Caspian Oil is extremely undervalued. Recently settled suit: payable on January 3, 2008. Mr. Knight agreed to surrender to Caspian International 400,000 shares of its common stock that had been issued to him,and agreed to the cancellation of his option to purchase 1,500,000 shares of Caspian International’s common stock.
Company’s revenue is currently provided by Dank, our oilfield service subsidiary. Although we have not experienced any abatement of demand for Dank’s services in 2007, our revenue for the nine months ended September 30, 2007 fell by 35%, from $16,953,258 in the nine months ended September 30, 2006 to $10,949,296 in the nine months ended September 30, 2007. The fall-off in revenue can be attributed primarily to three situations that arose earlier this year, each of which had an unfavorable impact on operating results
There were particularly harsh winter conditions in Kazakhstan in early 2007. This delayed all three of our seismic crews from getting into the field in the first quarter of the year.
During the first four months of 2007, a large Dank seismic crew that had contracted to work in Uzbekistan was put on standby status while our client attempted to resolve an issue with the Uzbek government. Dank received a standby fee from that client, but the fee did not fully offset the loss of revenue caused by the delay. Dank and the client ultimately agreed to defer the project.
During the second and a portion of the third quarter of 2007, one of Dank’s seismic crews was contracted by Kor-Tazh, the Company’s oil exploration and production
subsidiary, to provide 3D seismic data as part of the development plan for the oil field. Dank was chosen to provide the 3D seismic data because of the quality of service which Dank is known to provide. Also, the location of Kor-Tazh’s oil field is in rough terrain and many other seismic companies would not attempt this project, which is a critical part of the oil field development plan. Generally accepted accounting principles prevent the Company from recognizing revenue and profit on this intra-Company transaction in our consolidated results. On a consolidated basis, the expenses incurred by Dank to produce the seismic data for Kor-Tazh, which totaled $1,651,17, were capitalized as part of our oil exploration and production assets.
This accumulation of special circumstances caused the 35% reduction in nine month revenues. Since only one of the situations continued into the third quarter, the fall-off in revenue for the recent quarter was less pronounced. Revenue for the three months ended September 30, 2007 was $5,255,761, a reduction of 8% from the $5,706,355 in revenue realized in the three months ended September 30, 2006.
We expect our revenue to return to and exceed 2006 levels in the coming months. During the third quarter of 2007 Dank finalized three contracts totaling $26.8 million dollars to provide services in 2007 and 2008. Also, in August, 2007 Dank added a fourth seismic crew. Currently all four crews are engaged on contracts in Kazakhstan. In addition, the Company is evaluating the possibility of adding additional seismic crews for work in Kazakhstan as well as other countries. The decision regarding whether to expand our operations in this manner will depend, in part, on how soon the banking issues discussed in “Liquidity and Capital Resources” below are resolved.