Production exceeded 500 barrels per day in the third quarter
January-September 2012
• Total revenue for the period: SEK 76 (25) million
• Operating result for the period: SEK 23 (-1) million
• Result for the period after tax: SEK 18 (-3) million
• One-off item affects revenue and profit by SEK 7 (11)* million
• Basic earnings per share: SEK 1.70 (-0.33)
• Diluted earnings per share: SEK 1.63 (-0.33)
July-September 2012
• Revenue during the quarter: SEK 24 (21) million
• Operating result during the quarter: SEK 5 (10) million
• One-off item affects revenue and profit by SEK 0 (11)* million
* Relates to payment from the shareholding in Tomsk Refining
Oil production Q3 2012 Q3 2011 Q1-Q3 2012 Q1-Q3 2011 Q1-Q4 2011
Barrels 46,400 24,400 128,700 38,500 77,300
Barrels per day 504 265 470 141 212
Statement from the CEO
Shelton Petroleum reached an important milestone during the third quarter. For
the first time, we are able to report a production level exceeding 500 barrels
per day for a full quarter. Both the Rustamovskoye field in Russia and Lelyaki
field in Ukraine produced record volumes.
The results from the fracking of the wells at Rustamovskoye performed during
the third quarter are encouraging and strengthen our confidence in the
potential of this and the company’s adjacent fields. We are looking forward to
pursuing this through the drilling of additional wells in the area. In
November, a drilling contract was concluded and mobilization of the rig has
commenced. Spudding of the first of up to two wells in the first stage of
development drilling is expected to take place early next year. We will develop
the field step by step in order to manage geological risks and balance
investments against the financial resources available to the company.
The workover program at the Lelyaki field continued to raise production volumes
during the quarter on the very profitable Ukrainian market. In October, the
second of two new wells for the year was spudded with the objective of further
increasing daily production.
This week, the Shelton Petroleum share commenced trading at NASDAQ OMX
Stockholm’s main market. Migration to an internationally well-recognized stock
exchange will open up new opportunities for the company as well as for our
shareholders.
In summary, we continue to grow our profitable oil production and have
established a stable platform for future investments and partnerships. I am
looking forward to further pursuing the company’s potential in the quarters to
come.
Robert Karlsson
January - September 2012
Financial development
Revenue from oil sales amounted to SEK 69 (14) million. During the period,
Shelton Petroleum sold 129,100 (51,900) barrels of oil. The average price per
barrel in 2012 was higher than in 2011.
Production during the period amounted to 128,700 (38,500) barrels, which is
significantly higher compared to the same period last year. The production has
increased in both Russia and Ukraine compared to last year.
The average daily production during the first nine months 2012 amounted to 470
barrels compared to 141 barrels for the same period 2011.
Operating expenses in the period amount to SEK 56 (29) million and consist
primarily of production costs, personnel costs and other external expenses.
The operating result for the period January – September 2012 amounted to SEK 23
(-1) million, which is a significant improvement compared to the same period
last year. The result for the period amounted to SEK 18 (-3) million.
Shelton Petroleum reports other revenue of SEK 7 (11) million. The majority of
other revenue relates to a capital gain on the investment in Tomsk Refining AB
(TRAB) due to the voluntary liquidation. In the beginning of April 2012 the
company received the final payment, SEK 18 million, from TRAB. In total,
together with the first payment received in 2011, the company has received
approximately SEK 69 million from the liquidation and has reported a total gain
of SEK 18 million.
An adjustment of the fair value of the investment in Pan European Terminals
(PAN, previously Baltic Oil Terminals) of SEK -2 million and translation
differences of SEK -9 million related to intra-group loans in foreign currency
are included in other comprehensive income. The adjustment to fair value and
translation differences do not affect cash flow.
The group held SEK 50 million in cash and cash equivalents at the end of the
period compared to SEK 56 million at 30 September 2011 and SEK 46 million at 31
December 2011. Cash flow for the period was SEK 4 (-34) million. Investments in
exploration and development activity in Russia and Ukraine amounted to a total
of SEK 17 (11) million in the period. During the period the company repaid SEK
8 million to those holders of the convertible loan that chose not to exchange
it for the new convertible loan, which was issued in December 2011.
Financial fixed assets amounted to SEK 22 million at the end of the period
compared to SEK 35 million at 31 December 2011. The decrease is related to the
final payment from TRAB and the adjustment of fair value of PAN mentioned
above.
Shareholders' equity per share at 30 September 2012 was SEK 24.54 (23.96) and
the equity to assets ratio was 81 (78) per cent.
July – September 2012
Russian operations
Shelton Petroleum’s production of oil in Russia during the third quarter
amounted to 14,150 (17,400) barrels. Production per day amounted to 154 (189)
barrels. Due to the fracking program described below, the wells produced for
approximately two months out of three months in the third quarter 2012.
On the Rustamovskoye field in Russia, measures were implemented during the
quarter to counteract the natural depletion that all wells are exposed to and
also to maximize information on reservoir characteristics in order to determine
drill locations and optimize drilling technology. The company completed a
vertical seismic profile (VSP) and fracking of two wells. As a direct result of
the fracking, the field’s production increased to over 200 barrels per day,
compared to 120 in June.
The results from the work performed during the summer are encouraging and
strengthen the company’s confidence in the potential of Rustamovskoye and the
company’s adjacent Aysky and Suyanovskoye fields. Based on analyses and
modeling of available data, the company has initiated a production drilling
program. In November, the drilling company commenced mobilization of the rig.
Spudding of the first well is expected to take place early next year. Drilling
and evaluation of the first well is expected to take up to 90 days to complete.
The field will be developed step by step in order to manage geological risks
and balance investments against the financial resources available to the
company. Shelton Petroleum has therefore entered into a contract that allows it
to drill one well with an option to drill one more well. Following the first
stage of drilling, the company will review drilling data and geological
information to develop a new project design on how to optimally target and
extract the pool’s reserves. The new design will encompass the possibility of
horizontal drilling, which, given suitable geological conditions, allow for
enhanced well economics.
The Rustamovskoye field is covered by a production license on the northern part
of the block and an exploration license on the southern part of the block. The
company is currently producing oil from the northern part and the production
license is valid until 2030. The exploration license on the southern part of
the block, previously valid until 31 December 2012, has recently been prolonged
by the license authority for three more years.
Ukrainian operations
Production in the third quarter amounted to 32,250 (7,000) barrels. Production
per day amounted to 351 (76) barrels. The average daily production during the
third quarter was 25 per cent higher compared to the fourth quarter 2011. The
Lelyaki field production generates a strong USD 40 per barrel in operating
profit and contributes financially to the development of Shelton Petroleum’s
other oil assets.
The increase in production is a direct result of the continued field
development program performed by Shelton Petroleum (Zhoda 2001 Corporation) and
its partner Ukrnafta, Ukraine’s largest oil and gas company. The objective is
to step by step enhance productivity and increase production volumes.
Production can vary somewhat between months but the company’s objective is to
continue to increase production by performing additional workovers. A new well
#310 was spudded in October 2012. The field operator Kashtan Petroleum expects
that it will be drilled and completed before year end.
Warrants
The annual general meeting in May 2012 approved the issue of maximum 320,000
warrants to management. All warrants have been subscribed to at a market price
determined by the Black & Scholes pricing model. The subscribers paid SEK 0.5
million for the warrants in July 2012. The warrants give the holders the right
to subscribe to 320,000 B-shares during 1-15 June 2015. The subscription price
for the shares is SEK 18.69. A full subscription for the shares in 2015 would
increase the share capital by SEK 1.6 million and lead to a dilution of 2.92
per cent.
Significant events occurring after the reporting period
In October, the company spudded the new well #310 at the Lelyaki oil field.
In November mobilization of a rig was commenced in preparation for drilling a
new production well at the Rustamovskoye oil field.
The Shelton Petroleum share commenced trading at NASDAQ OMX Stockholm’s main
market on 19 November 2012. The last day of trading on NGM Equity was 16
November.
The parent company
The parent company's total assets as at the period end amounted to SEK 304
(311) million. Cash and cash equivalents amounted to SEK 32 (33) million. The
result after tax January – September 2012 was SEK -2 (-5) million. The
improvement is mainly related to the gain on the investment in TRAB.
Risk factors and uncertainties
A detailed account of the risks facing the company can be found in the 2011
annual report. During the period, there has been no major change in material
risk factors or uncertainties for the group or the parent company. Risks
include exploration risk, oil price risk, exchange rate risk, liquidity risk,
credit risk, interest rate risk and political risk, among others.
Upcoming financial reporting
Year-end Report January – December 2012 25 February 2013
Annual Report 2012 April 2013
Interim Report January - March 2013 21 May 2013
Interim Report April – June 2013 23 August 2013
Interim Report July – September 2013 22 November 2013
Annual General Meeting 2013 21 May 2013
Publication under Swedish law
Shelton Petroleum is publishing this information in accordance with the Swedish
Financial Markets Act (Sw. Lag om värdepappersmarknaden) and/or the Swedish
Financial Trading Act (Sw. Lag om handel med finansiella instrument). This
information was released for publication on 22 November 2012 at 08:30 CET.
This report has not been reviewed by the Company’s auditors.
(For full report, see attached file)
For more information, please contact:
Robert Karlsson, CEO, +46-709 565 141, robert.karlsson@sheltonpetroleum.com
Shelton Petroleum AB
Swedish corporate identity number: 556468-1491
Hovslagargatan 5B
SE-111 48 Stockholm
Tel: +46 8 407 18 50
www.sheltonpetroleum.com
info@sheltonpetroleum.com
About Shelton Petroleum
Shelton Petroleum is a Swedish company focused on exploring and developing
concessions in Russia and the resource-rich basins of Ukraine. The company
holds three licenses in the Volga-Urals area and has commenced production on
the Rustamovskoye field after a successful exploration program. In Ukraine,
Shelton Petroleum’s wholly owned subsidiary has a joint venture with Ukrnafta
and Chornomornaftogaz, two leading Ukrainian oil and gas companies. Shelton
Petroleum is pursuing an integrated business model and holds an equity stake in
Pan European Terminals PLC (PAN). The Shelton Petroleum share is traded on
NASDAQ OMX Stockholm under the symbol SHEL B.
Vertical seismic profile (VSP) is a method of measuring seismic velocities of
rock layers in a well. VSP provides higher resolution on a defined area
compared to surface seismic. The results give operators a clearer understanding
of the best ways to exploit the reservoir, enabling more accurate drilling
decisions.
Fracking is a method of breaking up the rock of the reservoir by inserting
fluids with additives under pressure. It allows for oil to flow more freely in
the reservoir into the wellbore.
