Interim Report Q2 2013

Second quarter from April to June

– Revenue for the second quarter amounted to tSEK 4647 ( 5208 )
– Operating profit for the second quarter amounted to SEK thousands -152 ( -6221 )
– Of which oil business tSEK -309 ( -3665 )

– Second -quarter profit after tax amounted to SEK thousands -1895 ( -6537 )
– EBITDA for the second quarter amounted to tSEK 972 ( -5276 )
– Of which oil business tSEK 814 (-2 721)

– Earnings per share amounted to SEK -0.18 ( -0.57 )
– Equity per share amounted to SEK 8.20 ( 6.79 )

Period January to June

– Net sales amounted to SEK thousands 7 893 (10 220)
– Operating profit amounted to SEK thousands -2199 ( -9241 )
– Of which oil business tSEK -463 ( -4858 )

– Profit after tax amounted to SEK thousands -4690 (-10 145)
– EBITDA for the period amounted to SEK thousands -147 ( -7380 )
– Of which oil business tSEK 1 587 (-2 999)

– Earnings per share amounted to SEK -0.41 ( -1.17 )

 

Highlights of the second quarter

Commodity Quest ‘s subsidiary conducted during April a new issue of 240 000 shares in order to improve the company’s position and key towards the new bank facility . Following the transaction, the Commodity Quest’s holdings increased from 64.0 % to 68.4 % .

At Commodity Quest ‘s Annual General Meeting May 16, 2013 re-elected Håkan Gustafsson (Chairman), Christian Lundkvist and Pål Mörch as directors. The Meeting resolved to amend the Articles of Association provisions of § 4 ( Share Capital ) and § 5 ( Number of shares). Amendment is a result of the Board’s proposal for authorization to issue new shares. The meeting also decided on a long-term incentive plan as follows, including a private placement of warrants to the company’s CEO.

That the Swedish Energy Alliance Ltd ( SWEA ) requested arbitration proceeding against Commodity Quest AB has a final award on June 25 left SWEA ‘s appeal dismissed. SWEA will also replace Commodity Quest AB for processing costs. Commodity Quest has always considered that the case was without foundation , and the company is very pleased with the award. The company can then put this behind him.

Events after the reporting period
Commodity Quest ‘s wholly owned subsidiary, COMQ Services LLC signed on July 12 an agreement to purchase Concord Dome Oilfield ( CDO) . CDO is a 500,000 m2 large producing oil field in Anderson County, Texas . Commodity Quest takes over 100 % of the field and Benchmark Oil & Gas is operator. The purchase amount is confidential by agreement with the seller, but the acquisition is self financed and Commodity Quest does not have to seek external funding . We expect initial production of approximately 20 barrels / day , with a possible increase of 40-60 barrels / day through a smaller drill programs on three existing oil wells. In the field, there are also 12 studied sources that require further investigation to determine the total potential. COMQ Services will have 100 % working interest and 84% net revenue interest .

Benchmark Oil & Gas signed July 29 agreement with Cargill on the sale of 1,200 barrels per month through December 2013 from 101USD per barrel + LLS premium and 500 barrels per month through December 2014 for 94USD per barrel + LLS premium. LLS premium has been between 5-20 USD per barrel in the last two years.
Commodity Quest as decided by the Tax Agency has become upptaxerad with tSEK 1016 regarding declared VAT deduction in 2012. Costs including any tax amounts to tSEK 1233 and has not been reported in the interim report as the company intends to appeal the decision.

Group Summary
( See graph in the pdf version of the report)

CEO’s Comments

The positive trend from the beginning of the year continued in the second quarter of the Benchmark Oil & Gas.

The company has had a stable production which resulted in a positive EBITDA even for the parent company. We have chosen to hold output growth processes in anticipation of ongoing seismic work. This allows production issues are planned well and avoid mistakes in the wells.

The formation of the “new” Imcc is in full swing and is registered under the name Delta Mineral Commodities Pacific Inc. and existing licenses are about to be transferred . Our long term plan is to continue to distribute the company to our shareholders.

Commodity Quest participated in the underwriting consortium was concerned Crown Energy ‘s rights issue . The company has sold this position at a profit in the second quarter .

Commodity Quest has reduced its stake in Kopy Goldfields because of its negative trend.

The Company completed a private placement to a handful of investors of 10.4 million. We are grateful to have been able to attract talented investors that new owners. In connection with the offering , we increased our ownership in the Benchmark Oil & Gas.

That the Swedish Energy Alliance Ltd requested arbitration proceeding against Commodity Quest AB rejected in an arbitration at the end of June, which was in line with the company’s earlier estimate .

After the end of the quarter Concord Dome Oil Field in Texas acquired. The field is in production and we are currently transferring licenses for the operation of the Benchmark Oil & Gas.

The field offers exciting opportunities and we plan to increase production in the coming months . The field’s long-term potential is as yet unknown , but we believe that the producing wells has a great potential. The plan is to eventually sell this asset to the Benchmark Oil & Gas. A reserve study is underway and infrastructure work in progress. We assess the overall potential for Concord field and orange field to several hundred barrels per day.

We also continue to explore other potential acquisitions. The recent positive oil price developments do oil business even more attractive as compared to the past years. We have therefore decided to sell part of our future production at very attractive levels.

We will provide news releases shortly in various cases.

Pål Mörch , MD

investment Portfolio
Valuation principles for stocks and shares are unchanged in the second quarter .

Holdings
Commodity Quest has the following two investments which are considered core holdings :

Benchmark Oil & Gas
Benchmark engaged in exploitation, exploration and production of oil and gas through its wholly owned U.S. subsidiary, Benchmark Holding Co. . The company focuses on the production and exploitation of Orangefield , Texas, USA .

The company produced and sold approximately 100 barrels per day.

It obtained a license for two new injection wells . Another application has been submitted.

The company Weatherford has installed so-called well -pilot .

Potential shift of production zones of 6-8 wells have been identified. Each zone can provide 20-40 barrels per day production .

Commodity Quest owns 68.4 % of the Benchmark Oil and Gas .
Ilocano Minerals & Construction Corporation ( Imcc )
Commodity Quest for a long time been negotiating with local actors in Imcc to take over the licenses and other assets and move them to a separate company . Commodity Quest has recently held meetings with local partners and agreed to transfer existing licenses to our new company Delta Mineral Commodities Pacific Inc. Commodity Quest has invested much time and money on this project and have now set there own management team to initiate the project during the year. Our geological and commercial research supports the project . Several negotiations with key partners is already implemented , and our goal is to initiate operations and cash flow during the end of year.

Commodity Quest owns 19.4% in Imcc .

other holdings
Kopy Goldfields
Kopy Goldfields AB ( publ) is a Swedish gold exploration company with a listing on the First North. Commodity Quest owns 5.7% of Kopy Goldfields .

Geotermica
Geotermica explores and develops geothermal resources for electricity generation and district heating with environmentally friendly technologies.

Commodity Quest owns 11.5% of the company.
In addition to the above investment carries Commodity Quest investments with shorter term.

pdf_52Interim Report Q2 2013