* 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 Report Dear 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 the previous management handled many problems in a way that disturbed the operative work of producing oil. The large loss after tax during the first half year is mainly a result of currency exchange rate losses and especially a result of an accounting cost without impact on cash flow or on the equity capital as a result of the early conversion of the outstanding convertible bonds. At the same time, the conversion has led to a considerable strengthening of the balance sheet and the company no longer has any outstanding long-term interest bearing debt. But I have to admit that the operating loss of 56 million SEK is a large loss and it is a sign of the difficulties that the company's management has had during the past year. The lower turnover during the first half year is mainly a result of the loss of production in May when oil transportation through the pipeline was stopped. Our focus is now on decreasing production costs and to make production more efficient and more profitable. The technological revision of all wells is on-going so that we can optimize our investments even more. As of today, we are involved only in two legal disputes and we are working to solve them. With all other suppliers we have reached settlement agreements and we are strictly following agreed payment schedules. We are also working to obtain all necessary approvals and permits related to our pipeline in line with a set plan. I begin to feel more optimism as regards the future of Malka Oil even if I want to stress that we still have a heavy work load up ahead. We have already now started to see the result of our focused work in the form of a positive cash flow from our oil production. With the profound competence of the new board of directors and management we will step by step move towards a profitable and stable Malka Oil. Maks Grinfeld Managing Director Malka Oil AB Comment on the Group's result and financial position Turnover and result Turnover for the January-June period amounted to TSEK 60,014 (TSEK 71,930), of which revenues from oil sales were TSEK 59,995 (TSEK 69,467). Gross profit amounted to TSEK -137 (TSEK 5,285). This amount includes an 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 to earlier report periods following the conclusion in early 2009 of a new more advantageous contract with Tomskayaneft for treatment and pumping of produced oil into Transneft's system. Other operating expenses amounting to -34 062 TSEK (-2 378 TSEK) of which TSEK 18,780 were damages and fees resulting from the company's financial 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 of TSEK -225,549 which has arisen in the accounts 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 80,386 consists of currency exchange rate losses with no impact on cash flow. These costs arose already during the first quarter when the depreciation of SEK versus USD as well as the depreciation of RUR versus USD had a negative 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 the Russian subsidiaries of TSEK 25,763 which has impacted the Group's result negatively. This dissolution does not have any impact on cash flow. The Group reports a net result after tax for the period 1 January-30 June 2009 of TSEK -387,041 (TSEK -34,816), equivalent to an earnings per share of SEK -0.23 (SEK -0.13). Investments Investments in tangible and intangible fixed assets in the Group during the period January - June 2009 amounted to TSEK 9,181 (224,196 TSEK), of which investments in intangible fixed assets represented TSEK 8,389 (TSEK 219,870). The limited investment activity reflects the company's difficult financial situation during the period. 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 June 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 11,267 (TSEK 16,169) as of June 30, 2009. 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. The company in its annual report for 2008 made a provision concerning its total outstanding receivable on "EERB" amounting to approximately 270 million RUR corresponding to approximately 70 million SEK. The group balance sheet as of today includes a receivable on "Kupir" of an amount of 75 million RUR or approximately 19 million SEK. The board sees no need for a provision for this receivable at the present time. 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 222 (232) persons, of which 47 (25) were women and 175 (207) 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 Early conversion of all outstanding convertible bonds and the rights issue has been executed. Malka Oil's rights issue was fully subscribed and the Company received proceeds of approximately SEK 141 million before issue expenses. At the same time the convertible bond debt of USD million has ceased to exist and been converted into 1,678,000,000 new shares. New seismic data confirmed 11 potentially oil bearing structures According to new seismic data covering the North and Central part of Malka Oil's license block eleven potential oil bearing structures have been identified including earlier mentioned seven undrilled structures and four new. The report is based upon more than 1,000 km of 2D-seismic that has been shot during the winter seasons 2006-2007 and 2007-2008 as well as on 6,000 km of 2D-seismic lines from previous year's surveys within the license block and adjacent areas. The report indicates additional potential resources of 673 million barrels. Jan-Olov Olsson was appointed as new CFO Jan-Olov Olsson has been appointed as new CFO at Malka Oil effective from April 22, 2009. Jan-Olov has long experience of working with Russian markets and Russian businesses. Debt to EERB was settled On Monday June 8, a court in Tomsk rejected a bankruptcy petition from EERB towards Malka Oil's Russian subsidiary STS-Service as Malka's entire debt of 273 MRUR to EERB already had been settled. Renaissance Capital was appointed as exclusive financial advisor for Malka Oil AB Malka Oil AB appointed Renaissance Capital as its exclusive financial advisor for the purposes of exploring the Company's strategic options. The new Board of Directors and CEO for Malka Oil The new Board of Directors including Sven-Erik Zachrisson, Maks Grinfeld, Johan Hessius, Mats Jansson, Colin Jones and Håkan Zadler was elected by the continued annual general meeting which was held on July 15, 2009. Sven-Erik Zachrisson was elected as the Chairman of the Board. The Board of Directors appointed Maks Grinfeld as new CEO at Malka Oil effective from July 1, 2009. 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 boreholes, three of which were discovered to produce 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 three 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 demonstrates 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 complete report see attached file)