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Stockholm-based Shelton Petroleum and Baltic Oil Terminals, a UK public company listed on the AIM market in London, have announced that the companies have completed a share swap and entered into a strategic relationship to pursue opportunities in the oil industry.

Baltic intends to use the funds from the sale of shares in Shelton Petroleum to finance an imminent acquisition of a fully operational fuel oil transportation and storage business, which it expects to be able to announce shortly.

In order to fund the acquisition, Baltic last week sold 46,000,000 B shares of Shelton Petroleum, realising proceeds of SEK 27.6 million before expenses.

"As a significant shareholder in Baltic, Shelton fully supports the transaction and looks forward to strengthening and deepening the relationship with Baltic in order to take a further step in its strategy to become an integrated oil and gas company," Shelton said in a statement.

Commenting on the target business, Baltic said: "The board of Baltic believes this business complements its own trading and transportation operations, will add considerable synergies and will open up new market opportunities."

Details regarding the exact location of the target fuel oil business are as yet unclear. According to media reports, the business is based 'outside Russia and the Former Soviet Union'.

Commenting on its expansion strategy on its website, the company says: "Baltic aims to grow a substantial hydrocarbon infrastructure and port business, within the Former Soviet Union. Baltic plans to become the largest terminal operator for crude and hydrocarbon product export from Kaliningrad, on Russia's Baltic Sea coast."

In order to facilitate the sale of the Shelton shares, Baltic has entered into a stock lending agreement with certain substantial shareholders of Shelton, pursuant to which such parties, for no consideration, have loaned the Shelton shares sold.

Shelton retains its shareholding of approximately 19.5 percent. in the Baltic's issued share capital and Baltic retains a holding of approximately 1.5 percent in Shelton's issued share capital.

Robert Karlsson, Chief Executive of Shelton, commented: "We are excited by this acquisition opportunity and believe it offers considerable scope to create value from a new market. We remain committed to a long term strategic relationship with Baltic and, as a significant shareholder, look forward to sharing in their success."

Simon Escott, Chief Executive of Baltic, said: "Shelton is fully supportive of our expansion strategy and the two companies remain committed to evaluating the strategic opportunities in order to explore ways of developing and strengthening the relationship in the future."