Interim report January - March 2015
Financial Summary
- Net revenue during the period January – March 2014 amounted to SEK 0 (0) thousand
- EBIT for the period amounted to SEK 2 086 (-3 960) thousand
- Cash flow from operating activities SEK -10 779 (-5 063) thousand
- Current assets and accounts receivable at the end of the period amounted to SEK 47 660 (715) thousand
INTERIM REPORT JANUARY - MARCH 2015
• Execution of a directed share issue of SEK 14.1 million
• Discovery of significant gas and gas condensate flows. Measured flows in short-term tests were measured at 114 000 m3/day mix of natural gas and condensate and 5 tons per day of pure condensate
• 71-1 declared a commercial field
• Registration of C3 resources corresponding to 131.9 mmboe geological resources or 123.2 mmboe extractable resources completed
Important events after the end of the period
• 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
Financial Summary
• Net revenue during the period January – March 2014 amounted to SEK 0 (0) thousand
• EBIT for the period amounted to SEK 2 086 (-3 960) thousand
• Cash flow from operating activities SEK -10 779 (-5 063) thousand
• Current assets and accounts receivable at the end of the period amounted to SEK 47 660 (715) thousand
Financial development
Revenue amounted to SEK 0 (0) thousand. The Company reported an operating result of SEK -1 538 (-3 644) thousand for the period January – March 2015. The Company held SEK 2 786 (247) thousand in cash at the end of the period.
During the period, the Company has conducted the following share issues. In January 2015 the Company executed a share issue without preferential rights for shareholders of in total SEK 14.1 million before related costs at a share price of SEK 1 per share, resulting in an issue of 14,149,000 shares. As a result of this, an issue of 4 945 467 shares were issued to The Far East and Pacific Investments Inc (“FEPI”) 10 March 2014 was completed in accordance with agreement. The agreement stipulates that FEPI up until that equity financing of USD 13 million has been acquired, FEPI shall have a shareholding of 25.9% in the Company.
After these share issues the total number of shares in the Company is 44 362 638.
The right of the shareholders of Interfox to participate on identical terms for up to 20 percent of the total financing, as communicated in the Q3 Report, 18 November 2014, means that the Board shall offer the shareholders to subscribe to 4 773 617 shares at a price of SEK 1.00 per share. Due to the share price development, the Board has decided to execute such offer if and when the share price has reached such level that the offer would be attractive to the shareholders of the Company.
Cash flow from operating activities for the year was SEK -1 903 (-5 063) thousand and current assets and accounts receivable at the end of the period amounted to SEK 47 660 (715) 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 30.64% in BNG. Such registration is under way.
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 m3 gas = 6.60; 1 metric tonne condensate = 8.18).
On 13 February 2015, the Company encountered commercial flow rates of natural gas and gas condensates from the weathered zone, between 3 010 – 2 990 meters. Short term tests showed flows of 114 000 m3/day mix of natural gas and gas condensate as well as 5 metric tons/Day of pure condensate.
Organization
At an extra general meeting of shareholders 10 March 2015, Jonathan Collins was elected to the Board of Directors. Former Board member Jan Lundström left his seat in connection with the EGM. After the EGM, the Board consists of Max Renard, Anders Thorsell and Jonathan Collins.
Significant events after the reporting period
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 has in collaboration with authorities decided to perform drilling with start from the first quarter 2016, whereby all preparations will be completed during autumn 2015. Accordingly, there is no time pressure from authorities regarding the timing of the drilling of the new well.
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.
C1 & C2 are the highest categories of classifications of extractable hydrocarbons. Under the current oil price, they carry a value of USD 1.5-2.0 per barrel when sold in the ground, i.e. without any development of production. 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 Annual General Meeting of Shareholders (“AGM”) in the Company 18 May 2015 was held in the Company’s office in Stockholm. The elected Board of Directors consists of Max Renard, Anders Thorsell and Jonathan Collins. At the first meeting of the Board of Directors following the AGM, Max Renard was elected Chairman of the Board.
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
Q2 2015, April – June 2015, will be published August 19 2015.
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:
www.interfoxresources.se
This report has not been reviewed by the Company’s auditors.
Stockholm 20 May 2015
Max Renard
Chairman
Anders Thorsell
Member of the board
Jonathan Collins
Member of the board
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