RNS Number:4293H
Baltic Oil Terminals Plc
09 August 2006
9 August 2006
Baltic Oil Terminals PLC ("Baltic" or the "Group")
Interim Results for the six month period ended 30th June 2006
Baltic Oil Terminals PLC, was established in 2004 to invest in oil related
infrastructure projects and upstream activities in Russia and the former Soviet
Union. Baltic listed on AIM in April 2006. The Company's principal asset is
its 58.5% equity interest in Tetoil, a company which is constructing an oil
export transhipment terminal in Kaliningrad, a sovereign Russian territory
located on the Baltic Sea. Baltic also has extensive exploration acreage
through Zauralneftegaz ("ZNG"), Baltic's 50/50 joint venture in which Baltic is
the operator, which is exploring for hydrocarbons in the Kurgan region of
Western Siberia.
Highlights:
* Successful listing on the AIM market in April 2006, raising #23m before
expenses
* Construction of the Tetoil transhipment oil terminal on schedule
* Tetoil operational management team strengthened
* ZNG has secured three new licences in the Kurgan region of Siberia
* Extensive Gas Seismic Program on two ZNG blocks through Exotrad -
encouraging results with ECL (part of RPS Group) confirming multiple leads
* Acquisition of Baltic Top, a Kaliningrad based domestic refined product
terminal for $3.35m, including 38 experienced employees
* Strengthened Board with the appointment of Stan Buck and Fred Hodder as
non executive Directors
Simon Escott, CEO of Baltic Oil Terminals commented:
"In light of the good progress we have made in both Tetoil and ZNG, the Board
believes the Group prospects to be very promising. Tetoil is on schedule and on
budget and we are confident that our exploration play in Kurgan will show
further encouraging results in the last quarter of the year.
"As a result the Board is increasingly confident of Baltic's propsects."
- Ends -
There will be a briefing for analysts at 09.30 today, at the offices of
Financial Dynamics
For further information, call:
Simon Escott, Chief Executive, Baltic Oil Terminals PLC 020 7667 6371
Chris Fielding, Arden Partners 020 7398 1638
Giles Sanderson/Billy Clegg, Financial Dynamics 020 7831 3113
Non Executive Chairman's & Chief Executive's Statement
The year to date, in which we have taken several major steps towards achieving
the overall business objectives, has been a very significant period in the
evolution of the company. Most importantly, we are pleased to present our first
set of results as a quoted company.
On 27 April 2006 the company successfully listed on AIM, raising #23.0 million
by means of an issue of 16,428,571 new shares at #1.40. RAB Capital
simultaneously sold 6 million shares at the same price, allowing the total
placing of 22,428,571 shares. Prior to this the Company had successfully raised
#2.3 million in a private placement in March 2006.
The Board of Baltic Oil Terminals is fully cognisant of the trust placed in it
by the new investors and will strive to the maximum to ensure that the programme
outlined in the Admission Document is adhered to.
On 10 June 2006 Baltic moved its finance and administration functions to Milton
Keynes and reduced the size of the London office.
In line with the strategy set out in the Admission Document, Baltic acquired, on
3 August 2006, Baltic Top, a small profitable, domestic refined products
terminal in Kaliningrad for a total cash consideration of $3.35 million. The
terminal, which is located less than 2 kms from the Tetoil site, stores gasoline
and diesel delivered by rail for storage and onward delivery to customers in the
Kaliningrad region.
On 7 August 2006 the Board was strengthened by the appointment of two new Non
Executive Directors: Stan Buck and Fred Hodder. Stan is a former Chairman and
Managing Director of Dow Chemical UK Limited and Fred was Chief Financial
Officer of Nelson Resources Limited. The Board is confident that their
specialised knowledge and experience will prove to be of great benefit to the
company.
The Board now consists of:
* Philip Dayer - Non Executive Chairman
* Simon Escott - Chief Executive Officer
* Robert Wilde - Finance Director
* Stanley Buck - Non Executive Director
* Fred Hodder - Non Executive Director.
Operations
Tetoil Terminal
The Group's principal asset is its 58.35% equity interest in Tetoil, a company
which is constructing an oil export transhipment terminal in Kaliningrad, a
sovereign Russian territory located on the Baltic Sea between the EU states of
Poland and Lithuania, which is Russia's only ice-free port on the Baltic Sea.
The terminal will have a throughput capacity of up to 480,000 tonnes per month
("tpm"), or 5.8 million tonnes per annum. Tetoil is targeting the demand for
new transhipment facilities in strong Russian light crude and oil products
export markets. The site includes 1 km of river frontage and has a fully
constructed tanker jetty.
The construction of the Tetoil terminal commenced as planned on 17 July 2006.
The main engineering contractors are on schedule and the first tank orders have
been placed in Latvia and Estonia. The Railway spur line routing has been
approved by the Kaliningrad Railways and construction will start, again on
schedule, in September 2006.
Baltic has recruited two expatriate UK personnel, being a Project Manager and
Project Planner, working out of Kaliningrad. Both individuals bring great
experience to the project team and have worked with the existing operations
management previously. We now have the foundations in place in terms of team,
contractors and partners to ensure that we remain on budget and on schedule.
Polex
Polex, a vessel cleansing business based in Kaliningrad in which the group holds
a 50% associate interest, is performing in accordance with expectations and
generating modest revenues.
ZNG - Kurgan Exploration Project
Following the award of three new licences in May and June, South Voskresensky,
Petukhovsky and Lebyazhevsky, ZNG Limited (of which Baltic has a 50% equity
interest and is the operator) now has exploration rights to around 1 million
acres in the Kurgan Oblast, in Western Siberia.
In accordance with the work programme, ZNG has been running an extensive Gas
Seismic Programme on two blocks (Privolny and Mokrousovsky). We commissioned
Exotrad to carry out the work, as this company is now recognised as the world
leader for this type of research and survey work. The results have been most
encouraging, potentially indicating significant resources and our UK Geological
and Engineering nominated contractor, ECL (part of the RPS Group), has recently
confirmed that we have identified well defined geochemical leads in these two
blocks.
Our next move will be to carry out high definition 2D seismic across the grids
made by the Gas Seismic Programme. The company plans to commence work in
Privolny and Mokrousovsky imminently using Bazneftgeophisica. The results of the
seismic, following processing and interpretation to be carried out in the UK by
ECL, are expected to be available by the end of October for Privolny and by the
end of the year for Mokrousovsky.
Outlook
In light of the good progress we have made in both Tetoil and ZNG, the Board
believes the Group prospects to be very promising.
Tetoil is on schedule and on budget, and we are confident that our exploration
play in Kurgan will show further encouraging results in the last quarter of the
year.
The progress we have made would not have been possible without the major efforts
of all of our employees, for which the Board is very grateful.
Financial review
The cost of the terminal construction project remains in line with budget
expectations, with the overall cost of both phases of capital development
expected to reach, collectively, around $40 million (#22 million) by the second
half of 2008.
Since revenue from transhipment throughput at the terminal is not expected
before 2007, there has been no operational income in the six months ended 30
June 2006. However, #0.1 million of interest income has been derived from funds
placed on deposit. To hedge future currency fluctuations, of the #21 million
(net) raised at IPO, $17 million and Euro 6 million were purchased and placed on
deposit.
The financial statements include a modest income of #20,000, being the Group's
share of the net results of its associate, Polex, since its acquisition in March
2006.
An operating loss of #2.7 million, and a loss per share of 8.04p per share were
generated in the period. Operating overheads were in line with budget, although
the loss is after charging for unrealised foreign exchange differences of #0.6
million resulting from the translation of foreign currencies to sterling at the
balance sheet date. The cash balance at the half year was #18.9 million. In
addition, the Group has charged #0.5 million to the profit and loss account
representing the charge from the Group's policy of writing off exploration
expenditure and #0.3 million representing associated administrative costs of the
ZNG subsidiary. Such expenditure is in line with the plan at the time of the
IPO. Finally, the Group introduced at IPO long term incentive plans ("LTIP") for
staff and directors. This is in addition to the options in existence for the
Group's founding shareholders. In line with International Financial Reporting
Standards in which the accounting cost of these LTIP options is allocated over
the life of the option, the Group has charged #0.1 million, representing the
proportionate charge for the period. The charge for the founders' options for
the period is #0.5 million.
In accordance with our policy at IPO, the company will not be declaring a
dividend for the period.
Simon Escott Philip Dayer
Chief Executive Non Executive Chairman
Consolidated interim income statement
Period from 1 January 2006 - 30 June 2006
Notes Unaudited six 12 months ended 31
months ended 30 December 2005
June 2006 #'000
#'000
Revenues - -
Cost of sales - -
Gross loss - -
Other income 105 117
Exploration and evaluation costs (491) -
Administrative expenses (2,414) (956)
Operating loss before taxation and (2,800) (839)
finance items
Finance income 100 48
Loss before taxation (2,700) (791)
Tax expense 5 (24) (10)
Share of result of associated company 20 -
Loss for the period (2,704) (801)
Attributable to:
Equity shareholders of the parent (2,539) (750)
Minority interests (165) (51)
(2,704) (801)
Earnings per share attributable to
equity shareholders of the parent:
Basic and diluted (loss) (8.04p) (4.37p)
Consolidated interim balance sheet
As at 30 June 2006
Unaudited 31 December
30 June 2006 2005
#'000 #'000
Non-current assets
Intangible exploration assets 2,145 1,689
Property, plant and equipment 432 90
Goodwill 494 144
Share of net assets of associates 1,198 -
Other non-current assets 88 80
4,357 2,003
Current assets
Loan 858 -
Trade and other receivables 24 25
Prepayments and other current assets 530 483
Cash and cash equivalents 18,974 395
20,386 903
TOTAL ASSETS 24,743 2,906
Equity and liabilities
Share capital 434 1
Share premium 25,256 2,639
Other reserves Equity - share options 603 -
Equity - foreign exchange reserve 214 -
Retained losses (3,289) (750)
Equity attributable to shareholders of the parent 23,218 1,890
Minority interests 23 188
Total equity 23,241 2,078
Non-current liabilities
Deferred tax liability 287 287
287 287
Current liabilities
Trade and other payables 1,215 541
1,215 541
Total liabilities 1,502 828
TOTAL EQUITY AND LIABILITIES 24,743 2,906
These financial statements were approved by the Board of Directors on 8 August
2006 and signed on its behalf.
Robert Wilde
Consolidated interim cash flow statement
Period from 1 January 2006 - 30 June 2006
Unaudited six 12 months ended
months ended 31 December
30 June 2006 2005
#'000 #'000
Operating activities
Group operating loss before taxation (2,700) (791)
Adjustments to reconcile group operating loss to net
cash inflows/outflows from operating activities
Finance income (100) (48)
Foreign exchange (gain)/loss 553 (196)
Share based payment 603 -
Depreciation of property, plant and equipment 17 4
Amortisation of intangible assets 12 4
Decrease in trade and other receivables 6 (292)
Increase in trade and other payables 674 108
Net cash flows from operating activities (935) (1,211)
Cash flows from investing activities
Interest received 40 15
Purchase of property, plant and equipment (371) (94)
Purchase of intangible assets (456) -
Payment to acquire investments (1,466) (383)
Loans made (858) (582)
Net cash flows from investing activities (3,111) (1,044)
Cash flows from financing activities
Net proceeds from shares issued 23,050 2,640
Net cash flows from financing activities 23,050 2,640
Increase in cash and cash equivalents 19,004 385
Cash and cash equivalents at beginning of year 395 -
Effect of exchange rate on cash and cash equivalents (425) 10
Cash and cash equivalents at the end of the year 18,974 395
Consolidated interim statement of changes in equity
Period from 1 January 2006 - 30 June 2006
Share based Foreign
Share Share payment exchange Retained Minority Total
capital premium reserves reserves losses Total interests equity
#'000 #'000 #'000 #'000 #'000 #'000 #'000 #'000
At 31 December 2005 1 2,639 - - (750) 1,890 188 2,078
Share based payments reserve - - 603 - - 603 - 603
Foreign exchange reserves - - - 214 - 214 - 214
Loss for the year - - - - (2,539) (2,539) (165) (2,704)
Shares issued during the 433 22,617 - - - 23,050 - 23,050
period
Unaudited totals at 30 June 434 25,256 603 214 (3,289) 23,218 23 23,241
2006
Notes to the interim financial statements
Period from 1 January 2006 - 30 June 2006
1. Accounting policies
a) Basis of preparation
The financial information contained herein does not constitute statutory
accounts within the meaning of Section 240 of the Companies Act 1985.
The unaudited interim financial statements have been prepared in accordance with
the accounting policies set out in the Group's financial statements for the year
ended 31 December 2005 and the new accounting policies set out below. The
financial information for the year ended 31 December 2005 has been extracted
from the full financial statements of the Group for the period. Those accounts
have been filed with the Registrar of Companies and contained an unqualified
audit report.
On 6 April 2006 a share for share exchange took place between Baltic Oil
Terminals and the shareholders of Baltic Petroleum Limited in consideration for
the acquisition of the entire issued share capital of Baltic Petroleum Limited.
The accounting for the reverse acquisition of Baltic Petroleum Limited by Baltic
Oil Terminals PLC reflects the legal subsidiary as being the acquirer. However,
the consolidated financial statements have been prepared under the name of
Baltic Oil Terminals PLC (legal parent). The financial statements represent a
continuation of Baltic Petroleum Limited, since it is the acquirer for
accounting purposes. The comparative information presented in the financial
statements is that of Baltic Petroleum Limited. The income statement for the
period reflects that of Baltic Petroleum Limited for the full period together
with the post-acquistion results of Baltic Oil Terminals PLC.
These interim financial statements do not include comparative data for the six
months ended 30 June 2005, since this was the first period after incorporation
and activity levels would not give a meaningful comparison. Almost all of the
operating activity took place in the second half of 2005.
b) New accounting policies
(i) Share-based payments
The cost of equity-settled transactions with employees is measured by reference
to the fair value at the date at which they are granted and is recognized as an
expense over the vesting period, which ends on the date on which the relevant
employees become fully entitled to the award. Fair value is determined by using
an appropriate valuation model. In valuing equity-settled transactions, no
account is taken of any vesting conditions, other than conditions linked to the
price of the shares of the company (market conditions). No expense is recognised
for awards that do not ultimately vest, except for awards where vesting is
conditional upon a market condition, which are treated as vesting irrespective
of whether or not the market condition is satisfied, provided that all other
performance conditions are satisfied. At each balance sheet date before vesting,
the cumulative expense is calculated, representing the extent to which the
vesting period has expired and management's best estimate of the achievement or
otherwise of non-market conditions and the number of equity instruments that
will ultimately vest or, in the case of an instrument subject to a market
condition, be treated as vesting as described above. The movement in cumulative
expense since the previous balance sheet date is recognized in the income
statement, with a corresponding entry in equity.
(ii) Interests in associates
An associate is an entity over which the group is in a position to exercise
significant influence through participation in the financial and operating
policy decisions of the investee, but which is not a subsidiary or a jointly
controlled entity. The results, assets and liabilities of an associate are
incorporated in these financial statements using the equity method of
accounting.
2. Segment information
The primary segment reporting format is determined to be business segments as
the Group's risks and rates of return are affected predominantly by differences
in the products and services provided. The operating businesses are organised
and managed separately according to the nature of the products and services
provided, with each segment representing a strategic business unit that offers
different products and serves different markets.
Unaudited
6 months ended 12 months ended
30 June 2006 31 December 2005
Business segment Exploration & Exploration &
Production Terminals Total Production Terminals Total
#'000 #'000 #'000 #'000 #'000 #'000
Revenue - - - - - -
Segment result (799) 35 (764) (278) (108) (386)
Unallocated expenses (2,036) (453)
Group operating loss (2,800) (839)
Finance income 100 48
Group loss before taxation (2,700) (791)
Tax expense (24) (10)
Share of associate results 20 -
Loss for the year (2,704) (801)
Assets and liabilities
Segment assets 2,665 2,019 4,684 2,045 222 2,267
Unallocated assets 20,059 639
Total assets 24,743 2,906
Segment liabilities (684) (49) (733) (617) (1) (618)
Unallocated liabilities (769) (210)
Total liabilities (1,502) (828)
3. Business combinations
On 31 March 2006 the group acquired 51% of the ordinary shares of OJSC Tetoil
for a purchase consideration of #171,000 (US$300,000). An option to acquire the
interest in OJSC Tetoil was agreed on 17 June 2005 for a premium of #57,000
(US$100,000). On signing of the shareholders agreement a control premium of
#114,000 (US$200,000) was paid. Baltic has control of OJSC Tetoil as the
majority shareholder. Legal costs in relation to the acquisition were #116,000,
so the total cost of acquisition was #287,000. A further 7.35% interest in OJSC
Tetoil was acquired through the investment in an associate company, OOO Polex
Service, on 31 March 2006.
OJSC Tetoil is a private company based in Kaliningrad, Russian Federation, which
has commenced building and proposes to operate a transshipment terminal, mini
refinery and topping unit in Kaliningrad The investment in OJSC Tetoil has been
included in the company's balance sheet at its fair value at the date of
acquisition.
Book and fair values of the net assets at date of acquisition were as follows:
Book Fair
Values Values
#'000 #'000
Tangible assets 134 134
VAT reclaimable 1 1
Current assets - -
Trade and other payables (243) (243)
Net assets (108) (108)
Minority Interest (41.65%) 45
Goodwill arising on acquisition 350
287
Discharged by:
Cash consideration 171
Costs associated with the acquisition, settled in cash 116
287
From the date of acquisition, OJSC Tetoil has contributed a loss of #90,000 to
the net loss of the Group. If the combination had taken place at the beginning
of the year, the contribution to the Group would have been a loss of #262,000.
The carrying value of trade receivables and trade payables is the same as the
fair value.
4. Investment
Investment in associates
On 31 March 2006 the Group acquired 50% of the ordinary shares of OOO Polex
Service, Kaliningrad, Russian Federation for a purchase consideration of
#1,148,000 (US$1,990,000). This is not deemed to be a controlling interest under
the terms of the company's charter. Management believe only significant
influence exists and therefore account using the equity method. The legal costs
were #31,000 giving a total acquisition cost of #1,179,000. The fair value of
the net assets acquired was #179,000 on 31 March 2006, with the Group share
being #89,500. Goodwill on acquisition totalled #1,089,500.
5. Taxation
(a) Tax on profit on ordinary activities
Tax charged in the income statement:
Unaudited six 12 months ended 31
months ended 30 December
June 2006 2005
#'000 #'000
Current income tax:
UK Corporation tax - current period 24 10
Tax charge in the income statement 24 10
(b) Reconciliation of the total tax charge
The tax expense in the income statement for the year is charged at the rate of
corporation tax in the UK of 30%. The tax expenses relates to Caspian Finance
Limited, which recorded a profit for the six months ended 30 June 2006 of
#79,000.
Unaudited six 12 months ended 31
months ended 30 December
June 2006 2005
#'000 #'000
Profit from continuing operations before taxation 79 51
Accounting profit before income tax 79 51
Accounting profit multiplied by the UK rate of 24
corporation tax of 30% 10
Total tax expense reported in the income statement 24 10
Independent Review Report to Baltic Oil Terminals Plc
Introduction
We have been instructed by the company to review the financial information for
the six months ended 30 June 2006 which comprises Consolidated Income Statement,
Consolidated Balance Sheet, Consolidated Cash Flow Statement, Consolidated
Statement of Changes in Equity, and the related notes 1 to 5. We have read the
other information contained in the interim report and considered whether it
contains any apparent misstatements or material inconsistencies with the
financial information.
This report is made solely to the company in accordance with guidance contained
in Bulletin 1999/4 'Review of interim financial information' issued by the
Auditing Practices Board. To the fullest extent permitted by law, we do not
accept or assume responsibility to anyone other than the company, for our work,
for this report, or for the conclusions we have formed.
Directors' responsibilities
The interim report, including the financial information contained therein, is
the responsibility of, and has been approved by, the directors. The directors
are responsible for preparing the interim report as required by the AIM Rules
issued by the London Stock Exchange.
Review work performed
We conducted our review in accordance with guidance contained in Bulletin 1999/4
'Review of interim financial information' issued by the Auditing Practices Board
for use in the United Kingdom. A review consists principally of making
enquiries of group management and applying analytical procedures to the
financial information and underlying financial data, and based thereon,
assessing whether the accounting policies have been applied. A review excludes
audit procedures such as tests of controls and verification of assets,
liabilities and transactions. It is substantially less in scope than an audit
performed in accordance with International Standards on Auditing (UK and
Ireland) and therefore provides a lower level of assurance than an audit.
Accordingly we do not express an audit opinion on the financial information.
Review conclusion
On the basis of our review we are not aware of any material modifications that
should be made to the financial information as presented for the six months
ended 30 June 2006.
Ernst & Young LLP
London
Corporate information
Registered No. 05752493
Directors
Simon Leigh Escott
Robert Wilde
Secretary
Robert Wilde
Non Executive Directors
Philip Dayer
Stanley Buck
Fred Hodder
Auditors
Ernst & Young LLP
1 More London Place
London SE1 2AF
Broker/Nomad/Financial Advisor
Arden Partners plc
Nicholas House
3 Laurence Poutney Hill
London
EC4R 0EU
Solicitors
Covington & Burling
265 Strand
London
WC2R 1BH
Bankers
Coutts & Co
440 Strand
London
WC2R 0QS
Registered Office
6 -8 Underwood Street
London
N1 7JQ
Correspondence Address
18b Charles Street
London W1J 5DU
This information is provided by RNS
The company news service from the London Stock Exchange
END
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