* Consolidated turnover for the period amounted to TSEK 445,665
(162,248).
* The net result after tax for the period was -15,230 (-7,088).
* EPS was SEK - 0.06 (-0.04) for the report period.
* On February 1st, Malka Oil upgraded its estimated reserves of
extractable oil and gas condensate with 32 % to 140-190 million
barrels.
* A production level of 2,904 barrels per day was reached on Dec
31, 2007 which is on par with the targeted 3,000 barrels per day.
* Extensive hydrofracturing programme encompassing 16 wells
initiated in February 2008 and planned to be completed in the
early part of 2nd quarter.
* Malka Oil will complete its direct connection to Transneft during
2008.
MD's Report - The Year in Brief
Dear Shareholders,
During the last quarter 2007 the most significant business events
were our re-listing on OMX First North, the subsequent fund raising
and the reserve upgrade. We successfully raised MUSD 15 in equity and
MUSD 20 in a convertible bond issue. This enabled Malka to enter 2008
with a focused and concrete budget for the coming year.
Year 2007, which was my first year as Managing Director of Malka Oil
has been filled with challenges but even more so with exciting
results. Malka is an exploration and production company and this is
exactly what we have been focusing on. On the exploration side we
have had a series of successes which has so far resulted in a company
estimate of extractable reserves of 140-190 million barrels. This
should be compared with the company estimate at the beginning of 2007
which was 60-120 million barrels, an increase of 83%.
The bankable recoverable reserves approved by the Russian State
Reserve Committee GKZ are currently 97 million barrels, up from 26
million barrels over the last year, an increase of an astonishing
273%.
In August we started to produce for commercial purposes and in
December 2007 we demonstrated a capacity of 2,904 barrels per day
which was in line with the earlier promised 3,000 barrels per day.
A successful E&P company should be a successful explorer as well as a
successful producer and there are many factors that have to be put in
place to achieve this.
Our licence block has turned out to be a truly prolific hydrocarbon
bearing area. This knowledge is based on earlier seismic data,
updated and new seismic data as well as continuously updated borehole
data as drilling is progressing. I would like to comment shortly on
some geological factors and theories: On our eastern border lies the
huge Luginetskoye field which is today owned by Rosneft through their
subsidiary Tomskneft. Our Chief Geologist nurtures the theory that
the origin of the migrating oil is located westwards, i.e. from
inside or even west of our license block. So far our drilling data
support this theory and therefore our future exploration drilling
plans will include a westward search for the actual oil-water contact
boundary. This can have dramatic positive effects on the size of the
reservoirs we command.
For 2008 we have a comprehensive work programme which ultimately aims
for achieving the next level of production of 8,000 barrels per day
by the year-end 2008. Firstly, we are now conducting hydro fracturing
of 16 wells which is expected to significantly raise the production
level to between 4,500-6,000 barrels per day upon completion.
Secondly, our drilling programme comprises up to 16 new production
wells and one to two exploration wells. Thirdly, we have initiated a
western study of our license block according to SPE norms which is
expected to be ready in the form of a CPR (Competent Person's Report)
during the 2nd quarter. Fourthly, we are now consolidating new
seismic data from the so far virgin northern part of the block and it
will be very exciting to follow this interpretation which is planned
to be finalised during the 3rd quarter 2008. Our expectation is to be
able to identify additional structures for further increased reserves
and development. Finally we plan to be delivering oil and gas
condensate directly into the Transneft network through our own direct
connection latest by the 4th quarter 2008.
As you can see we are not shy about our goals, plans and ambitions We
also understand that the actual results over time must harmonize with
the ambitions. This is what we have managed to achieve so far, and we
intend to do so also in the future.
I reiterate my statement that there are many possibilities ahead and
that Malka is very well placed to capture and capitalise on them with
the short term goal of delivering 8,000 barrels per day by year-end
2008, medium term 12,000 barrels per day by year-end 2009 and to
drive towards of our vision which is 30,000 barrels per day by
year-end 2012.
Sincerely Yours
Fredrik Svinhufvud
MD Malka Oil AB
Result and Turnover - The Group
The group reports a net result after tax for the period 1 January -
31 December 2007 of
TSEK -15,230 (-7,088), equivalent to a earnings per share of SEK
-0.06 (-0.04) .
Transaction costs of TSEK -16,568 (-5,636) relating to the new share
and convertible bond issues during the report period have been booked
against equity.
The consolidated income statement also includes an income item of
TSEK 441,945 (155,561) relating to capitalized work on the group's
account in accordance with the established accounting principles.
In accordance with said accounting principles, incomes from oil sold
within the framework of the exploration licence have been net
reported against the oil- and gas assets. This means that they are
not shown in the group income statement and instead they are reducing
capitalized work from the development program. The income from oil
sold amounted to MSEK 36.5 during the report period of which MSEK
25.5 in the 4th quarter.
Operating costs for the report period amounted to TSEK -456,519
(-166,334) in total.
Net financial items for the period Jan-Dec 2007 were TSEK -4,031
(-5,234).
The tax cost for the period amounted to TSEK -325 (2,232).
Investments
Investments in tangible and intangible fixed assets in the group
during the period January - December 2007 amounted to TSEK 499,322
(163,432), of which intangible fixed assets represented TSEK 441,945
(154,762).
Financing and liquidity
Cash balances in the group amounted to TSEK 58,739 (46,230) at 31
December 2007. After year-end 2007 a convertible bond issue attracted
net TSEK 117,772.
Employees
The number of employees in group companies at the end of the report
period was 91 persons, of which 9 were women and 82 were men.
Operations
Summary
Malka Oil AB is an independent oil company active in Russia involved
in exploration and production of hydrocarbons in the form of oil, gas
condensates and gas. In conjunction with this, 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 1,800 square kilometres and is
located in the north-western part of the Tomsk region. It is
surrounded by a large number of producing oil and gas fields.
During the Soviet era six boreholes were drilled in the licence
block, five of which were discovered to produce hydrocarbons. The
existing seismic investigation within the block have, besides the
three existing oil fields, identified another seven structures, i.e.
potential oil fields. These will be subject to exploration drilling
over the next few years. It should be mentioned that around one third
of the licence block has just recently been covered by seismic
investigation and the final interpretation will be completed during
the 3rd quarter 2008.
(for complete report see attached file)
