Wednesday, December 6th 2023

Volga Gas Plc

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Russia-focused Volga Gas has had an eventful week. Investors may have been puzzled last week to see shares mysteriously rise 30 per cent in a day. 

On Monday, after the Bank Holiday Weekend, they got an explanation – and it probably wasn’t what many were expecting.

The oil and gas producer, which is focused on the Volga region of Russia, revealed that a consultant had been hoaxed into revealing market-sensitive information on Whatsapp.

Mistake or not, Volga’s share price has remained marginally up, with investors hoping for a sale process that was launched last month.

Who is Volga Gas?

Listed on the Aim market since 2007, the exploration company has five licences in the Volga region of Russia. Overall, it claims proven and provable reserves of 9.1m barrels of oil equivalent.

Volga’s chief executive is Andrey Zozulya, a Russian oil industry veteran. The firm is chaired by Mikhail Ivanov, who was chief executive between 2006 and 2015.

In 2008, the firm’s share price was sitting pretty at more than 500p. But it has fallen steadily since, and today is valued at 23p, giving the firm a market cap of just over £20m.

How has it been performing recently?

Volga’s stock market decline has continued in recent months. 

In late January, its share price was 38.5p. Its stock dropped 17 per cent on Monday 27 January, to 32p, and it has so far failed to recover.

This fall was prompted by the company announcing reserves at its Vostochny Makarovskoye and Dobrinskoye fields had been downgraded because of higher-than-expected has to water contact.

Early last month, reporting its preliminary results, the company revealed it had swung to a loss of $10.5m – down from a profit of $10.6m – in 2019.

The firm’s share price remained reasonably steady as it also revealed it had launched a “formal review of the various strategic options available to the company to maximise value for shareholders”. It was reported that the strategic review could result in a sale of the business or of one or more of its assets. 

And the Whatsapp hoax?

Last Thursday, Volga’s share price rocketed by 30 per cent. The company revealed on Monday this week that this was the result of a Whatsapp hoax.

Announcing the error, the company revealed that a long-term consultant to the company with access to confidential information about the sale process with a person claiming to be a non-executive director of Volga.

After the market closed on Thursday, the consultant released that the Whatsapp message exchange had no actually been with the non-executive director, but “with a person or persons unknown”.

The Times reported more details on the hoax in Tuesday’s newspaper. It said that the consultant was Tony Alves, a former finance director, who thought he was communicating with Andrei Yakovlev, a newly-appointed non-exec. According to the Times, the exchange enabled the hoaxer to “deduce that the company had received interest from multiple parties”.

Alves told the newspaper: “I am embarrassed it happened but I am relieved that I kept the exchange to entirely non-specific and process-related matters.”

Volga Gas said it has “implemented additional protocols covering both internal and external communications to prevent similar occurrences in the future and will co-operate fully with any subsequent investigation by regulatory authorities in the UK”.

And where does this leave the company?

Also on Monday, Volga updated its investors on the sale process. 

It said: “Multiple parties have, following the provision by them of non-binding expressions of interest, agreed to participate in the [formal sales process] and they have been invited to proceed further by signing a confidentiality agreement. 

“Participation in the FSP includes the provision of confidential due diligence materials and access to Volga Gas management. The company looks forward to engaging with all potential offerors in a constructive and positive manner through the FSP to achieve an outcome that maximises value for Volga Gas shareholders.”

Volga’s share price rose a further six per cent last Monday to 28p. They have dipped slightly since – but, at 23p, are at their highest level since March, suggesting shareholders are holding out some hope for the sale process.

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The author was remunerated but does not hold shares in the company