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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Timan | LSE:TMAN | London | Ordinary Share | GB00B1FLNQ18 | ORD 0.1P |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 12.50 | 0.00 | 01:00:00 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| 0 | 0 | N/A | 0 |
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RNS Number : 7347I
Timan Oil & Gas Plc
24 November 2008
24 November 2008
For Immediate release
TIMAN OIL AND GAS PLC (LSE AIM: TMAN)
Interim report for the 6 months ended 30 June 2008
Resumption of trading on Alternative Investment Market
Timan Oil & Gas ("Timan" or the "Group"), an independent oil and gas exploration and production company with its main assets in the
Timan-Pechora region of Western Russia and the Caspian basin, is pleased to present the results of its six months financial and operational
performance to 30 June 2008.
Operational and financial highlights:
* Significant increase in the Group's State Registered resources under the Russian Classification:
* NGPT field (Nizhnechutinskoye) registered reserves increased to 86.4 million tonnes of Category C1+C2 recoverable reserves
(approximately 631 million barrels);
* KNG (Khudoyelskoye area) issued with a Certificate of Commercial Discovery with recoverable reserves evaluated at 17.6 million
tonnes of Category C1+C2 (approximately 112.6 million barrels);
* Successful and final conclusion to the legal dispute with the Russian Subsoil Agency over Zapadno-Vodnenskoye licence and NGPT
licence extension;
* New loan facility of US$100 million secured from Kamanisk Holdings Limited, allowing the Group to resume development of its
fields.
Resumption of trading:
* With publication of Interim Results and securing of financing, trading in shares on AIM resumes today.
Report of the Chief Executive Officer
The first six months of 2008 was a period of significant challenges for Timan. With the global financial markets deteriorating it became
virtually impossible to raise further finance in the wider capital markets. This inevitably meant development of our oil assets could not
proceed as planned.
The Group's main priority in the first six months of 2008 was to secure sufficient financing to enable us to continue trading and to
continue with the NGPT field development plan. Due to limited cash resources, the Group scaled back development on the fields to "care and
maintenance" and minimised overheads during this period.
As we reported in the 2007 Annual Results, the capital of £18.3 million raised at the time of admission to trading on the London Stock
Exchange's Alternative Investment Market (AIM) on 28 December 2006 was sufficient to provide finance for the field development activities in
2007.
On Admission to AIM at the end of 2006 we recognised that the Group would require further funding in 2008. The process of raising
finance began in the second half of 2007 and as previously reported, an investment bank was engaged to manage a high yield bond issue which,
despite initially positive feedback, did not materialise largely due to the global financial downturn. This led to the Board requesting
suspension of the trading of our shares on AIM pending resolution of the financial situation.
On 29 September 2008, we were pleased to announce that we had signed an agreement for a loan facility of up to US$100 million with
Kamanisk Holdings Limited. The first tranche of US$50 million will be available to the Group over the next 12 months, of which US$8 million
has already been drawn down, and should provide the Group with sufficient funding at least until the end of 2009. A second tranche of US$50
million is available in 18 months time only if we meet aggressive targets for our reserves and production on NGPT and KNG. We very much look
forward to working with Timur Kuanyshev, Kamanisk's controlling shareholder, and his team to continue development on NGPT in 2008 and to
re-start drilling on KNG in 2009.
Whilst the Group did not have sufficient resources to continue full development on the fields during much of 2008, we were still active.
Based on the results of development and pilot production that were achieved in 2007 the Group obtained very substantial state registered
reserve upgrades. We recorded significant increases to our reserves under the Russian classification system for both NGPT and KNG, with KNG
also being granted a Certificate of Discovery. We also managed a successful and final conclusion to the Zapadno-Vodneskoye Licence and NGPT
licence extension, a legal issue that had been ongoing for some time. These issues are discussed further in the Operations Review below.
The net loss for the half year to 30 June 2008 was £2,734,000 compared to a net loss of £5,265,000 for the corresponding period last
year. The larger loss for the corresponding period last year is mainly due to a £2.3 million fair value charge for options and warrants
granted in 2006 which under IFRS rules are charged to the Income Statement proportionately over the vesting period. There was only a charge
of £147,000 for the first half of 2008.
Revenues in the first six months of 2008 increased to £370,000 from £306,000 for the corresponding six months last year due to increased
revenues from the sale of thermal water at Geoterm.
The Group started the year with US$2 million in cash remaining and we were virtually debt free. During the first six months of 2008 we
were obliged to reduce capital expenditures and minimise overheads whilst additional financing was being sought. At the end of June we only
had cash remaining of £51,000 and creditors had risen from £3.5 million on 31 December 2007 to £5.0 million on 30 June 2008.
Securing of the loan facility with Kamanisk Holdings Limited removes short and medium term financing concerns, however further finance
will be required to fully develop our current asset portfolio. We expect to have sufficient funds to at least the end of 2009, but at the
same time the company continues to explore financing options for the longer term. The current financing opens the way for the resumption of
field development and allow the Group to focus on the implementation of its operational plans for NGPT and KNG fields.
Timan's shares have been suspended on AIM since 27 March 2008. Following the publication of these interim results trading in Timan's
shares will resume today at 7.30 a.m.
Operations Review
Nizhnechutinskoye Field ("NGPT")
The NGPT field, located in the Timan-Pechora region of Russia, consists of three reservoirs, NGPT I, NGPT II and NGPT A. Based on flow
rates from existing wells, we believe enhanced oil recovery methodologies will be required to attain commercial production levels for this
field. The NGPT I reservoir is located at a depth of 28-150 metres and contains light sweet crude oil of low viscosity, which is unusual for
the relatively shallow depths of the reservoir. We operate the NGPT field under a combined exploration and production licence which is
effective until April 2024. The NGPT field has a net land position of 215 km2.
In close proximity to the NGPT field, we hold an exploration licence for an as yet unexplored area, Timanskiy-4. The Timanskiy-4 licence
area covers a total area of 1,053 km2. The NGPT field is located near developed transportation infrastructure, including the important
Transneft pipeline, which runs through the NGPT field, service and communication facilities and experienced local service providers. The
NGPT field also benefits from its relative proximity to Moscow (the field being approximately 1,200 kilometres northwest of Moscow) and
relatively favourable weather conditions (such as no permafrost) allowing for year-round crude oil production operations.
The Board has approved an operational plan based upon the receipt of US$50 million funds from the recently announced loan facility. The
Group's immediate plan is to recommence drilling operations at NGPT following the completion of preparatory works in the field. The Group
intends to undertake an extended pilot program involving the drilling of an additional 25 wells, expanding the NGPT Pilot Program Area to 50
wells in aggregate. This work is expected to be completed by the second quarter of 2009. The Group will continue its two-year cooperation
with BLZ-Geotechnik GmbH ("BLZ"), the German drilling contractors, utilizing new techniques approved by our technical consultants, G.E.O.S,
the German production consultants, as identified from the results of the previous pilot scheme. In consultation with BLZ and G.E.O.S., we
believe we now know how to solve the well completion and isolation issues.
NGPT Licences
In the third quarter of 2008 we were pleased to announce the successful and final conclusion to the legal disputes over the
Zapadno-Vodnenskoye licence and NGPT licence extension. We received final rulings in our favour from the Supreme Arbitration Court of the
Russian Federation ("the Presidium Court") in relation to both the Zapadno-Vodnenskoye licence and its NGPT licence extension. The rulings
were published by the Presidium Court on 20 September 2008 and 11 October 2008. The Presidium Court is the court of final instance in
commercial disputes in the Russian Federation.
Zapadno-Vodnenskoye Licence
In October 2007, the Moscow City Arbitration Court declared that the failure by the Territorial Subsoil Agency in the Republic of Komi
("Kominedra") to issue the exploration licence over the Zapadno-Vodnenskoye area in Timan-Pechora to our main operating subsidiary, NGPT,
was unlawful and ordered Kominedra to issue the licence to NGPT. An appeal against this ruling by the Russian Federal Subsoil Agency
("Rosnedra") was dismissed by the Moscow Ninth Appellate Arbitration Court on 5 March 2008 and by the Moscow Federal Arbitration Court on 18
June 2008.
On 18 September 2008 the Presidium Court finally ruled that it found no grounds to satisfy the appeals that were filed with it by each
of Kominedra and Rosnedra regarding the Zapadno-Vodnenskoye licence. Kominedra is therefore now legally bound to issue the licence to NGPT.
NGPT Licence Extension
In October 2007, the Moscow City Arbitration Court ruled that an internal order by Rosnedra to Kominedra to revoke the extension of our
exploration and production licence for the NGPT field was unlawful and annulled the order. An appeal against this ruling by Rosnedra was
dismissed by the Moscow Ninth Appellate Arbitration Court on 28 February 2008 and by the Moscow Federal Arbitration Court on of 18 June
2008.
On 9 October 2008, the Presidium Court finally ruled that it found no grounds to satisfy the appeal that was filed with it by Rosnedra
regarding NGPT Licence extension.
NGPT Reserves
We are pleased to report that on 30 September 2008, the Russian Federal Subsoil Agency registered an increase to the approved reserves
for the NGPT field under the Russian classification as follows:
* 235.8 million tonnes of Category C1+C2 unrisked original oil in place ("OOIP") (approximately 1,722 million barrels), which
includes 109.6 million tonnes of Category C1 oil in place (approximately 800 million barrels);
* 86.4 million tonnes of Category C1+C2 recoverable reserves (approximately 631 million barrels) which includes 40.9 million tonnes
of Category C1 reserves (approximately 299 million barrels).
The previous estimated Category C1 + C2 recoverable reserves for the NGPT Field, stated in accordance with the Russian classification,
were 4.9 million tonnes (around 35.2 million barrels) including 0.3 million tonnes of Category C1 reserves (approximately 2.3 million
barrels) as of November 1999. The increase is a result of the substantial amount of new technical data gathered since then and recently
submitted to the Russian State Reserves Committee ("GKZ").
Miller and Lents Ltd, the Group's independent reserves auditor, assessed the NGPT field as containing 191.3 million barrels of 2P
(Proved plus Probable) Reserves under the SPE Standard in June 2006. It should be noted that there are fundamental differences between the
Russian Classification System and SPE Standard, which make direct comparison of resource/reserve numbers problematic. In addition the
Russian State Classification system is not a recognised standard under the AIM Rules, and as such the Group is required to obtain an updated
assessment under the SPE Standard as soon as practicable. Therefore Timan will shortly submit a documentation package to Miller and Lents
for the purpose of obtaining a revised assessment. Any reassessed SPE numbers are likely to differ from the Russian Classification numbers
disclosed above.
Khudayelskoye Field ("KNG")
The KNG Field is located approximately 300 kilometres from the NGPT Field and has a net land position of 180 km2 with crude oil reserves
located primarily at depths of 100-700 metres and 4,000 metres. The field is comprised of four reservoirs: three shallow reservoirs, located
at depths of between 100-700 metres and one deep reservoir located at a depth of approximately 4,000 metres.
The shallow reservoirs in the KNG Field have high gravity crude oil estimated at 13°API that is also of high viscosity. We believe that
steam injection will be required for production wells in these reservoirs. The deep reservoir contains two prospects, both of which have
been penetrated by a well. We do not believe the deep reservoir will initially require enhanced oil recovery methodologies because of its
high pressure, low expected crude oil gravity of 31°API, low expected viscosity and the high expected permeability of the formation.
KNG Licences and Reserves
On 27 February 2008 the State Reserves Committee of Russia approved the oil reserves for 5 deposits of the shallow reservoir at the KNG
field: the Original Oil in Place was evaluated at 88.2 million tonnes (Category C1+C2) which includes 3.2 million tonnes (Category C1); the
recoverable reserves were evaluated at 17.6 million tonnes (Category C1+C2) which includes 0.641 million tonnes of Category C1. In
accordance with this approval, the reserves will be put on the State Register of Natural Reserves under Category C1+C2. We aim to have KNG
reserves evaluated under SPE definitions by the first quarter of 2009.
The KNG exploration licence, which did not allow for commercial production, expired in March 2008. KNG applied on a non-competitive
basis on 6 February 2008 to the appropriate authorities in order to ultimately obtain a production licence. The issue of the Certificate of
Commercial Discovery by Rosnedra in March 2008 was an important step in receiving approval of the production licence which we expect to be
issued in due course.
Geoterm
Through our 80% ownership interest in Docom, we hold an indirect interest in its subsidiary, Geoterm. Our principal Geoterm assets are
the Sulak and Izberbash block exploration and production licences located in two shallow areas in the Middle Caspian Sea Basin with a net
land position of 1,280 km2. The Ministry of Natural Resources has estimated that the Izberbash block contains Russian C3 resources of
approximately three billion barrels of crude oil. Initial estimates of potential resources for Sulak should be completed during 2009
following our review of relevant seismic data. No wells have been drilled on either licensed area to date.
The Geoterm blocks are also favourably positioned near to distribution access points, with the Azerbaijan-Northern
Caucasian-Novorossiysk branch of the Transneft pipeline only ten kilometres away and in close proximity to the Caspian oil terminal in
Makhachkala. Geoterm's blocks are adjacent to crude oil and natural gas fields which are already in production. A new Baku to Ceyhan
pipeline has been constructed which has the capacity to transport one million barrels per day. The Western Caspian region is well connected
to the Russian pipeline network, with key pipelines to Novorossiysk in Russia and export terminals and refineries on the Black Sea.
Additionally, rail transport is also well developed in the region and is an established method of shipping crude oil products.
The Group is currently considering its options with regard to the best way to further explore these blocks, including seeking a farm-in
partner for these licences. A drilling jack-up rig has been already secured for Izberbash No. 2
Under the Russian legislation, Geoterm offshore is subject to tax breaks (zero Mineral Extraction Tax) for the first seven years of
production.
Outlook
With the current financing that has been secured we intend to focus once again on bringing NGPT into full production. Furthermore, once
we have received the production licence for KNG we intend to continue our appraisal of this field during 2009.
We hope that, with the Group's shares resuming trading on AIM and with the assistance of our new investors we can begin to increase
shareholder value. The Board and our management team fully appreciate your continued support of the Group.
Review by Qualified Person
The technical information and opinions contained in this statement have been reviewed by Alexander Petukhov, the Group's Deputy General
Manager of LLC Neftegazopromyslovye tekhnologii or "NGPT" who is a qualified mining engineer and geologist, and a member of the American
Association of Petroleum Geologists.
Enquiries:
Timan Oil & Gas PLC
Alexander Kapalin, Chief Executive Officer
David Herbert, Chairman
+7 495 22 333 90
Strand Partners
Rory Murphy
+ 44 (0) 20 7409 3494
Merlin
David Simonson
Leonid Fink
+ 44 (0) 20 7653 6620
CONSOLIDATED INCOME STATEMENT
(UNAUDITED)
Half year to Half year to Year to
30 June 30 June 31 December 2007
2008 2007
(unaudited) (unaudited) (audited)
£'000 £'000 £'000
Continuing operations
Revenue 370 306 641
Operating expenses (370) (181) (553)
Other administrative expenses (3,391) (3,038) (7,953)
Fair value expense of options (147) (2,309) (4,122)
issued
Total administrative expenses (3,538) (5,347) (12,075)
Operating loss (3,538) (5,222) (11,987)
Investment revenue 7 90 161
Other income, net - 12 12
Other gains / (losses) 794 (74) 783
Finance costs (19) (68) (114)
Impairment of goodwill - - (35)
Loss before tax (2,756) (5,262) (11,180)
Tax 22 (3) (17)
Loss for the period (2,734) (5,265) (11,197)
Attributable to:
Equity holders of the parent (2,730) (5,264) (11,150)
Minority interest (4) (1) (47)
(2,734) (5,265) (11,197)
Loss per ordinary share
Basic and diluted 1.6p 3.2p 6.9p
CONSOLIDATED BALANCE SHEET
(UNAUDITED)
As at As at As at
30 June 30 June 31 December 2007
2008 2007
(unaudited) (unaudited) (audited)
£'000 £'000 £'000
ASSETS
Non-current assets
Goodwill - 35 -
Other intangible assets 3,355 2,087 3,254
Property, plant and equipment 14,887 9,173 13,526
Other non-current assets 1 1 1
18,243 11,296 16,781
Current assets
Inventories 262 703 459
Trade and other receivables 9,094 9,892 8,395
Other current assets 234 207 205
Cash and cash equivalents 51 5,262 1,956
9,641 16,064 11,015
Total assets 27,884 27,360 27,796
LIABILITIES
Current liabilities
Trade and other payables (5,019) (1,215) (3,529)
Loans and overdrafts (226) (44) (212)
Total current liabilities (5,245) (1,259) (3,741)
Net current assets / 4,396 14,805 7,274
(liabilities)
Non current liabilities
Long term loans - - -
Provisions (222) (76) (260)
Deferred tax liabilities (295) (295) (295)
(517) (371) (555)
Total liabilities (5,762) (1,630) (4,296)
Net assets 22,122 25,730 23,500
Equity
Share capital 168 162 166
Share premium 41,170 38,308 40,226
Other reserves 9,010 7,050 8,863
Retained losses (28,293) (19,905) (25,828)
Total equity attributable to 22,055 25,615 23,427
equity holders of the parent
Minority interest 67 115 73
22,122 25,730 23,500
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
(UNAUDITED)
Share capital Share premium Other reserves Retained losses Attributable to equity
holders of Minority interest Total
parent
£'000 £'000 £'000 £'000
£'000 £'000 £'000
Equity at 31 December 2006 162 38,117 4,670 (14,775) 28,174
117 28,291
Loss for the period - - - (5,264)
(5,264) (1) (5,265)
Translation difference - - - 134
134 (1) 133
Warrants - fair value charge - - 71 -
71 - 71
Options - fair value charge - - 2,309 -
2,309 - 2,309
Share capital issued - 191 - -
191 - 191
Equity as at 30 June 2007 162 38,308 7,050 (19,905)
25,615 115 25,730
Loss for the period - - - (5,886)
(5,886) (46) (5,932)
Translation difference - - - (37)
(37) 4 (33)
Options - fair value charge - - 1,813 -
1,813 - 1,813
Share capital issued 4 1,918 - -
1,922 - 1,922
Equity as at 31 December 2007 166 40,226 8,863 (25,828)
23,427 73 23,500
Loss for the period - - - (2,730)
(2,730) (4) (2,734)
Translation difference - - - 265
265 (2) 263
Options - fair value charge - - 147 -
147 - 147
Share capital issued 2 944 - -
946 - 946
Equity as at 30 June 2008 168 41,170 9,010 (28,293)
22,055 67 22,122
CONSOLIDATED CASH FLOW STATEMENT
(UNAUDITED)
Half year to Half year to Year to
30 June 30 June 31 December 2007
2008 2007
(unaudited) (unaudited) (audited)
£'000 £'000 £'000
Loss before taxation (2,756) (5,262) (11,180)
Adjustments for:
Depletion, depreciation and 98 62 290
amortisation
Foreign exchange gains (808) (198) (813)
Fair value charge for warrants - 71 71
Fair value charge for options 147 2,309 4,122
Interest received (7) (90) (161)
Interest paid 19 - 43
Impairment of goodwill - - 35
Other non-operating income 14 - 18
Operating cash flow prior to (3,293) (3,108) (7,575)
working capital
Increase in trade and other (728) (4,587) (2,008)
receivables
Increase in inventories 197 (341) (98)
(Decrease)/increase in trade 1,490 (2,311) (708)
and other payables
Net cash outflow from (2,334) (10,347) (10,389)
operations
Investing Activities
Purchase of intangible assets (101) - (1,248)
Purchase of property, plant (695) (1,919) (5,191)
and equipment
Interest received 21 90 150
Net cash used in investing (775) (1,829) (6,289)
activities
Financing Activities
Proceeds from issue of share 946 948 2,113
capital and warrants
Repayment of bank loans - (56) (106)
Drawdown of bank loans 14 - 184
Interest paid (19) (7) -
Net cash from financing 941 885 2,191
activities
Net (decrease) / increase in (2,168) (11,291) (14,487)
cash and cash equivalents
Net foreign exchange (gain) / 263 10 (100)
loss
Cash and cash equivalents at 1,956 16,543 16,543
beginning of period
Cash and cash equivalents at 51 5,262 1,956
end of period
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL INFORMATION (UNAUDITED)
Period ended 30 June 2008
1. Basis of preparation and accounting policies
These interim consolidated financial statements are for the six months ended 30 June 2008. The interim financial report, which is
unaudited, has been prepared in accordance with the recognition and measurement criteria of International Financial Reporting Standards
("IFRS"). The accounting policies and methods of computation used are consistent with those used in the Group Annual Report for the year
ended 31 December 2007.
These financial statements do not comprise statutory accounts as defined in Section 240 of the Companies Act 1985. Statutory accounts
for the year ended 31 December 2007, on which the auditors gave an unqualified report, have been filed with the Registrar of Companies and
did not contain statements under Section 237(2) or (3) of the Companies Act 1985.
2. Auditors' review
These unaudited interim accounts have not been either reviewed or audited by the Group's auditors, Deloitte & Touche LLP.
3. Approval of accounts
These unaudited interim accounts were approved by the Board of Directors on 23 November 2008.
4. Business and geographical segment reporting
In the opinion of the Directors, the operations of the Group comprise one class of business, being oil and gas exploration, development
and production and the sale of hydrocarbons and related activities; and in only one geographical area, the Russian Federation.
The Group has operations in the Russian Federation. The Group's head office is in London, England. Since the UK head office does not
earn revenue from external customers, it is not a reportable segment under IAS 14.
5. Revenue
Total revenue for the Group of £0.4 million was derived from the sale of thermal water. The previous interims for the 6 months to 30
June 2006 included £2.5 million from the trading of oil products. This was reclassified in the 2007 year end accounts as other income, and
netted off with the cost of sales of £2.5 million.
6. Administrative Expenses
Administrative expenses include £147,000 relating to the fair value of options issued in prior years with the fair value being charged
to the Income Statement over the vesting period and is spread proportionately over this period. The charge for the corresponding period of
the prior year was £2.3 million.
7. Other Income
Other income in 2007 relates to the net profit from trading activities. In the interim report for the six months ended 30 June 2007,
revenues included £2,527,000 for trading activities and cost of sales included £2,515,000 for trading activities. This was reclassified in
the financial statements for the year ended 31 December 2007 to be shown as other income.
8. Taxation
No provision for corporation tax has been provided for, due to losses incurred in the period.
9. Dividends
No dividends were declared in the reporting period (2006: nil).
10. Loss per ordinary share
Basic loss per ordinary share amounts are calculated by dividing net loss for the period attributable to ordinary equity holders of the
parent by the weighted average number of ordinary shares outstanding during the period. Diluted loss per ordinary share equals basic
earnings per ordinary share as there are no dilutive potential ordinary shares due to the Group's loss making position.
Half year to 30 June Half year Year to 31 December
2008 to 30 June 2007 2007
Losses £'000 £'000 £'000
Net loss attributable to (2,730) (5,264) (11,150)
equity shareholders of the
parent
Number of shares Number Number Number
'000 '000 '000
Basic weighted average number 167,576 162,015 162,197
of shares
11. Share capital and share premium account
On 28 December 2007, Mainstream Invest Corp. B.V. notified the Group that they were exercising their 2,012,000 warrants. Each warrant
converted into one new ordinary share and the exercise price was £0.47 per share. However, the funds of £0.9 million were only received in
2008 and therefore the shares were only issued and allotted to Mainstream on 21 February 2008.
The issued share capital of the Group is now 168,142,518 Ordinary Shares.
12. Subsequent events
US$100 million loan facility with Kamanisk Holdings
On 29 September 2008, the Group entered into a loan agreement with Kamanisk Holdings Limited ("Kamanisk"), a British Virgin Islands
registered company controlled by Timur Kuanyshev. Mr Kuanyshev is a prominent Kazakh investor, who through his principal entity BATT
Corporation, has interests in Russia, Kazakhstan and globally in oil & gas, construction, retail, agriculture and fast moving consumer
goods.
Under the terms of the agreement Kamanisk has agreed to provide the Group with a five year loan facility of up to US$100 million. The
loan facility is available in 2 tranches of US$50 million each.
The Group has already received US$8 million of the first US$50 million tranche, secured over 51 per cent. of the shares owned by the
Group in the intermediate holding company of Geoterm, the Caspian subsidiary. Further drawdown at the rate of US$5 million per month up to
an aggregate US$22 million (including the initial US$5 million) will result in security over 51 per cent. of the shares in the Timan Oil &
Gas Holdings Limited and its Russian operational subsidiaries. Drawdown of further funds results in the security over Timan Oil & Gas
Holdings Limited and the intermediate holding company of Geoterm increasing to 100 per cent. of the shares held by group companies.
The second tranche of US$50 million will be made available subject, inter alia, to the following conditions being met within 18 months
of the date of the agreement:
* A revised audit by Miller & Lents of NGPT reserves confirming P2 reserves under SPE classification of at least 400 million
barrels;
* Production at NGPT reaching at least 2,000 bopd for at least 3 consecutive months;
* An audit by Miller & Lents of KNG reserves confirming P2 reserves under SPE classification of at least 100 million barrels; and
* Production at KNG reaching at least 10,000 bopd for at least 3 consecutive months.
The loan is repayable five years from first drawdown and accrues interest quarterly at 10 per cent per annum to be rolled up until
repayment. Kamanisk is entitled to a payment equal to the higher of the loans plus accrued interest and an amount representing 51 per cent.
of the value of the Group at repayment. Alternatively, the loan together with accrued interest is convertible at any time after initial draw
down into new ordinary shares of 0.1p each at both Kamanisk's and the Group's option. On conversion Kamanisk would obtain 51 per cent. of
Timan Oil and Gas Plc's fully diluted ordinary shares in issue (as enlarged by such conversion). To the extent that part of the first US$50
million has not been drawn down and a conversion notice is then served by Kamanisk, Kamanisk has to pay the remainder of the first US$50
million before conversion can take effect. The conversion is conditional upon shareholder approval being obtained for the issue of the
ordinary shares following a conversion notice. In addition to the conditions set out above, drawdown of the second tranche of US$50 million is subject to this shareholder approval.
Kamanisk has the ability to nominate three directors to the board of the Group. The nominations will be subject to approval by the Board
and Strand Partners Limited and the directors are expected to have substantial oil and gas experience so as to contribute to the current
management team's expertise.
Increase in NGPT State Registered Reserves
Following the submission of technical data, the Russian State Reserves Committee ("GKZ") met on 18 July 2008 and approved new reserves
for the Nizhnechutinskoye field. Subsequently on 30 September 2008 the Russian Federal Subsoil Agency ("Rosnedra") registered these reserves
into the State Register of Natural Reserves as follows:
* 235.8 million tonnes of Category C1+C2 unrisked original oil in place ("OOIP") (approximately 1,722 million barrels), which
includes 109.6 million tonnes of Category C1 oil in place (approximately 800 million barrels);
* 86.4 million tonnes of Category C1+C2 recoverable reserves (approximately 631 million barrels) which includes 40.9 million tonnes
of Category C1 reserves (approximately 299 million barrels).
The previous estimated Category C1 + C2 recoverable reserves for the NGPT field, stated in accordance with the Russian classification,
were 4.9 million tonnes (around 35.2 million barrels) including 0.3 million tonnes of Category C1 reserves (approximately 2.3 million
barrels) as of November 1999.
Successful and final conclusion to the Zapadno-Vodnenskoye Licence and NGPT Licence Extension
Timan received final rulings in its favour from the Supreme Arbitration Court of the Russian Federation ("the Presidium Court") in
relation to both its Zapadno-Vodnenskoye licence and its NGPT licence extension. The rulings were published by the Presidium Court on 20
September and 11 October 2008. The Presidium Court is the court of final instance in commercial disputes in the Russian Federation.
Zapadno-Vodnenskoye Licence
In October 2007, the Moscow City Arbitration Court declared that the failure by the Territorial Subsoil Agency in the Republic of Komi
("Kominedra") to issue the exploration licence over the the Zapadno-Vodnenskoye area in Timan-Pechora to Timan's main operating subsidiary,
NGPT, was unlawful and ordered Kominedra to issue the licence to NGPT. An appeal against this ruling by the Rosnedra was dismissed by the
Moscow Ninth Appellate Arbitration Court on 5 March 2008 and by the Moscow Federal Arbitration Court on 18 June 2008.
On 18 September 2008 the Presidium Court finally ruled that it found no grounds to satisfy the appeals that were filed with it by each
of Kominedra and Rosnedra regarding the Zapadno-Vodnenskoye Licence. Kominedra is therefore now legally bound to issue the licence to NGPT.
NGPT Licence Extension
In October 2007, the Moscow City Arbitration Court ruled that an internal order by Rosnedra to Kominedra to revoke the extension of
Timan's exploration and production licence for the NGPT Field was unlawful and annulled the order. An appeal against this ruling by
Rosnedra was dismissed by the Moscow Ninth Appellate Arbitration Court on 28 February 2008 and by the Moscow Federal Arbitration Court on of
18 June 2008.
On 9 October 2008, the Presidium Court finally ruled that it found no grounds to satisfy the appeal that was filed with it by Rosnedra
regarding NGPT licence extension.
Change of Company Offices
The Group no longer occupies the premises at 33 St. James Square, London, SW1Y 4JS. We are currently seeking new premises and an
announcement will be made in due course.
This information is provided by RNS
The company news service from the London Stock Exchange
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