2009-11-30 18:20:57 -
London, November , 30, 2009
* Turnover for the 3rd quarter amounted to TSEK 37,716 (TSEK 57,857)
* Operating profit for the 3rd quarter amounted to TSEK -36,653 (TSEK
-21,470)
* Result after financial items for the 3rd quarter amounted to TSEK
-65,566 (TSEK -90,351)
* The net result after tax for the 3rd quarter amounted to TSEK
-62,982 (TSEK -85,883)
* Turnover for the January-September period amounted to TSEK 97,730
(TSEK 129,787)
* Operating profit for the January-September period amounted to TSEK
-93,256 (TSEK -44,969)
* The net result after tax for the January-September period amounted
to TSEK -450,023 (TSEK -120,699)
* Earnings Per Share for the January-September period was SEK -0.18
(SEK -0.41)
MD's Report
Dear Shareholders,
During the third quarter, we have continued to stabilize the
situation in the company. We put the highest priority on reopening
the pipeline in order to be able to increase production and to avoid
costly oil deliveries by truck. By mid September, all necessary
permits had been obtained and the pipeline could be reopened. We have
also reviewed all other infrastructure to ensure that the necessary
permits are valid.
We are working actively to make our production process more efficient
and cost effective. During the autumn, we have installed three new
beam pumps. The efficiency work has resulted in savings and I can
mention that production cost expressed in SEK per produced barrel of
oil was approximately 30% lower during the first nine months 2009 as
compared to the same period 2008.
When commenting upon our result, I am far from satisfied but I would
like to highlight a few negative factors that the company has been
unable to influence.
Obviously the oil price development has been detrimental this year as
compared to 2008. In USD terms, the average sale price realized by
our subsidiary in Tomsk during January-September this year was
approximately 27 USD/barrel of oil as compared to a price of
approximately 54 USD/barrel during the same period 2008.
Furthermore, our result has been exposed to large fluctuations in the
exchange rates of the USD and Russian rouble in 2009. Out of the
financial costs of 110 million SEK in the January-September period,
only 10 million SEK were interest paid with a cash flow impact. In
our report for the second quarter, we described the specific one-off
financial cost of approximately 225 million SEK which arose in the
accounts as a result of the revised terms for the early conversion of
convertible bond loans.
Finally, the company has taken a number of one-off costs and
write-downs linked to financial and other problems that arose during
2008.
On the other hand, if we analyze the trends in our operations we see
improvements. I already mentioned the decrease in our production
costs. We have also seen a dramatic reduction in our selling and
distribution expenses in 2009 as compared to in 2008 and from a cash
flow perspective, the company had a positive cash flow from current
operations in the third quarter.
Another positive development is that the company has obtained Swedish
VAT registration and during the third quarter received a refund of
all Swedish VAT paid since 2005. Going forward, this will reduce
costs in the parent company.
I feel that all the efforts by our employees have led to concrete
results and that we now have a stronger company than when I joined as
Managing Director half a year ago. We now have a good base to start
from when we engage in the work to develop our business plan for the
coming year.
Maks Grinfeld
Managing Director Malka Oil AB
Comment on the Group's result and financial position
Turnover and result
Turnover for the January-September period amounted to TSEK 97,730
(TSEK 129,787), of which revenues from oil sales were TSEK 97,370
(TSEK 127,083).
Gross profit amounted to TSEK 475 (TSEK 7,268). This amount includes
an amortization charge of TSEK 12,803 (TSEK 11,141).
Selling and distribution expenses were TSEK -2,986 (TSEK -18,659).
These expenses have decreased significantly compared to earlier
report periods following the conclusion of a new more advantageous
contract with Tomskayaneft for treatment and pumping of produced oil
into Transneft's system.
Administrative costs and other operating expenses amounted in total
to TSEK -90,745 (TSEK -33,578). A number of one-off costs related to
the company's financial difficulties and the debt restructuring
process have been booked as other operating expenses. Specifically,
damages and fees amounting to TSEK 18,780 arose in the second quarter
and in the third quarter, a provision of approximately TSEK 18,000
was made for a doubtful receivable from OOO Kupir.
Operating profit for the January-September period amounted to TSEK
-93,256 (TSEK -44,969).
Net financial items for the January-September period amounted to TSEK
-334,169 (TSEK
-77,879). Part of this amount is a financial cost of TSEK -225,549
which has arisen in the accounts during the second quarter as a
result of the revised terms for early conversion of the convertible
bond loans. This cost is shown as a separate financial cost and does
not have any impact on the cash flow. This cost also does not impact
the reported equity capital of the company. The predominant
proportion of the remaining financial costs amounting to TSEK
-110,377 consists of currency exchange rate losses with no impact on
cash flow. The amount of interest paid with an effect on cash flow
during the January-September period was only TSEK 9,775. The
financial costs during the third quarter amounting to TSEK -29,990
were exclusively attributable to currency exchange rate losses.
The tax cost for the period amounted to TSEK -22,598 (TSEK -2,149).
This amount includes a dissolution of deferred tax assets in the
Russian subsidiaries of TSEK 23,381 which has impacted the Group's
result negatively. This dissolution, which does not have any impact
on cash flow, has been made based on the assessment that the losses
carried-forward accumulated in the subsidiaries during earlier
periods not will be fully usable in future periods.
The Group reports a net result after tax for the period 1 January-30
September 2009 of TSEK -450,023 (TSEK -120,699), equivalent to an
earnings per share of SEK -0.18 (SEK -0.41).
Investments
Investments in tangible and intangible fixed assets in the Group
during the period January - September 2009 amounted to TSEK 24,363
(TSEK 331,951), of which investments in intangible fixed assets
represented TSEK 24,086 (TSEK 327,009).
Valuation of assets
In line with what has been earlier communicated the company is in the
process of evaluating its strategic opportunities. In this process,
the company is looking at possibilities to acquire other companies or
new licences or as an alternative to sell companies. The outcome of
this evaluation process may influence the valuation of the company's
assets. A detailed impairment test will be made at the time of the
annual report for 2009.
VAT- registration
During the 3rd quarter, the company applied for VAT registration and
after it was granted applied for and received retroactively a refund
of all VAT paid by the parent company during the whole period of its
activity.
Financing and liquidity
In the beginning of 2009, the company's financial situation was very
difficult and the board of directors made a proposal for a financial
restructuring as a way to solve the financing requirements.
The proposal consisted of two parts:
- an offer to holders of convertible bonds of early conversion into
shares of the two outstanding convertible bond loans of nominally
MUSD 80;
- a new rights issue under the special condition that the convertible
bond owners must accept their offer in full for the rights issue to
go through.
The proposal was accepted by the convertible bond holders and
shareholders and the conversion of the convertible bond loan and the
rights issue were according to the decisions executed in April 2009
which led to a reduction of the company's interest bearing debt of
approximately 640 million SEK. As a result of these actions, the
Group balance sheet has been significantly strengthened and the Group
does not as of 30 September have any outstanding long- term interest
bearing debt.
The new board of directors immediately started a process to determine
the long-term financing needs of the company. This work is still
on-going.
Cash balances in the Group amounted to TSEK 3,779 (TSEK 134,386) as
of September 30, 2009. The company has a commitment from one of the
major shareholders concerning a temporary bridge financing if there
should be a need for this in the short term.
Legal disputes
Malka Oil's Russian subsidiary, OOO STS-Service, is as of today
involved in legal disputes with two local suppliers: OOO Kupir
concerning construction work and OOO EERB concerning drilling work.
Since the last quarterly report, these suppliers have presented new
claims, all of which are disputed by OOO STS-Service. Malka Oil in
its annual report for 2008 made a provision concerning its total
outstanding receivable from OOO EERB amounting to approximately 270
million RUR corresponding to approximately 70 million SEK. Since OOO
Kupir now is in a procedure of bankruptcy, it has been necessary to
make a provision also concerning the receivable from OOO Kupir. This
means that the company's income statement during the 3rd quarter has
been charged with a cost of approximately 75 million RUR
corresponding to approximately 18 million SEK.
Legal disputes with other suppliers are regulated by settlement
agreements and the board of directors in Malka Oil sees no need for
further provisions due to these disputes.
Employees
The number of employees in Group companies at the end of the report
period was 172 (239), of which 39 (35) were women and 133 (204) were
men. The comparative figures from the previous year include personnel
working for Group companies but formally employed in Management
company Malca.
Major events during the report period
CEO-letter to shareholders was published on July 10, 2009
Newly appointed CEO together with the Board of Directors conducting
an audit of the company's reserves, production targets and the future
organization. Sergey Sedunov is re-employed as CEO for Malka Oils
subsidiary "STS Management" and Elena Alatartseva is appointed as
vice president of "STS Management". A constructive dialogue with
authorities and creditors is entered and the new management goes
through existing disputes and debts in order to regulate these.
CEO-letter to shareholders was published on August 17, 2009
The Board of Directors and management in Tomsk continue to strengthen
the company's position. The company is working on obtaining all
necessary permits for the pipeline that was built for connection to
Tomskayaneft without necessary authorization. Meanwhile the technical
inspection of the pipeline was carried out in order to prepare it for
operation, which is expected to occur during the middle of September.
A new contract was renegotiated and signed with SIBNINP (The
governmental engineering office in Tyumen) on the amount of 89
million rubles, which corresponds to approximately 20 million SEK
according to the today exchange rate. 31 million rubles of this
amount are already paid. Their work is expected to be complete by the
year-end 2009.
Ministry of Natural Resources conducted an audit of all licenses
issued in Tomsk region which is used to happen every six months and
no objections were noted on STS-service license.
During autumn it is planned to complete the work on well 210 which is
located between Zapadno-Luginetskoye and Lower Luginetskoye (ZL and
LL) oil fields in order to confirm that these two fields are
connected into one large oil deposit which would lead to higher
reserve estimates for these two fields.
The company is currently producing oil from 10 wells, of which seven
are equipped with submersible electric pumps and three are working
under self-pressure that must be built up intermittently. It is not a
profitable way to extract oil, therefore it has been invested into
three new land located pumps. These pumps and other equipment will be
delivered during the autumn and then installed. Oil production in
total is estimated to 2,300 barrels per day by the year-end 2009.
Malka Oil's subsidiary, STS-Service engaged a law firm in Tomsk to
assist with legal expertise. Their work aims to review all agreements
with two key suppliers "EERB" and "Kupir". Other suppliers have
signed new contracts with and STS-Service completes the instalment
plan without any delay.
Malka Oil: The pipeline is in operation
After the intensive and demanding work performed by our personnel at
STS-Service in Tomsk the extensive documentation has been completed
and submitted to the authorities for issuing of construction and
operating permissions. All documents have been approved and signed by
all the authorities concerned and as of September 18, 2009 the
pipeline is back into operation. All oil is now transported by the
pipeline to Tomskayaneft and then is shipped into the Russian
pipeline system, Transneft.
Work with production improvements, cost savings and updating of
reserves is going intensively and more details about this will be
presented later.
Operations
Summary
Malka Oil AB is an independent Swedish oil company within exploration
and production active in Tomsk region in western Siberia in Russia.
The subsidiary OOO STS-Service owns an oil licence valid for 25 years
as from April 2005, which gives the company the right to extract all
hydrocarbons found within the Tomsk licence block during the licence
period. The licence block measures just over 1,803 square kilometres,
corresponding to an area of approximately 30 times 60 kilometres and
is located in the very active oil and gas producing north western
part of the Tomsk region. The licence block is surrounded by a large
number of established producing oil and gas fields.
Drilling on the licence block commenced during the Soviet era. The
Soviet authorities drilled four wells, three of which discovered
hydrocarbons, i.e. oil, gas and gas condensate. A vast amount of 2D
seismic data was collected which indicated a volume of approximately
one million tons (which is about eight million barrels) of
recoverable oil reserves classified in accordance with Russian
categories "Proven" (C1) and "Probable" (C2).
Besides the four oilfields that are currently establish in the
licence block, Malka Oil has, based on existing seismic data,
identified another seven structures, i.e. potential oil fields. A
further important dimension that indicates additional potential in
Malka Oil's licence block is that there was no seismic data for
approximately a third of the licence block and the data acquisition
for this area was completed during spring 2008. After two seasons of
seismic data gathering and interpretation, Sibneftegeofizika, a
reputable Siberian oil service company has presented a seismic report
covering Malka Oil's license block nr 87 in the Tomsk region. This
new report identifies four new potential oil bearing structures in
addition to the seven communicated earlier. These will be subject to
exploration drilling over the next few years.
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 Malka Oil AB, see the website
www.malkaoil.se
(for complete report see attached file)
hugin.info/138739/R/1358163/330595.pdf
This announcement was originally distributed by Hugin. The issuer is
solely responsible for the content of this announcement.
