(BTC.L) Baltic Oil Terminals PLC Buy/Sell

* Development of lower volume, higher margin trade business
* 57% reduction in administrative costs from £3.3m in H1 2008 to £1.4m in H1 2009

* Since period end, significant improvement in trading conditions in Kaliningrad
* Agreement with Swiss trading company to ship over 100,000 tonnes of fuel oil in Far East

Simon Escott, Chief Executive of Baltic, commented:

"The first half of 2009 was tough for Baltic, as we expected. We spent the period carefully managing our costs and reducing our cash burn. Since then, however, the signs have been much more encouraging: various trading contracts have been entered into and we are seeing more throughput at the Rosbunker terminal.

"President Obama's decision to abandon plans for a missile shield in Eastern Europe has had a noticeable and immediate impact in terms of activity and sentiment in Kaliningrad. We are about to start the winter season, which is when Kaliningrad enjoys a monopolistic position in terms of Russian exports into the Baltic Sea. We therefore have good grounds for optimism for the remainder of the year and are confident that the conditions are right for a major breakthrough for the Company."

Enquiries:

Baltic Oil Terminals plc Tel: +44 (0)20 7034 7030

Simon Escott, Chief Executive

Arbuthnot Securities Limited Tel: +44 (0)20 7012 2000

Alastair Moreton, Corporate Finance

Pelham PR
Archie Berens Tel: +44 (0)20 7337 1509
Evgeniy Chuikov Tel: +44 (0)20 7337 1513
About Baltic Oil Terminals

Over the last four years, Baltic has built up a terminals business in the Russian ports of Baltysk and Kaliningrad. A separate enclave located between Poland and Lithuania, Kaliningrad is Russia's only year round access to the Baltic Sea. Other ports in the region, such as St Petersburg, are frozen for much of the winter, as are many rivers, including the Volga River, one of the most significant commercial waterways in the world. As Russia relies on year round export of its vast supplies of petroleum products, Kaliningrad is thus a trading centre of major strategic importance.

Baltic's key asset is a 50% interest in the Rosbunker terminal, which is located at Baltysk, right on the Baltic Sea at the mouth of the Pregol River leading into Kaliningrad. It is the only port in the region at which all types of ship can take on cargo, as the channel into Kaliningrad is too shallow for many vessels. Trains are able to deliver products from all over Russia, the Former Soviet Union and Asia directly to the terminal.

Since 2007, the Rosbunker terminal has been handling consignments of oil refined products, specialising in fuel oil (mazut), a product that requires heating and special equipment and as such is not handled by other terminals in the area.

Baltic earns tolling fees for processing the unloading of cargo from trains into storage tanks and then onto vessels. Baltic is also able to trade in these products in its own right, taking advantage of local price differences. Since the financial crisis in Russia, this market has become increasingly interesting to Baltic. Baltic's transportation and trading activities utilises its extensive network of industrial partners and refineries.

In addition to Rosbunker, Baltic also has interests in several other oil product assets in Kaliningrad, which derive revenues through processing and distribution of oil products to domestic markets.

Baltic's executive management have a wealth of experience of the oil services industry. The team has worked in the industry for more than 40 years, constructing and operating oil rigs, terminals and other infrastructure in world wide locations, including the Former Soviet Union.

Baltic has been listed on AIM since May 2006. It is headquartered in Kaliningrad, with a small representative office in London.

Baltic Oil Terminals plc

Half year report for 6 months ended 30 June 2009

Chairman's Statement

Introduction

As we reported in our year end announcement, the economic and political climate at the end of 2008 and the start of 2009 made operating conditions in Kaliningrad very difficult. This inevitably affected Baltic's performance in a period that should have been ideal for our terminal business.

One of the main problems was the slowness of the Russian authorities to lower the export tax on refined products. This continued further into 2009 than had been expected by anybody in the industry. This reluctance to make a decision cost the country billions of dollars and affected all export terminals, the Russian railways and, most of all, the Russian refineries.

By the middle of the summer, however, the operating environment in Russia and the FSU had improved, following an eventual relaxing of export taxes. Due to the efforts of our operational and sales teams, real progress is being made in the second half of the year, with significant throughput through both terminals and a very large increase in trading revenues for the third quarter.

As part of the ongoing transformation of Baltic into a fully fledged infrastructure and terminals business, Baltic has now been reclassified by the FTSE Actuaries Committee under Transportation Services. The Company's shares will be listed in the Financial Times under Industrial Transportation.

Financial Results

In a very difficult trading period, Baltic was able to reduce its net loss for the first six months to £1.1 million, compared with a net loss of £5.1 million for the corresponding period in 2008 (£1.7 million before write-offs). A change in the accounting treatment of trading revenue reflects the move away from our original volume driven business model. Because of the way we trade product, there is an apparent fall in revenues in absolute terms, although considerably higher margins are achievable.

The comprehensive cost cutting that was carried out at the end of 2008 was increased further during the beginning of 2009, with a 56.9 % reduction in administrative costs from £3.3 million in the first of 2008 to £1.4 million. Our cash burn has significantly reduced again, with no impact on efficiency in our terminals, although some extra operators will be hired during October to cope with the recent increase in throughput.

As at 30 June 2009, the Group's bank balances amounted to £327,000. Given the change in the trading model and the reduction in cash burn, this was felt to be more than sufficient. Since that date, steps have been taken to bolster the cash position of the company and levels of available cash, should it be needed.

Baltic has no external bank debt, nor any other type of debt repayment mechanisms in place. It is also pleasing to note that since the period end, cash balances have risen to £465,000.

Legal Action by former director

The company announced on 1 June 2009 that Mr Vladimir Gavrilov, a former director of the company whose employment had been terminated in January 2009, had commenced legal action against the company for repayment of a purported trading loan.

The company has robustly denied that any liability exists and has made a vigorous defence against this action. At the same time the Company has commenced a counter claim for a sum far exceeding that claimed to be owed to Mr Gavrilov and is confident of the merit of this claim.

Review of Operations

Rosbunker

Due to the factors described above, performance in the first half of 2009 was disappointing. However, since then, conditions have improved rapidly and the outlook for October onwards is very bright. Pre-booked throughput for October stands at around 35,000 tons of client product, plus between 10,000 and 20,000 tons of Baltic sourced products to be shipped though the terminal.

With the onset of winter and the closure of the Volga River, we see no reason why throughput should not increase further, with the terminal capable of shipping significant quantities of product through into 2010.

Baltic Top

Although trading conditions have remained very tough in Kaliningrad region, with most service station sales down by around 40%, we have continued to remain profitable and the terminal is full on a constant basis. Baltic Top has no external debt. It has a small loan to the Baltic Group and this is being paid off on a regular basis out of operating cash flows.

Management is studying plans to increase the volume through the terminal by night deliveries, a plan that was already in place but was shelved because of the economic crisis.

Baltic Hydrocarbons

The contracts already announced have been augmented by a further important joint venture contract recently signed by Baltic Hydrocarbons and a Swiss trading group. This contract is for Fuel Oil and Diesel and will allow BHL to trade at least 100.000 tons over the next ten to fifteen days, and then on a regular month to month basis. This represents a major milestone for our trading team.

As the Volga River closes, supplies of Fuel Oil originating in Russia will become easier to source and ship through the Rosbunker terminal and although quantities are still not as high as we would like, a significant improvement is being seen in late September through October contracts.

Current Trading and Outlook

The economic and political outlook that was so bleak at the end of 2008 and which continued into 2009 has taken a significant turn for the better in the third quarter of 2009.

The export tax regime has been modified to allow export of refined product, especially fuel oil, at a profit and this has resulted in an immediate increase in business through the Rosbunker terminal, as reported above.

The Company has recently signed a significant Joint Venture agreement with a Swiss Trading company the result of which will be over 100,000 tons of fuel oil and diesel being shipped over the next ten days. This represents a major milestone for the trading group. The decision by President Obama to cancel the missile shield program in Eastern Europe has already resulted in a real and positive improvement in the relations with the Navy in Baltysk and the authorities in Kaliningrad. This will be of considerable assistance in increasing throughput and trading in the remainder of the year.

As previously stated, recent trading results give the management team strong grounds for optimism for the remainder of the year and confidence in the group's prospects.

Richard Healey Simon Escott
Chairman Chief Executive
30 September 2009 30 September 2009
Baltic Oil Terminals plc

Half year report for 6 months ended 30 June 2009

Financial Overview

Overview

Baltic has worked hard to reduce costs in the face of a recessionary economy. During 2009, the Company has adapted its approach to trading in order to better support the Company and the results are reflected in the 2009 interim financials.

In 2008, the Company was focused on high volume, low margin trades in order to supply product to the Rosbunker terminal.

For 2009, the Company has been concentrating on developing a lower volume, higher margin trade business. Revenues for the current year reflect the change in focus as revenues through June are £6.2 million, compared with £25.9 million for the same period in 2008. As a result, Baltic has also been able to reduce the loss before tax for the 6 month period to £1.2 million in 2009, compared to the £1.7 million loss (before write-off of exploration costs) in 2008.

A substantial benefit of the change in approach has allowed the Company to substantially lower administrative costs during the 6 month period for June 2009 to £1.4 million in 2009 as compared to £3.3 million through June 2008, a reduction of 56.9%.

The Company has also been less reliant on operating cash. The reduction in operating cash has been used to reduce the number of outstanding creditors.

Currency

The majority of the underlying costs and revenues are in US Dollars, but with some elements being exposed to local currencies. Where possible, risks relating to local currencies are mitigated contractually by tying cost to the US Dollar, or offset with local assets/liabilities.

The fluctuation in currencies for the 6 months ended June 2009 has caused a reduction in the recorded valuation in fixed assets of £2.4 million.
Baltic Oil Terminals plc

Condensed consolidated statement of financial position

As at 30 June 2009

Unaudited Unaudited Restated - Audited
30 June 30 June 31 December 2008

£'000 £'000 £'000

Non current assets
Intangible assets 2 - 3
Property, plant and equipment 13,877 16,302 16,561
Investments in associates 1,189 1,189 1,189
Goodwill 2,671 2,599 2,680
17,739 20,090 20,433

Current assets
Inventories 858 1,024 1,019
Prepayments and other current 2,030 1,951 2,471

assets
Trade and other receivables 1,480 3,924 1,681
Cash and cash equivalents 327 3,477 1,106
4,695 10,376 6,277
TOTAL ASSETS 22,434 30,466 26,710
Share capital 571 558 558
Share premium 40,559 40,539 40,559
Other reserves - Equity - 2,459 2,806 2,459

share options
Other reserves - Equity - (965) (223) 671

foreign exchange reserves
Retained losses (27,595) (25,619) (26,472)
Total equity 15,029 18,061 17,775

Non current liabilities
Deferred tax liability 1,079 2,306 1,407
1,079 2,306 1,407

Current liabilities
Trade and other payables 2,440 4,397 3,152
Borrowings 3,886 5,702 4,376
6,326 10,099 7,528
Total liabilities 7,405 12,405 8,935
TOTAL EQUITY AND LIABILITIES 22,434 30,466 26,710
Baltic Oil Terminals plc

Condensed consolidated income statement

For the 6 months ended 30 June 2009

Unaudited Unaudited Audited
6 months 6 months 12 months
ended ended ended
30 June 30 June 31 December 2008

£'000 £'000 £'000
Revenue 6,162 25,923 46,858
Cost of sales (5,916) (24,302) (45,396)
Gross profit 246 1,621 1,462
Exploration and evaluation - (3,627) (3,637)

costs
Administrative expenses (1,442) (3,344) (5,009)
(1,196) (5,350) (7,184)
Finance income - 51 66
Finance costs (32) (37) (212)
Loss before taxation (1,228) (5,336) (7,330)
Tax credit 105 240 1,381
Share of result of associate - - -
Loss for the period (1,123) (5,096) (5,949)

Attributable to:
Equity shareholders of the (1,123) (5,096) (5,949)

Company
Minority interests - - -
(1,123) (5,096) (5,949)

Loss per share attributable to equity shareholders of the Company
Basic and diluted (pence per (2.0) (9.3) (10.7)

share)
Baltic Oil Terminals plc

Consolidated cash flow statement

For the 6 months ended 30 June 2009
Unaudited Unaudited Audited
6 months 6 months 12 months
ended ended ended
30 June 30 June 31 December 2008

£'000 £'000 £'000

Cash flows from operating activities
Group operating loss before (1,228) (5,336) (7,330)

taxation Adjustments to reconcile group operating loss to net cash ouflows from operating activities
Finance costs/(income) net 32 (51) 146
Foreign exchange gains - (70) (139)
Share based payment - 171 (176)
Derivative financial - (17) -

instruments
Depreciation and impairment of 389 141 1,204

property, plant and equipment
Amortisation and impairment of - 3,409 3,574

intangible assets
Loss on disposal of property, - - 257

plant and equipment
Fair value gains on derivative - - (17)

financial instruments
(Increase)/Decrease in 51 (802) (794)

inventories
(Increase)/Decrease in trade (65) 405 1,887

and other receivables
Increase/(Decrease) in trade (296) (1,569) (524)

and other payables
Cash generated from operations (1,117) (3,719) (1,912)
Income taxes paid - (47) (32)
Interest paid (32) - (212)
Net cash outflows from (1,149) (3,766) (2,156)

operating activities Cash flows from investing activities
Interest received - 51 66
Purchase of property, plant (97) (444) (792)

and equipment
Proceeds from sale of - - 82

property, plant and equipment
Purchase of intangible assets - - (71)
Purchase of joint venture - (2,577) (2,578)

interest, net of cash acquired
Repayment of loans issued - - 151
Loans issued - (430) -
Net cash outflows from (97) (3,400) (3,142)

investing activities
Baltic Oil Terminals plc

Consolidated cash flow statement (cont.)

For the 6 months ended 30 June 2009

Unaudited Unaudited Audited
6 months 6 months 12 months
ended ended ended
30 June 30 June 31 December

£'000 £'000 £'000

Cash flows from financing activities
Proceeds from shares issued 13 3,341 3,361
Proceeds from borrowings 132 4,230 -
Repayment of borrowings - - (475)
Net cash inflows from 145 7,571 2,886

financing activities
Increase/(decrease) in cash (1,101) 405 (2,412)

and cash equivalents

Cash and cash equivalents at 1,106 2,953 2,953

beginning of period
Effect of exchange rate on 322 119 565

cash and cash equivalents
Cash and cash equivalents at 327 3,477 1,106

end of period

Baltic Oil Terminals plc

Condensed consolidated statement of comprehensive income

For the 6 months ended 30 June 2009

Unaudited Unaudited Audited
6 months ended 6 months 12 months ended
30 June ended 31 December 2008
2009 30 June

£'000 £'000 £'000
Loss after tax attributable to (1,123) (5,096) (5,949)

the equity share owners for the financial period

Other comprehensive income
Exchange differences on (1,636) 346 (94)

translating foreign operations
Other comprehensive income for (1,636) 346 (94)

the period, net of tax
Total comprehensive income for (2,759) (4,750) (6,043)

the period attributable to equity shareholders
Baltic Oil Terminals plc

Condensed consolidated statement of changes in equity

For the period ended 30 June 2009
Attributable to equity shareholders of the parent
Share capital Share premium Share based payment Foreign currency Retained losses Total Minority interests Total equity
reserve translation
adjustment
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
At 1 Janaury 2008 476 33,195 2,635 (569) (20,515) 15,222 (8) 15,214
Loss for the period - - - - (5,104) (5,104) 8 (5,096)
Total comprehensive income for - - - - (5,104) (5,104) 8 (5,096)

the period
Shares issued during the period 82 7,344 - - - 7,426 - 7,426
Share based payment reserve - - 171 - - 171 - 171
Foreign exchange reserves - - - 346 - 346 - 346
Transaction with owners 82 7,344 171 346 - 7,943 - 7,943
At 30 June 2008 and 1 July 558 40,539 2,806 (223) (25,619) 18,061 - 18,061

Loss for the period - - - - (853) (853) - (853)
Total comprehensive income for - - - - (853) (853) - (853)

the period
Shares issued during the year - 20 - - - 20 - 20
Share based payment reserve - - (347) - - (347) - (347)
Foreign exchange reserves - - - 894 - 894 - 894
Transaction with owners - 20 (347) 894 - 567 - 567
At 31 December 2008 558 40,559 2,459 671 (26,472) 17,775 - 17,775
Loss for the period - - - - (1,123) (1,123) - (1,123)
Total comprehenisve income for - - - - (1,123) (1,123) - (1,123)

the period
Shares issued during the year 13 - - - - 13 - 13
Foreign exchange reserves - - - (1,636) - (1,636) - (1,636)
Transaction with owners 13 - - (1,636) - (1,623) - (1,623)
At 30 June 2009 571 40,559 2,459 (965) (27,595) 15,029 - 15,029

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

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