Misen Group publishes the third quarter report including information about uncertainties regarding going concern
Misens auditors who reviewed the company's financial report for Q3 2016, make the following statement:
“In the section “Group financial situation” it is described that the Joint Activity is subject to certain covenants related primarily to its borrowings. At 30 September 2016, the Joint Activity was in the breach of the financial covenants under its agreements with Sberbank Russia. The Joint Activity is currently negotiating a prolongation of the overdue credit line with the bank but the restructuring was not approved by the participants of the Joint Activity as of the date of this report.
Further, as referred to in the section “Expected future development of the Company and going concern” the Misen Group is currently involved in arbitration proceedings with the Joint Activity partner PSJC Ukrgazvydobuvannya related to their request to terminate the Joint Activity Agreement and allocate the assets between the partners. The Misen Group is also involved in a criminal investigation which has resulted in a court order issued by the Pechersk District Court in Kiev which mean that the Misen Group is prohibited to sell or transfer certain property owned by Misen Enterprises AB and LLC Karpatygaz under the Joint Activity during the investigation. Additionally and as described, there are also operational issues related to the Joint Activity’s ability to sell gas, gas condensate, oil and LPG. These matters may further complicate the operations of the Joint Activity and the Group. Depending on how the arbitration cases develop, a need for increased financing of the Swedish operations might arise in 2017.
Based on the abovementioned facts there is a material uncertainty related to events and conditions that may cast significant doubt on the Misen Group’s ability to continue as a going concern and to realize its assets and discharge its liabilities in the normal course of business”.
Management and the board are concerned with the situation and will report on further developments in upcoming reports.
Information from Q3 2016 Misen Energy AB (publ)
Following is a summary of the financial information given in the Q3 2016 report from Misen Energy AB (publ) published today. The complete report is available in both English and Swedish on the Company's website: http://misenenergy.se/repository/Financial_reports_ENG/Misen_Energy_Q3_2016_ENG.pdf
Summary of results:
- Renewed investment program in 2015 has resulted in stable production during January – September 2016.
- During January – September 2016 Misen Energy AB (publ) led Joint Activity (“JA”) faced lower sales prices combined with increased sub-soil charges, what resulted in consolidated operating group income being lower by 50% when compared to January - September 2015 and in consolidated group net turnover being lower by 18%.
- Accumulated earnings per share for January – September 2016 were 80% lower than for January - September 2015.
- Due to increased sub-soil charges JA investment program fell by 73% in January – September 2016 compared to January - September 2015.
- The Government of Ukraine continued to impose a 70% subsoil use charge for enterprises established under Joint Activity Agreements. This has been done in accordance with the laws adopted in late 2014.
- On 5 July Misen Energy AB (publ) completed the sale of 37.5 % of the shares and shares capital in its subsidiary Misen Enterprises AB to the Hong Kong based company Powerful United Limited. Misen Energy AB (publ) became debt-free.
- On 18 July 2016 PJSC Ukrgasvydobuvannya submitted the Request for Arbitration to the Arbitration Institute of the Stockholm Chamber of Commerce and requested termination of Joint Activities Agreement No. 3 dated 10 June 2002 (as further amended) between PJSC Ukrgasvydobuvannya, LLC Karpatygaz and Misen Enterprises AB (“JAA”).
- Misen Enterprises AB continued to implement an agreement with the JA partner PJSC Ukrgasvydobuvannya regarding the operation of Khrestyshchenska BCS, according to which, the JA has leased out Khrestyshchenska BCS on a monthly basis to PJSC Ukrgasvydobuvannya with an obligation of the latter to compensate the power supply costs needed for operations of BCS. However, in September 2016 PJSC Ukrgasvydobuvannya refused to sign the lease agreement forcing JA to use part of produced gas to cover the technical needs of Khrestyshchenska BCS operations.
January – September 2016 (2015):
- Consolidated operating group income: KSEK 25,252 (50,109)
- Consolidated group net turnover: KSEK 550,312 (673,921)
- Earnings per share: SEK 0,02 (0,10)
- Production of natural gas: 493.8 million cubic meters (523.7)
Key events after end of Q3 2016:
- Misen Energy AB (publ) continued meaningful discussions with Ukraine what regards application of the exorbitant subsoil use charge and its increasing negative effect to the Company’s investments in Ukraine.
- Misen Enterprises AB and LLC Karpatygaz, the two partially owned subsidiaries of Misen Energy AB (publ), requested the tribunal to reject all claims of PJSC Ukrgasvydobuvannya and order PJSC Ukrgasvydobuvannya to compensate the losses that MisenEnterprises AB and LLC Karpatygaz incurred as a result of PJSC Ukrgasvydobuvannya’s failure to implement the JAA.
- Pechersk District Court in Kyiv issued an order and prevented LLC Karpatygaz from disposing the booster compression stations that fall under the scope of the JA’s assets.
- Since the end of October 2016 PJSC Ukrgazvydobuvannya has prevented the transfer of ownership rights for extracted volumes of gas condensate, oil and LPG to JA. Thus, several regional units of PJSC Ukrgasvydobuvannya refused to ship the hydrocarbons to the JA’s clients without stating any clear reason.
- Since the end of October 2016 PJSC Ukrgazvydobuvannya has refused to sign the statements of transfer – acceptance of gas transferred by PJSC Ukrgazvydobuvannya to the JA. However, the national gas pipeline operator confirmed the JA’s ownership rights for gas and, the JA continued to sell the produced gas.
For further information, please contact:
Göran Wolff, MD
Misen Energy AB (publ) (formerly Svenska Capital Oil AB (publ)) is a Swedish upstream oil and gas company with operations in Ukraine. The company was founded in 2004 and its shares are traded on Nasdaq First North since 12 June 2007.
In 2011, Misen Energy AB (publ) acquired Misen Enterprises AB and its Ukrainian subsidiary, LLC Karpatygaz, including the rights to 50.01% of the revenue and profit from a gas production project in Ukraine. Under IFRS rules, this transaction is classified as a reverse takeover. In consideration of the acquisition, a new share issue was carried out. The gas producing assets were acquired by production cooperation via a joint activity project governed by a Joint Activity Agreement between at that time the wholly-owned direct and indirect subsidiaries of Misen Energy AB (publ), i.e. Misen Enterprises AB and LLC Karpatygaz (together 50.01%) and PJSC Ukrgasvydobuvannya (49.99%), a subsidiary of the National Joint Stock Company Naftogaz of Ukraine. PJSC Ukrgasvydobuvannya is the largest producer of natural gas in Ukraine. The purpose of the Joint Activity Agreement is to significantly increase production of gas and oil by providing modern technologies via a large-scale investment program for the purposes of attainment of profits.
In June 2016 Misen Energy AB (publ) sold 37.5 % of Misen Enterprises AB shares to the Hong Kong based company Powerful United Limited. Owning (the remaining) 62.5% of Misen Enterprises AB shares, Misen Energy AB (publ) maintains full control of the company and preserves a right to obtain 62.5% of the future dividends from the operations in Ukraine.
The registered office of Misen Energy AB (publ) is in Stockholm and the shares are traded on First North under identification ticker MISE. The Certified Adviser of the company at Nasdaq First North is Consensus Asset Management AB.
For further information, please visit our website www.misenenergy.se.
This information is information that Misen Energy AB (publ) is obliged to make public pursuant to the EU Market Abuse Regulation. The information was submitted for publication, through the agency of the contact person set out above, at 14:00 CET on 30 November 2016.