Overview of Operations and Financing during 2019
Terraoil Swiss AG ("TOS") announced in the spring of 2019 the execution of its first CHF 15 Million convertible loan note. The note was fully funded before summer and the Company is currently working on the remaining CHF 15 Million convertible loan note which is expected to be placed in early 2020. This will complete the pre-listing funding for TOS. Additionally, on December 3, 2019, the existing note holder provided notice of its intention to convert the loan into shares of the Company. This was an important demonstration of support for the Company's business plan.
Additionally, under the guidance of the Company's CFO, the new Management Information System (MIS) has been installed and will be live as of January 2020. The audit of the 2018 consolidated financial statement audits was completed in Q4 2019 under international financial reporting standards.
Operationally, TOS had a productive year. Preparations for the operational takeover of the new producing oil fields in Albania are progressing well and a new reserve report is ready to be updated immediately following the final sign-off of the three new PSA's. To further complement the independent reserve report, TOS engaged RPS Energy to produce a separate Evaluation Report which was completed at the end of September 2019.
The TOS management team believes that the Company is in an ideal position for any future potential stock market listings.
Listing and Outlook 2020
The current market environment shows stable Brent oil prices in recent weeks, hovering above US $60 per barrel in December 2019.
After a volatile end to 2018, Q1 2019 was very quiet with no IPOs above €100m (the first time since 2012) and investors had to wait until April 2019 to see a handful of "mega-IPOs" (offering size exceeding €1billion) list on European exchanges. The ARAMCO IPO story shows that international stock market listings were still challenging in 2019. Capital market sentiments in 2019 would not support ARAMCO's IPO on an international exchange, nor was it possible to achieve the valuation which was expected by analysts. Further steps are planned in 2020, and we expect that Saudi Arabia will support a stable Brent price.
Russia's gas pipeline to China is now in operation and thereby Russia gains further independence from the international oil markets, stabilizing an important OPEC partner. Rig counts in North America have dropped for the first time in recent years, indicating peak oil production has been reached for shale oil and gas up-streamers.
The resounding support for the Conservatives and Boris Johnson in the UK election has increased certainty in the international trade relations of the UK, and BREXIT is not expected to continue to weigh on the stock market sentiment in London. Meanwhile, TOS has been actively exploring suitable stock market alternatives in order to complete a listing as soon as possible.
All of these events are expected to squeeze oil supply in the coming year. These factors support the stronger Brent oil prices expected from many analysts in the first half of 2020. This is expected to strengthen international capital markets which, in turn, should increase the appetite for investments in the international oil and gas sector.
Terraoil Swiss is prepared for a stock listing and has completed much of the necessary groundwork. Once the market offers the best conditions, listing on a stock exchange can be completed without delay. A board of directors' decision will be required to select the right moment and market. At that time the existing groundwork which has been completed can be updated for any further disclosure requirements.
Meanwhile, TOS is screening new producing assets in order to achieve the future growth of the Company and, in parallel, TOS is developing a commodity trading arm with negotiations proceeding in various countries. Potential manpower partners have been contacted and are prepared to be engaged to assist in these activities.
A highly dedicated and skilled management team stands ready to ensure the Company's success. For this purpose, the CEO also participated in the SPE Upstream Finance and Investments Conference in London on 29th October which confirmed the above-mentioned analysis of global energy markets.
The improved market conditions, milestones achieved to date and the continued business development efforts are core to the management team's belief that the Company will achieve its long-awaited listing on a premier capital market and position the Company for stable and continued growth paths.
We are thankful to the team and all our professional business partners for their commitment and support during the year. You can be assured that we are proud of our Company and the highest duty of leadership will continue to deal professionally with all future challenges in this competitive international environment.
Hans-Peter Vogt, ChairmanPeter Krempin, Chief Executive Officer