Interim report April - June 2015
• Decision to apply for registration of reserves C1+C2 corresponding to 38 mmboe (5 million tons)
• Due to unique results and need for further analysis, drilling of new well planned to commence Q1 2016
• Analyses of samples from well #4 shows gas and condensate of highest quality
Important events after the end of the period
• Results of further analysis indicates that the weathered crust mainly contains oil. Based on the test results and increased understanding of the reservoir, company internal assessments indicate that the weathered crust may contain 97-277 mmbbl of recoverable light oil.
Financial Summary January – June 2015
• Net revenue during the period January – June 2015 amounted to SEK 32 (0) thousand
• EBIT for the period January – June amounted to SEK -1 841 (-2 808) thousand
• Cash flow from operating activities SEK -12 668 (-35 324) thousand
• Cash at the end of the period amounted to SEK 897 (814) thousand
Financial Summary April – June 2015
• Net revenue during the period April – June 2015 amounted to SEK 32 thousand
• EBIT for the period April – June amounted to SEK -4 046 thousand
• Cash flow from operating activities SEK -1 888 thousand
• Cash at the end of the period amounted to SEK 897 thousand
January – June 2015
Revenue amounted to SEK 32 (0) thousand. The Company reported an operating result of SEK -2 071 (-7 539) thousand for the period January – June 2015. The Company held SEK 897 (814) thousand in cash at the end of the period.
Cash flow from operating activities for the period was SEK -12 668 (-35 324) thousand and current assets and accounts receivable at the end of the period amounted to SEK 43 648 (38 863) thousand.
Investments are made into the local project company OOO Bakcharneftegaz, in which Interfox at the end of the period via the fully owned subsidiary Mezhlisa Resources Cyprus Ltd (“Mezhlisa”) had a registered ownership of 25.42 percent. However further investments made into BNG now entitles the Company to register a further ownership onto Mezhlisa so that Mezhlisa shall have an ownership of 33.16% in BNG. Such registration is under way.
The total number of shares in Interfox Resources AB (publ) is 44 362 638.
Overview of operations
During the period, the Company continued the exploration program in the Tomsk region, license 71-1 Elley-Igayskoye. The license is held in the local project company OOO Bakcharneftegaz in which the Company has the right to attain a 74 percent ownership against investing in total USD 12.4 million. The exploration program covers the re-entry of one old well, Phase 1, and the drilling of a new exploration well, Phase 2.
The purpose of the exploration program is to prove as much reserves as possible and then exit the project to a larger company, more suited for the development phase. The initial phase in proving the contents of the asset was to attain a registration of resources under Russian C3 standard. An application for registration was approved as per 1.1.2015 according to the following:
- Gas 16 470 million m3
- Condensate 2 831 000/1 775 000 metric tonnes geological/extractable resources
This corresponds to 131.9 mmboe geological resources or 123.2 mmboe extractable resources (conversion rate used: 1 thousand m3gas = 6.60; 1 metric tonne condensate = 8.18).
Substantial amounts of hydrocarbons were observed during the testing of the well. Furthermore, amounts of pebbles and rock fragments were received, coming from the reservoir, which indicates the presence of a collector, a hydrocarbon reservoir, characterized by absolute permeability, exceeding 100 mD. It is essential to understand what this means for the character of the asset and how it optimally shall be exploited.
The location of the new well can be affected by these new discoveries and the subsequent analyses currently being done, so the Company decided, in collaboration with authorities, to perform drilling with start from the first quarter 2016, whereby all preparations will be completed during autumn 2015.
This change of timing for the drilling of the new well does not automatically mean than the Company’s ambition to initiate the active phase of the exit process during the third quarter 2015 will be affected.
It was in April 2015 decided to apply for registration of reserves under category C1 & C2 with the Russian authority GKZ (belonging to the Ministry of Natural Resources). This process and evaluation will go on during May-October 2015, after which GKZ will register the approved volumes. BNG will apply for the registration of 38 million barrels (5 million tons) of oil equivalents (boe), which means oil and gas combined and converted as if it were oil only. [Update of timeline?]
C1 & C2 are the highest categories of classifications of extractable hydrocarbons. Interfox Resources' exit strategy is based on a sale of the value in the ground and a holding of 74% of the shares of BNG.
The new well that the Company intends to drill during the first half of 2016 is for the purpose of converting an additional portion of the mentioned C3 resources to C1 & C2 reserves.
The Company had samples of both gas and condensate from well #4 taken for analysis during the spring. The results from these analyses were delivered to the Company from the geochemical institute OAO TomskNIPIneft. The results show that 71-1 contains both gas and condensate of the highest commercial quality. The gas consist of 89.22% methane. This is a very good result and the gas corresponds well to the gas Russia exports to both the EU and to Asia.
The condensate also was of the highest quality, the one that is most valuable in the market, with a freezing point of -60C; no Sulphur; low density = 708 kg/m3; low viscosity and the absence of solid elements.
Organization
At the Annual General Meeting of shareholders 18 May 2015 (the “AGM”), the Board that was elected consists of Max Renard, Anders Thorsell and Jonathan Collins. Max Renard has been elected Chairman of the Board of Directors by the Board. Peter Klimt is the CEO for the Company.
Johan Erlandsson of HLB Revisorsguppen was elected as new auditor for the Company.
The AGM decided to authorize the Board to The Board of Directors to, at one or more occasions before the next Annual General Meeting, with or without deviation from the pre-emption rights of shareholders, resolve upon the new issue shares, warrants and/or convertibles. The issue/issues shall be made against cash payment, contribution in kind and/or as a set-off. The subscription price shall correspond to the market value. The issue of shares, warrants and/or convertibles may increase the number of shares by a total of 8 000 000 shares.
Significant events after the reporting period
On August 17 2015, the Company announced results of further tests, done in addition to the test results of gas and condensate that were published 2015-06-08. The further test included tests both of the pebbles that constitute large parts of the weathered crust and of a darker fluid, expected to contain oil.
The presence of pebbles is of significant importance, as it gives close to an absolute permeability.
The analysis of the pebbles indicate that the weathered crust contains mainly oil. The dark fluid that was tested turned out to be a mix of condensate (90%) and oil (10%). The geologists assume that the large portion of condensate is caused by the very high gas pressure above the weathered crust, forcing condensate down in the weathered crust while the samples were taken. The test results of the combined liquids rule out that the oil is of other quality than a light oil with a low content of sulphur.
Based on these new test results and the increased understanding of the reservoir these have given, the Company's geologists have estimated that the weathered crust alone may contain 13-37 million metric tons (97-277 mmbbl) of recoverable light oil.
In addition have recently performed new studies of old Soviet data from well #2 shown significant quantities of light oil on 4020 m, 4080 m and 4120 m, with a density of 0.8227-0.8192.
The local partner, Mr Mikhail Malyarenko comments: “We should assume a mixture of 80% oil and 20% gas & GC in the 71-1 deposit. In the upper layers we will find a lot of gas condensate and as we go higher we will find a lot of gas as well“.
The purpose of the drilling of the new well #7, planned for Q1 2016, is to convert the above mentioned findings to certified C1 & C2 reserves. This will possibly to a certain extent be in addition to the registration of the 5 million tons of oil equivalents already in progress.
Other information
About Interfox Resources
Interfox Resources AB is an exploration company that seek to identify license properties with potential to become significant oil and gas assets. The Company’s operations currently involve the development of the Company’s first asset, license 71-1 “Elley-Igayskoye”. The strategy is to confirm oil and gas reserves and prepare for a sale to or a deep cooperation with a strategic partner.
Risks
Among the risks relating to the company and the industry are that the company's operations are subject to all of the risks and uncertainties associated with exploration, acquisition, development, production and sale of oil and gas. All oil and gas reserves and resources contain a degree of uncertainty. In many cases, exploration activities never get to development and production. The company's potential inability to retain and expand its reserves would have a material adverse effect on the company's business, results and financial position. The company may also suffer accidents and damage to facilities, the environment and staff, and natural disasters. Any major incident could have an adverse effect on the company's ability to produce oil and gas.
The Company may in the future need to turn to the capital market for additional funding. Both the size and timing of the Company's potential future capital requirements will depend on a number of factors, including the nature resource. There is a risk that the required funding of operations is not available at the right time and at reasonable cost.
General accounting principles
The company has in the preparation of this interim report applied the Swedish Annual Reports Act and the general advice as given by the Swedish Accounting Standards Board.
Upcoming financial reports
Q3 2015, July – September 2015, will be published November 18 2015.
Year-end report 2015, February 17 2016.
Financial reports, press releases and other information are available on Interfox Resources’ website:
This report has not been reviewed by the Company’s auditors.
Stockholm 19 August 2015
Max Renard
Chairman
Anders Thorsell
Member of the board
Jonathan Collins
Member of the board
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