Under the terms of the strategic relationship, Baltic has agreed to issue to Shelton 14,957,368 new ordinary shares of 1 pence each in the capital of Baltic (the “Baltic Shares”) and Shelton has agreed to issue to Baltic 54,000,000 new B shares in the capital of Shelton (the “Shelton Shares” and the “Equity Swap”, respectively). The exchange ratio has been calculated by reference to the average market closing price of Baltic ordinary shares and Shelton B shares for the four weeks ending 2 November 2010, being 25.89 pence and SEK 0.759, respectively, and an average SEK/GBP exchange rate over the period of 10.584, valuing each issue of shares at approximately £3.87m. The market closing prices on 5 November 2010 were 25.5 pence for Baltic ordinary shares and SEK 0.76 (7.1 pence) for Shelton B shares.

Following completion of the Equity Swap, Shelton will own approximately 19.5 per cent. of Baltic’s enlarged issued share capital, and Baltic will own approximately 10.2 per cent. of Shelton’s enlarged share capital. The Equity Swap is structured as an issue of equity in kind and no cash will be expended by either party.

Baltic and Shelton are involved in two separate but highly complementary areas of the oil industry. Shelton is an oil exploration and production company, with proven and producing assets in the resource-rich basins of Volga-Urals and Ukraine and a further portfolio of assets in the Black Sea and Azov Sea. It has Proven, Probable and Possible (3P) reserves of 14 million barrels and a very significant resource base of over 300 million barrels of oil equivalent. Shelton is currently in the process of scaling up existing production through an extensive development programme. Shelton is also a major investor in Tomsk Refining A.B., a Swedish company which owns significant refinery operations in Western Siberia.

With Baltic’s own expertise in oil trading, infrastructure and transportation, the relationship between Baltic and Shelton will provide both companies with the opportunity to explore significant long term commercial benefits. Baltic and Shelton intend to identify and take advantage of a broad range of joint initiatives, including identifying customers for the supply of crude oil and other products, facilitating suitable transportation and storage services and entering into product swap arrangements. Several opportunities have already been identified and are currently being progressed. The companies will further evaluate the strategic opportunities in order to explore ways of developing and strengthening the relationship in the future.

Simon Escott, Chief Executive of Baltic, commented:

“Shelton are an ideal partner for Baltic as we seek to expand our business. They have considerable oil reserves and their production levels are expected to increase significantly in the short term. Their refining interests will also be highly complementary to our existing trading and terminals operations and represent a key potential synergy between ourselves and Shelton. As a major investor in Baltic, they will be able to provide access to a range of opportunities which with our expertise should benefit our operations.”

Robert Karlsson, Chief Executive of Shelton, commented:

“Baltic has built up a very impressive oil terminals and trading business and we see several areas of mutually beneficial cooperation. Securing a presence in hydrocarbons transhipment allows Shelton to take a further step in its strategy of becoming an integrated oil & gas company. We also look forward to supporting Baltic in evaluating significant growth opportunities for both companies’ benefit. I am looking forward to a long and successful relationship.”