(i) a request to transfer to the Financing Entity a number of shares that corresponds to the quotient of the amount equal to the direct equity investment in the Company shares in the amount of PLN 8,000,000 performed by the Financing Entity in the form of cash payment and the issue price equal to PLN 10.00 and  
(ii) a call to offer to the Financing Entity 800,000 ordinary bearer Company shares at an issue price of PLN 10.00 per share, that is for a total amount of PLN 8,000,000.
The Company’s Management Board would like to point out that it was another payment made recently by the entity indicated by Prokom Investments S.A. which, together with payments which the Company announced in the current report No. 89/2010, constituted the total amount of financing of PLN 26.5 m.
In relation to the cash payments described above, the Company’s Management Board adopted a resolution discussed in more detail in item 4 below, with regard to the offer of 2,650,000 registered subscription warrants entitling the holder to take up 2,650,000 Company Series B Shares at an issue price of PLN 10.00 per share, and offered their take-up to entities which provided the above financing to the Company.

2. Moreover, on 9 December 2010, the Company signed an agreement with Prokom Investments S.A. (“Prokom”) (the “Transfer Agreement”), concerning the transfer of the following debt claims by Prokom to the Company:
(i) Debt claim under the loan agreement concluded on 14 January 2008 between Prokom and Capital Energy S.A. (the “Loan Agreement”). The value of that debt claim amounts to over PLN 51,367,000, and the Company acquired it from Prokom for PLN 45,460,579.37, whereas the settlement of that amount with Prokom will be cash-free, through an issue of shares by the Company; and
(ii) Debt claim under the share sale agreement of 20 December 2007 concluded between Prokom and Mars International Worldwide Inc. with regard to the indirect acquisition of shares in BMB Munai, a company from the Capital Energy S.A. group. The value of the debt claim is over PLN 22,880,000, and the Company acquired it from Prokom for the amount of PLN 20,250,000.00, whereas the settlement of that amount with Prokom will be cash-free, through an issue of shares by the Company.
The Transfer Agreement was concluded in execution of the obligation arising from the agreement of 13 January 2009 concluded between the Company and Prokom (“Agreement”), which the Company announced in the current report No. 4/2009, and due to the obtaining of the consent of PKO Bank Polski S.A. as the Syndicate Agent on 9 December 2010 to the performance of the Agreement in the part concerning the acquisition of debt claims indicated above. The Bank’s consent has been issued on terms ensuring legal security of the Company as a party to the Transfer Agreement.
In relation to the conclusion of the Transfer Agreement, the Company signed with Prokom an agreement concerning the transfer of Prokom’s rights and obligations resulting from the pledge agreement concluded on 13 January 2008 between InvestTechnoGroup LLP, a Kazakh law company (“ITG”), and Prokom, on the basis of which ITG established a pledge on 75% of shares in BMB Numai LLP, a Kazakh law company, as the security for Prokom’s debt claims resulting from the Loan Agreement (“Pledge Agreement”), onto the Company. The agreement on transfer of rights and agreements under the Pledge Agreement shall become effective as of the moment of the following conditions precedent being satisfied:
(i) consent by the Ministry of Oil and Gas of the Republic of Kazakhstan ("MRG") to the transfer of rights and obligations under the Pledge Agreement to the Company or a written confirmation by MRG that such consent is not required; and
(ii) registration of an agreement on transfer of rights and obligations under the Pledge Agreement in the Almaty Regional Department of Justice or in MRG.
The Company would like to inform you that agreements under which debt claims have been transferred to PETROLINVEST S.A. were concluded by Prokom at the request and in the interest of the Company in order to allow the implementation of investments related to the exploration and production operations conducted. The conclusion of the agreements indicated constituted one of many forms of Prokom’s involvement in the financing of the Company’s activity.  
The conclusion of the Transfer Agreement was a stage of work aimed at concentrating exploration assets under PETROLINVEST S.A. In the opinion of the Company Management Board, such concentration will allow efficient restructuring of exploration assets in Kazakhstan. The Management Board would also like to emphasise that the acquisition of the debt claims was with a discount for their book value, which corresponds to the risk premium related to the restructuring of exploration assets.

3. At the same time, on 9 December 2010, under the performance of the agreement of 13 January 1009 determining among other things the possibility of meeting the Company’s obligations towards Prokom through the issue of shares, the Company received from Prokom:
(i) a request to transfer to Prokom the number of shares that corresponds to the quotient of the total amount of debt claims to which Prokom was entitled with regard to the Company under the Transfer Agreement, i.e. PLN 65,710,579.37 and the issue price equal to PLN 10.00, and
(ii) a call to offer to Prokom 6,571,057 ordinary bearer Company shares, at the issue price of PLN 10.00 per one Company share, that is for a total amount of PLN 65,710,70.

4. In relation to the above requests and calls, and the request and call received by the Company on 16 November 2010, which the Company announced in the current report No. 89/2010, and also in relation to the resolution of the Extraordinary General Meeting of 30 October 2010 regarding the issue of subscription warrants, a conditional increase of share capital, the exclusion of the pre-emptive rights of the existing shareholders of the Company and amendment of the statutes of the Company (“Issue Resolution”) published in the current report No 85/2010, on 9 December 2010, the Company Management Board adopted a resolution concerning the offering of registered subscription warrants entitling holders to subscribe for Company Series B Shares (“Subscription Warrants”) and the determination of detailed terms of issue of Subscription Warrants. The Company Management Board decided to issue 9,221,057 Subscription Warrants and offered their subscription to entities which made the requests and calls described above (“Financing Entities”). Next, the Subscription Warrants were subscribed by the Financing Entities. At the same time, the Financing Entities executed rights to subscribe for Series B Shares under the Subscription Warrants, and submitted representations about the subscription of the total of 9,221,057 ordinary bearer Company Series B Shares.
The issue price of the ordinary bearer Series B Shares, issued to holders of Subscription Warrants issued pursuant to the Issue Resolution under the conditional increase of the Company share capital, was set by the Management Board at PLN 10.00 per share, allowing for the statutory restrictions concerning the minimum share issue price.
The payment was made by Prokom for the subscribed Series B Shares through the set-off of the Company’s debt claims against Prokom’s debt claim arising from the Transfer Agreement. Therefore, on 9 December 2010, the Company entered into a set-off agreement with Prokom, pursuant to which the Company and Prokom set off the Company’s due and payable debt claim under the subscription of Series B shares in the amount of PLN 65,710,570.00 against Prokom’s due and payable debt claim against the Company in the amount of PLN 65,710,579.37.
The set-off agreement, together with other agreements concluded by the Company and its subsidiaries with Prokom and its subsidiaries during the period from 28 May 2010, i.e. from the date of publication of the last report on the conclusion of a significant agreement with Prokom and its subsidiaries (current report No. 39/2010) jointly meets the criterion of a significant agreement. The total value of the agreements mentioned amounts to PLN 121,811,310 and thus exceeds 10% of the Company’s shareholders’ equity. The said set-off agreement is the agreement of the highest value.

The Company Management Board would like to point out that the satisfaction of debt claims towards Prokom through an issue of shares is, considering the financial needs of the Company, a solution beneficial for the Company. The conversion of obligations towards Prokom to share capital constitutes a desired step towards the reduction of debt in the structure of financing of the Company’s assets, and is translated to an increase in shareholders’ equity. Under debt claims acquired by the Company in the cash-free method described above, the Company received a right to obtain cash proceeds from its debtors.
The total cash payment made for the subscription of Series B Shares amounted to PLN 26.5 million. The Company Management Board would like to point out that investors indicated by Prokom decided to invest funds despite the fact that the listings of the Company shares at the Stock Exchange were much lower than their nominal price (PLN 10) at which those investors subscribe the shares. As a result of the said capital investment in the Company shares, the total value of financing invested in PETROLINVEST S.A. by Prokom or entities indicated by it exceeded the amount of PLN 225 million from the beginning of 2010, including the financing by entities indicated by Prokom under the performance of the above-mentioned agreement on the acquisition of financing which exceeded PLN 30 million.
The Company Management Board would like to note with satisfaction that as a result of the conversion described in item 4, the capital engagement of Prokom Investments S.A. in the shareholding structure of PETROLINVEST S.A. will be significantly increased, by over 10%. This, together with the direct cash investments in the Company share capital described above, constitutes another proof for the involvement of Prokom Investments S.A. in the Company’s operations, which is consistent and independent of the market environment.

Download current report no. 96/2010