Distribution of company announcements to the professional platforms, finance portals and syndication of important corporate news to a wide variety of news aggregators and financial news systems.
Malka Oil (STO:MALK) * Income from oil sales amounted to TSEK 69,467 (0) * The net result after tax for the period was TSEK -34,816 (-8,530) * EPS was SEK -0.13 (-0.04) for the report period * SEK 250 Million (41.9 MUSD) directed share issue completed * Production targets are delayed as previously announced. Production target of 4,000 barrels per day is moved forward till the year-end 2008/2009 * Western reserve study estimates 90.6 million barrels 3P and 43.5 million barrels 2P oil reserves
MD's report - The Quarter in brief
Dear Shareholders,
Lately we have experienced very high volatility in the global raw material markets and also oil prices have demonstrated significant movements. When I joined Malka Oil in March 2007 the spot price was 60 US dollars per barrel and at the moment it is 117 US dollar per barrel, almost a doubling. This also goes for the domestic Russian oil price which implies significantly better conditions for a company like Malka today than one year ago.
Unfortunately we have not reached set production targets as planned due to limitations in infrastructure. It is encouraging though that our oil production has been growing steadily. Lately, the interest for Russian investments and in oil has cooled off and contributed to a gloomier and tougher market image although we do not see any effect of this worsening macroclimate in our operating environment. To conclude, we do not see that this influences the potential of Malka Oil's licence block.
After the second quarter Malka Oil received the result of the first Western report on our reserves which was based upon data available by April 30, 2008. The probable reserves (2P) came out lower than expected due to that the field development plans were not fully optimized according to the more strict Western norms. We will now adapt our future drilling program and the plan is to conduct a second updated reserve report due around year-end 2008/2009 which will include test results from wells 580 and 210 as well as production data produced after April 30, 2008. To increase the share of probable (2P) reserves according to the SPE norms we will drill within existing productive oil fields, so called "in-field drilling". This will start on drill pad number two on the Lower Luginetskoye field. We also plan to conduct an exploration program during 2009 to increase the amount of possible reserves (3P).
Our objective also includes a continuous production increase which step by step takes us closer to a positive cash-flow. We will work with existing wells and complete the infrastructure to stabilize and build up the level to 4,000 barrels per day before the end of the year.
Even if oil exploration is inherently filled with risks I do see a continued great potential in our licence block. This is our reality and we systematically continue to work towards our vision of 30,000 barrels per day by 2012.
Stockholm August 29, 2008
Fredrik Svinhufvud MD Malka Oil AB
Comments on the group's result and financial position
Turnover and result
Operating income for the period January 1 - June 30 amounted to TSEK 71,930 (0), of which revenues from oil sales were TSEK 69,467 (0)
The gross profit amounted to TSEK 5,285 (TSEK 0). Costs in relation to the hydro-fracturing have been charged to the gross profit.
Selling and distribution expenses were TSEK -11,286 (0) and in this item extra overhead costs depending on lack of own Transneft connection are included.
Transaction costs of TSEK -4,445 (-9,642) relating to the share and convertible bond issues during the report period have been booked against equity.
Net financial items for the period January 1 - June 30 2008 were TSEK -8,998 (1,649).
The tax cost for the period amounted to TSEK -2,319 (622).
The group reports a net result after tax for the period January 1 - June 30 2008 of TSEK -34,816 (-8,530), equivalent to an earnings per share of SEK -0.13 (-0.04).
Investments Investments in tangible and intangible fixed assets in the group during the period January - June 2008 amounted to TSEK 222,869 (205,154), of which intangible fixed assets represented TSEK 219,870 (153,996).
Financing and liquidity Cash balances in the group amounted to TSEK 16,169 (274,222) at June 30, 2008. After the end of the report period a new share issue attracted another net TSEK 230,571.
Employees The number of employees in group companies at the end of the report period was 107 persons, of which 15 were women and 92 were
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 condensate 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 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 has, 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 recently been covered by seismic investigation and the final interpretation will be completed during the 3rd quarter 2008.
For further information, please contact: Fredrik Svinhufvud, Managing Director Malka Oil, tel +46 8 5000 7811, mobile +46 708 708 708 Richard Tejme, CFO, tel +46 8 5000 7812 mobile +46 707 31 52 17
