Crown Energy : Interim Report Jan-June 2019

HALF-YEAR REPORT 2019

SECOND QUARTER - APRIL-JUNE 2019

• Revenue amounted to SEK 12,492 thousand (19,060).
• Operating profit amounted to SEK 1,861 thousand (5,329).
• Unrealised changes in property values amounted to SEK 133,974 thousand (-27,883), of which SEK 141,877 thousand (0) relates to unrealised changes in value of property assets held for sale.
• Profit before tax amounted to SEK 151,262 thousand (181,828), and profit after tax amounted to SEK 108,572 thousand (164,320), corresponding to SEK 0.23 (0.34) per share.

HALF-YEAR PERIOD- JANUARY-JUNE 2019

• Revenue amounted to SEK 25,538 thousand (39,660).
• Operating profit amounted to SEK 4,863 thousand (12,358).
• Unrealised changes in property values amounted to SEK 103,913 thousand (-46,372), of which SEK 141,877 thousand (0) relates to unrealised changes in value of property assets held for sale.
• Profit before tax amounted to SEK 148,397 thousand (224,115), and profit after tax amounted SEK 86,333 thousand (173,687), corresponding to SEK 0.18 (0.36) per share.

KEY EVENTS DURING REPORTING PERIOD JANUARY-JUNE 2019

• On 30 April 2019 Crown Energy concluded an agreement for the sale of the C-View property in Angola. Buyer is the Angolan State via the Ministry of Finance. The property is to be paid over three years in a total of six equal semi- annual instalments.
  Economic control is transferred to the buyer already after the second instalment. Up until the economic control is transferred to the buyer, C-View will continue to be managed by Crown Energy, which means that it will be classified as an asset held for sale (up until the control is transferred). The asset is valued at fair value, which equals to the agreed purchase price, discounted over the payment period of three years. As per 30 June 2019, the fair value amounts to corresponding SEK 540,938 thousand.
  The unrealised change in value for C-View during the second quarter amounts to SEK 141,877 thousand. When the economic control is transferred, C-View will be derecognised as an asset held for sale and instead be recognised as a receivable on the buyer. At this time, the profit from the transaction is realised.
  The deferred tax liability has increased by SEK 43,152 thousand as a result of the higher valuation.
  The agreement is subject to a formal regulatory registration process in Angola. This process is not finalised, which means that Crown Energy has not been able to receive the first instalment.

CONDENSED CONSOLIDATED FINANCIAL INFORMATION

	Group		APR-JUN		APR- JUN		JAN- JUN		JAN- JUN		FULL YEAR
	All amounts in SEK thousands		2019		2018		2019		2018		2018
	Operating income	12,865	19,206		26,318	39,835		76,847
	Operating expenses	-11,004	-13,877	-21,454	-27,477		-54,772
	Operating profit/loss	1,861	5,329	4,863	12,358		22,075
			204,332	39,621	258,128
	Net financial items	15,427		324,569
	Net profit/loss for the period. after tax	108,572	164,320		86,333	173,687		186,909
	Earnings per share	0.23	0.34	0.18	0.36	0.39
	Equity per share	1.79	1.79	1.79	1.79		1.70
			-713	-24,425	-22,210
	Change in cash and cash equivalents	-14,850		-44,524

Q2

CEO statement

DEAR SHAREHOLDERS AND INVESTORS,

During the period, Crown Energy has continued the efforts in order to generate new business. Major steps have been taken in a positive direction, leading to gains in both Energy and Asset Development and Management business areas. We hope to capitalise on this soon. The situation has been relatively stable in the oil and gas market and the energy market and we continue to have a positive outlook on new business and thus on the prospects for substantial growth for the Company.

The currency situation in Angola has stabilised significantly during 2019 compared to 2018. Therefore, the Company's net financial items are not affected to the same extent as in previous periods. This is an indication that the devaluation that was carried out in the first quarter last year, as well as other market measures implemented in Angola, is starting to have positive effects on the country's economy. This development is of course good for the part of Crown Energy's business that is attributable to this market.

The property business has been relatively steady compared with first quarter this year. The financial result, as well as key ratios have been affected during the period, mainly due to the sale of the C- View property which the Company announced the 30 April. Positive unrealized changes in value have been recorded in the income statement as a result of the C-View sale. Also, the occupancy rate has increased as a result of that C-View, which had a low occupancy rate, is excluded in the total leasable area.

For the energy business, the Company has not reported anything significant during the period, but our oil and gas projects have generally developed well in the relatively steady oil price environment, with prices of crude oil fluctuating between USD 60 and USD 70 per barrel in the quarter and up to today. Investments in the energy sector in general and in the oil and gas industry specifically are expected to increase going forward. We maintain the trust that Crown Energy's assets within the Energy business will be attractive to outside interest. Crown Energy's business model, developing assets in early stages and then introducing them to bigger players in the industry for trade sale exits or partner farm-in transaction, is very suitable in this market.

BUSINESS DECISIONS THAT AFFECTED THE COMPANY'S PERFORMANCE

The sale of a large asset in the interim period will contribute capital for future investments in Asset Development and Management. Much time and effort are being invested in establishing Crown Energy's Asset Development concept in new markets, primarily through new customer sales.

OUTLOOK

The Company now continues its progress towards a larger and even more stable foundation to stand on. We will make use of our contacts in the oil industry to generate business in new and existing markets, and future cash flows should ensure faster development of the Company's existing assets. Our capital and organisation are and will be further adapted to accommodate an exciting continuation of Crown Energy's development efforts.

We look forward to continuing our efforts to capitalise on our assets, thus creating value for you, our shareholders.

Andreas Forssell

CEO, Crown Energy

2 Crown Energy Half-Year Report 2019

Q2

16

Properties

19,973

Leasable area, sqm (excl. C-View)

Asset Development and Management business area

THE PROPERTY MARKET AND CURRENCY IN ANGOLA

During the first half-year of 2019, the Angolan currency ("AOA") has been stable but has devalued further against the Swedish krona by -6.3 per cent, which however is to be compared to a depreciation during the first half-year of 2018 by -27.6 per cent. (See the development of AOA against SEK in the diagram below to the left.) Inflation in Angola is no longer at the high levels it was previously in and amounted to 6.8% in the first half 2019 (Source: Banco Nacional de Angola).

As far as the residental market is concerned, the property management consultants Abacus have seen that demand has generally fallen during 2017-2018. This is mainly due to the reduced activity of the international companies in the country, which in turn led to reduced demand for residential properties. On the other hand, it is assumed that the demand for buildings that offer total solutions (housing, parking, security, areas for leisure activities, etc.) together with ongoing and qualitative maintenance will be relatively stable (Source: Abacus / JLL Property Market Report Angola 2019).

As mentioned in the annual report 2018, 2019 is expected to be a more stable year than 2018, as a result of more stable inflation and currency developments, combined with expected increased investments in the country (Source: Abacus / JLL Property Market Report Angola 2019). Abacus' report, on the other hand, shows that expectations of market rents in 2019 in Angola have fallen as a result of the development in 2018, which affects the valuation of properties.

SUMMARY OF PROPERTY-RELATED KEY RATIOS

For definitions of key ratios please see pages 24-25.

	ALL AMOUNTS IN SEK THOUSANDS		2019-06-30			2019-03-31
	Revenue backlog, SEK thousand		43,795		61,594
	Rent backlog, SEK thousand		34,504		43,044
	Contracted annual rental and service revenues, SEK		46,046	45,822
	thousand
	Contracted annual rental revenues, SEK thousand		30,782		30,040
	Area occupancy rate (excl. C-View) %		67%		45%
	Economic occupancy rate (excl. C-View), %		59%		27%
	WAULT rent and service, months		13.5		15.6
	Market value of portfolio (excl. C-View), SEK thousand		159,757		161,963
	Market value C-View, SEK thousand		540,938		435,767

3 Crown Energy Half-Year Report 2019

Q2

SEK 44 M

Revenue backlog

14 months

WAULT

65%

Area occupancy rate

COMMENTS ON PROPERTY-RELATED KEY RATIOS

Changes in the first quarter of 2019

A major change in the second quarter is the fact that Crown Energy's largest property in Angola, C- View, is under sale. As mentioned in key events during the quarter, Crown Energy will continue to manage the property until the economic control is transferred, which is after the second installment. Crown Energy's expectations are that this will happen around the turn of the year 2019/2020. Due to the fact that the agreement to sell C-View has been negotiated for a long time, Crown Energy has limited the number of new tenants during this period. This has during the past year affected key ratios such as rental rate, etc. As the sales agreement now has been signed, the remaining tenant lease agreements are terminated. Since Crown Energy does not consider the property to be leasable anymore, C-View has been excluded from total leasable area which effects key figures such as occupancy rate etc. Remaining income to be obtained from existing contracts in C-View is included in revenue and rent backlog.

The company strives to maintain the existing customer base, while at the same time increasing the flexibility of the agreements. A number of a certain tenant's service and lease contracts, have historically been signed for longer periods, but have now been renegotiated during the quarter to refer to shorter periods. This increases the flexibility to sign new contracts, but has negatively affected the company's backlog.

Below is a list of changes in revenue and rent backlog for the second quarter of 2019.

	ALL AMOUNTS IN SEK THOUSANDS		REVENUE BACKLOG			RENT BACKLOG
	Backlog at 31 March 2019	61,594	43,044
	Changes in the second quarter 2019:
	Contracted revenue	-11,217		-7,507
	New/extended contracts	10,997		9,022
	Contracts terminated early	-14,854		-8,314
	Exchange rate effects	-2,725		-1,742
	Backlog at 30 June 2019	43,795	34,504

During the second quarter of 2019, a total of five leases expired, of which none was extended. In addition, 13 new contracts were signed during the quarter and nine contracts were extended before the lease expired. Contracted rental value and service value of extended and new contracts amount to SEK 9,022 thousand and SEK 1,975 thousand, totalling SEK 10,997 thousand. Four contracts were terminated early, which means that the revenue backlog decreased by a total of SEK 14,854 thousand. Net between new, renewed and terminated lease and service agreements amount to SEK -3,857 thousand. In total 67 lease agreements remain, of which six will commence after the reporting period.

The distribution between USD and AOA contracts amounts to 34 and 66 per cent, respectively.

As a result of the changes in the rental contracts, the Company's WAULT has decreased since the first quarter 2019 from 15.6 to 13.5 months.

The area occupancy rate has decreased during the second quarter from 67 to 65 per cent, excluding C-View where the current tenant contracts were terminated early. The average economic occupancy rate, excluding C-View has decreased from the first quarter from 61 per cent to 59 per cent.

The chart on the left illustrates the value of the expiring contracts over time and the accumulated expiring in per cent, as it appears on June 30, 2019. The value of the expiration in each period represents the respective expiring contract's annual rental and service revenue.

4 Crown Energy Half-Year Report 2019

Q2

60-70 USD/bbl

Oil price in Q2 2019

4

Exploration licences

Energy business area

MARKET

The second quarter of 2019 has continued to be a positive period for the oil price, and the oil price has remained over the last three months in the $60's per barrel price range. The outlook of the industry also appears to continue to be positive.

The current level of the oil price, i.e. around 65 USD/bbl, continues to be supported by a combination of solid demand for crude across the world plus OPEC as well as non-OPEC producing countries maintaining the management of production at lower levels and by the efficient running of the industry as a whole. We have reported that investments in the oil and gas industry have been limited in recent years, but such investments are beginning to rise as oil prices continue to firm up. We have also seen recent drilling successes in Africa, such as with ENI making discoveries in offshore Angola, and also with Total and Africa Energy (who is also our partner in our South African Block) making a discovery in offshore South Africa and now planning the drilling of further wells.

Up to the end of this reporting period, oil prices have once again remained comfortably in the 60's USD/bbl. We continue to feel that the probability remains that oil prices will stay at this general level in the long term as global oil consumption does continue to carry on firmly. We also believe that there are indications now that activity is beginning to increase, which again shows positivity in the industry.

EXPLORATION PROJECTS

At present, the Company holds four exploration licenses, located in Iraq, South Africa, Equatorial Guinea and Madagascar. No significant changes have occurred in Crown Energy's exploration projects during the reporting period.

For an up-to-date description of the assets, see the 2018 Annual Report and the Company's website.

5 Crown Energy Half-Year Report 2019