(For full report, including tables, please see attached file)
Increased operating margin compared to the first quarter
January - June 2015
* Total revenue for the period: SEK 42 (63) million
* Operating result for the period: SEK 5 (15) million
* Operating margin: 12% (23%)
* Basic and diluted earnings per share: SEK 0.19 (0.70)
April - June 2015
* Revenue during the quarter: SEK 23 (32) million
* Operating result during the quarter: SEK 4 (6) million
* Operating margin: 15% (18%)
| Oil production | Q2 2015 | Q2 2014 | Q1-Q2 2015 | Q1-Q2 2014 | 2014 |
2013 | 2012 |
| Barrels | 68,870 | 81,677 | 140,630 | 166,437 | 321,377 | 248,870 | 177,850 |
| Barrels per day | 757 | 898 | 777 | 920 | 880 | 682 | 486 |
Statement from the CEO Robert Karlsson
During the second quarter, Shelton Petroleum produced 757 barrels per
day. The company recorded a turnover of SEK 23 million and an operating
result of SEK 4 million. Compared to the first quarter this year, the
operating margin doubled to 15 per cent during the second quarter,
mainly as a result of the development of the oil price.
The oil price continues to be volatile and the oil industry is still
adapting to the new economic environment. Compared to last year, the
lower oil price has affected turnover and operating margins negatively
Shelton Petroleum and the industry as a whole. At current price levels
the industry will continue to reduce investments. Although it is
difficult to predict the oil price development in the short term, the
lower investments will reduce supply levels, which in turn is expected
to have a positive impact on the oil price.
Shelton Petroleum has built an attractive 2P reserves base in Russia
amounting to 23 million barrels of oil. The production potential of
these reserves amount to 5,000 barrels per day, which is about 10 times
the current level. Shelton Petroleum is currently evaluating its options
on how to finance further development. The company holds two substantial
assets – the shareholding in Petrogrand, with a market value of SEK 45
million as well as receivables on a customer in Ukraine. If one or both
of these could be used to generate cash, then Shelton Petroleum would be
able to finance a drilling program to significantly enhance production.
We are also considering industrial partnerships on the asset and
corporate level.
As mentioned previously, it is Shelton Petroleum’s objective to dissolve
the cross-ownership with Petrogrand. Following the recent change in the
board composition of Petrogrand, the probability of reaching an
agreement has increased.
In summary, Shelton Petroleum has established an attractive license
portfolio with proven and producing fields, and I am looking forward to
realize their value that is substantially higher than current production
volumes show.
January - June 2015
Financial development
Revenue from oil sales amounted to SEK 42 (63) million. During the
period, Shelton Petroleum sold 142,100 (167,960) barrels of oil and the
production in the period amounted to 140,630 (166,437) barrels of oil.
The production has decreased in both Russia and Ukraine compared to last
year. The price of oil, in USD, in both Russia and Ukraine was lower in
the first six months 2015 compared to the same period last year.
The average daily production during the first six months 2015 amounted
to 777 barrels compared to 920 barrels the same period in 2014.
The company reported an operating result for the period January - June
2015 of SEK 5 (15) million, equivalent to an operating margin of 12%.
The operating result was negatively affected by the lower oil prices in
the period compared to last year. In January - June 2015 the average
price of Brent oil was USD 58 per barrel compared to USD 109 per barrel
January - June 2014.
The group held SEK 12 million in cash and cash equivalents at the end of
the period. Cash flow from operations during the period was SEK 5
million, whereas cash flow from investing activities was SEK -7 million,
all related to the oil and gas operations.
The accounts receivable balance, included in Other short term
receivables in the balance sheet, amounted to SEK 57 million as of 30
June 2015 compared to SEK 54 million at 31 December 2014. During January
to June, payments received for oil sales in Ukraine amounted to SEK 19
million. The receivable has been confirmed in writing by the
counterparties. Despite the fact that the operator in Ukraine has sold
its produced oil to new customers in the second quarter, that is to
other companies than the one that previously has acquired the vast
majority of the oil, payments are still made with delays, although on a
regular basis. The company believes that the receivables will be settled
in full. However, to reflect the cost of interest on older receivables
the company has increased the reserve that was booked at year end by SEK
1.7 million and the reserve amounts to SEK 2.2 million. The company
monitors the situation closely and has a continuous dialogue with the
customers on settling the outstanding amounts as they become due.
In the first quarter the operator of the Lelyaki oil field, Kashtan
Petroleum, recommenced to pay dividends to Shelton Petroleum’s wholly
owned Canadian subsidiary. During the period January to July,
approximately SEK 6.5 million has been received.
Investments in exploration and development activity amounted to a total
of SEK 7 (14) million for the period.
Non-current financial assets amounted to SEK 45 million at the end of
the period compared to SEK 48 million at 31 December 2014, and consisted
of shares in Petrogrand. The lower value is due to lower price of the
Petrogrand share.
Shareholders\' equity per share at 30 June 2015 was SEK 14.81 (20.08)
and the equity to assets ratio was 83 (87) %.
The Russian and Ukrainian currencies continued to be volatile during the
period. The Russian ruble strengthened by 7 per cent against the Swedish
krona compared to the year-end rate 2014 while the Ukrainian hryvnia
weakened by 21 per cent against the Swedish krona. As a result of the
fluctuations in the exchange rates the company reports translation
differences in other comprehensive income of SEK -10 (-42) million. The
translation differences arise when the income statements and balance
sheets of foreign operations are translated from local currency to
Swedish krona. The translation differences mainly relate to intra-group
loans and fixed assets and do not affect cash flow. See note 7 for a
table of exchange rates that have been used.
April - June 2015
Russian operations
Shelton Petroleum’s production of oil in Russia during the quarter
amounted to 41,210 (49,526) barrels. Production per day amounted to 453
(544) barrels. The decrease is due to the natural depletion that all
wells are subject to as oil is extracted. Revenue in the quarter for
the Russian segment amounted to SEK 9.0 (11.9) million and operating
profit to SEK 2.8 (6.2) million, corresponding to an operating margin of
31% (52%). The lower operating profit and margin compared to the same
period last year is due to a significantly lower oil price, a higher
production tax rate and lower volumes compared to the same period last
year.
The oil prices were higher in the second quarter compared to the first
quarter and the operating margin increased to 31% in the second quarter
compared to 20% in the first quarter.
In April, Shelton Petroleum announced that an additional 142 kilometers
of seismic data has been collected on the Suyanovskoye oil field to
further delineate three promising structures that were identified in
2014. The results of the processing and interpretation of the data will
be published later in 2015.
Ukrainian operations
Production in the quarter amounted to 27,660 (32,151) barrels.
Production per day amounted to 304 (353) barrels. Revenue in the quarter
in the Ukrainian segment amounted to SEK 11.9 (19.9) million and
operating profit to SEK 3.9 (8.1) million, corresponding to an operating
margin of 28% (41%). The lower operating profit and margin is due to a
significantly lower oil price, higher production tax rate and lower
volumes compared to the same period last year. As is the case with the
Russian segment, the Ukrainian segment is also able to show sound
profitability despite the lower oil prices. The average Brent oil price
during the second quarter was USD 62 per barrel, which is USD 8 higher
than the average price in the first quarter and the operating margin
thus increased from 21% in the first quarter to 28% in the second
quarter.
Shelton Petroleum (Zhoda 2001 Corporation) and its partner Ukrnafta,
Ukraine’s largest oil and gas company continue the field development
program on the Lelyaki field. The objective is to step by step enhance
productivity and support production volumes through a program consisting
of new wells, sidetracks and workovers.
Significant events occurring after the reporting period
There have been no significant events.
The parent company
The parent company\'s total assets as at the period end amounted to SEK
399 (382) million. Cash and cash equivalents amounted to SEK 1 (17)
million. The result after tax January – June 2015 was SEK 1 (-24)
million. The total assets have increased by approximately SEK 41 million
since year end. In preparation for the extra general meeting in January
2015, which was to resolve on the dissolution of the cross-ownership
with Petrogrand, the company transferred its shares in Petrogrand to a
wholly owned subsidiary in Cyprus. The shares have since been
transferred back to Shelton Petroleum as a loan.
Risk factors and uncertainties
A detailed account of the risks facing the company can be found in the
2014 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
Interim Report July – September 2015 20
November 2015
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 21 August
2015 at 08:30 CET.
This report has not been reviewed by the Company’s auditors.
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
