MALKA OIL: INTERIM REPORT JANUARY-JUNE 2009
(Thomson Reuters ONE) - * Turnover for the 2nd quarter amounted to TSEK 38,525 (TSEK 45,351) * Operating profit for the 2nd quarter amounted to TSEK -28,225 (TSEK -10,106) * Result after financial items adjusted for cost due to conversion of convertible bonds amounted to TSEK -29,848 (TSEK -33,928) for the 2nd quarter * The net result after tax for the 2nd quarter amounted to TSEK -268,593 (TSEK -34,004) * Turnover for the January-June period amounted to TSEK 60,014 (TSEK 71,930) * Operating profit for the January-June period amounted to TSEK -56,603 (TSEK -23,499) * The net result after tax for the January-June period amounted to TSEK -387,041 (TSEK -34,816) * Earnings Per Share for the January-June period was SEK -0.23 (SEK -0.13)MD's ReportDear Shareholders,The first half of 2009 was a very turbulent half year for Malka Oil.I took up my position as of July 1st and I have to conclude that theprevious management handled many problems in a way that disturbed theoperative work of producing oil.The large loss after tax during the first half year is mainly aresult of currency exchange rate losses and especially a result of anaccounting cost without impact on cash flow or on the equity capitalas a result of the early conversion of the outstanding convertiblebonds.At the same time, the conversion has led to a considerablestrengthening of the balance sheet and the company no longer has anyoutstanding long-term interest bearing debt.But I have to admit that the operating loss of 56 million SEK is alarge loss and it is a sign of the difficulties that the company'smanagement has had during the past year.The lower turnover during the first half year is mainly a result ofthe loss of production in May when oil transportation through thepipeline was stopped.Our focus is now on decreasing production costs and to makeproduction more efficient and more profitable. The technologicalrevision of all wells is on-going so that we can optimize ourinvestments even more.As of today, we are involved only in two legal disputes and we areworking to solve them. With all other suppliers we have reachedsettlement agreements and we are strictly following agreed paymentschedules. We are also working to obtain all necessary approvals andpermits related to our pipeline in line with a set plan.I begin to feel more optimism as regards the future of Malka Oil evenif I want to stress that we still have a heavy work load up ahead. Wehave already now started to see the result of our focused work in theform of a positive cash flow from our oil production. With theprofound competence of the new board of directors and management wewill step by step move towards a profitable and stable Malka Oil.Maks GrinfeldManaging Director Malka Oil ABComment on the Group's result and financial positionTurnover and resultTurnover for the January-June period amounted to TSEK 60,014 (TSEK71,930), of which revenues from oil sales were TSEK 59,995 (TSEK69,467).Gross profit amounted to TSEK -137 (TSEK 5,285). This amount includesan amortization charge of TSEK 9,115 (TSEK 6,007).Selling and distribution expenses were TSEK -2,605 TSEK (TSEK-11,286). These expenses have decreased significantly compared toearlier report periods following the conclusion in early 2009 of anew more advantageous contract with Tomskayaneft for treatment andpumping of produced oil into Transneft's system.Other operating expenses amounting to -34 062 TSEK (-2 378 TSEK) ofwhich TSEK 18,780 were damages and fees resulting from the company'sfinancial problems and the debt restructuring process.Operating profit for the half year amounted to TSEK -56,603 (TSEK-23,499).Net financial items for the January-June period amounted to TSEK-305,255 (TSEK -8,998). Part of this amount is a financial cost ofTSEK -225,549 which has arisen in the accounts as a result of therevised terms for early conversion of the convertible bond loans. .This cost is shown as a separate financial cost and does not have anyimpact on the cash flow. This cost also does not impact the reportedequity capital of the company. The predominant proportion of theremaining financial costs amounting to TSEK 80,386 consists ofcurrency exchange rate losses with no impact on cash flow. Thesecosts arose already during the first quarter when the depreciation ofSEK versus USD as well as the depreciation of RUR versus USD had anegative impact on net financial items.The tax cost for the period amounted to TSEK -25,182 (TSEK -2,319).This amount includes a dissolution of deferred tax assets in theRussian subsidiaries of TSEK 25,763 which has impacted the Group'sresult negatively. This dissolution does not have any impact on cashflow.The Group reports a net result after tax for the period 1 January-30June 2009 of TSEK -387,041 (TSEK -34,816), equivalent to an earningsper share of SEK -0.23 (SEK -0.13).InvestmentsInvestments in tangible and intangible fixed assets in the Groupduring the period January - June 2009 amounted to TSEK 9,181 (224,196TSEK), of which investments in intangible fixed assets representedTSEK 8,389 (TSEK 219,870). The limited investment activity reflectsthe company's difficult financial situation during the period.Financing and liquidityIn the beginning of 2009, the company's financial situation was verydifficult and the board of directors made a proposal for a financialrestructuring as a way to solve the financing requirements.The proposal consisted of two parts:- an offer to holders of convertible bonds of early conversion intoshares of the two outstanding convertible bond loans of nominallyMUSD 80;- a new rights issue under the special condition that the convertiblebond owners must accept their offer in full for the rights issue togo through.The proposal was accepted by the convertible bond holders andshareholders and the conversion of the convertible bond loan and therights issue were according to the decisions executed in April 2009which led to a reduction of the company's interest bearing debt ofapproximately 640 million SEK. As a result of these actions, theGroup balance sheet has been significantly strengthened and the Groupdoes not as of 30 June have any outstanding long- term interestbearing debt.The new board of directors immediately started a process to determinethe long-term financing needs of the company. This work is stillon-going.Cash balances in the Group amounted to TSEK 11,267 (TSEK 16,169) asof June 30, 2009.Legal disputesMalka Oil's Russian subsidiary, OOO STS-Service, is as of todayinvolved in legal disputes with two local suppliers: OOO "Kupir"concerning construction work and OOO "EERB" concerning drilling work.The company in its annual report for 2008 made a provision concerningits total outstanding receivable on "EERB" amounting to approximately270 million RUR corresponding to approximately 70 million SEK. Thegroup balance sheet as of today includes a receivable on "Kupir" ofan amount of 75 million RUR or approximately 19 million SEK. Theboard sees no need for a provision for this receivable at the presenttime.Legal disputes with other suppliers are regulated by settlementagreements and the board of directors in Malka Oil sees no need forfurther provisions due to these disputes.EmployeesThe number of employees in Group companies at the end of the reportperiod was 222 (232) persons, of which 47 (25) were women and 175(207) were men. The comparative figures from the previous yearinclude personnel working for Group companies but formally employedin Management company Malca.Major events during the report periodEarly conversion of all outstanding convertible bonds and the rightsissue has been executed.Malka Oil's rights issue was fully subscribed and the Companyreceived proceeds of approximately SEK 141 million before issueexpenses. At the same time the convertible bond debt of USD millionhas ceased to exist and been converted into 1,678,000,000 new shares.New seismic data confirmed 11 potentially oil bearing structuresAccording to new seismic data covering the North and Central part ofMalka Oil's license block eleven potential oil bearing structureshave been identified including earlier mentioned seven undrilledstructures and four new. The report is based upon more than 1,000 kmof 2D-seismic that has been shot during the winter seasons 2006-2007and 2007-2008 as well as on 6,000 km of 2D-seismic lines fromprevious year's surveys within the license block and adjacent areas.The report indicates additional potential resources of 673 millionbarrels.Jan-Olov Olsson was appointed as new CFOJan-Olov Olsson has been appointed as new CFO at Malka Oil effectivefrom April 22, 2009. Jan-Olov has long experience of working withRussian markets and Russian businesses.Debt to EERB was settledOn Monday June 8, a court in Tomsk rejected a bankruptcy petitionfrom EERB towards Malka Oil's Russian subsidiary STS-Service asMalka's entire debt of 273 MRUR to EERB already had been settled.Renaissance Capital was appointed as exclusive financial advisor forMalka Oil ABMalka Oil AB appointed Renaissance Capital as its exclusive financialadvisor for the purposes of exploring the Company's strategicoptions.The new Board of Directors and CEO for Malka OilThe new Board of Directors including Sven-Erik Zachrisson, MaksGrinfeld, Johan Hessius, Mats Jansson, Colin Jones and Håkan Zadlerwas elected by the continued annual general meeting which was held onJuly 15, 2009. Sven-Erik Zachrisson was elected as the Chairman ofthe Board. The Board of Directors appointed Maks Grinfeld as new CEOat Malka Oil effective from July 1, 2009.OperationsSummaryMalka Oil AB is an independent Swedish oil company within explorationand production active in Tomsk region in western Siberia in Russia. The subsidiary OOO STS-Service owns an oil licence valid for 25years as from April 2005, which gives the company the right toextract all hydrocarbons found within the Tomsk licence block duringthe licence period. The licence block measures just over 1,803 squarekilometres, corresponding to an area of approximately 30 times 60kilometres and is located in the very active oil and gas producingnorth-western part of the Tomsk region. The licence block issurrounded by a large number of established producing oil and gasfields.Drilling on the licence block commenced during the Soviet era. TheSoviet authorities drilled four boreholes, three of which werediscovered to produce hydrocarbons, i.e. oil, gas and gas condensate.A vast amount of 2D seismic data was collected which indicated avolume of approximately one million tons (which is about eightmillion barrels) of recoverable oil reserves classified in accordancewith Russian categories "Proven" (C1) and "Probable" (C2).Besides the three oilfields that are currently establish in thelicence block, Malka Oil has, based on existing seismic data,identified another seven structures, i.e. potential oil fields. Afurther important dimension that indicates additional potential inMalka Oil's licence block is that there was no seismic data forapproximately a third of the licence block and the data acquisitionfor this area was completed during spring 2008. After two seasons ofseismic data gathering and interpretation, Sibneftegeofizika, areputable Siberian oil service company has presented a seismic reportcovering Malka Oil's license block nr 87 in the Tomsk region. Thisnew report demonstrates four new potential oil bearing structures inaddition to the seven communicated earlier. These will be subject toexploration drilling over the next few years.For further information, please contact:Maks Grinfeld, MD, tel; +46 768 077 614Sven-Erik Zachrisson, Chairman of the Board of Directors, tel: +46 841 05 45 96(for complete report see attached file)http://hugin.info/138739/R/1338117/319151.pdfThis announcement was originally distributed by Hugin. The issuer is solely responsible for the content of this announcement.
Datum: 28.08.2009 - 19:35 Uhr
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