Urals' working capital 'significantly constrained' following unauthorised loan

Russia-focussed exploration and production firm Urals Energy told investors on Monday that an unauthorised loan and asset sale had led to a combined working capital deficit of roughly $1.6m.

Urals, which announced last week that it was looking into a loan that had been offered without the board's knowledge by Sergey Kononov, president of JSC Petrosakh, the company's 98.56%-owned subsidiary, demanded that it be repaid in full, among other demands, to restore its "significantly constrained current working capital position".

The AIM-listed group said thatit considers the loan to be "wholly inappropriate and unacceptable" and stated its intention to investigate whether the documentation relating to the loan was, in fact, valid.

However, Urals cautioned that there was "no guarantee" that it would be successful in collecting the funds lent by Kononov and that management was of the opinion that if nothing was done to correct the working capital shortfall by the end of October, the firm would be forced to take steps to "protect the interests of the group's creditors".

Urals also noted that it had "significantly augmented its control framework" in order to avoid future breaches of its systems, procedures and controls.

As of 1300 BST, Urals shares had slipped 0.18% to 54.90p.