SBE Sibir Energy

 

TIDMSBE 
 
RNS Number : 3217R 
Sibir Energy PLC 
28 April 2009 
 
Sibir Energy plc ("Sibir" or the "Company") 
 
 
Market Update 
 
 
 
 
Chief Executive Officer 
 
 
Sibir is pleased to announce that Mr Stuard Detmer has been confirmed as the 
Chief Executive Officer of Sibir. His experience in a senior management role 
within the Company since 2003 will ensure effective management continuity for 
the Company. 
 
 
Investigation into Related Party Transactions ("Investigation") 
 
 
On 25 February 2009 Sibir announced that it had appointed the solicitors, Jones 
Day, and the accountants, Ernst & Young, to carry out an investigation into 
various actual and proposed transactions with Mr Tchigirinski and interests 
controlled by him in 2008. The Company has received an interim report in 
relation to the investigation, a copy of which has been delivered to the 
Financial Services Authority and to AIM. Although the investigation by the 
Company is ongoing, the principal conclusions of the interim report are set out 
in the Appendix to this announcement and the Company reconfirms the sum of 
approximately $400 million as the total amount of money currently estimated to 
have been diverted from the Company. 
 
 
Litigation against Mr Tchigirinski 
 
 
As previously announced, the Sibir Group commenced proceedings in the High Court 
against Mr Tchigirinski. The proceedings are continuing and Sibir is in without 
prejudice negotiations with Mr Tchigirinski to settle the claim on terms which 
the Board of Sibir (the "Board") believes, having taken appropriate legal 
advice, would be a satisfactory settlement to Sibir given all the relevant 
circumstances. The terms of the proposed settlement are confidential at present 
and if the negotiations are successful an announcement of the terms will be made 
on execution of the relevant documents. The Board expects that if the settlement 
was successfully implemented the Company would receive return of a substantial 
amount of its total claims. 
 
 
Further Investigations 
 
 
Arising out of the Investigation and the routine annual audit the Company has 
conducted a detailed review of the carrying value of assets on its Balance Sheet 
as at 31 December 2008. It has identified two major items that will need to be 
fully provided in the audited accounts for 2008, namely, a bank deposit of 
$37,303,781 (which the bank is unable to repay due to its own financial 
position) and promissory notes issued by certain regional airlines totalling 
$34,810,596 as consideration for jet aircraft fuel sales (which it is unlikely 
to recover). Although the Company has received assets in exchange for the 
former, the Company does not propose to attribute any value to these assets for 
the purposes of the 2008 accounts, given their uncertain value. 
 
 
Financial Consequences 
 
 
Although the Company expects significant recoveries from the Tchigirinski 
interests in due course, the Company's intention is to provide fully in its 2008 
accounts for the $400 million and the items mentioned above. It will take monies 
recovered into income when received. 
 
 
If those provisions were to be made the Company would expect to make a loss 
after exceptional items for the 2008 financial year of up to $100 million. The 
precise amount of this loss could change as the Company continues its detailed 
review of its affairs. 
 
 
Banking Facilities 
 
 
The Company has taken steps to keep all of its banking and trading partners 
fully apprised of its financial and operating condition. Constructive 
discussions with the Company's principal bankers are on-going and they currently 
remain supportive of the Company. 
 
 
Review of Financial Controls 
 
 
In view of the unauthorised payments made to Mr Tchigirinski and his companies, 
Sibir has engaged a major accounting consultancy firm to conduct a complete 
review of its procedures, policies and practices regarding all internal 
controls, corporate governance and limits of authority. It is the intention of 
the Board to implement the findings of this review in due course but it has in 
the interim taken steps to ensure no further misappropriation of funds. 
 
 
Future Developments 
 
 
In light of the recent acquisition by Gazpromneft of approximately 17 per cent 
of the Company's shares, the Board intends to seek discussions shortly with its 
major shareholders about their intentions with regard to the Company's minority 
shareholders and the strategic future of the Company. 
 
 
Further announcements will be made as appropriate including as a result of the 
ongoing investigation by the Company and the progress of the negotiations with 
Mr Tchigirinski regarding a possible settlement of the Company's claims against 
him. In the meantime, the Company's shares will remain suspended. 
 
 
 
 
Enquiries: 
 
 
Stuard Detmer, CEO 
Moscow +7 495 790 7840 
 
 
Rory Murphy, Strand Partners Limited 
London +44 20 7409 3494 
 
 
Nick Miles, M: Communications 
London +44 (0) 20 7153 1535 
 
 
 
 
Appendix 
 
 
1.    Between 16 September and 3 October 2008 Mr Henry Cameron arranged for 
Sibir and its subsidiaries (the "Sibir Group") to pay $115.454 million to a 
company owned by Mr Tchigirinski in order to provide funds to Mr Tchigirinski to 
meet his liabilities. These payments were then subsequently characterised by Mr 
Cameron and Mr Tchigirinski as part payments to acquire properties from 
companies associated with Mr Tchigirinski known as the Sovietsky Hotel and New 
Sovietskaya. Those acquisitions have not taken place and are now not ever 
intended by the Sibir Group to take place. 
 
 
2.    On 16 October 2008 Mr Cameron arranged for another payment of $39 million 
to be made by the Sibir Group to a company owned by Mr Tchigirinski for the same 
purpose. No characterisation of that payment was made by Mr Cameron and Mr 
Tchigirinski. 
 
 
3.    Between 19 October and 4 December 2008 Mr Cameron arranged for a further 
$174 million to be paid to a company which subsequently used those funds in 
repaying debts owed by Mr Tchigirinski to third parties or otherwise for the 
benefit of Mr Tchigirinski. Those funds were characterised by Mr Cameron and Mr 
Tchigirinski as payments for the purchase of oil products by the Sibir Group but 
no products were ever delivered or intended to be delivered to the Sibir Group. 
 
 
4.    In December 2008 Mr Cameron arranged for the Sibir Group in effect to 
repay loans totalling $62 million made to companies owned by Mr Tchigirinski or 
connected with him. The loans in question had been made by a company unconnected 
with either the Sibir Group or Mr Tchigirinski. 
 
 
5.    In 2007 Sibir advanced $10 million to a company owned by Mr Tchigirinski 
in connection with the purchase of a private jet for Mr Tchigirinski. The jet 
was purchased but the $10 million advanced by Sibir has never been repaid. 
 
 
6.    Therefore, the total amount paid to companies owned by or connected with 
Chalva Tchigirinski in respect of which no value has been received by the Sibir 
Group is approximately $400 million. 
 
 
7.    The acquisition by Sibir in September 2008 of the two properties located 
in the Sochi area where the 2012 Winter Olympic games are to be held and known 
as Krasnaya Polyana Olympic Centre and Katerina City for a total of EUR22 million 
were in fact made from companies connected with Mr Tchigirinski rather than from 
unconnected parties as reported by Sibir in its circular dated 2 December 2008. 
Those acquisitions have been completed and the purchase consideration has been 
fully paid. However, it has been discovered that Sibir only acquired 74% of the 
Katerina City property. 
 
 
8.    It appears that further steps are still required to complete the 
acquisition by Sibir of the Korimos and Avtocard businesses and that the 
acquisitions may require further ratification at a future general meeting of 
Sibir's shareholders. 
 
This information is provided by RNS 
            The company news service from the London Stock Exchange 
   END 
 
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