Zhoda Investments Zhoda Investments widens its business operations - - PowerPoint PPT Presentation

Zhoda Investments

“Zhoda Investments widens its business

• perations and strengthens its capital base

through a rights issue”

Presentation of Zhoda Investments and the rights issue October-November 2016

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Disclaimer

IMPORTANT INFORMATION This presentation and the information contained herein are being presented by Zhoda Investments AB (publ) (the “Company”,”Zhoda”). By accessing this presentation you agree to be bound by the following limitations and notifications. THIS PRESENTATION CONSTITUTES A GENERAL COMPANY PRESENTATION. ACCORDINGLY, THIS PRESENTATION DOES NOT CONSTITUTE AN OFFER OR INVITATION TO PURCHASE OR SUBSCRIBE FOR ANY SECURITIES OR ANY FORM OF COMMITMENT OR RECOMMENDATION ON THE PART OF THE COMPANY. This presentation does not purport to be all-inclusive or to contain all the information that prospective investors may desire in analysing and deciding whether or not to hold

• r transact in any of the Company’s securities. Furthermore, recipients of this presentation should not treat the contents of this presentation as advice relating to legal,

taxation, financial or other matters and are advised to consult their own professional advisors concerning the acquisition, holding or disposal of any of the Company’s securities. Certain information contained in this presentation has been obtained from published sources prepared by other parties that the Company has deemed to be relevant. However, neither the Company nor any other person assumes any responsibility whatsoever and makes no representation or warranty, express or implied, for the contents

• f this presentation, including its accuracy, completeness or verification for any other statement made or purported to be made by any of them, or on their behalf. Nothing in

this presentation is, or shall be relied upon as, a representation or promise made, whether as to the past, present or future. Accordingly, no responsibility is accepted by the Company, its subsidiaries or associates or any of their directors, officers, employees or agents, in respect thereof. This presentation contains forward-looking statements that reflect the Company’s current views with respect to certain future events and potential financial performance. While the Company believes that the expectations reflected in such forward-looking statements are reasonable, no assurance can be given that such expectations will

• materialise. Accordingly, results could differ materially from those set out in the forward-looking statements as a result of various factors. To the extent that this presentation

contains opinions, estimates, forecasts or other forward looking statements, no guarantees or undertakings that these are correct or complete are given by the Company or any of its members, advisors, officers or employees or any other person. Forecasts and assumptions which are subject to economic and competitive uncertainty are outside such person’s control and no guarantee can be given that projected results will be achieved or that outcomes will correspond with forecasts. Information in this presentation may be changed, added to or corrected without advance notification. The Company does not undertake any obligation to publicly update or revise any information contained herein. This presentation as well as any other information provided by or on behalf of the Company shall be governed by Swedish law. The courts of Sweden, with the District Court of Stockholm as the first instance, shall have exclusive jurisdiction to settle any conflict or dispute arising out of or in connection with this presentation or related matters.

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Zhoda Investments overview

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Widens its business opera/ons and strengthens its capital base Number of outstanding shares: A shares 761 900 B shares 17 899 347 Spin-off from Petrosibir in 2015 Previously Zhoda Petroleum Ukraine Preferen/al rights issue to raise SEK 22 million to develop the oil & gas as well as investment

• pera/ons

Main assets include (i) Cash posi/on of SEK 7 million, debt free (ii) 45% stake in Lelyaki oil field Ac/ve in Ukraine since 2003 Produc/on of 330 barrels per day Proven+probable 2P reserves of 8 million barrels

• f oil

Shareholder structure recently consolidated Board and management hold over 35% Traded on Pareto Securi/es OTC New trading pla\orm to increase liquidity

Solid track record in transactions

• Several successful investments have been made within the group framework
• Equity swap with PAN European Terminals in 2010
• Diversification and expansion of terminals business from Kaliningrad to

Rotterdam and Aabenraa

• Exit through cash sale to a strategic investor

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• Cash acquisition of equity stake in Tomsk Refining in 2010
• From greenfield to refinery operations in Western Siberia with a yearly

processing capacity reaching 350,000 tons

• Exit through cash sale to a strategic investor
• Business combination with Shelton Canada listed on Toronto Exchange in 2009
• Added production and proven reserves to the existing exploration operations to

balance risks and upside

• From exploration start-up to production exceeding 1,000 barrels per day and

2P reserves of 34 million barrels under at times challenging market conditions

• Market capitalization exceeding SEK 500 million prior to

Russia/Ukraine geopolitics and shareholder conflict

Board and management with extensive experience from investments and business development

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Katre Saard, Director Katre has 20 years experience of investment management and of working in the financial markets She was one of the founders of East Capital, where she also worked as a fund manager and board member. She has also held senior positions as an investment manager in the European Investment Fund in Luxembourg, and as a stock market analyst at Enskilda Securities. She is also partner, board director and investment manager at Alpcot Capital Management Katre Saard has a Masters degree in Business Administration and Economics from the Stockholm School of Economics. Zenon Potoczny, Director, President Shelton Canada Corp. Zenon is raised in Ukraine and has broad experience both in the oil and gas industry and working internationally. Zenon has an extensive network both in the private and public sectors in Ukraine He served as President and Chief Executive Officer of Shelton Canada Corp. since the company’s listing on the TSX Venture Exchange in 1996 Serves as President of Canada-Ukraine Chamber of Commerce He holds an MSc in Engineering and an MBA from the University of Toronto. Robert Karlsson, CEO Robert has vast experience within business, finance and company management. He has been active in Russia and other former Soviet republics for over 15 years He was previously CEO of Petrosibir, a listed company with oil and gas operations in Russia and Ukraine, and CFO of a Nasdaq listed IT consultancy firm, where he was also in charge of the company’s financial communications Previously investment manager in Moscow for the listed investment company ORESA Ventures and spent four years with KPMG, in Stockholm and St. Petersburg Robert Karlsson holds a Master of Science in Business Administration from the Stockholm School of Economics Björn Lindström, Chairman of the board Björn has 20 years of experience from investments and management of operations Founder of Alpcot Capital Management Ltd and Agrokultura AB. Alpcot Capital Management Ltd is authorized by the Financial Conduct Authority in United Kingdom One of the founders of East Capital Asset Management AB and Gustavia Capital Management AB and had the position of managing director in both companies He was also the fund manager for East Capital Russia Fund and Gustavia Balkan Fund Holds a Master of Science in Business Administration and Economics from the Stockholm School of Economics. Peter Geijerman, Director Peter has 20 years of experience of managing operations in Russia and Ukraine within agriculture, logistics and industry He founded, managed and divested a company that owns and runs an industrial group in Western Siberia within road construction and railway transport He has an MBA from INSEAD and a Masters degree in clinical medicine from Karolinska Institutet. Simon Escott, Director Simon has over 40 years of management experience in the oil and gas and petrochemical industries He has held senior positions in large corporations such as ESSO GmbH, BP Brazil, Phillips Petroleum Incorporated, Elf Aquitaine, Norsk Hydro and Saga Petroleum He has founded and developed several successful ventures as an entrepreneur (Portland Bunkers UK Ltd, PAN European Terminals) Simon holds an engineering degree (BSc) in Petroleum Engineering from Texas A&M University and an engineering degree (Bsc) in Mechanical Engineering from Imperial College London

Shareholder structure

• Board and management hold approximately 35% of the shares

6 Shareholder A shares B shares No of shares Shares % No of votes Votes % LINDSTROM, BJORN 211 349 1 991 514 2 202 863 11,8% 4 105 004 16,1% GEIJERMAN, PETER 211 349 1 991 512 2 202 861 11,8% 4 105 002 16,1% SAARD, KATRE 211 349 1 991 512 2 202 861 11,8% 4 105 002 16,1% SEB 27 868 3 441 247 3 469 115 18,6% 3 719 927 14,6% AVANZA BANK AB 765 246 765 246 4,1% 765 246 3,0% SVENSKA HANDELSBANKEN AB (PUBL) 9 002 537 223 546 225 2,9% 627 243 2,5% NORDEA BANK AB (PUBL) 500 021 500 021 2,7% 500 021 2,0% FISCHLER, MAX 301 000 301 000 1,6% 301 000 1,2% BOSTADSRÄTTSBYGGARNA SVENSKA HOLDING 278 068 278 068 1,5% 278 068 1,1% SWEDBANK AB 261 159 261 159 1,4% 261 159 1,0% KARLSSON, ROBERT 222 867 222 867 1,2% 222 867 0,9% OTHER SHAREHOLDERS 90 983 5 617 978 5 708 961 30,6% 6 527 808 25,6% TOTAL 761 900 17 899 347 18 661 247 100,0 25 518 347 100,0 Source: Euroclear shareholder register for EGM as of 1 October 2016

Zhoda investment strategi

Iden/fy

Iden/fying, analyzing and inves/ng in unlisted European ventures Using experience, exper/se and an extensive network Opportuni/es that are hard to reach or manage for an individual shareholder

Develop

Ac/ve ownership to manage risk and leverage on hands-on experience Establishing strategic and opera/onal excellence Entrepreneurial approach to drive growth and profitability

Manage

Manage a por\olio balancing risks against value apprecia/on Flexible ownership horizon Principal ownership to secure control and influence

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Zhoda has a company-specific annual average return target IRR that amounts to a minimum of 20%

Actively pursuing investments

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Zhoda Investments Por\olio (examples)

Oil & Gas Investment X Investment Y Investment Z

• Ukraine
• Enhance produc/on with

new Western management

• Low geological risk
• New sales channel to

improve cash flows

• Addi/onal licenses
• United Kingdom
• Infrastructure
• Based on long-term

contracts

• Expansion through add-
• n services and into

new geographic areas

• Eastern Europe
• Land-based
• Large historical capex,

profitable business but financial distress

• Sum of the parts larger

than the whole

• Based in Croa/a (EU)

with a world market

• Enhance profitability and

growth through subsidized investments

• From bulk to consumer

products

“Lelyaki field with proven reserves” “Proven business model with posiHve cash flow” “Restructuring case with undervalued assets”

“Business model

transformaHon”

Oil field in Poltava

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Doing business in Ukraine

10 positive changes, according to Anders Åslund in June 2016

• 1. Ukraine now has a comprehensive free trade agreement with the EU
• 2. In its Association Agreement with the EU, Ukraine committed to adopting hundreds of good laws
• 3. Ukraine has stabilized its financial system
• 4. Nowhere else in Europe can an investor find as good and qualified workers for such low wages
• 5. The payroll tax has been reduced from 45 to 22 per cent
• 6. Ukraine has adopted a realistic floating exchange rate
• 7. Ukraine has introduced an electronic public procurement system
• 8. An automatic system for refunding VAT has been introduced
• 9. Substantial deregulation has taken place
• 10. The greatest positive change of all is Ukraine’s extraordinary openness

“I am quite optimistic about the Ukrainian economy”

• Anders Åslund, 23 March 2016 at the US-Ukraine Business Council

Senior Fellow at the Atlantic Council in Washington, leading expert on the transition economies of Ukraine, Russia and Eastern Europe

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Proven reserves and production of oil

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Zhoda Petroleum’s 45% net interest of reserves and production at the Lelyaki oil field through a 45% ownership in the operator and license holder Kashtan Petroleum Ukrnafta, Ukraine’s largest oil company, holds the remaining 55% The reserves audit was conducted in accordance with SPE by Trimble Associates in 2009 The license expired in May 2016. The production has temporarily been halted until the license authorities approve the application for prolongation

1 2 3 4 5 6 7 8 9 1P 2P

Oil reserves in million barrels Oil produc/on barrels per day

50 100 150 200 250 300 350 400

2012 2013 2014 2015 2016

Financial highlights

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Amounts in SEK th excl one-off items

2015 2014 2013 2012 Revenue 49 628 68 578 79 278 79 046 Raw materials and consumables

• 31 194 -41 368 -43 485 -41 852

Other opera/ng expenses

• 7 256
• 2 775
• 2 819
• 4 593

OperaHng profit 11 178 24 435 32 974 32 601

OperaCng margin 23% 36% 42% 41%

Number of produced barrels 119 170 125 141 126 565 119 950 Average Brent oil price 52 99 109 112 Average UAH/USD 21,95 12,01 8,16 8,08

• Stable production as a result of the ongoing workover program, with revenue affected by the world market oil price
• Variable royalty reduces costs at lower oil prices
• Healthy profitability even when the oil price bottomed out early 2016
• Revenue based in USD and costs in the depreciated UAH provides attractive pricing for investments
• Kashtan Petroleum has SEK 57 million of receivables and oil inventory and SEK 40 million in payables

net to Zhoda Petroleum

Source: Shelton Petroleum annual reports

”Largest field in the Soviet Union”

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• Discovered 1962 in Poltava,
• nce SU’s largest onshore producer
• Partnership with Ukraine’s

largest oil company (45%/55%)

• 170 wells produced over

80,000 barrels per day

• 1 billion barrels original oil in place

385 million barrels of cumulative production 38,5% recovery could become over 50%

• Very large remaining reserves that have

not yet been explored

• Mature field with low geological risk
• Well developed infrastructure for treatment and

transport

Unleashing the Lelyaki potential

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• A 20 year prolongation of the license is expected to be granted
• Partner’s new Western management is a catalyst for change
• New proven sales channel will significantly improve cash flow
• Enhance production under low geological risk
• Develop a simulation model for the reservoir and explore lower horizons with new technology
• Mature field with very large historical production reduces geological risk
• Apply proven Western enhanced recovery technology
• Increase production and operational efficiency
• Production can be increased manifold (4-5 times) to over 1,500 bopd net to Zhoda (Trimble Engineering)
• Increase the number of wells on-stream. Currently only 20 of 150 wells are producing
• Improve sourcing and drilling practice
• Royalty on gas has been reduced and oil may be next
• Use Lelyaki as a profitable platform with proven reserves for expansion in Ukraine

$ $ $

Rights issue to strengthen the capital base

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• Rights issue to raise SEK 22 million for investment and oil operations
• Right to subscribe for 6 new shares for every old share
• Subscription price of SEK 0.20 per share
• Subscription period 19 October – 2 November 2016
• Information Memorandum has been published
• Preferential rights issue but opportunity for new investors to apply for

subscription

• Further information on www.zhodapetroleum.com

Why subscribe in the rights issue?

• Gain access to investments in unlisted European ventures
• Experienced team with track record within investments and business development
• Entrepreneurial approach to drive growth and profitability through active ownership and extensive

network

• Annual average IRR target exceeding 20%
• Unleashing the potential in the Lelyaki

proven reserves

• 20 year license extension is expected to be granted
• New Western management of Lelyaki partner is a

catalyst for change

• New proven sales channel will significantly improve cash flow
• Opportunity to subscribe at an attractive valuation
• Board and management are committed and financially motivated to create

success and will subscribe for 35% of the issue

• A new trading platform and improved information flow will increase liquidity in

the share

• Subscription form and more information on www.zhodapetroleum.com

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Valuation in the issue SEK 4 mln

• Market cap

12 mln

• Operating profit 2015

11 mln

• Cash position

7 mln

• 45% stake in the Lelyaki field with 8

million barrels of oil 2P

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