Qualified auditor’s report on the annual accounts and consolidated accounts 2016 of Misen Energy AB (publ)

The audit report has been published today in Swedish and English on the company’s website at (please refer to the page 68 of the Annual Report 2016): http://misenenergy.se/repository/Financial_reports_ENG/Misen_Energy_AR2016_ENG.pdf

The report in whole follows below.

Auditor’s report

To the general meeting of the shareholders of Misen Energy AB (publ.), corporate identity number 556526-3968

Report on the annual accounts and consolidated accounts

Disclaimer of Opinions

We were engaged to audit the annual accounts and consolidated accounts of Misen Energy AB for the year 2016. The annual accounts and consolidated accounts of the company are included on pages 2-65 in this document.

We do not express an opinion on the accompanying annual accounts and consolidated accounts. Because of the significance of the matters described in the Basis for Opinions section of our report, we have not been able to obtain sufficient appropriate audit evidence to provide a basis for an audit opinion on the annual accounts and consolidated accounts.

Basis for Opinions

The group’s operations are in all material respects conducted by the Joint Activity (“JA”) between PJSC Ukrgasvydobuvannya, LLC Karpatygaz and Misen Enterprises AB which is governed by the Joint Activity Agreement No. 3, dated 10 June 2002.

As described in the administration report, the group is currently part in several significant legal processes as a consequence of disputes between the participants of the JA which are vital for the group’s future operations. These are described in the administration report under the headings “Subsoil use charge”, “PJSC Ukrgasvydobuvannya commenced arbitration”, “Criminal investigation”, “Request for interim measures submitted by Misen Enterprises AB and LLC Karpatygaz”, “Sale of hydrocarbons” and “Company’s expected future development and going concern”.

All material income and all fixed assets of the group are directly or indirectly attributable to the JA. Based on the multiple material uncertainties related to the legal processes described under the headings above as well as the material uncertainties related to going concern we have not been able to obtain sufficient appropriate audit evidence on which to base an opinion on the value of the group’s fixed assets which amounts to KSEK 541,212, representing approximately 91% of the group’s total assets.

The assessment of the value of the parent company’s shares in the subsidiary Misen Enterprises AB, which amounts to KSEK 301,187, corresponding to approximately 92% of the parent company’s total assets and thereby representing a significant share of the parent company’s total assets, is also dependent on the outcome of the ongoing legal processes between the participants of the JA. Based on the multiple material uncertainties related to the development of the JA, we have not been able to obtain sufficient appropriate audit evidence on which to base an opinion on the value of the parent company’s shares in Misen Enterprises AB.

We are independent of the parent company and the group in accordance with professional ethics for accountants in Sweden and have otherwise fulfilled our ethical responsibilities in accordance with these requirements.

Material Uncertainty Related to Going Concern

As described under the heading “Company’s expected future development and going concern” the JA has not by the end of 2016 fulfilled the loan terms for the financial liabilities and at present, negotiations are under way with the banks for an extension of the credits. The restructuring was not approved by the participants of the Joint Activity as of the date of this report. In addition, since December 2016, the JA has had problems with sales of natural gas, gas condensate, oil and LPG.

Further, as a result of the on-going investigation regarding criminal acts that includes the Ukrainian state seizing JA’s fixed assets, JA has not had any revenue since December 2016.

It is also described that depending on how the arbitration proceedings that the Misen Group is involved in develop, further financing needs may arise with regard to continuous operations of the Swedish companies in the  second half of 2017. At the date of this report, such financing is not secured.

As funding for the next twelve months is not secured there is a material uncertainty that may lead to significant doubts about the group's ability to continue its operations. In a situation where going concern no longer can be assumed, there is a risk of significant write-downs of the group's assets as well as the parent company's book value of shares in subsidiaries.

Responsibilities of the Board of Directors and the Managing Director

The Board of Directors and the Managing Director are responsible for the preparation of the annual accounts and consolidated accounts and that they give a fair presentation in accordance with the Annual Accounts Act and, concerning the consolidated accounts, in accordance with IFRS as adopted by the EU. The Board of Directors and the Managing Director are also responsible for such internal control as they determine is necessary to enable the preparation of annual accounts and consolidated accounts that are free from material misstatement, whether due to fraud or error.

In preparing the annual accounts and consolidated accounts, The Board of Directors and the Managing Director are responsible for the assessment of the company’s and the group’s ability to continue as a going concern. They disclose, as applicable, matters related to going concern and using the going concern basis of accounting. The going concern basis of accounting is however not applied if the Board of Directors and the Managing Director intend to liquidate the company, to cease operations, or has no realistic alternative but to do so.

Auditor’s responsibility

Our objectives are to obtain reasonable assurance about whether the annual accounts and consolidated accounts as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinions. However, because of the matters described in the Basis for Opinions section of our report, we were not able to obtain sufficient appropriate audit evidence to provide a basis for an audit opinion on the annual accounts and consolidated accounts.

Report on other legal and regulatory requirements

Disclaimer of Opinion and Opinion

In addition to our engagement to audit the annual accounts and consolidated accounts, we have also audited the administration of the Board of Directors and the Managing Director of Misen Energy AB (publ.) for the year 2016 and been engaged to audit the proposed appropriations of the company’s profit or loss.

Because of the matters described in the Basis for Opinion section of our report, we can neither recommend nor oppose to the general meeting of shareholders that the profit be appropriated in accordance with the proposal in the statutory administration report.

We recommend that the members of the Board of Directors and the Managing Director be discharged from liability for the financial year.

Basis for Opinions

Because of the matters described in our Report on the annual accounts and consolidated accounts, we have not been able to obtain sufficient appropriate audit evidence to provide a basis for an audit opinion if the annual accounts give a fair presentation of the financial performance and financial position of the company.

We conducted the audit of the administration of the Board of Directors and the Managing Director in accordance with generally accepted auditing standards in Sweden. Our responsibilities under those standards are further described in the Auditor’s Responsibilities section. We are independent of Misen Energy AB (publ.) in accordance with professional ethics for accountants in Sweden and have otherwise fulfilled our ethical responsibilities in accordance with these requirements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Responsibilities of the Board of Directors and the Managing Director

The Board of Directors is responsible for the proposal for appropriations of the company’s profit or loss. At the proposal of a dividend, this includes an assessment of whether the dividend is justifiable considering the requirements which the company's and the group’s type of operations, size and risks place on the size of the parent company's and the group’s equity, consolidation requirements, liquidity and position in general.

The Board of Directors is responsible for the company’s organization and the administration of the company’s affairs. This includes among other things continuous assessment of the company’s and the group’s financial situation and ensuring that the company's organization is designed so that the accounting, management of assets and the company’s financial affairs otherwise are controlled in a reassuring manner. The Managing Director shall manage the ongoing administration according to the Board of Directors’ guidelines and instructions and among other matters take measures that are necessary to fulfill the company’s accounting in accordance with law and handle the management of assets in a reassuring manner.

Auditor’s responsibility

Our objective concerning the audit of the administration, and thereby our opinion about discharge from liability, is to obtain audit evidence to assess with a reasonable degree of assurance whether any member of the Board of Directors or the Managing Director in any material respect:

• has undertaken any action or been guilty of any omission which can give rise to liability to the company, or
• in any other way has acted in contravention of the Companies Act, the Annual Accounts Act or the Articles of Association.

Our objective concerning the audit of the proposed appropriations of the company’s profit or loss, and thereby our opinion about this, is to assess with reasonable degree of assurance whether the proposal is in accordance with the Companies Act.

Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with generally accepted auditing standards in Sweden will always detect actions or omissions that can give rise to liability to the company, or that the proposed appropriations of the company’s profit or loss are not in accordance with the Companies Act.

A further description of our responsibility for the audit of the administration is available on Revisorsnämnden’s website: www.revisorsinspektionen.se/rn/showdocument/documents/rev_dok/revisors_ansvar.pdf. This description is part of the auditor´s report.

Remark

Without further qualifying our opinions we observe that personnel taxes and social security contributions have not always been paid on time.

Göteborg 12 April 2017
PricewaterhouseCoopers AB

Johan Palmgren
Authorized Public Accountant

For further information, please contact:

Göran Wolff, MD

Direct line:  +46 31 759 50 72
Mobile:       +46 709 45 48 48
E-mail:       goran@misenenergy.se
                  info@misenenergy.se
 

Misen Energy AB (publ) (formerly Svenska Capital Oil AB (publ)) is a Swedish upstream oil and gas company with operations in Ukraine. The company was founded in 2004 and its shares are traded on Nasdaq First North since 12 June 2007.
In 2011, Misen Energy AB (publ) acquired Misen Enterprises AB and its Ukrainian subsidiary, LLC Karpatygaz, including the rights to 50.01% of the revenue and profit from a gas production project in Ukraine. Under IFRS rules, this transaction is classified as a reverse takeover. In consideration of the acquisition, a new share issue was carried out. The gas producing assets were acquired by production cooperation via a joint activity project governed by a Joint Activity Agreement between at that time the wholly-owned direct and indirect subsidiaries of Misen Energy AB (publ), i.e. Misen Enterprises AB and LLC Karpatygaz (together 50.01%) and PJSC Ukrgasvydobuvannya (49.99%), a subsidiary of the National Joint Stock Company Naftogaz of Ukraine. PJSC Ukrgasvydobuvannya is the largest producer of natural gas in Ukraine.  The purpose of the Joint Activity Agreement is to significantly increase production of gas and oil by providing modern technologies via a large-scale investment program for the purposes of attainment of profits.
In June 2016 Misen Energy AB (publ) sold 37.5 % of Misen Enterprises AB shares to the Hong Kong based company Powerful United Limited. Owning (the remaining) 62.5% of Misen Enterprises AB shares, Misen Energy AB (publ) maintains full control of the company and preserves a right to obtain 62.5% of the future dividends from the operations in Ukraine.
The registered office of Misen Energy AB (publ) is in Stockholm and the shares are traded on First North under identification ticker MISE. The Certified Adviser of the company at Nasdaq First North is Erik Penser Bank AB.
For further information, please visit our website www.misenenergy.se.

This information is information that Misen Energy AB (publ) is obliged to make public pursuant to the EU Market Abuse Regulation. The information was submitted for publication, through the agency of the contact person set out above, at 14:20 CET on 13 April 2017.