The Company had many achievements during 2018, some of which are highlighted below: 1. New Executive Board Members (COO, CTO, CFO)
TOS continued to strengthen the human capital of the company in 2018, by adding three key personnel to the management board
. The enhanced team's extensive experience in managing similar oil projects in Albania and many other countries, provides the skillsets required to execute the field development plan ("FDP"): Bill Cummins, Chief Financial Officer.
Prior to joining the Group in 2018 as Chief Financial Officer, Bill Cummins was Chief Financial Officer and Corporate Secretary at Petromanas Energy Inc. from 2010 to 2016; Chief Financial Officer at Calvalley Petroleum Inc. from 2007 to 2010; Vice President of Corporate Finance at Leede Financial Markets Inc. from 2001 to 2007 and Controller at Calgary Overseas Development (JV) Limited from 1994 to 2001. Mr Cummins received a Bachelor of Commerce from the University of Calgary and an MBA from the International Institute for Management Development, Lausanne, Switzerland. He is a Chartered Accountant. Bayne Assmus, Chief Operating Officer.
Bayne Assmus joined the Group in 2018. Prior to joining the Group, he worked for Bankers Petroleum Limited in a variety of positions including Vice President Engineering & Operations, Deputy General Director and Vice President Production & Operations. He has also worked at Arcan Resources Ltd, Harvest Energy, Encana Oil & Gas and Petroversa Resources Ltd. Mr Assmus received a Bachelor of Geological Engineering from the University of Saskatchewan. He is a Professional Engineer, APEGA member and SPE member. Peter Clutterbuck, Chief Technical Officer.
Peter Clutterbuck joined the Group in 2015. He is also Managing Director of Global Energy Consultants Ltd. Mr Clutterbuck has extensive experience managing oil and gas developments in countries which used Soviet era petroleum technology, including Russia, Kazakhstan, Azerbaijan, Poland, Lithuania and Vietnam. He worked for the BP group in operations management for 15 years in Abu Dhabi, UK North Sea, and Alaska. Subsequently, Mr Clutterbuck was the Chief Executive Officer of four listed oil companies and has served on the boards of four AIM-listed oil companies. His heavy oil experience includes fields in Colombia, Alaska, California, and Madagascar. Mr Clutterbuck served on the Board of the Society of Petroleum Engineers ("SPE") in London. He holds a Master's degree in Engineering from Cambridge University. 2. Preparations for an International Stock Market Listing
During the Company's 2018 Annual General Meeting held in Zug, Switzerland, the Company's shareholders mandated management to prepare an initial public offering ("IPO") on a relevant international stock market. The engagement of specialised consultants provided TOS with the necessary legal, regulatory, and financial expertise to support our experienced project team. The Company continues to complete all required preparatory steps for the listing. 3. Heads of Agreement 2018
The Heads of Agreement for three additional producing oil fields were signed with the Albanian government in June 2018. TOS completed and signed the Heads of Agreement for PSAs with Albpetrol for the New Fields with approval of the Ministry of Energy.
Field Development Plans, which required extensive engineering and geological input, have also been completed for all of the Company's assets, including the New Fields. The acquisition of the three New Fields represents a significant multiple to the Company's Oil & Gas reserves and resources. 4. Board Approved Field Development Plan ("FDP")
The Company engaged RPS Energy in 2017 to prepare the FDP for the oil fields in Albania. The FDP included Visoka and the three New Fields and was delivered by RPS in November 2018. The FDP confirmed the significant upside which the Company's assets hold with the implementation of western technologies and oilfield management techniques.
Terraoil Swiss AG's Board of Directors approved the FDP which articulates the Company's financial and technical plan for the development of its assets in order to achieve the fastest possible increase in production in the coming years. 5. Completion of the Competent Person's Report
In May 2018, Terraoil Swiss appointed an independent UK oil and gas appraiser and is anticipating the imminent completion of the appraisal of all oilfields in which the Company has a 100 per cent working interest. The Competent Person's Report ("CPR") was commissioned to establish parameters for the valuation of the Company. A large volume of technical and geological data was sourced, produced and analyzed during 2018 in preparation for this report. This document is the last key element required for the preparation of a major transaction at an international stock market. 6. KERUI Test Program and Netzsch Cooperation
On 26 May 2017, an agreement was signed with KERUI
to test a new production method. This was approved by the Albanian government as a test as it is a very promising technology designed specifically for heavy oil fields.
The production tests were continued into 2019 on three existing vertical wells, G-8, G-626, and G-2, with the injection of nitrogen and surfactant over a few weeks' time period. The production rate was significantly improved over the production test period, positively impacting the overall value of the oil fields. The first well, G-8, with original production of four bopd, increased tenfold since the start of the test 13 months ago. The well has also achieved a stable production rate with a very low water cut, with the application of a progressive cavity pumping system designed by Netzsch. The second well is also testing with an increased oil production rate. Further wells will be treated and tested. 7. Consolidated Three Year IFRS Financial Statements
The conversion to International Financial Reporting Standards ("IFRS") for the Company's consolidated financial statements and the audit of these financial statements for 2015, 2016 and 2017 was completed by management and the Company's auditor. Going forward all financial reporting for the international markets will be prepared in accordance with IFRS.
Thus, all important steps towards the IPO preparation required for accounting and auditing were completed in 2018. 8. Offtake Agreement Signed With Eni
Another important milestone was reached by signing an offtake agreement with Eni
for all production from Terraoil Swiss AG`s Albanian assets. In December 2018, the Company announced that it had signed an agreement with Eni Trading & Shipping S.p.A. ("Eni"), in respect of the sale and purchase of its Albanian crude oil. The companies are also considering the possibility of other future collaboration. The initial term of the sale and purchase agreement is two years. The Board and management were extremely pleased to have signed this agreement with Eni. It is a testament to the quality of our assets and the continued hard work of our team that a global player such as Eni is interested in establishing an ongoing supply contract with Terraoil. There are several logistical advantages to the collaboration between the two companies, including proximity to Eni's Italian refineries and the oil major's shipping capabilities. Furthermore, working with a global oil company will help provide a strong platform on which to build our future growth. We are looking forward to a positive working relationship with Eni for the mutual benefit of both companies. Outlook
2019 is shaping up to be a very promising and exciting year for TOS. The draft CPR was completed in April 2019. The volumes attributed in the report included 40 mmbbl of 2P reserves with an additional contingent resource of 87 mmboe including estimated recoverable gas resources of 84 bscf. This draft CPR is the last document required for the finalization of a listing at an international stock market. The PSAs for the New Fields are expected to be finalized and executed this quarter, with the takeover of all operations to commence shortly after the execution of these agreements. We are expecting to make a substantial announcement shortly in connection with a possible stock market listing in 2019.
Additional wells have been designated for the Nitrogen treatment, to build on the recent successes which have been achieved. The success of the Nitrogen treatment also contributes towards the estimate of 2P recoverable reserves. TOS received a Letter of Intent from KERUI confirming their capability to supply 15 nitrogen units for TOS, which are expected to be ready for operation in 2019.
We are very satisfied that the majority of the milestones leading up to the IPO have already been achieved and that the course is set for the future of the Company. We are convinced that all necessary remaining steps will be completed to position the Company for a successful listing in 2019. We continue to assess the potential of additional assets which could be added to the Company's portfolio and we plan to become one of the strongest upstream companies in the Balkans in the coming years.
As CEO, I would like to take this opportunity to thank all contributors and the Board of Directors for their unconditional commitment and the shareholders for their continued support. I will work personally every day to make Terraoil Swiss AG a successful company on the international stock market. I am determined to deliver continued results in 2019.
Peter Krempin, Chief Executive Officer