PETROGRAND AB: INTERIM REPORT JANUARY-SEPTEMBER 2010
(Thomson Reuters ONE) -
* Petrogrand AB is an independent Swedish oil company within exploration and
production previously active in oil production in the Tomsk region in
western Siberia in Russia through its subsidiary STS-Service. On 5 February
2010, Russian Authorities registered the transfer of ownership of the
production subsidiary STS-Service to Gazprom Neft Vostok. The company did
not produce any oil during the remainder of the report period.
* Operating income for the 3rd quarter amounted to TSEK 14,022 (TSEK 37,716)
of which TSEK 0 (TSEK 37,716) attributable to the discontinued operations.
* Since a major part of the company's excess liquidity is held in roubles,
while the company's reporting currency is SEK, the quarterly report was
impacted by the strengthening of the SEK versus the rouble during the 3(rd
)quarter. This resulted in a non-realised exchange loss on financial
investments amounting to TSEK -58,081.
* Net result after tax for the( )3rd quarter amounted to TSEK -39,702 (TSEK
-62,982) of which TSEK -842 (TSEK -61,286) attributable to the discontinued
operations
* Petrogrand's production of oil and gas condensate during January-September
2010 amounted to 63,998 barrels. The total production took place in January.
Operating income for the January-September period amounted to TSEK 26,521
(TSEK 97,730) of which TSEK 12,499 (TSEK 97,730) attributable to the
discontinued operations
* Net result after tax for the( )January-September period amounted to TSEK
-55,029 (TSEK -450,023) of which TSEK -6,230 (TSEK -439,370) attributable to
the discontinued operations
* Earnings Per Share for the January-September period amounted to SEK -0.0161
(SEK -0.18) of which SEK -0.0018 (SEK -0.18) attributable to the
discontinued operations. Earnings Per Share is calculated using the average
number of shares outstanding for the period.
MD`s report
Dear Shareholders,
Another quarter of this year has gone by and I know most of you are waiting
anxiously for news on new acquisitions. Our efforts on implementing the business
plan has continued unabated, we have examined and evaluated a large number of
companies and licensing areas. It turns out that evaluations of the various
possibilities have taken much longer and been more extensive than we originally
assumed. But my opinion is that it's well worth the time and resources spent to
penetrate the various business proposals so that the projects we ultimately
choose to invest in are really good projects with great potential. I have as a
result spent more time in Moscow during this quarter.
In June it was decided to move the major part of our excess liquidity from SEK
to Russian roubles. The decision was based on the fact that our business
activities will be implemented in roubles. The move was also made to ensure that
we can complete acquisitions and ongoing investments in future acquisitions on
short notice. The fact that the Swedish krona rose sharply in the third quarter
resulted in an unrealized foreign exchange loss. On the other hand, the return
of some 40 million roubles covers current expenditures of the Russian units,
which amounts to 5-6 million roubles per month. This also provides a surplus of
about 20 million roubles per quarter which covers our running expenses in
Sweden.
Gazprom Neft Vostok (GPN) has received several claims from former subcontractors
to STS-Service. It has been decided that a team of lawyers and economists coming
from both LLC Petrogrand and GPN shall collaborate in examining all claims
against GPN. We believe that there may be a risk that GPN may have to reach
settlements regarding some of these claims. In these cases there is also a risk
that some of the settlements may fall under the warranties within the sale
agreement. Therefore, we have as a precaution made a provision of 35 million
roubles to cover potential liabilities under these warranties.
Meanwhile, we note that the dispute between us and Tardan Gold is dissolved to
the satisfaction of all parties involved. We have received all payments which
amounted to 16 million SEK, including interest on the outstanding bill of
exchange. Since we in our previous annual report made a provision for this
amount, our result is positively affected by the resolution of this dispute.
I and our teams in in Moscow, Tomsk and Stockholm will continue to work
intensively. We stand by our forecast that our first acquisition will be
presented sometime around year-end. As soon as our first deal is closed we will
come to you with information.
Merry Christmas and Happy New Year!
Maks Grinfeld
Managing Director
Petrogrand AB
Comment on the Group's result and financial position
Turnover and result
In early February 2010, the sale of the subsidiary STS-Service to Gazprom Neft
Vostok was completed. As a consequence of the sale, continuing and discontinued
operations are separated in the Group income statement and in 'Turnover and
result' continuing and discontinued operations are therefore described
separately.
Continuing operations during July-September 2010
Operating income for the period amounted to TSEK 14,022 (-). This amount
represents payments from Central Asia Gold AB's Russian subsidiary Tardan Gold
to cover a receivable in the form of a bill of exchange..In the annual accounts
for 2009, Petrogrand AB wrote off this receivable.
The administration costs amounted to TSEK -5,984 (TSEK 5,152) during the period.
The operating profit amounted to TSEK 8,039 (TSEK -1,738).
Net financial items amounted to TSEK -46,898 (TSEK 42). In Financial income is
included an amount of TSEK 2,200 in received interest from Tardan Gold on the
bill of exchange receivable. Net financial items include profits and losses from
financial investments involving the company's excess liquidity assets, see below
under Financing and liquidity. Result after financial investments amounted to
TSEK -38,860 (TSEK -1,696).
Continuing operations during January-September 2010
Operating income for the period amounted to TSEK 14,022 (-). This amount
represents payments from Central Asia Gold AB's Russian subsidiary Tardan Gold
to cover a bill of exchange receivable. In its annual accounts for 2009,
Petrogrand AB made a provision concerning this receivable.
The administration costs amounted to TSEK -17,650 (TSEK -3,805) during the
period.
The operating profit amounted to TSEK -3,628 (TSEK -10,695).
Net financial items amounted to TSEK -45,171 (TSEK 42). In Financial income is
included an amount of TSEK 2,200 in received interest from Tardan Gold on the
bill of exchange receivable. Net financial items include profits and losses from
financial investments involving the company's excess liquidity assets, see below
under Financing and liquidity. Result after financial investments amounted to
TSEK -48,799 (TSEK -10,653).
The continuing operations were not charged with any tax during the period and
consequently, the net result amounted to TSEK -48,799 (TSEK -10,653).
Discontinued operations during January-September 2010
Operating income for the period amounted to TSEK 12,499 (TSEK 97,730), of which
revenues from oil sales were TSEK 12,485 (TSEK 97,730). Production costs
amounted to TSEK -9,602 (TSEK -84,452) during the period. Income as well as
costs reflect the fact that the sale of the production subsidiary STS-Service
was completed in early February.
Gross profit amounted to TSEK 2,721 (TSEK 475). This amount includes an
amortization charge of TSEK -176 (TSEK -12,803).
Selling and distribution expenses amounted to TSEK -96 (TSEK -2,986).
Administration costs amounted to TSEK -4,329 (TSEK -24,861). Other operating
expenses amounted to TSEK -4,342 (TSEK -55,189). This item includes a provision
of TSEK 7,739 made for the purpose of prudence to cover eventual warranty claim
costs to the buyer of STS-Service, see below under Legal disputes.
Operating profit for the period amounted to TSEK -6,046 (TSEK -82,561).
Net financial items amounted to TSEK -84 (TSEK -335,926). Result after financial
investments amounted to TSEK -6,130 (TSEK -416,771).
The tax item for the period amounted to TSEK -100 (TSEK -22,598).
The net result after tax for the discontinued operations during the report
period amounted to TSEK -6,230 (TSEK -439,370), equivalent to an Earnings Per
Share of SEK -0.0018 (SEK -0.18).
The Group in total during January-September 2010
For the period, the Group in total reports a net result after tax of TSEK
-55,029 (TSEK -450,023) equivalent to an earnings per share of SEK -0.0161 (SEK
-0.18).
Investments
The Group's investments in tangible and intangible fixed assets during the
January-September period amounted to TSEK 1,708 (TSEK 24,363). Investments in
the continuing operations were TSEK 513 (-) and in the discontinued operations
TSEK 1,195 (TSEK 24,363).
Financing and liquidity
Cash balances in the Group amounted to TSEK 183,929 (TSEK 3,779) as of 30
September 2010.
In anticipation of future investments, a re-allocation of the major part of the
company's excess liquidity assets was made by exchanging SEK 500 million into 2
billion roubles in the beginning of the 3(rd) quarter. The move into roubles was
motivated by the fact that the company's main activities shall be to make
investments in oil related operations in Russia.
One billion roubles were placed in a fixed-rate investment in a Russian bank and
one billion roubles were placed for asset management in another Russian bank.
The bank's mandate is executed within strict limits defined by the board of
Petrogrand and the investments are mainly made into bonds.
During the 3(rd) quarter, these investments resulted in a total return of 40
million roubles. This amount covers the company's total expenses for the head
office as well as for the offices in Russia.
In the company's reporting currency SEK, the result of the asset management is
reported as a "Change in real value of assets under external management"
amounting to TSEK 5,177. The fixed-rate investment resulted in an "Interest and
currency effect on short financial loan" amounting to TSEK 4,146, of which the
accrued interest was TSEK 4,404 and the currency effect on this interest was
TSEK -258.
The major strengthening of SEK versus the rouble during the 3(rd) quarter
resulted in a non-realised exchange rate loss on financial investments amounting
to TSEK -58,081 during the period. This amount is reported in the income
statement as an "Exchange rate effect on financial investments". From the end of
the 3(rd) quarter and till the time of the publishing of this report, the rouble
has again strengthened by approximately 1.5 per cent versus SEK.
Legal disputes
Tardan Gold
Since the end of 2009, Petrogrand was involved in a legal dispute with Central
Asia Gold AB's Russian subsidiary Tardan Gold concerning a bill of exchange
receivable. In its annual accounts for 2009, Petrogrand AB made a provision
concerning this receivable amounting to TSEK 14,046. In the second quarter of
2010, an agreement with an installment plan was made with Tardan Gold. As of 30
September, Petrogrand AB had received payments according to the installment plan
amounting to TSEK 14,022 to cover the bill of exchange receivable which have had
a positive impact on the Group's result. In addition to the repayment of the
receivable, Petrogrand received interest amounting to TSEK 2,200 from Tardan
Gold which is included in Financial income.
With the fulfillment of all payments according to the agreed installment plan,
there is no longer any dispute with Tardan Gold at the time of publishing of
this interim report.
Gazprom Neft Vostok
In August, the company received claims relating to alleged violations of
warranties defined in the agreement concerning the sale of STS-Service.
Petrogrand was of the opinion that the claims were not justified and dismissed
the claims and therefore no provisions were made in the balance sheet.
Since then, discussions have been initiated with Gazprom Neft Vostok on this
issue. At the time of the publishing of this report, there is no agreement with
Gazprom Neft Vostok. For the purpose of prudence, however, a provision has been
made in the company's balance sheet amounting to the value in SEK of 35 million
roubles, equal to TSEK 7,739. Consequently, this amount is also included with a
negative result impact in the company's income statement.
Employees
The number of employees in Group companies at the end of the report period was
28 (172), of which 18 (39) were women and 10 (133) were men.
Comments on the Parent Company
Other operating income in the income statement represents the payments received
from Tardan Gold to cover the bill of exchange receivable for which previously a
provision was made. Financial income includes the interest received from Tardan
Gold.
Other operating expenses includes the provision of TSEK 7,739 made for the
purpose of prudence to cover eventual warranty claim costs to Gazprom Neft
Vostok. In the balance sheet, this amount is included in Accrued costs and
prepaid income.
The result of the parent company has been charged with a write-down of loans
given to the Russian subsidiary 'STS-Management' amounting to TSEK 12,404. These
loans have been given during the report period in order to cover expenses linked
to the subsidiary's liquidation which is still not completed. The amount is
included in the Other financial costs in the income statement.
Transactions with related parties
The company in the fourth quarter of 2009 used a commitment from one of the
major shareholders concerning short-term bridge financing at market conditions
in order to meet its liquidity needs until receipt of payment from the buyer of
STS-Service. After receiving payment from the buyer in early February 2010, the
short-term credit including interest was repaid.
Major events during the report period
New Certified Adviser
On 1 July, Mangold Fondkommission began its engagement as new Certified Adviser
for Petrogrand AB.
Consolidation of shares
On 10 August, the Board decided that the record date for the consolidation of
shares, in line with the decision at the AGM, would be August 20. The last day
of trading with the company's old shares before the consolidation was to be
August 17 and the first day of trading with the consolidated shares was to be
August 18. In the consolidation, 100 old shares were consolidated into 1 new
share.
Result of the Incentive Programme
On 11 August, the company reported that 87 per cent equal to 113 million of the
subscription warrants of series A had been subscribed for by employees and board
members. According to the rules of the incentive programme which was approved by
the AGM, the application period with regards to the subscription warrants of
series A was from 23 June to 9 July 2010.
Subsequently, one employee who originally subscribed for 5 million warrants has
terminated his employment in the company. Thus, the final number of warrants of
series A subscribed for amounted to 108 million.
Operations
Petrogrand AB is an independent Swedish oil company within exploration and
production previously active in oil production in the Tomsk region in western
Siberia in Russia through its subsidiary STS-Service.
On 5 February 2010, Russian Authorities registered the transfer of ownership of
the production subsidiary STS-Service to Gazprom Neft Vostok in line with the
resolution by the extraordinary general shareholders' meeting on 17 December
2009 to sell STS-Service to Gazprom Neft Vostok.
Following the transaction, the board of Petrogrand AB has developed a new
business plan for future operations. The business plan was approved by the
shareholders at an extraordinary general shareholders' meeting on 27 April.
Petrogrand's general business concept is to carry on oil production through
acquired Russian oil companies and oil licenses. Petrogrand will also manage,
enhance the value of and sell Russian oil assets. The goal is to become one of
Sweden's leading oil companies on the Russian market by means of investments in
the Russian oil sector.
Since the approval of the business plan, Petrogrand's organization has actively
worked to evaluate a large number of acquisition proposals received from
potential partners.
Production during the report period
Petrogrand's production of oil and gas condensate during January-September 2010
amounted to 63,998 barrels. The total production took place in January. As a
result of the completion of the sale of STS-Service to Gazprom Neft Vostok in
early February, the company did not produce any oil during the remainder of the
report period.
Major events following the end of the report period
-
Share data
Since the time of the rights issue and the conversion of the convertible bonds
in April 2009, the share capital of Petrogrand AB amounted to SEK 268,410,272
divided into 4,026,589,880 outstanding shares, each with a par value of SEK
0.0667.
At the AGM on 21 June, it was resolved in favour of a consolidation of shares
1:100 by which one hundred (100) old shares would be consolidated into one (1)
new share. The Board of the company then decided on 10 August that the record
date for the consolidation of shares would be Friday 20 August 2010.
As a result of the consolidation, the share capital of Petrogrand AB at the time
of the publishing of this report amounts to SEK 268,410,272 divided into
40,265,898 outstanding shares, each with a par value of SEK 6.67
In addition, there is a latent dilution due to an Incentive Program 2010/2013
which was approved at the AGM on 21 June. Company employees and board members
are included in the incentive program. Within the program, a total of 211
million subscription warrants have been issued and at the time of the publishing
of this report, 108 million have been subscribed and purchased. The remaining
options may be offered to existing and future employees and board members up
until the AGM of 2011.
Assuming full exercise of all subscription warrants, the share capital will
increase by no more than 14,065,144.22 SEK, equivalent to a dilution of about
4.98 per cent of share capital and voting rights.
Accounting policy
Basis for the preparation of the interim report
This interim report has been prepared in accordance with IAS 34, Interim
reporting. The consolidated group accounting has been prepared in accordance
with International Financial Reporting Standards (IFRS) as approved by EU and
the Annual Accounts Act.
Discontinued operations
In December 2009, Petrogrand AB and Gazprom Neft Vostok signed a sale and
purchase agreement concerning the sale of Petrogrand's subsidiary STS-Service.
Consequently, Petrogrand has based this interim report according to IFRS 5, Non-
current Assets Held for Sale and Discontinued Operations. In the Group income
statement, continued and discontinued operations are thus reported separately
and in the balance sheet, assets and liabilities held for sale are reported as
separate items. In the income statement for discontinued operations, all income
and costs, including financial items that are directly attributable to the
divested subsidiary are included.
Parent company
The interim report for the parent company has been prepared in accordance with
the Annual Accounts Act and the Securities Market Act, which is in accordance
with the rules in RFR 2.3
Accounting for Legal Entities.
Future reporting dates
Year-end report for the year 2010: To be published on February 28, 2011
Annual report 2010: To be published in April/May 2011
January - March 2011 interim report: To be published May 31, 2011
Annual general meeting 2011: To be held in June 2011
January - June 2011 interim report: To be published August 31, 2011
January - September 2011 interim report: To be published November 30, 2011
Company information
The full name of the parent company is Petrogrand AB (publ). It is a public
limited company with head offices in Stockholm and the corporate registration
number 556615-2350. The address of the parent company is Birger Jarlsgatan
41A, 111 45 Stockholm. Its telephone number is +46 8 5000 7810 and fax number is
+46 8 5000 7815. Internet web site: www.petrogrand.se
Certified Adviser
Certified Adviser First North: Mangold Fondkommission
This report has not been subject to review by the company's auditors.
Stockholm, 30 November 2010
The Board of Petrogrand AB (publ)
For further information, please contact:
Maks Grinfeld, MD, tel; +46 768 077 614
Sven-Erik Zachrisson, Chairman of the Board of Directors, tel: +46 8 41 05 45 96
For further information on Petrogrand AB, see the websitewww.petrogrand.se
Reasonable caution notice: The statement and assumptions made in the company's
information regarding Petrogrand AB's ("Petrogrand") current plans, prognoses,
strategies, concepts and other statements that are not historical facts are
estimations or "forward looking statements" concerning Petrogrand's future
activities. Such future estimations comprise but are not limited to statements
that include words such as "may occur", "concerning", "plans", "expects",
"estimates", "believes", "evaluates", "prognosticates" or similar expressions.
Such expressions reflect the management of Petrogrand's expectations and
assumptions made on the basis of information available at that time. These
statements and assumptions are subject to a large number of risks and
uncertainties. These, in their turn, comprise but are not limited to i) changes
in the financial, legal and political environment of the countries in which
Petrogrand conducts business, ii) changes in the available geological
information concerning the company's projects in operation, iii) Petrogrand's
capacity to continuously guarantee sufficient financing to perform their
activities as a "going concern", iv) the success of all participants in the
group, or of the various interested companies, joint ventures or secondary
alliances, v) changes in currency exchange rates, in particular those relating
to the RUR/USD rate. Due to the background of the many risks and uncertainties
that exist for any oil-prospecting venture and oil production company in its
initial stage, Petrogrand's actual future development may significantly deviate
from that indicated in the company's informative statements. Petrogrand assumes
no implicit liability to immediately update any such future evaluations.
[HUG#1467293]
INTERIM REPORT JANUARY SEPTEMBER 2010:
http://hugin.info/138739/R/1467293/404916.pdf
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(i) the releases contained herein are protected by copyright and
other applicable laws; and
(ii) they are solely responsible for the content, accuracy and
originality of the information contained therein.
Source: Petrogrand AB via Thomson Reuters ONE
Unternehmensinformation / Kurzprofil:
Datum: 30.11.2010 - 18:44 Uhr
Sprache: Deutsch
News-ID 49274
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