* 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)
