices	and	are	therefore	directly	influenced	by	this.	Taking	into	account	the	marginal	rates	of	export	taxes	and	MET,	
management estimates that if international oil prices had been US$5 per barrel higher or lower and all other variables been unchanged, the 
Group’s	profit	before	tax	would	have	been	US$1.2	million	higher	or	lower	(2014:	$1.7	million).
(iii) Cash flow and fair value interest rate risk
As	the	Group	currently	has	no	significant	interest-bearing	assets	and	liabilities,	the	Group’s	income	and	operating	cash	flows	are	
substantially independent of changes in market interest rates.
(b) Credit risk
The Group’s maximum credit risk exposure is the fair value of each class of assets, presented in note 3.1(a)(i) of US$6,769,000 and 
US$15,767,000 at 31 December 2015 and 2014 respectively. 
The	Group’s	principal	financial	asset	is	cash	and	credit	risk	arises	from	cash	and	cash	equivalents	and	deposits	with	banks	and	financial	
institutions.	It	is	the	Group’s	policy	to	monitor	the	financial	standing	of	these	assets	on	an	ongoing	basis.	Bank	balances	are	held	with	
reputable	and	established	financial	institutions.	
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3. Financial risk management continued
The Group’s oil and condensate sales are normally undertaken on a prepaid basis and accordingly the Group has no trade receivables and 
consequently no credit risk associated with the related trade receivables. Gas sales accounting for 38.4% of Group revenues in 2015 (2014: 
31.0%) are made to OOO Trans Nafta. As at 31 December 2015 there were trade receivables of US$1.0 million (31 December 2014: US$0.6 
million) relating to gas sales. As at 31 December 2015 there was no provision for bad debts (2014: nil).
Rating of financial institution (S&P)
31 December 
2015
31 December 
2014
A+ 4,794  7,123 
BBB+ 1,579  4,971 
BBB- 202  3,615 
Other 194  58 
Total bank balance 6,769  15,767
 
(c) Liquidity risk
Cash	flow	forecasting	is	performed	by	Group	finance.	Group	finance	monitors	rolling	forecasts	of	the	Group’s	liquidity	requirements	to	
ensure	it	has	sufficient	cash	to	meet	operational	needs.	The	Group	believes	it	has	sufficient	liquidity	headroom	to	fund	its	currently	planned	
exploration and development activities.
The Group expects to fund its capital investments, as well as its administrative and operating expenses, through 2016 using a combination 
of cash generated from its oil and gas production activities, existing working capital and, when appropriate, medium-term bank borrowings. 
If the Group is unsuccessful in generating enough liquidity to fund its expenditures, the Group’s ability to execute its long-term growth 
strategy	could	be	significantly	affected.	The	Group	may	need	to	raise	additional	equity	or	debt	finance	as	appropriate	to	fund	investments	
beyond its current commitments.
(d) Capital risk
The Group manages capital to ensure that it is able to continue as a going concern whilst maximising the return to shareholders. The Group 
is not subject to any externally imposed capital requirements. The Board regularly monitors the future capital requirements of the Group, 
particularly	in	respect	of	its	ongoing	development	programme.	Management	expects	that	the	cash	generated	by	the	operating	fields	will	
be	sufficient	to	sustain	the	Group’s	operations	and	future	capital	investment	for	the	foreseeable	future.	Further	short-term	debt	facilities	
may	be	arranged	to	provide	financial	headroom	for	future	development	activities.
3.2 Fair value estimation
Effective	1	January	2009,	the	Group	adopted	the	amendment	to	IFRS	7	for	financial	instruments	that	are	measured	in	the	balance	sheet	at	
fair value. This requires disclosure of fair value measurements by level of the following fair value measurement hierarchy:
 – Quoted prices (unadjusted) in active markets for identical assets or liabilities (level 1).
 – Inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (that is, as prices) or 
indirectly (that is, derived from prices) (level 2).
 – Inputs for the asset or liability that are not based on observable market data (that is, unobservable inputs) (level 3).
The	Group	has	no	financial	assets	and	liabilities	that	are	required	to	be	measured	at	fair	value.
4. Critical accounting estimates and judgements
The	Group	makes	estimates	and	assumptions	concerning	the	future.	The	resulting	accounting	estimates	will,	by	definition,	seldom	equal	the	
related	actual	results.	The	estimates	and	assumptions	that	have	a	significant	risk	of	causing	a	material	adjustment	to	the	carrying	amounts	
of	assets	and	liabilities	within	the	next	financial	year	are	discussed	below.
(a) Carrying value of fixed assets, intangible assets and impairment
Fixed assets and intangible assets are assessed for impairment when events and circumstances indicate that an impairment condition may 
exist.	The	carrying	value	of	fixed	assets	and	intangible	assets	are	evaluated	by	reference	to	their	value	in	use	and	primarily	looks	to	the	
present	value	of	management’s	best	estimate	of	the	cash	flows	expected	to	be	generated	from	the	asset.	In	identifying	cash	flows	
management	firstly	determine	the	cash	generating	unit	or	group	of	assets	that	give	rise	to	the	cash	flows.	The	cash	generating	unit	(“CGU”)	
is	the	lowest	level	of	asset	at	which	independent	cash	flows	can	be	generated.	For	this	purpose	the	directors	consider	the	Group	to	have	
two	CGUs:	the	VM	and	Dobrinskoye	fields	with	the	Dobrinskoye	gas	processing	plant	are	treated	as	a	single	CGU,	and	the	Uzen	oil	field	is	a	
separate CGU.
The	estimation	of	forecast	cash	flows	involves	the	application	of	a	number	of	significant	judgements	and	estimates	to	a	number	of	variables	
including	production	volumes,	commodity	prices,	operating	costs,	capital	investment,	hydrocarbon	reserves	estimates,	inflation	and	
discount rates. Key assumptions and estimates in the impairment models relate to: commodity prices that are based on forward curves for 
two years and the long-term corporate economic assumptions which include a long term oil price of US$50 per barrel. The models utilised 
are	based	on	the	remaining	reserves	in	the	Proved	category	and	future	production	profiles	based	on	established	field	development	plans.	
Cost	assumptions	are	based	on	current	experience	and	expectations,	and	levels	of	export	and	mineral	extraction	taxes	reflect	rates	set	by	
current legislation. A discount rate of 15% per annum is utilised in the models.
Notes to the IFRS Consolidated Financial Statements 
continued
Financial Statements 37 Volga Gas plc  |  Annual Report and Accounts 201 5
4. Critical accounting estimates and judgements continued
As at 31 December 2015, the Group’s impairment testing of the property, plant and equipment related to each CGU indicated that no 
impairment was required. Variation in the long term oil price assumption to US$10 per barrel below the US$50 per barrel central 
assumption, yielded net present values in excess of carrying value for each CGU. However, following unsuccessful operations on certain 
non-producing	wells	during	2015,	management	decided	to	write-off	assets	associated	with	these	specific	operations.	This	is	further	
detailed in Note 5(c).
(b) Estimation of oil and gas reserves
Estimates of oil and gas reserves are inherently subjective and subject to periodic revision. In addition, the results of drilling and other 
exploration or development activity will often provide additional information regarding the Group’s reserve base that may result in 
increases	or	decreases	to	reserve	volumes.	Such	revisions	to	reserves	can	be	significant	and	are	not	predictable	with	any	degree	of	
certainty.	Management	considers	the	estimation	of	reserves	to	represent	a	significant	judgement	in	the	context	of	the	financial	statements	
as reserve volumes are used as the basis for assessing the useful life of oil and gas assets, applying depreciation to oil and gas assets and in 
assessing	the	carrying	value	of	oil	and	gas	assets.	Decreases	in	reserve	estimates	can	lead	to	significant	impairment	of	oil	and	gas	assets	
where	revisions	(positive	or	negative)	can	have	a	significant	effect	on	depreciation	rates	from	period	to	period.	Management	have	
considered the sensitivity of this key assumption and in order for an impairment issue to present itself to the Group, reserve estimates 
would need to reduce by more than 25%.
An independent assessment of the reserves and net present value of future net revenue (“NPV”) attributable to the Group’s three principal 
fields,	Dobrinskoye,	Vostochny	Makarovskoye	and	Uzenskoye,	as	at	1	August	2012,	was	prepared	in	accordance	with	reserve	definitions	set	
by the Oil and Gas Reserves Committee of the Society of Petroleum Engineers (“SPE”).
(c) Income taxes
Significant	judgement	is	frequently	required	in	estimating	provisions	for	deferred	taxes.	This	process	involves	an	assessment	of	temporary	
differences	resulting	from	differing	treatment	of	items	for	tax	and	accounting	purposes.	These	differences	result	in	deferred	tax	assets	and	
liabilities, which are included within the balance sheet.
5. Cost of sales and administrative expenses – Group
Cost of sales and administrative expenses are as follows:
Year ended 31 December
2015
US$ 000
2014
US$ 000
Production expenses 7,367 9,530
Mineral extraction taxes 5,877 8,344
Depletion, depreciation and amortisation 2,345 4,640
Cost of Sales 15,589 22,514
Total expenses are analysed as follows:  
  
Year ended 31 December
2015
US$ 000
2014
US$ 000
Export sales related expenses 319  – 
Field operating expenses 6,016  7,805 
Mineral extraction tax 5,876  8,344 
Depreciation & amortisation (a) 2,369  4,656 
Exploration & evaluation (b) 635  – 
Write	off	of	development	assets (c) 2,950  – 
Salaries	&	staff	benefits (d) 2,471  2,896 
Directors’	emoluments	and	other	benefits	 (e) 765  810 
Audit fees (f) 203  201 
Taxes other than payroll and mineral extraction 44 82 
Legal & consulting 480  907 
Fines and penalties – 99 
Other 742  871 
Total 22,870 26,671 
(a)  Depreciation: Substantially all depreciation relates to oil and gas assets and is included within cost of sales. 
(b) Exploration and evaluation: The	principal	component	was	the	write-off	of	costs	relating	to	the	Yuzhny	Mironovskaya	prospect	on	which	an	
unsuccessful well was drilled during the year ended 31 December 2015.
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5. Cost of sales and administrative expenses – Group continued
(c) Write-off of development assets:	In	the	year	ended	31	December	2015,	the	principal	sources	of	the	write-off	of	development	assets	were	
impairment	of	the	carrying	value	of	the	Sobolevskoye	field,	the	Urozhainoye-2	licence	area	in	which	it	is	located	and	the	cost	of	the	
attempted	sidetrack	to	the	Sobolevskoye-11	well.	There	were	also	charges	relating	to	unsuccessful	operations	on	well	in	the	Uzen	field	
and	other	minor	asset	write-offs.
(d) The average monthly number of employees (including executive directors) employed by the Group was:
Year ended 31 December 2015 2014
Exploration and production 149 141
Administration and support 42 23
Total 191 164
Their aggregate remuneration (excluding executive directors) comprised:
2015
US$ 000
2014
US$ 000
Wages and salaries 1,859 2,083
Payroll taxes & social contribution 577 761
Staff	benefits 35 52
Total 2,471 2,896
The average monthly number of employees employed by the Company was:
Year ended 31 December 2015 2014
Chief	Executive	and	Chief	Financial	Officers 2 2
Only directors are employed by the Company. 
(e) Directors’ emoluments and other benefits: Directors’ emoluments comprised salaries of US$595,000 (2014: US$688,000), pension 
contributions of nil (2014: US$21,000) and non-executive directors’ fees of US$170,000 (2014: US$100,000). There were no share grant 
expenses in 2015 (2014: nil).
(f) Audit Fees – Group and Company: Disclosure of the fees paid to the Company’s auditor and its associates is given in Note 21.
6. Finance income – Group
Finance	income	comprises	interest	earned	during	the	period	on	cash	balances	with	different	banks	(note	13).
7. Other gains and losses – Group
Year ended 31 December
2015
US$ 000
2014
US$ 000
Foreign exchange gain 942 3,263 
Loss from unauthorised bank transfers (727) – 
Other gains 91  27 
Total other gains and losses 306  3,290
 
Notes to the IFRS Consolidated Financial Statements 
continued
Financial Statements 39 Volga Gas plc  |  Annual Report and Accounts 201 5
8. Current and deferred income tax – Group
Year ended 31 December
2015
US$ 000
2014
US$ 000
Current tax:
Current income tax (3) – 
Adjustments to tax charge in respect of prior periods –  – 
Total current tax (3) – 
Deferred tax:
Adjustments to tax charge in respect of prior periods –  – 
Origination	and	reversal	of	timing	differences 559 (3,229)
Total deferred tax 559 (3,229)
Total tax credit/(charge) 556 (3,229)
The	tax	charge	in	the	Group	income	statement	differs	from	the	theoretical	amount	that	would	arise	using	the	weighted	average	tax	rate	
applicable	to	profits	of	the	consolidated	entities	as	follows:
Year ended 31 December
2015
US$ 000
2014
US$ 000
(Loss)/profit	before	income	tax	 (4,620) 16,287 
Tax	calculated	at	domestic	tax	rates	applicable	to	(profits)/losses	in	the	respective	countries 1,038 (3,104)
Tax effect of items which are not deductible or assessable for taxation purposes:
Non-deductible expenses (450) (287)
Other tax adjustments (32) 162 
Income tax credit/(charge) 556 (3,229)
The weighted average applicable tax rate was 22.5% (2014: 19.1%).
Deferred	taxation	is	attributable	to	the	temporary	differences	that	exist	between	the	carrying	amounts	of	assets	and	liabilities	for	financial	
reporting	purposes	and	the	amounts	used	for	tax	purposes.	The	tax	effects	of	temporary	differences	that	give	rise	to	deferred	taxation	are	
presented below: 
31 December 
2015
US$ 000
Differences 
recognised 
in other 
comprehensive 
income
US$ 000
31 December 
2014
US$ 000
Differences 
recognised
US$ 000
31 December 
2013
US$ 000
Tax effects of taxable temporary differences:
Exploration and production assets (2,724) 1,173 (3,897) 2,848 (6,745)
Property, plant & equipment (1,039) 447 (1,486) 1,085 (2,571)
Total (3,763) 1,620 (5,383) 3,933 (9,316)
Tax effect of deductible temporary differences:
Tax losses carry forward 2,866 (745) 3,611 (6,542) 10,153 
Trade and other receivables – – – 87 (87)
Property, plant and equipment – – – – – 
Total 2,866 (745) 3,611 (6,455) 10,066 
Net tax effect of temporary differences (897) 875 (1,772) (2,522) 750 
Deferred	income	tax	assets	are	recognised	for	tax	loss	carry	forwards	to	the	extent	that	the	realisation	of	the	related	tax	benefit	through	
the	future	taxable	profits	is	probable.	As	at	31	December	2015,	deferred	income	tax	assets	of	US$1,098,000	(2014:	US$706,000)	and	
deferred tax liabilities of US$1,995,000 (2014: US$2,478,000) have been recognised. Tax losses in respect of Cyprus and the UK do not 
expire.	The	Group	has	not	recognised	a	deferred	tax	asset	of	US$1,950,000	in	respect	of	tax	losses	and	other	short-term	timing	differences	
in the UK (2014: US$1,711,000).
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9. Basic and diluted profit per share – Group
Profit	per	share	is	calculated	by	dividing	the	profit	attributable	to	equity	holders	of	the	Company	by	the	weighted	average	number	of	
ordinary and diluted shares in issue during the year.
Year ended 31 December 2015 2014
Net	(loss)/profit	attributable	to	equity	shareholders	(US$	per	share) (0.050) 0.161
Diluted	net	profit	attributable	to	equity	shareholders (0.050) 0.161 
Net	(loss)/profit	attributable	to	equity	shareholders	(US$	000) (4,064) 13,058 
Basic weighted number of shares 81,017,800 81,017,800
Dilutive share options outstanding – 195,503
Diluted number of shares 81,017,800 81,213,303
As at 31 December 2015 1,332,967 options were excluded from the weighted average diluted number of shares calculation because their 
effect	would	have	been	anti-dilutive	(2014:	1,137,464).	The	average	market	value	of	the	Company’s	shares	for	the	purpose	of	calculating	the	
dilutive	effect	of	share	options	was	based	on	quoted	market	prices	for	the	year	during	which	the	options	were	outstanding.
10. Intangible assets – Group
Intangible assets represent exploration and evaluation assets such as licences, studies and exploratory drilling, which are stated at historical 
cost,	less	any	impairment	charges	or	write-offs.
Note
Work in 
progress: 
exploration 
and 
evaluation
Exploration 
and 
evaluation Total
At 1 January 2015 151  3,595  3,746 
Additions –  606  606 
Write	offs	and	impairments 5(b) – (635) (635)
Transfers –  –  – 
At 31 December 2015 151  3,566  3,717 
Exchange adjustments (34) (816) (850)
At 31 December 2015 117  2,750  2,867
 
Work in 
progress: 
exploration 
and 
evaluation
Exploration 
and 
evaluation Total
At 1 January 2014 258  6,180  6,438 
Additions –  –  – 
Impairments – –  – 
Transfers –  –  – 
At 31 December 2014 258  6,180  6,438 
Exchange adjustments (107) (2,585) (2,692)
At 31 December 2014 151  3,595  3,746
 
Notes to the IFRS Consolidated Financial Statements 
continued
Financial Statements 41 Volga Gas plc  |  Annual Report and Accounts 201 5
11. Property, plant and equipment – Group
Movements in property, plant and equipment, for the years ended 31 December 2015 and 2014 are as follows:
Cost
Development 
assets
US$ 000
Land & 
buildings
US$ 000
Producing 
assets
US$ 000
Other
US$ 000
 Total 
US$ 000
At 1 January 2015 8,523  842 57,944  701  68,010 
Additions 378  –  9,422  – 9,800 
Write-offs	and	impairments (673) – (2,338) (51) (3,062)
Transfers (6,181) –  6,181  – – 
At 31 December 2015 2,047  842  71,209  650  74,748 
Accumulated depreciation 
At 1 January 2015 –  – (9,589) (599) (10,188)
Adjustment	for	assets	written	off –  –  10  51  61 
Depreciation –  – (2,384) (66) (2,450)
At 31 December 2015  –   – (11,963) (614) (12,577)
Exchange adjustments (910) (192) (12,766) (13) (13,881)
NBV at 31 December 2015  1,137   650  46,480   23  48,290 
Cost
Development 
assets
US$ 000
Land & 
buildings
US$ 000
Producing 
assets
US$ 000
Other
US$ 000
 Total 
US$ 000
At 1 January 2014 9,170  1,446 98,439  784 109,839 
Additions 5,547 –  82  – 5,629 
Transfers (901) –  901  –  – 
At 31 December 2014 13,816  1,446 99,422  784 115,468 
Accumulated depreciation 
At 1 January 2014 – – (11,017) (551) (11,568)
Depreciation – – (4,635) (49) (4,684)
At 31 December 2014 – – (15,652) (600) (16,252)
Exchange adjustments (5,293) (604) (35,418) (82) (41,397)
NBV at 31 December 2014 8,523 842  48,353  102  57,819 
12. Non-current assets – Group
As at 31 December
2015
US$ 000
2014
US$ 000
VAT recoverable 152 24
Other non-current assets 3 44
Total other non-current assets 155 68
Management	believes	that	it	may	not	be	able	to	recover	all	VAT	specific	to	contractors’	payments	within	the	12	months	of	the	balance	sheet	
date.	Therefore	this	VAT	is	classified	as	a	non-current	asset.
13. Term deposits, cash and cash equivalents – Group and Company
Group Company
At 31 December
2015
US$ 000
2014
US$ 000
2015
US$ 000
2014
US$ 000
Cash at bank and on hand 6,769 15,767  4,529  6,786 
Short term bank deposits –  –  –  – 
Total cash and cash equivalents 6,769  15,767  4,529  6,786
 
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13. Term deposits, cash and cash equivalents – Group and Company continued
An analysis of Group deposits, cash and cash equivalents by bank and currency is presented in the table below:
Group Company
At 31 December
Bank Currency
2015
US$ 000
2014
US$ 000
2015
US$ 000
2014
US$ 000
United Kingdom 
Barclays Bank PLC USD  4,750  6,943  4,485  6,606 
Barclays Bank PLC GBP 44  180  44  180 
Russian Federation 
Unicreditbank RUR 70  123  –  – 
Unicreditbank USD  195  3,492  –  – 
ZAO	Raiffeisenbank RUR 825  2,986  –  – 
ZAO	Raiffeisenbank USD  740  1,970  –  – 
ZAO	Raiffeisenbank EUR 132  15  –  – 
Other banks and cash on hand RUR 13  58  –  – 
Total cash and cash equivalents 6,769 15,767  4,529 6,786
 
14. Inventories – Group
At 31 December
2015
US$ 000
2014
US$ 000
Production consumables and spare parts 704  1,060 
Crude oil inventory 363  39 
Total inventories 1,067  1,099
 
15. Other receivables – Group
Group Company
At 31 December
2015
US$ 000
2014
US$ 000
2015
US$ 000
2014
US$ 000
VAT receivable 80  81  22 31 
Prepayments 298  202 – –
Trade receivables 987  579 – –
Other accounts receivable 84  56 – –
Total other receivables 1,449 918  22 31
 
Prepayments are to contractors and relate to initial advances made in respect of drilling, construction and other projects. Trade receivables 
relate to sales of gas and condensate. The receivables were settled on schedule subsequent to the balance sheet date.
16. Share capital and share premium – Group
The following summarises the movement in the share capital and share premium of the Company for the years ended 2014 and 2015. 
Number of 
shares
Share capital
US$ 000
Share 
premium
US$ 000
At 1 January 2015 81,017,800  1,485  – 
Issues of shares –  –  – 
At 31 December 2015 81,017,800  1,485 – 
   
Number of 
shares
Share capital
US$ 000
Share 
premium
US$ 000
At 1 January 2014 81,017,800  1,485  165,873 
Cancellation of share premium (165,873)
Issues of shares –  –  – 
At 31 December 2014 81,017,800  1,485 – 
Notes to the IFRS Consolidated Financial Statements 
continued
Financial Statements 43 Volga Gas plc  |  Annual Report and Accounts 201 5
16. Share capital and share premium – Group continued
On	9	July	2014	the	capital	reduction	approved	by	shareholders	at	the	Company’s	Annual	General	Meeting	on	6	June	2014	became	effective	
following	confirmation	by	the	High	Court,	the	filing	of	the	Court	Order	and	a	Statement	of	Capital	with	Companies	House	and	the	fulfilment	of	
certain minor undertakings given to the Court. As a result, the Share Premium Account of the Company, amounting to US$165.9 million, was 
cancelled	and	the	equivalent	sum	credited	to	the	Company’s	Profit	and	Loss	Account,	thereby	creating	distributable	reserves.
The total number of authorised ordinary shares is 330,720,100 (2014: 330,720,100) with a par value of £ 0.01 per share (2014: £ 0.01 per share).
Share-based compensation
Share options and other share-based awards have been granted to certain directors. There were no shares issued to directors under such 
schemes during 2015 (2014: nil).
2008 Executive Share Option Plan 
On 15 July 2008 the Group announced a new Executive Share Option Plan (“ESOP”). During 2008, the Company granted options to acquire 
1,137,464 ordinary shares to Mikhail Ivanov under the terms of the ESOP. The options may be exercised at a price of 405p per share and 
vested in equal portions on May 2010, 2011 and 2012 and will remain outstanding until May 2017. In January 2009, the Company granted 
568,732 share options to Tony Alves under the ESOP. A total of 195,503 share options vested in eight semi-annual tranches over a period of 
four years under conditions related to the Company’s share price. The options have an exercise price of £1.00. As of 17 December 2012 no 
further options were eligible for vesting. There were no share grant expenses in 2015 (2014: nil).
The fair value of share options outstanding as at 31 December 2015 is measured by use of the Black-Scholes pricing model with the 
following assumptions:
Year ended 31 December 2015
2008 Executive Share 
Option Plan
Share price 29.5p
Exercise price 100.0p – 405.0p
Expected volatility 43.5%
Expected life 1-2 years
Risk free rate 0.5%
17. Other reserves – Group
At 31 December
2015
US$ 000
2014
US$ 000
Currency translation reserves (91,350) (76,049)
Share grant reserve 5,233  5,233 
Total other reserves (86,117) (70,816)
18. Accumulated profit/(loss) – Group and Company
Group Company
At 31 December
2015
US$ 000
2014
US$ 000
2015
US$ 000
2014
US$ 000
Retained	profits/(losses) 145,114 (30,779) 155,566 (5,797)
Profit/(loss)	for	the	year (4,064) 13,058 (102,956) (1,472)
Equity dividends paid (1,013) (3,038) (1,013) (3,038)
Cancellation of share premium –  165,873  – 165,873 
Accumulated profit/(loss) 140,037  145,114 51,597  155,566 
19. Trade and other payables
Group Company
At 31 December
2015
US$ 000
2014
US$ 000
2015
US$ 000
2014
US$ 000
Trade payables 2,467  268 89 16
Taxes	other	than	profit	tax 750  881 – –
Customer advances 932  524 – –
Total 4,149 1,673 89 16 
The	maturity	of	the	Group’s	and	the	Company’s	financial	liabilities	are	all	between	0	to	3	months.	
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20. Investments – Company
Investments in subsidiaries, comprising ordinary share capital, are accounted for at cost. The Company’s subsidiaries are as follows:
Name Jurisdiction Nature of operations % Owned From
Woodhurst Holdings Ltd. Cyprus Intermediate Holding Company 100% October 2005
Pre-Caspian Gas Company Russia Oil & gas exploration and production 100% May 2006
Gaznefteservice Russia Oil & gas exploration and production 100% September 2006
Shropak Investments Ltd Cyprus Dormant 100% June 2007
Volga Gas (Cyprus) Ltd. Cyprus Intermediate Holding Company 100% August 2007
Gazservice Russia Special purpose entity 99% October 2008
Volga Gas Finance Ltd. UK Intermediate Holding Company 100% March 2010
To	avoid	certain	legal	restrictions	on	land	ownership	in	October	2008	Pre-Caspian	Gas	Company	acquired	a	99%	shareholding	in	ZAO	
Gazservice.	Subsequently,	Pre-Caspian	Gas	Company	sold	an	unimproved	plot	of	land	to	ZAO	Gazservice	at	cost	basis.
Company
31 December 
2014
US$ 000
Additions
US$ 000
Impairment
US$ 000
31 December 
2015
US$ 000
Investments in Woodhurst Holdings 150,683 – (101,759) 48,924
Investments in Volga Gas (Cyprus) 1,551 – – 1,551
Total investments 152,234 – (101,759) 50,475
 
The Company funds its activities in the Russian Federation via Woodhurst Holdings (“Woodhurst”), the Company’s Cyprus registered 
subsidiary. The directors considered that, as a result of the long term depreciation of the Ruble, the value of the Company’s investment  
in Woodhurst was impaired. The reduced valuation of the investment is aligned with the value of shareholders’ equity in Woodhurst as at  
31 December 2015.
21. Audit fees – Group and Company
During the year the Group (including its overseas subsidiaries) obtained the following services from the Company’s auditor and associates:
Year ended 31 December
2015
US$ 000
2014
US$ 000
Fees	payable	to	Company’s	auditor	for	the	audit	of	Parent	Company	and	consolidated	financial	statements 183 177
– Audit of the Company’s subsidiaries pursuant to legislation 20 24
– Audit-related assurance services 32 31
– Other services pursuant to legislation 3 27
Total 238 259
22. Related Party Transactions – Group and Company
The Group is controlled by Baring Vostok Private Equity Funds III and IV, which respectively own 48.9% and 9.76% (in aggregate 58.66%) of 
the Company’s shares. The Baring Vostok Private Equity Funds exercise their control through a number of nominee holding companies. The 
remaining 41.34% of the shares are widely held.
The following transactions concerning purchases of goods and services were carried out by the Group with related parties:
Related party Relationship Nature of transactions
Year ended 31 December
2015 2014
Baring Vostok Cyprus Limited Affiliated	with	controlling	shareholder Rent, services – 5
Year-end balances arising from transactions with related parties: 
Due to related parties
31 December 
2015 US$ 000
31 December 
2014 US$ 000
Baring Vostok (Cyprus) Limited 12 12
Notes to the IFRS Consolidated Financial Statements 
continued
Financial Statements 45 Volga Gas plc  |  Annual Report and Accounts 201 5
22. Related Party Transactions – Group and Company continued
All transactions with related parties were made on commercial basis.
The following transactions were carried out between the Company and its wholly-owned subsidiaries:
Group Company Relationship Nature of transactions
Year ended 31 December
2015 2014
Woodhurst Holdings Limited 100% directly-owned subsidiary Reduction of receivables due – 11,092
Year-end balances arising from transactions with subsidiaries
31 December 
2015 US$ 000
31 December 
2014 US$ 000
Accounts receivable from subsidiaries
Woodhurst Holdings Limited 4,735 4,606
Accounts payable to subsidiaries
Woodhurst Holdings Limited 1,357 1,357
Key management
Key management of the Company is considered to be the directors. Details of key management compensation are presented in the 
Directors’ Remuneration Report and in note 5(d) above.
23. Contingencies and Commitments 
23.1 Capital commitments
As of the balance sheet date all material licence commitments have been met.
23.2 Taxation 
Russian tax, currency and customs legislation is subject to varying interpretations and changes which can occur frequently. Management’s 
interpretation of such legislation as applied to the transactions and activity of the Group may be challenged by the relevant regional and 
federal authorities. Recent events within the Russian Federation suggest that the tax authorities may be taking a more assertive position in 
their interpretation of the legislation and assessments, and it is possible that transactions and activities that have not been challenged in 
the	past	may	be	challenged.	As	a	result,	significant	additional	taxes,	penalties	and	interest	may	be	assessed.	Fiscal	periods	remain	open	to	
review by the authorities in respect of taxes for three calendar years preceding the year of review, but under certain circumstances, reviews 
may cover longer periods.
At 31 December 2015, management believes that its interpretation of the relevant legislation is appropriate and the Group’s tax, currency 
and customs positions will be sustained.
23.3 Restoration, rehabilitation, and environmental costs
The Group operates in the upstream oil industry in the Russian Federation and its activities may have an impact on the environment. The 
enforcement of environmental regulations in the Russian Federation is evolving and the enforcement posture of government authorities is 
continually being reconsidered. The Group periodically evaluates its obligation related thereto. The outcome of environmental liabilities 
under proposed or future legislation, or as a result of stricter interpretation and enforcement of existing legislation, cannot reasonably be 
estimated at present, but could be material.
Under	the	current	levels	of	enforcement	of	existing	legislation,	management	believes	there	are	no	significant	liabilities	in	addition	to	
amounts	which	are	already	accrued	and	which	would	have	a	material	adverse	effect	on	the	financial	position	of	the	Group.
23.4 Oilfield licences
The	Group	is	subject	to	periodic	reviews	of	its	activities	by	governmental	authorities	with	respect	to	the	requirements	of	its	oilfield	licences.	
Management	of	the	Group	correspond	with	governmental	authorities	to	agree	on	remedial	actions,	if	necessary,	to	resolve	any	findings	
resulting	from	these	reviews.	Failure	to	comply	with	the	terms	of	a	licence	could	result	in	fines,	penalties,	licence	limitation,	suspension	or	
revocation. The Group’s management believes any issues of non-compliance would be resolved through negotiations or corrective actions 
without	any	materially	adverse	effect	on	the	financial	position	or	the	operating	results	of	the	Group.
The principal licences of the Group and their expiry dates are:
Field Licence holder
Licence 
expiry date
Karpenskiy OOO Pre-Caspian Gas Company 2021
Urozhainoye-2 OOO Pre-Caspian Gas Company 2032
Vostochny-Makarovskoye OOO Gaznefteservice 2026
Dobrinskoye OOO Gaznefteservice 2026
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Notice	is	hereby	given	that	the	Annual	General	Meeting	(the	“AGM”)	of	Volga	Gas	plc	(the	“Company”)	will	be	held	at	the	London	office	of	
Baring Vostok at 2nd Floor, 25 Old Burlington Street, London W1S 3AN on 10 June 2016 at 10.00 a.m. for the following purposes:
Ordinary Resolutions
1. To receive and adopt the Company’s accounts for the year ended 31 December 2015 and the Directors’ Report.
2. To reappoint Ronald Freeman, who retires by rotation, as a director.
3. To reappoint Aleksey Kalinin, who retires by rotation, as a director.
4. To reappoint Stephen Ogden, who retires by rotation, as a director.
5. To reappoint KPMG LLP as auditor of the Company until the conclusion of the next general meeting at which accounts are laid before the 
members of the Company.
6. To authorise the directors to determine the remuneration of the auditor of the Company.
7. That the directors be and they are hereby generally and unconditionally empowered to exercise all the powers of the Company to allot 
shares in the Company and/or to grant rights to subscribe for or to convert any security for shares in the Company (together “Relevant 
Securities”) up to a maximum aggregate nominal amount of £500,000 to such persons and at such times and on such terms as they think 
proper, provided that this authority shall expire the earlier of (i) 15 months from the passing of this resolution, or (ii) the conclusion of 
the AGM of the Company to be held in 2017 (unless renewed, varied or revoked by the Company prior to or on such date), save that this 
authority	shall	allow	the	Company	to	make	offers	or	agreements	before	the	expiry	of	such	authority	which	would	or	might	require	
Relevant Securities to be allotted after such expiry and the directors shall be entitled to allot Relevant Securities pursuant to any such 
offer	or	agreement	as	if	this	authority	had	not	expired;	and	all	unexercised	authorities	previously	granted	to	the	directors	to	allot	
Relevant Securities be and are hereby revoked.
Special Resolutions
8. That the directors be and they are hereby empowered pursuant to Sections 570 and 573 of the Companies Act 2006 (the “Act”) to allot 
equity	securities	(as	defined	in	Section	560	of	the	Act)	for	cash;	pursuant	to	the	authority	conferred	by	Resolution	7	set	out	in	this	Notice	
convening the AGM (the “Notice”) as if Section 561 of that Act did not apply to any such allotment, provided that this power shall be 
limited to:
(a)	 the	allotment	of	equity	securities	in	connection	with	a	rights	issue,	open	offer	or	other	offer	of	securities	in	favour	of	the	holders	of	
ordinary shares on the register of members at such record date(s) as the directors may determine where the equity securities 
respectively attributable to the interests of the ordinary shareholders are proportionate (as nearly as may be) to the respective 
numbers of ordinary shares held by them on any such record date(s), subject to such exclusions or other arrangements as the 
directors may deem necessary or expedient to deal with fractional entitlements or legal or practical problems arising under the laws 
of any overseas territory or the requirements of any regulatory body or stock exchange or by virtue of shares being represented by 
depositary receipts or any other matter; and 
(b) the allotment (otherwise than pursuant to sub-paragraph (a) above) to any person or persons of equity securities up to an aggregate 
nominal amount of £100,000.
 And the power conferred hereby shall expire upon the expiry of the general authority conferred by resolution 7 set out in this Notice (unless 
renewed,	varied	or	revoked	by	the	Company	prior	to	or	on	such	date),	save	that	the	Company	shall	be	entitled	to	make	offers	or	agreements	
before the expiry of such power which would or might require equity securities to be allotted after such expiry and the directors shall be 
entitled	to	allot	equity	securities	pursuant	to	any	such	offer	or	agreement	as	if	the	power	conferred	hereby	had	not	expired.	
9. That the Company be generally and unconditionally authorised for the purposes of section 701 of the Act, to make market purchases 
(within the meaning of section 693 of the Act) of fully-paid ordinary shares of 1p each (“Shares”) on such terms and in such manner as the 
directors of the Company may decide provided that:
(i)  the maximum number of Shares that may be purchased by the Company pursuant to this authority is 12,144,000 (representing 
approximately 14.99% of the Company’s issued ordinary share capital at the date of this Notice;
(ii)  the minimum price (exclusive of expenses) which may be paid for any such Shares shall not be less than the nominal value of that 
Share at the time of purchase;
(iii) the maximum price (exclusive of expenses) which may be paid for any Shares purchased pursuant to this authority is an amount equal 
to the higher of (a) an amount equal to 105% of the average of the middle market prices shown in the quotations for the Company’s 
Shares	in	the	London	Stock	Exchange	Daily	Official	List	for	the	five	business	days	immediately	preceding	the	day	on	which	that	Share	
is contracted to be purchased; and (b) an amount equal to the higher of the price of the last independent trade of an ordinary share 
and the highest current independent bid for an ordinary share as derived from the London Stock Exchange; and
(iv) unless previously varied, revoked or renewed, the authority conferred by this resolution shall expire on the earlier of 30 June 2017 or 
at the end of the next annual general meeting of the Company to be held in 2017, but the Company may make a contract to purchase 
Shares under this authority before its expiry which will or may be completed wholly or partly after the expiry of this authority, and 
may complete such a purchase as if this authority had not expired.
Registered Office: BY ORDER OF THE BOARD
40 Dukes Place Tony Alves
London Company Secretary
EC3A 7NH 31 March 2016
Notice of Meeting 47 Volga Gas plc  |  Annual Report and Accounts 201 5
Notes:
1. Resolutions 1-7 are ordinary resolutions. For these resolutions to be passed, a simple majority of the votes cast at the Company’s AGM must be in favour of the resolutions. 
Resolutions 8 and 9 are special resolutions. For these resolutions to be passed, at least three-quarters of the votes cast at the AGM must be in favour of the resolution.
2. Share buy-back (Resolution 9). The purpose of Resolution 9 is to permit the Company to purchase its own shares in the market under the terms described therein. Shares so 
purchased would be cancelled and the issued share capital of the Company accordingly reduced.
3. Only those members entered on the register of members of the Company at 6.00 p.m. on 8 June 2016 or, in the event that this meeting is adjourned, in the register of members 
as at 6.00 p.m. on the day two days before the date of any adjourned meeting, shall be entitled to attend and vote at the meeting in respect of the number of ordinary shares 
registered in their names at that time. Changes to the entries on the register of members after 6.00 p.m. on 8 June 2016 or, in the event that this meeting is adjourned, in the 
register of members after 6.00 p.m. on the day two days before the date of the adjourned meeting, shall be disregarded in determining the rights of any person to attend or 
vote at the meeting.
4. A member entitled to attend, speak and vote at the meeting convened by the notice set out above is entitled to appoint a proxy to attend, speak and, on a poll, to vote in his 
place. To appoint more than one proxy you may photocopy this form. Please indicate the proxy holder’s name and the number of shares in relation to which they are authorised 
to act as your proxy (which, in aggregate, should not exceed the number of shares held by you). Please also indicate if the proxy instruction is one of multiple instructions being 
given. All forms must be signed and should be returned together in the same envelope.
5.	 A	form	of	proxy	is	enclosed.	To	be	effective,	it	must	be	deposited	at	the	office	of	the	Company’s	registrars	(Capita	Asset	Services,	PXS,	34	Beckenham	Road,	Beckenham,	Kent	
BR3 4TU) so as to be received not later than 48 hours before the time appointed for holding the AGM. Completion of the proxy does not preclude a member from subsequently 
attending and voting at the meeting in person if he or she so wishes.
6.	 To	change	your	proxy	instructions	simply	submit	a	new	proxy	appointment	using	the	methods	set	out	in	notes	3	and	4	above.	Note	that	the	cut-off	time	(in	note	3	above)	for	
receipt	of	proxy	appointments	also	apply	in	relation	to	amended	instructions;	any	amended	proxy	appointment	received	after	the	relevant	cut-off	time	will	be	disregarded.	
 Where you have appointed a proxy using the hard-copy proxy form and would like to change the instructions using another hard-copy proxy form, please contact the Company’s 
registrars. If you submit more than one valid proxy appointment, the appointment received last before the latest time for the receipt of proxies will take precedence.  
7. In order to revoke a proxy instruction you will need to inform the Company using one of the following methods:
(a)	 by	sending	a	signed	hard	copy	notice	clearly	stating	your	intention	to	revoke	your	proxy	appointment	to	the	Company’s	registered	office	address.	In	the	case	of	a	member	
which	is	a	company,	the	revocation	notice	must	be	executed	under	its	common	seal	or	signed	on	its	behalf	by	an	officer	of	the	company	or	an	attorney	for	the	company.	Any	
power	of	attorney	or	any	other	authority	under	which	the	revocation	notice	is	signed	(or	duly	a	certificated	copy	of	such	power	of	authority)	must	be	included	with	the	
revocation notice; or 
(b) by sending an email to info@volgagas.com.
In	either	case,	the	revocation	notice	must	be	received	by	the	Company’s	registrars	no	later	than	the	cut-off	time	set	out	in	note	3	above.	
8. The register of interests of the directors and their families in the share capital of the Company and copies of contracts of service of directors with the Company or with any of its 
subsidiary	undertakings	will	be	available	for	inspection	at	the	registered	office	of	the	Company	during	normal	business	hours	(Saturdays	and	public	holidays	excepted)	from	the	
date of this notice until the conclusion of the AGM.
9. To appoint a proxy or to give or amend an instruction to a previously appointed proxy via the CREST system, the CREST message must be received by the issuer’s agent RA10 no 
later than 48 hours before the meeting date. For this purpose, the time of receipt will be taken to be the time (as determined by the timestamp applied to the message by the 
CREST Applications Host) from which the issuer’s agent is able to retrieve the message. After this time any change of instructions to a proxy appointed through CREST should 
be communicated to the proxy by other means. CREST Personal Members or other CREST sponsored members, and those CREST Members who have appointed voting service 
provider(s) should contact their CREST sponsor or voting service provider(s) for assistance with appointing proxies via CREST. For further information on CREST procedures, 
limitations and system timings please refer to the CREST Manual. We may treat as invalid a proxy appointment sent by CREST in the circumstances set out in Regulation 35(5) (a) 
of	the	Uncertificated	Securities	Regulations	2001.	In	any	case	your	proxy	form	must	be	received	by	the	Company’s	registrars	no	later	than	48	hours	before	the	meeting	date.
10. Any corporation which is a member can appoint one or more corporate representatives who may exercise on its behalf all of its powers as a member provided they do not do so 
in relation to the same shares. 
11.  Under section 319A of the 2006 Act, the Company must cause to be answered any question relating to the business being dealt with at the Annual General Meeting put by a 
member	attending	the	meeting	unless	answering	the	question	would	interfere	unduly	with	the	preparation	for	the	meeting	or	involve	the	disclosure	of	confidential	
information, or the answer has already been given on a website in the form of an answer to a question, or it is undesirable in the interests of the Company or the good order of 
the meeting that the question be answered. 
 Members who have any queries about the Annual General Meeting should contact the Company Secretary by email on info@volgagas.com. Members may not use any electronic 
address or fax number provided in this notice or in any related documents (including the Form of Proxy) to communicate with the Company for any purpose other than those 
expressly stated.
12.  Information regarding the Annual General Meeting, including information required by section 311A of the 2006 Act, and a copy of this notice of Annual General Meeting is 
available from www.volgagas.com.
 S t r a te gic  
  Report
 C or p ora t e 
  Governance
Financial 
  Statements 48 Volga Gas plc  |  Annual Report and Accounts 201 5
Glossary of T echnical T erms
2-D seismic geophysical data that depicts the subsurface strata in two dimensions.
3-D seismic geophysical data that depict the subsurface strata in three dimensions. 3-D seismic typically provides a more detailed and accurate interpretation of 
the subsurface strata than 2-D seismic.
abandonment application of a cement plug to close a well and welding of a steel plate to the top of the well; the well is then plugged and abandoned.
bbl the standard barrel of crude oil or other petroleum product is 42 US gallons (approximately 159 litres).
bcf billion cubic feet.
bcm billion cubic metres.
best estimate the term “best estimate” is used here as a generic expression for the estimate considered to be the closest to the quantity that will actually be 
recovered from the accumulation between the date of the estimate and the time of abandonment.
boe barrels of oil equivalent, being for natural gas the energy equivalent on one barrel of oil. The usual ratio is to equate 6,000 cubic feet to one barrel of 
oil equivalent.
condensate liquid hydrocarbons associated with the production from a primarily natural gas reservoir.
field means an area consisting of either a single reservoir or multiple reservoirs, all grouped on or related to the same individual geological structural 
feature and/or stratigraphic condition.
gas natural gas.
gas processing facilities together with the laboratory, gathering pipelines and storage facilities (if any), a plant comprising one or more units such that after conditioning the 
gas	will	be	of	pipeline	quality	as,	specified	by	Gazprom,	such	units	may	include	dehydration,	sweetening	and	separation	of	natural	gas	liquids.
gas-water contact bounding surface in a reservoir above which predominantly gas occurs and below which predominantly water occurs.
hydrocarbons compounds formed from the elements hydrogen (H) and carbon (C) and existing in solid, liquid or gaseous forms.
Kungurian Salt a layer of salt laid down during the lower Permian age which occurs in the Northern Caspian Petroleum Province.
licence area the	particular	subsoil	plot	specified	in	the	subsoil	licence	issued	by	the	applicable	Russian	federal	authority,	which	the	licence	holder	has	the	right	to	
use	for	the	purpose	and	on	the	terms	specified	in	the	subsoil	licence.	A	licence	area	may	contain	one	or	more	fields	or	may	encompass	only	a	portion	of	
a	field.
mcm thousand cubic metres.
mmbbls million barrels.
mmBOE million barrels of oil equivalent.
natural gas hydrocarbons that are gaseous at one atmosphere of pressure at 20°C. It can be divided into lean gas, primarily methane but often containing some 
ethane and smaller quantities of heavier hydrocarbons (also called sales gas) and wet gas, primarily ethane, propane and butane as well as smaller 
amounts of heavier hydrocarbons; partially liquid under atmospheric pressure.
petroleum naturally occurring liquids and gases which are predominantly comprised of hydrocarbon compounds.
possible reserves are those unproven reserves that, on the available evidence and taking into account technical and economic factors, have a 10% chance of  
being produced.
probable reserves are those reserves in which hydrocarbons have been located within the geological structure with a lesser degree of certainty because fewer wells have 
been drilled and/or certain operational tests have not been conducted. Probable reserves are those reserves that, on the available evidence and taking 
into account technical and economic factors, have a better than 50% chance of being produced.
prospective resources are those quantities of hydrocarbons which are estimated, on a given date, to be potentially recoverable from undiscovered accumulations.
proved plus probable 
reserves
sum of the proved reserves and the probable reserves calculated in accordance with SPE standards.
proved reserves include	reserves	that	are	confirmed	with	a	high	degree	of	certainty	through	an	analysis	of	development	history	and/or	volume	method	analysis	of	the	
relevant geological and engineering data. Proved reserves are those that, based on the available evidence and taking into account technical and 
economic factors, have a better than 90% chance of being produced.
reserves quantities of petroleum which are anticipated to be commercially recoverable from known accumulations from a given date forward.
reservoir a	porous	and	permeable	underground	formation	containing	a	natural	accumulation	of	producible	natural	gas	and/or	oil	that	is	confined	by	
impermeable rock or water barriers and is separate from other reservoirs.
risk factor for contingent resources means the estimated chance, or probability, that the volumes will be commercially extracted; for prospective resources 
means	the	chance	or	probability	of	discovering	hydrocarbons	in	sufficient	quantity	for	them	to	be	tested	to	the	surface,	this,	then,	is	the	chance	or	
probability of the prospective resource maturing into a contingent resource.
SPE standards reserves	definitions	consistent	with	those	approved	in	March	2007	by	the	Society	of	Petroleum	Engineers	and	the	World	Petroleum	Congresses.
sub-salt below the Kungurian salt layer.
supra-salt above the Kungurian salt layer. Corporate Directory 
Registered Office
40 Dukes Place
London EC3A 7NH
United Kingdom
Company Secretary
Tony Alves
of	the	registered	office
Nominated Adviser and Broker
Stifel Nicolaus Europe Limited
150 Cheapside
London EC2V 6ET 
United Kingdom
Auditor
KPMG LLP
15 Canada Square
London E14 5GL
United Kingdom
Lawyers and Solicitors to the Company as to English and Russian Law
As to English law:
Akin Gump Strauss Hauer & Feld
8th Floor, Ten Bishops Square
London E1 6EG
United Kingdom
As to Russian law:
Akin Gump Strauss Hauer & Feld LLP
Geneva House 7 Petrovka Street
Moscow 107031
Russian Federation
Registrar
Capita Registrars
34 Beckenham Road, Beckenham
Kent BR3 4TU
United Kingdom
Corporate Communications/PR
FTI Consulting
200 Aldersgate, Aldersgate Street
London EC1A 4HD
United Kingdom Volga Gas plc  Annual Report and Accounts 2015
Volga Gas plc
40 Dukes Place
London
EC3A 7NH
www.volgagas.com