Statement from the Chairman; Selena Oil and Gas Company – a new start!

Dear Investor,

On the 3rd of June 2013, Selena Oil and Gas Holding AB (Selena) held its first
meeting of the newly elected Board of Directors in Stockholm.


As many of you are already aware, Selena has gone through, and now finally left
behind, a long period of inaction and lack of clear and common corporate
strategy. Disputes between the previous larger owners and creditors have been
the main reasons for the company’s inability to develop its true potential in
an efficient manner.

Today, however, as a result of the settlement agreement decided upon by the EGM
held on May 31st, Selena finds itself in a position to return to its core
business.

To search for, find and produce oil requires great resources and persistence of
an oil company. This business is also heavily regulated.  Russia is no
exception and it is of utmost importance for any serious oil company to comply
with all applicable rules and regulations.

The first two parts, finding the oil and thereafter producing it profitably,
involves high levels of uncertainty and risks and, in general, requires very
significant capital expenditures. As a result of most known conventional oil
resources on-shore having been depleted, oil exploration today often takes
place off-shore at sea, at great depths, high costs, and frightening
environmental risks.

When we look at Selena, the first part of the business is already done. The oil
is there, and so is the infrastructure with roads and railways. Its assets are
based in the Perm region that has been producing oil since back in the 1930s.
Not only do we know there is oil in the ground, it is also remarkably well
documented. Whereas oil explorers in most other parts of the world were limited
by access to capital, costs in the Soviet Union were often not an issue. Hence,
drilling teams were sent out to drill and document their findings across large
areas. In the 1970s, able oilmen, many of them working for what is today
LUKoil, were identifying plenty of oil rich areas where Selena now has
production licenses.

Many wells were drilled, and the low hanging fruits, i.e. those with high flow
rates were put into production. Other lesser producing wells, were conserved
for the future. With today’s oil prices, many of these conserved wells will be
very profitable once they are put into production. As for the second and third
part, we have able hands on the ground to bring the oil to the surface, and
then on to trucks and railcars to be delivered to local refineries.

 

“Why are not everybody exploring for oil in Russia” then?

You must have a local organization and knowledge of Russia in the management,
to succeed there. Doing business in Russia is not for beginners. Russia is
found very far down on the World Bank’s ease of doing business ranking list. I
am the first to agree that it is tedious work to operate in the Russian
business environment, but it can be done in a good, transparent and profitable
way.

As for any business, and that goes for something as basic as crude oil, it is
all about people. Having worked with investments, corporate restructuring and
capital markets in and around Russia for more than 20 years, I know that cheap
assets are fairly easily found. The challenge is finding the entrepreneurs who
can navigate properly and in an orderly manner get things done on the ground.

The Board and Management of Selena have today initiated intensive work that
will form the basis for immediate investment decisions as well as for longer
term expansion plans. It is too early to talk about expected production from
new, or rather reopened, wells. Needless to say, we shall communicate such
information as soon as possible. The roles of the Board of Directors are
several. Apart from guiding and supporting management, as well as ensuring that
the company at all times works in the best interest of its investors and
creditors, the Board of Directors sets the overall standards of the company.
Some of you may find softer parameters such as codes of conduct, business
ethics, quality control and others, being of less importance than the bottom
line result. It is my firm belief that a sustainable business is a business
that commits to both.

It is therefore, I am very pleased to present the new Board Members of Selena
in an informal and personal manner. A more uniform presentation of each member
will be posted on this website soon.

Indrek Rahumaa, b. 1972, is a Swedish and Russian speaking Estonian national
educated at the Stockholm School of Economics. We have worked on various
projects since 2009, during my time at Carnegie Investment Bank. Indrek has
participated in the privatisation and turn-around of industries in the CIS
since the mid-nineties and is together with Jürgen Lamp a co-founder of Selena.

Jürgen Lamp, b. 1971 is also a Russian speaking Estonian national who has
worked as a consultant at McKinsey in Stockholm and Helsinki, and was later a
member of the SEB Estonia management team. Jyrgen is the man on the ground that
is in charge of operations and leading the team.

Paul Waern, b 1950, has spent his professional life in the oil industry and is
one of the most experienced oil men active in Northern Europe. He regularly
flies out to supervise the drilling performed by international majors in the
North and Barent’s Seas. Paul is also a Member of the Board of PA Resources,
another oil company listed on NASDAQ OMX.

Staffan Torstensson, b 1972, who is the Head of Equity Capital Markets at Evli
Bank, brings valuable investment banking and capital markets competence to the
Board. Once drilling and investment plans have been decided upon, the company
will seek to find optimal ways to finance investments that may not be funded
from own cash flow. Capital markets will offer interesting opportunities.

Per-Olof Sjöstedt, b.1953, has been the CEO of Ericsson Russia, CEO of US
Company Emerson in Russia, and recently Board Member and Director for Strategic
Development of Megafon, one of the leading mobile operators in Russia. Few
people can match PeO’s competence, integrity and knowledge of the Russian
language, corporate and cultural soul. His recent engagement with the company
is much appreciated and welcome.

Magnus Stuart, b. 1954, who is the company’s CEO, is the right man for keeping
order in the Stockholm based holding company. With its shares listed on NASDAQ
OMX First North, and with an ambition to be listed on the regulated main market
once deemed appropriate, transparency, compliance and communication with third
parties is of key importance. Magnus’s experience will ensure that this is done
by the book. Magnus is presently serving as board member of Ginger Oil AB,
listed on NGM-Equity where he has served as CEO between 2008 and 2012.

As for myself, I feel at home in Russia where I have spent all of my
professional life. Half of it, I have been living there and the other half, I
have been travelling out of Stockholm. During my years as, i.a., Harvard
advisor to the Russian Government in the early nineties, and CEO of Alfred Berg
/ABN Amro Equities in Russia, I have come across a lot of different types of
people and assets.

In Selena, I have found a very promising combination of assets and people, and
one of my most important functions is to ensure that all competences and
resources made available to the company are utilized in full.

On a final note, the Board of Directors has got a best in class ambition in all
areas of the business and our goal is to build a company for the future.

 

Our first immediate steps are: 1) secure financing for current operations and
near term investments into production, 2) put in place a proper legal and
corporate governance structure, 3) continue to build a competent team in Perm,
4) establish a compliance function to ensure that all formal requirements for
its operations are met, and 5) to establish clear communication practices, both
internally and externally.

 

We will now return to work and return to you with updates and more information
on our progress in due course.

Sincerely,

 

Lars Bergström

Chairman of the Board of Directors

Stockholm, June 5th 2013

 

 

Selena Oil & Gas Holding AB (publ) (former Emitor Holding AB) is engaged in the
production and transportation of oil and gas in the Volga-Ural region in the
Russian Federation, including Perm and Udmurtia. The company is listed on
NASDAQ OMX First North Premier in Stockholm under the ticker SOGH. Mangold
Fondkommission is the company´s Certified Adviser and liquidity provider.
Telephone +46 8-503 015 50.