PAN Pan European Terminals

RNS Number:6922Q
Baltic Oil Terminals Plc
05 February 2007


5 February 2007


               Baltic Oil Terminals PLC ("Baltic" or the "Group")


                          Corporate and trading update


The Board of Baltic, the owner and operator of oil transhipment terminals in
Kaliningrad and exploration assets in the Kurgan region of Western Siberia, is
pleased to give shareholders a corporate and trading update prior to going into
its close period.


Highlights

   * Baltic plans major expansion of terminal projects through planned
     acquisition. Group is in advanced negotiations to acquire an interest of 76
     per cent in the issued shares of CEPRUSS for a cash consideration of US$11
     million (#5.6 million), to be financed from existing resources. CEPRUSS
     interest to be acquired by Tetoil Baltic which will become a 69 per cent
     subsidiary of Baltic
   * CEPRUSS' principal asset is a 358 acre site in the centre of the
     Kaliningrad port, equipped for the purpose of transhipping oil and oil
     product with jetty, rail, insulated storage capacity, power and steam
     generation infrastructure already in place
   * It is intended that Tetoil Baltic will construct a transhipment terminal
     on the nearby CEPRUSS site ahead of the Tetoil terminal on the Rybachiy
     peninsular ("Rybachiy"). The first phase development will focus on
     exploiting the "ready to use" assets of CEPRUSS whilst at the same time
     expanding the capacity there
   * This will result in a faster scale up and greater capacity:
        - 400,000 tonnes per month ("tpm") by end of 2007 (former expectation
          240,000 tpm for Rybachiy only, i.e. excluding TDKN)
        - 800,000 tpm by the end of 2009 (formerly 480,000 tpm for Rybachiy 
          only)
   * Directors confident that development of the two terminals will not
     require further investment by shareholders
   * Tetoil Rybachiy terminal construction to continue, with cost saving
     engineering solution through low cost pipeline replacing railway spur
   * First product transhipment delivered by Tetoil through CEPRUSS site in
     January 2007
   * Baltic Top operating to maximum capacity - expansion being considered
   * TDKN expected to meet targets for 2007
   * Spudding of first well by Zauralneftegaz now due at the end of February
     2007 due to mild weather
   * Results to 31st December 2006 in line with market expectations
   * Board confident that 2007 will see further significant progress for the
     Group


Commenting on the corporate and trading update, Simon Escott, Chief Executive of
Baltic, said:

"We are confident that Baltic will not only continue to deliver original
expectations, such as the commencement of loading in January, but on a greater
scale and ever more quickly, with no further investment from shareholders. The
Group is set to become the major terminal operator in Kaliningrad with a planned
capacity (including TDKN) of over 1,000,000 tonnes per month by the end of 2009,
significantly more than originally expected. We have had excellent co-operation
from the Kaliningrad authorities, and the Board believes that this strategy will
result in more substantial value for shareholders.

"It is a very exciting and busy time for Baltic. The hard work that has been put
into both Kaliningrad and Kurgan has allowed us to make excellent progress
towards our goals."

Enquiries

Baltic Oil Terminals PLC                           0207 667 6371
Simon Escott, Chief Executive
Robert Wilde, Finance Director

Arden Partners plc                                 020 7398 1600
Chris Fielding
Tom Fyson

Financial Dynamics                                 020 7831 3113
Billy Clegg
Ed Westropp


Baltic Oil Terminals PLC ("Baltic" or the "Group")


Corporate and trading update


Tetoil Limited ("Tetoil") operations


A. Expansion of Tetoil terminal project through a potential acquisition


The Directors are pleased to announce that the Group is in advanced negotiations
to acquire, through Tetoil Baltic (referred to below), an interest of 76 per
cent in the issued shares of Joint Venture Closed Stock Company CEPRUSS
("CEPRUSS"), being a fully controlling interest, for a consideration of US$11
million (#5.6 million) payable in cash upon completion. The Group is currently
progressing its due diligence enquiries and anticipates entering into an
acquisition agreement by March 2007. The consideration would be wholly financed
from the Group's existing resources.


The principal asset of CEPRUSS is a 358 acre site in the centre of the
Kaliningrad port, located on the North Bank of the Pregol River to the North
East of Tetoil's development site on the Rybachiy peninsular. The site was
originally developed in the first half of the 20th century as a paper mill,
which has largely now closed down. It has also previously been used for the
storage and local distribution of Mazut, a heavy fuel oil.


The acquisition is intended to enable a significant expansion of Baltic's
existing Tetoil terminal project in Kaliningrad. It is particularly attractive
as the CEPRUSS site already has operational infrastructure which would enable
the immediate start up of a transhipment terminal operation and also the
construction by Tetoil Baltic of a new terminal, the first phase of which would
be scheduled for completion by December 2007. The Directors therefore intend to
take advantage of this opportunity and have decided to prioritise the
development of the terminal on the CEPRUSS site ahead of the development of what
was originally proposed as the first phase of the Tetoil terminal on the
Rybachiy peninsular. The Rybachiy terminal would then be expected to be
completed in the summer of 2008.


It is intended to operate both locations, when complete, as a single, integrated
terminal. The combined capacity is expected to reach over 400,000 tonnes per
month ("tpm") by the end of 2007 (compared to 240,000 tpm for the Tetoil
Rybachiy peninsular terminal alone) and 800,000 tpm during 2009 (compared to
480,000 tpm for the Rybachiy terminal alone). This will enable the Group to
benefit to a greater extent than previously from the substantial demand for
transhipping oil and products via Kaliningrad.


The CEPRUSS site is well equipped for the purpose of transhipping oil and oil
product. Its currently installed and operational infrastructure includes:


   *A privately owned 267 metre jetty, with capacity for significant
    expansion, which is equipped with 12 mooring points;
   *3.6 kms of privately owned railway, including two railway lines installed
    on the jetty, together with rolling stock in good working order;
   *3 cranes located on the jetty;
   *A steam generating plant with an approximate capacity of 200 tons per
    hour, which will enable the immediate transhipment of Mazut, which commands
    a higher transhipment price than product or crude. This plant will also
    continue to be used for the sale of heating oil to the local district;
   *A 31.5MW (net) power plant comprising six 6MW turbines, complete with two
    transformers to allow sale of electricity to the city of Kaliningrad, in
    addition to the provision of electricity to the CEPRUSS site;
   *7,800 m3 of storage tanks, of which one 5,000 m3 tank is insulated to
    enable the shipment of Mazut; and
   *Two small oil and product railway unloading racks.


Under a co-operation agreement with CEPRUSS, the Group has already shipped
product through Tetoil using the CEPRUSS facilities and expects to continue to
do so on a regular basis pending completion of the acquisition.


CEPRUSS already has in place the necessary Cadastra (planning permission) and
permits to operate on its site a terminal for the storage and transhipment of
oil and oil product. The Directors therefore intend, immediately following
completion of the acquisition, that Tetoil Baltic will commence constructing a
new terminal on the site, based principally on the detailed engineering plans
developed for Tetoil's Rybachiy peninsular site, enabling capacity of over
400,000 tpm to be reached by December 2007. This development will require less
than one third of the CEPRUSS site area. The Directors also intend therefore to
discuss with the Kaliningrad Regional Administration how best to exploit the
remainder of the site.


The Directors are confident that the CEPRUSS terminal can be built at a lower
cost per tpm of capacity, including the acquisition consideration, than Tetoil's
Rybachiy terminal, and that thereafter significant savings will be achieved on
the construction, referred to below, of the Rybachiy terminal relative to the
original capital expenditure budget.


The paper mill originally constructed on the site became uneconomic, because of
the impact of the rising oil price on the cost of delivering timber to the mill
using the Pregol River, and was largely closed down several years ago. The
remaining part of the paper mill is involved in the production of toilet tissue
and paper napkins, using tissue supplied from other mills.


The Directors intend to operate the steam plant, the power plant and the
remaining paper mill largely using the incumbent management and staff.


B. Tetoil Baltic Limited ("Tetoil Baltic")


As a result of not meeting various obligations and conditions subsequent under
the shareholder agreement with the Group, Alexander Dronov forfeited his right
to acquire 41.65 per cent of the equity of Tetoil. Tetoil therefore remains
wholly owned by the Group.


As part of the arrangements relating to the acquisition of CEPRUSS, Baltic will
transfer 31 per cent of the issued shares of Tetoil Baltic, a newly incorporated
subsidiary company, to two local Kaliningrad companies, one of which is involved
in construction and one in consulting.


The Directors intend that Tetoil Baltic will acquire the 76 per cent interest in
CEPRUSS and, in addition, all of the assets and liabilities relating to Tetoil's
Rybachiy terminal.


The General Director of Tetoil Baltic, who has already been appointed to the
same role in Tetoil, will be Romas Yankauskas. Mr Yankauskas, a well known local
figure, was formerly Chief of the Customs Service for the Kaliningrad Region and
a General in the Russian Army.


C. Tetoil Rybachiy terminal


In December 2006, the Group established that the use of a pipeline would realise
a substantial saving relative to the cost of the proposed railway spur, which
was due for completion in late January 2007. Use of a pipeline would result in a
delay of two months relative to completion of the railway. However, against the
background of the planned acquisition of CEPRUSS and the Group's ability to use
CEPRUSS' facilities to transport oil, the Board determined to adopt the pipeline
solution and prioritise the development of the terminal on the CEPRUSS site
ahead of that on the Rybachiy peninsular.


Four storage tanks and the associated pipe work have already been installed on
the Rybachiy site. The Directors anticipate that the Rybachiy terminal will now
be commissioned in the summer of 2008 with an operating capacity of 240,000 tpm.


D. Baltic Top Terminal ("Baltic Top")


The Directors are pleased to report that Baltic Top is operating to maximum
capacity and are therefore assessing whether there is sufficient demand to
expand the operations of the terminal, which stores diesel and gasoline for
distribution to local customers.


E. Torgovy Dom Kaliningradneft ("TDKN")


TDKN, in which Baltic has a 51 per cent interest, is expected to meet its
targets for 2007.


F. OOO Polex Service ("Polex")


Polex, in which the Group has a 50 per cent interest, is continuing to trade
satisfactorily. New operating procedures are currently being implemented, which
the Directors are confident will enhance both efficiency and profitability
during 2007.


Zauralneftegaz Limited ("Zauralneftegaz") operations


As previously announced, the discovery of four drilling prospects, as a result
of the seismic and gas seismotomography results coinciding, has permitted
Zauralneftegaz to commence a drilling programme in the Privolny block. Very mild
winter weather has delayed the transport of the drilling rig to Western Siberia,
but as the weather has finally become more normal the Directors now expect to
spud the first well by the end of February 2007 and to announce the results by
May this year.


Zauralneftegaz personnel, assisted by experienced specialists from Baltic and
RPS Group Plc (formerly Exploration Consultants Limited), are assisting the
drilling contractor in order to complete the drilling and analysis as soon as
possible. As the drilling contract is on a "turnkey" basis, the Group will not
incur additional costs as a result of the delay.


Preliminary results


The Directors expect to publish the Group's preliminary results for the year
ended 31 December 2006 by early April 2007.


The Board anticipates that the Group's results for the year ended 31 December
2006, before taking into account foreign exchange adjustments and adjustments
relating to FRS20 (share based payments), will be in line with its expectations.







                      This information is provided by RNS
            The company news service from the London Stock Exchange

END
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