Interim Report January – September 2012

Period July to September

  • – Operating income for the third quarter amounted to SEK thousands 43,889 ( -2210 )
  • – Including the oil business tSEK 45,299 (251)
  • – Earnings per share amounted to SEK 4.04 ( -0.21 )
  • – Equity per share amounted to SEK 10.57 ( 7.37 )
  • – Third quarter profit after tax amounted to SEK thousands 41,448 ( -3048 )
  • – EBITDA for the third quarter amounted to SEK thousands -1753 (- 1383 )
  • – Including the oil business tSEK -344 (1 076)
  • – Net sales for the third quarter amounted to SEK thousands 4098 ( 4643 )
  • – Including the oil business tSEK 3 647 (4 409)
  • – Reversal of previous write-downs have affected the result by 46,389 (0)
  • – Unrealized foreign exchange losses impacted financial net with tSEK -1631 (0)
  • – The Board proposes that the Extraordinary General Meeting on December 11 2012 resolves on after dividends to its shareholders of shares in the subsidiary, Benchmark Oil & Gas Holding AB. The value of the dividend amounts to 104,708 million, representing a dividend of SEK 0.01 per share.

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CEO’s Comments

The third quarter has been a positive and volatile period for Commodity Quest , mainly with regard to the events of the subsidiary Benchmark Oil & Gas. The drilling at Orangefield was sadly disappointing which prompted a restructuring of the organization in Houston. Significant changes in management and field personnel has resulted in lower cost . Stable production and lower costs resulted in Benchmarks EBITDA in September improved so dramatically that it almost compensated fully for the negative result in the first two months of the quarter . The good momentum we looked mainly at the end of the third quarter has continued into the fourth quarter, so we confidently look forward to a steady EBITDA positive in the fourth quarter . The potential of the assets at Orangefield begins to show itself clearly. The year has been challenging , but we finally see the results of the great work done for increasing the capacity of injection wells and more production wells . Production is now in the composition 3 % oil and 97% water, which set high standards for our återinjeceringsbrunnar . To continue to increase production on the field , we need to either increase the number of injection wells or change intervals on existing wells . Today we have a major focus on just the injection wells as we believe that oil production can be greatly increased with larger capacity.

The investment made in Orangefield during the year have produced a positive impression in the valuation of assets . The value of Benchmarks producing reserves have increased and EBITDA and net asset value during the year improved markedly. We expect that further investment in the field continues to provide value to our shareholders.

Despite the defeat, in July , we see good potential for additional drilling ahead. The field’s geological and economic conditions for exploration is good , with a historical success ratio of 60%. Several earlier successful wells have yielded production levels of 100 barrels per day, which strengthens our ambition for continued drilling activity . We are now in negotiations with several seismic companies to ensure that we have the absolute best knowledge about Orange Fields reservoir before moving forward with new drilling prospects. More information communicated as soon as possible.

As you know , we have announced a dividend of shares in one of our subsidiaries. The aim is for the company in the next stage via the share issue shall acquire gold company Kilimanjaro Gold. Following the transaction, our existing shareholders owning 10% of Kilimanjaro Gold. We see this as an interesting opportunity to offer our shareholders a dividend and upside in a project with great potential. The proposal is subject to EGM approval on 11 December in Stockholm.

In order to facilitate and highlight the company’s financial performance, we report applied the unbundling and new performance measures . Our hope is that the group’s cash flows in the Benchmark and the Swedish parent company shall be stated in a clearer manner.

In the current situation, we have unfortunately no update on developments in Imcc but hope to come back soon with new information.

Kopy Goldfields has after the reporting period released good news about drilling at Krasny license. The company’s biggest bargain at 1.28 moz in resource holds great potential to a potential mine . Expectations for the company is to further expand the resources going forward. Commodity Quest continues to support the company and manage our investment.

Overall we are very pleased with the value and earnings growth in our subsidiary, Benchmark Oil, where much focus has been recently. The earnings trend in recent months has strengthened our view of the company’s capabilities. It is also gratifying to see positive news from the associated companies and also offer our owners a further dividend like the one we previously made ​​in Crown Energy.

Pål Mörch, MD