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Ramco Energy PLC (SEA)

  Print      Mail a friend       Annual reports

Thursday 29 June, 2006

Ramco Energy PLC

Final Results

Ramco Energy PLC
29 June 2006



Press Information
29 June 2006
                                Ramco Energy plc
                            ('Ramco or the Company')

           Preliminary  Results for the year ending 31 December 2005


2005 Highlights
     
•    Turnover of £13.7 million (2004: £41.9 million), reflecting lower gas
     production from Seven Heads

•    Profit after tax of £1.8 million (2004: loss of £3.4 million)

•    Disposal of Oil Services division and repayment of recourse debt


Post Balance Sheet events
     
•    Sale of interest in Seven Heads gas field

•    Extension of Irish licensing Options

•    Creation and listing on AIM of Lansdowne Oil & Gas - Ramco retains an 
     interest of 86.25%

•    Raised £298,000 through the issue of new equity

•    Successful appeal in Tenge lawsuit

•    Sale of office building in Aberdeen concluded raising £1.5 million


Turnaround strategy being implemented

•    Focus on current operations in Ireland, Montenegro and Bulgaria

•    Initiation of new ventures - potential focus in Middle East and Caspian Sea

•    Company now almost debt free


Steve Remp, Chairman of Ramco, commented:

'This has been an immensely challenging period for Ramco.  At times our future
was in doubt, but we have remained resolute and determined.

We have an exciting turnaround strategy in place and are returning to our
exploration roots which brought us so much success in the nineties. With the
exciting portfolio of assets that we are involved in and with the new ventures
that we are planning to embark upon, Ramco is now able, for the first time in
two years, to look to the future with a renewed  confidence.'


ENQUIRIES:

Ramco Energy - Aberdeen                              01224 352 200
Steve Remp, Executive Chairman
Steven Bertram, Managing Director

College Hill - London                                020 7457 2020
Nick Elwes



Preliminary Results for the year ending 31 December 2005


Chairman's Statement

This has proved to be an immensely challenging period for the Company.  However,
both the Board and employees have remained resolute in their commitment to
Ramco's turnaround and I offer my sincere thanks to them and to the many
shareholders who continued to support the Company during such trying times.


Strategy

In April 2005, the Ramco Board undertook a thorough review of the Company's
prospects and strategy, following the significant problems we encountered with
the Seven Heads gas development, offshore Ireland, and decided to pursue a
turnaround strategy based on the following key objectives:

•    The sale of our Oil Services division to repay £12 million of secured debt 
     related to the Seven Heads development; this transaction and the associated
     debt repayment were completed just before the end of 2005.

•    The sale of our interest in the Seven Heads gas field, which was pledged as 
     security for the remaining project debt. The completion of this transaction 
     in February 2006 also relieved Ramco of related liabilities in the
     form of parent company guarantees.
     
•    The resolution of the long-running Tenge lawsuit in the US; whilst this 
     objective was to a large extent outside our control, we were delighted to
     announce earlier this month that the Fourteenth Texas Court of Appeals had 
     ruled in our favour and overturned the trial court's judgement in its 
     entirety.  The plaintiffs have filed a motion with the Court of Appeals for 
     a re-hearing, but the Directors do not consider it necessary to alter the 
     existing provision in Ramco's accounts which should cover the costs of this 
     anticipated procedure.


Financial Results

Group turnover for 2005 totalled £13.7 million, down from £41.9 million in 2004,
reflecting the lower gas production from the Seven Heads gas field and a
contribution from the Oil Services division for the period to 16 December 2005.

Despite the lower turnover, Group operating profit increased from £598,000 in
2004 to £5.3 million in 2005. This improvement is largely due to exceptional
adjustments to cost of sales, which reflect the impairment borne by the finance
provider on the Seven Heads project, and the reversal of a previous impairment
provision to bring the year end carrying value of the asset in line with the
price received on its subsequent disposal early in 2006.

Administrative expenses rose slightly from £1.4 million in 2004 to £1.5 million
in 2005. Cost savings instigated following the recognition of difficulties with
the Seven Heads gas field were expected to result in a further reduction in
administrative expenses. However, these savings were more than offset by
additional professional fees incurred in the merger talks aborted in April 2005.

The overall result, before tax, for the year, after reflecting the net reversal
of £4.9 million in the impairment provision against the Seven Heads gas field
referred to above, is a profit of £1.9 million. After a tax charge of £84,000,
the net result is an after tax profit of £1.8 million, compared with a loss of
£3.4 million in 2004.

The Directors do not recommend the payment of a dividend (2004 - nil) and £1.8
million will be added to the Group's reserves.

At 31 December 2005 the Group held cash balances of £4.8 million. Of this sum,
£2.9 million was ring fenced and has subsequently been repaid to the Group's
lenders. Since the year end, a total of £298,000 has been raised through the
issue of 1,873,102 new shares and, following the lifting of arrestments and
inhibitions related to the Tenge lawsuit earlier this month, we have concluded
the sale of our office building in Aberdeen for £1.5 million and will shortly be
relocating to new premises.

A debt of £0.9 million, connected with the Seven Heads development, remains due
to Schlumberger. Under a waiver agreement it signed to allow us to complete the
retirement of the bank debt, Schlumberger has the option to request that the
debt be repaid by an issue of new Ramco shares.


Exploration

While we were pursuing our turnaround objectives, we also succeeded in retaining
valuable exploration rights. We have, over the past two years, had a very
limited amount of cash to devote to our exploration portfolio but have retained
the following interests:


Ireland.

We required funds to ensure that we could honour commitments to complete the
work programmes necessary to have our four Licensing Options in the Celtic Sea
extended.  Protective security (arrestments and inhibitions) put in place by the
plaintiff in the Tenge lawsuit greatly limited our ability to raise the
necessary funds, but we succeeded, initially in February 2006, through a private
placing by a newly formed subsidiary Lansdowne Oil & Gas plc ('Lansdowne'), and
later by listing that subsidiary on AIM and raising further funds. Lansdowne now
holds all of our remaining Irish acreage, including our interest in Seven Heads
oil. The funds raised by Lansdowne amount to over £2.3 million before expenses
and ensure that it has the ability to meet its current obligations to the Irish
authorities. We had already farmed out our interest in the Frontier Exploration
Licence in the Donegal basin, retaining a 19.25 per cent. carried interest, and
this asset was also transferred to Lansdowne. Drilling is scheduled to commence
next month. At the time of its listing Lansdowne achieved a market
capitalisation of £17.7 million with Ramco retaining an interest of 86.25 per
cent.


Montenegro.

We have been successful in converting our 40 per cent. working interest, which
we could not fund, into a carried option which entitles us to rejoin the project
by acquiring an interest of up to 15 per cent. The option can be exercised after
a successful well has been drilled. The operator, Jugopetrol Kotor, a subsidiary
of Hellenic Petroleum, is negotiating with the newly independent Government of
Montenegro with the objective of agreeing a drilling programme in the near
future.


Bulgaria.

In January 2005 we announced that we had converted our 20 per cent. working
interest in the A Lovech block, onshore Bulgaria, into an 11 per cent. interest
carried through a planned extensive 3D seismic programme. A change in ultimate
ownership of the operator in this project, Anschutz Bulgaria Limited, was the
catalyst for a change to the plans for the block, with the objective of
accelerating a drilling programme. We have in the past few weeks agreed a
revised deal, whereby our interest reverts to its former level of 20 per cent.
whilst being fully carried through this year's work programme. The work
programme now includes a smaller seismic survey combined with the use of the
operator's proprietary technology aimed at firming up a well site for drilling
in 2007.


Outlook

We have come a very long way over the past year and now have a new sense of
purpose and optimism. Following the sale of our interest in the Seven Heads gas
field, the Company is almost debt-free, holds a major asset in the form of
Lansdowne shares, where the current market value of our interest is £13 million,
and has other exploration interests through which we are largely carried and
which have the potential to create additional value.

Our intention now is to pick up where we left off in 2000. Ramco will aim to
serve as a vehicle to initiate new ventures, initially as subsidiaries or joint
ventures and these may be private or public as in the case of Lansdowne. We are
also looking at potential new ventures in the Middle East and Caspian area,
where we were a major player throughout the 90s.

Our strategy will be to remain 'lean and mean' with a small corporate group that
has achieved significant successes, but also one which has been through the wars
- an experience that we believe will serve us well for the future.


Stephen E Remp
Chairman

                                Ramco Energy plc
                              Preliminary Results
                      Consolidated Profit and Loss Account
                                   Unaudited
                      For the year ended 31 December 2005

                                                             2005                               2004
                                         Continuing  Discontinued           Continuing  Discontinued     Total
                                         operations    operations    Total  operations    operations  Restated
                                   Note       £'000         £'000    £'000       £'000         £'000     £'000

Turnover - Group and share of                             
joint venture and associates                     -        17,212   17,212            -       45,568    45,568   
Less share of joint venture and                           
associates                                       -        (3,548)  (3,548)           -       (3,641)   (3,641)         

Group turnover                        2          -        13,664   13,664            -       41,927    41,927           
                       
Cost of sales before exceptional              
item                                          (475)      (22,060) (22,535)       1,071      (46,590)  (45,519)
Exceptional item                      3          -        15,681   15,681            -        5,714     5,714           
Cost of sales after exceptional               
item                                          (475)       (6,379)  (6,854)       1,071      (40,876)  (39,805)

Gross (loss) / profit                         (475)        7,285    6,810        1,071        1,051     2,122
Administrative expenses                     (1,030)         (445)  (1,475)       (995)         (426)   (1,421)
(Loss)/profit on exchange                       (2)                    (2)       (233)          130      (103)
                                                               -
Group operating (loss) / profit             (1,507)        6,840    5,333        (157)          755       598
Exceptional item                      4          -          (809)    (809)           -            -         -           
Share of operating profit in                                         
joint venture and associates                     -           656      656            -          681       681           
   
(Loss) / profit before interest             (1,507)        6,687    5,180        (157)        1,436     1,279
and taxation
Net interest payable                                               (3,290)                             (4,565)

Profit /(loss) on ordinary            
activities before taxation            2                             1,890                              (3,286)
Tax charge on profit/ (loss) on                                       
ordinary activities                                                   (84)                                (91)

Profit /(loss) for the financial     
year                                 11                             1,806                              (3,377)

Profit / (loss) per ordinary
share - basic and fully diluted
On profit / (loss) for the            
financial year                        5                               5.7p                             (11.2)p


There is no material difference between the profit on ordinary activities before
taxation and the retained profit for the year stated above, and their historical
cost equivalents.


          Consolidated Statement of Total Recognised Gains and Losses
                      For the year ended 31 December 2005

                                                                                  2005       2004
                                                                                 £'000      £'000

Profit / (loss) for the financial year                                           1,806    (3,377)
Unrealised translation differences on foreign currency                                        16
net investments                                                                      -

Total recognised profit / (loss) relating to the year                            1,806    (3,361)



                                Ramco Energy plc
                              Preliminary Results
                                 Balance Sheets
                                   Unaudited
                             As at 31 December 2005

                                                                        Group                  Company
                                                                  2005       2004         2005       2004
                                                    Note         £'000      £'000        £'000      £'000

Fixed assets
Intangible assets                                    7          6,278      5,906           -           -
Other tangible fixed assets                          8         11,567     16,706         1,514     1,654

Investments
   Share of joint venture's gross assets                            -      2,575            -          -
   Share of joint venture's gross liabilities                       -     (1,503)           -          -

   Share of joint venture's net assets                              -      1,072            -          -
   In subsidiaries                                                  -          -            -      3,000
   In associated undertakings                                       -         80            -          -
   Other fixed asset investments                                    -          2            -          2

Total investments                                                   -      1,154            -      3,002

                                                               17,845     23,766        1,514      4,656

Current Assets
Stocks                                                              -      2,331            -          -
Debtors: amounts falling due within one year                    1,648      5,203          264      2,279
Cash at bank and in hand                                        4,799      3,265        1,311        119

                                                                6,447     10,799        1,575      2,398
Creditors: amounts falling due within one year                (11,618)   (24,808)      (1,299)      (760)

Net current (liabilities)/assets                               (5,171)   (14,009)         276      1,638

Total assets less current liabilities                          12,674      9,757        1,790      6,294

Provisions for liabilities and charges                         (5,385)    (5,274)         (26)       (38)

Net assets                                                      7,289      4,483        1,764      6,256

Capital and reserves
Called up share capital                                         3,314      3,014        3,314      3,014
Share premium account                                          69,294     68,576       69,294     68,576

Revaluation reserve                                                 -        752            -          -

Other reserves                                                     -         (21)           -          -
Profit and loss account                              11       (65,319)   (67,838)     (70,844)   (65,334)

Equity shareholders' funds                           12         7,289      4,483        1,764      6,256



                                Ramco Energy plc
                              Preliminary Results
                        Consolidated Cash Flow Statement
                                   Unaudited
                      For the year ended 31 December 2005

                                                                           2005         2004
                                                              Note        £'000        £'000

Net cash inflow from operating activities                    13(a)        3,542        6,728

Returns on investments and servicing of finance
Interest received                                                           147          376
Interest paid                                                              (785)      (3,994)

Net cash outflow from returns on investments and servicing                 
of finance                                                                 (638)      (3,618)

Taxation
Overseas corporation tax paid                                               (27)        (170)

Taxation paid                                                               (27)        (170)

Capital expenditure and financial investment
Purchase of tangible fixed assets                                          (216)         (86)
Sale of tangible fixed assets                                                 9           54
Oil & gas expenditure - intangible assets                                  (372)      (1,370)
Oil & gas expenditure - producing assets                                      -      (10,202)
Receipt of sale of other fixed asset investments                            144           42

Net cash outflow for capital expenditure and financial                     
investment                                                                 (435)     (11,562)

Disposal
Net proceeds from sale of subsidiary                                     11,801            -

Net cash inflow from disposal                                            11,801            -

Net cash inflow/(outflow) before financing                               14,243       (8,622)

Financing
Issue of share capital                                                    1,018            -
(Decrease)/increase in debt                                             (13,727)       8,600

Net cash (outflow)/inflow from financing                                (12,709)       8,600

Increase/(decrease) in cash                                  13(b)        1,534          (22)





                               Ramco Energy plc
                              Preliminary Results
                       Notes to the Financial Statements
                                   Unaudited
                      For the year ended 31 December 2005


 1. Accounting policies


Basis of presentation

The financial statements have been prepared on the going concern basis which
assumes that the Company and its subsidiaries will continue in operational
existence for the foreseeable future.

The Group balance sheet as at 31 December 2005 shows net current liabilities of
£5.2 million. However, the Director's consider that it is appropriate to adopt a
going concern assumption in preparing these financial statements as the
following significant developments occurred after the balance sheet date:

(i) The bank loan of £8.2 million shown in Creditors (amounts falling due within
one year) was repaid in February 2006 following the sale of the Group's interest
in the Seven Heads gas field. This loan repayment was sufficient to return the
Group balance sheet to positive net current assets.

(ii) As described in note 10, the Company has issued new shares raising
additional funding of £298,000.

(iii) The Group successfully completed the listing of their subsidiary Lansdowne
Oil & Gas plc on the Alternative Investment Market (AIM). The Group owns 86.25%
of Lansdowne Oil and Gas plc, which has a current market value of £13 million.

(iv) In June 2006, the Fourteenth Court of Appeals in Texas reversed the trial
court's judgement in respect of the Tenge lawsuit. This decision resulted in all
arrestments and inhibitions, that had previously been placed on the Group, being
lifted. As a result, missives have now been completed for the sale of the
Company's head office building in Aberdeen. The £1.5m of funds from this sale
are expected to be received before the end of June.

(v) The Directors are currently reviewing a number of alternative funding
arrangements to allow the Group to exploit its development opportunities.

The Directors have prepared cash flow forecasts for the Group for the period
ending 12 months from the date of approval of these financial statements. These
cash flows take into account the proceeds from the sale of the building and
indicate that the Group will have adequate cash resources to meet its
obligations as they fall due. For these reasons, the Directors believe that it
is appropriate for the financial statements to be prepared on the going concern
basis.

If for any reason the cash flow assumptions proved to be invalid, the going
concern basis may no longer be applicable and adjustments to the Group profit
and loss account and Group balance sheet would be required to record additional
liabilities and write down assets to their recoverable amounts.



2. Segmental Reporting
                                                   Oil & Gas             Oil Services             Total
                                            2005           2004        2005      2004         2005        2004
                                           £'000          £'000       £'000     £'000        £'000       £'000

Turnover                                   4,787         32,861      12,425    12,707       17,212      45,568
Less joint venture and associates              -              -      (3,548)   (3,641)      (3,548)     (3,641)

Group turnover                             4,787         32,861       8,877     9,066       13,664      41,927

Profit /(loss) before taxation

Group                                      4,148            729       3,318     2,074        7,466       2,803
Less Joint venture and associates              -              -        (656)     (681)        (656)       (681)

Group gross profit                         4,148            729       2,662     1,393        6,810       2,122
Joint venture and associates                   -              -         656       681          656         681
                                           4,148            729       3,318     2,074        7,466       2,803
Administrative expenses                   (1,030)          (995)       (445)     (426)      (1,475)     (1,421)
Exceptional item                               -              -        (809)        -         (809)          -
(Loss)/profit on exchange                    (38)           (53)         36       (50)          (2)       (103)

Profit / (loss) before interest and        
taxation                                   3,080           (319)      2,100     1,598        5,180       1,279
Net interest                                                                                (3,290)     (4,565)

Profit /(loss) before taxation                                                               1,890      (3,286)

The Ramco Oil Services sub group was sold in December 2005 and so this part of
the business has been classed as discontinued.

The turnover for the oil and gas division relates to the Seven Heads gas field
which was sold after the year end. This has been included in discontinued
operations in the profit and loss account. A proportion of the administrative
expenses for the oil and gas division are also included in discontinued
operations.


3. Exceptional Item - Seven Heads
                                                                                               2005        2004
                                                                                              £'000       £'000

Impairment provision - Seven Heads                                                              634      47,698
Reversal of impairment provision - Seven Heads                                              (5,485)          -
Impairment borne by finance provider                                                       (10,830)    (53,412)
Mezzanine finance written off                                                               (8,600)          -
Reversal of impairment provision borne by finance provider                                    8,600          -

                                                                                           (15,681)     (5,714)


In accordance with the SORP further impairment in the carrying value of Seven
Heads is being borne by the non-recourse finance provider, resulting in a credit
of £10.8 million (2004: £53.4 million).

The impairment provision against the asset was made in 2004 (£47.7 million) and
there was a net reversal in 2005 (£4.9 million) to reflect the net realisable
value of the asset on disposal.


Ramco Energy plc
Preliminary Results
Notes to the Financial Statements
Unaudited
For the year ended 31 December 2005


4. Exceptional Item - Disposal of Subsidiary
                                                                                                  2005      2004
                                                                                                 £'000     £'000

Loss on sale of subsidiary                                                                         809         -


On 16 December 2005 the Group sold Ramco Oil Services Limited together with its
subsidiaries for £12.6 million in cash, after costs. The ROSL sub group provided
downhole tubular maintenance and pipeline coating services and the disposal of
ROSL sub group ceased the Ramco Group's involvement in these activities. As a
result of the material change in the nature and focus of the Group's operations
that this disposal represented, it has been treated as a discontinued operation
in the profit and loss account (see note 13(d)).



5. Earnings / (Loss) Per Share

Basic and fully diluted earnings/(loss) per share

The calculation of earnings/(loss) per share is based on the profit for the
financial year of £1.8 million (2004: loss of £3.4 million) and 31,714,576
(2004: 30,144,713) ordinary shares, being the weighted average number of
ordinary shares in issue during the year.
                                                           2005                                    2004

                                    Continuing      Discontinued              Continuing    Discontinued
                                    operations        operations       Total  operations      operations    Total
                                         £'000             £'000       £'000       £'000           £'000    £'000
Profit/(loss) before interest
and taxation                           (1,507)            6,687       5,180        (157)          1,436     1,279
Net interest                               18            (3,308)     (3,290)        301          (4,866)   (4,565)

Profit/(loss) on ordinary
activities before taxation             (1,489)            3,379       1,890         144          (3,430)   (3,286)
Tax (charge)/credit on profit/
(loss) on ordinary activities             (21)              (63)        (84)        552            (643)      (91)

Profit/(loss) for the financial        
year                                   (1,510)            3,316       1,806         696          (4,073)   (3,377)
Profit/(loss) per ordinary
share - basic
and fully diluted on profit/(loss)
for the financial year                  (4.8)p            10.5p        5.7p        2.3p          (13.5)p   (11.2)p


For dilutive earnings per share, the weighted average number of ordinary shares
in issue is adjusted to assume conversion of all dilutive potential ordinary
shares. The Group has two classes of dilutive potential ordinary shares, share
options and share warrants. The lowest exercise price of the share options is
34p per share. In August 2005 warrants over 3,000,000 shares of 10p each, with
an exercise price of 34p, each were issued to the Group's lenders. Share options
and warrants are only considered dilutive if their exercise price is below the
average market price of the shares for the period. On that basis none of the
share options or warrants are considered dilutive for the current period.


6. Taxation

The prior year deferred tax disclosures included a potential deferred tax
liability relating to the disposal of the ACG interest in 2000. This liability
was held over against expenditure incurred developing the Seven Heads interest.
The disposal of the Seven Heads interest from Ramco Seven Heads Limited and
Northern Exploration Limited to Ramco Celtic Sea Limited caused the heldover
gain to crystallise, but also caused significant UK tax losses to be generated.
The UK tax losses generated have largely been utilised offsetting the heldover
gain, such that no tax liability arises on the heldover gain in 2005 and no
further potential liability exists at 31 December 2005.


7. Intangible Fixed Assets                                                       Group Exploration Costs
                                                                                      2005         2004
                                                                                     £'000        £'000

At 1 January                                                                         5,906        4,536
Additions                                                                              372        1,370
At 31 December                                                                       6,278        5,906

Oil and gas project expenditures, including geological, geophysical and seismic
costs, are accumulated as intangible fixed assets prior to the determination of
commercial reserves. At 31 December 2005, intangible fixed assets totalled £6.3
million (2004: £5.9 million), all of which relates to Ireland and central and
eastern Europe.


8. Other Tangible Fixed Assets
                                                                                      2005         2004
Cost and net book value                                                              £'000        £'000

At 1 January                                                                        16,706       72,782
Retranslation                                                                            -            3
Additions                                                                              216        1,347
Disposals                                                                           (9,074)         (91)
Depreciation                                                                        (1,132)      (9,637)
Impairment                                                                           4,851      (47,698)

At 31 December                                                                      11,567       16,706



9. Creditors: Amounts Falling Due After More Than One Year
                                                                                      2005         2004
                                                                                     £'000        £'000

Bank Loans  - Main & mezzanine                                                      68,415       68,415
                  - Unpaid gas price hedge                                          13,199         2,343
                  - Unpaid interest on loan                                          4,556         2,329
Repaid during the year                                                             (13,727)           -

                                                                                    72,443       73,087
Less: Impairment borne by finance provider                                         (64,242)     (53,412)

                                                                                     8,201       19,675
Amounts falling due within one year                                                 (8,201)     (19,675)

                                                                                         -            -


This relates to a £68.6 million project finance facility arranged for the Seven
Heads gas field development which was due to be repaid in six monthly
instalments. The net cash generated from the field was insufficient to meet the
repayments. The Company announced on 20 June 2005 that it had reached agreement
with its Bankers regarding these matters. Under the terms of this agreement, the
Group's Bankers granted waivers in respect of arrears of capital and interest
and breach of financial covenants until the earlier of (a) 31 December 2005 and
(b) the later of (i) the formal conclusion of the sale of the business and
assets of ROSL and (ii) the formal conclusion of the sale of the business and
assets of, and/or the interest of financial covenants until the earlier of (a)
31 December 2005 and (b) the later of (i) the formal conclusion of the sale of
the business and assets of ROSL and (ii) the formal conclusion of the sale of
the business and assets of, and/or the interest of Ramco and its subsidiaries
in, RSHL and NEL. The Company also issued warrants to the lenders for 3,000,000
ordinary shares of 10p at a price of 34p.

The amount of £64.2 million (2004: £53.4 million) provided above represents an
adjustment to bring the non-recourse element of the loan creditor in line with
the net present value of future cash flows expected from the gas field in
accordance with the Statement of Recommended Practice Accounting for Oil and Gas
Exploration, Development, Production and Decommissioning Activities.

The £8.2 million outstanding at 31 December 2005, was repaid in full in February
2006 following the sale of the Group's interest in the Seven Heads gas field.


10 . Share Capital

In June 2005 the Company completed the placing of 3,000,000 new ordinary shares of 10p
each at an issue price of 34p per share. The placing raised £1 million net of expenses.

Since 1 January 2006 there have been two placings of shares. On 5 April 2006, 520,322 new
ordinary shares of 10p each were issued for 28.5 per share. The issue raised £148,000.

On 1 June 2006 952,380 new ordinary shares of 10p each were issued for 10.5p per share
and 400,400 new ordinary shares of 10p each were issued for 12.5p per share. The issue
raised £150,000.


11. Profit and Loss account
                                                                        2005        2004
                                                                       £'000       £'000

At 1 January                                                         (67,838)    (64,461)
Profit / (loss) for the year                                           1,806      (3,377)
Revaluation reserve released on disposal                                 713           -

At 31 December                                                       (65,319)    (67,838)


12. Movement in Shareholders' Funds
                                                                        2005        2004
                                                                       £'000       £'000

Profit / (loss) for the financial year                                 1,806      (3,377)
Other recognised gains and losses relating to the year                     -          16
Issue of ordinary share capital                                        1,018           -
Movement in revaluation                                                    -         (41)
Amortisation of deferred gain on asset sold to joint venture             (18)        (17)

Net change in shareholders' funds                                      2,806      (3,419)
Shareholders' funds at 1 January                                       4,483       7,902

Shareholders' funds at 31 December                                     7,289       4,483


13. Notes to Consolidated Cash Flow Statement
          
    (a)  Reconciliation of operating profit / (loss) to net cash flow from
          operating activities
                                                                    Continuing  Discontinued       2005      2004
                                                                         £'000          £'000     £'000     £'000

Operating (loss) / profit                                               (1,507)         6,840     5,333       598
Amortisation of goodwill                                                     -             30        30        30       
Gain on sale of investments                                               (142)             -      (142)        -       
Depreciation of tangible fixed assets                                      301            832     1,133     9,637
(Gain)/loss on sale of tangible fixed assets                                (9)             -        (9)       37       
Amortisation of deferred gain on asset sold to joint venture                 -            (18)      (18)      (17)
Decrease/(increase) in stocks                                                -          2,109     2,109       (66)
(Increase)/decrease in debtors                                            (107)          (141)     (248)    2,448
Increase/(decrease) in creditors                                           685           (328)      357    (2,446)
(Decrease)/increase in other provisions                                   (178)             -      (178)      100
Impairment provision                                                         -         (4,851)   (4,851)   47,698
Unpaid gas price hedges added to loan                                        -         10,856    10,856     2,343       
Impairment borne by finance provider                                         -        (10,830)  (10,830)  (53,412)
Exchange difference on retranslation                                         -              -         -      (222)

Net cash inflow from operating activities                                 (957)         4,499     3,542     6,728


(b) Reconciliation of net cash flow to movements in net debt
                                                                                                   2005      2004
                                                                                                  £'000     £'000

Increase/(decrease) in cash in the year                                                           1,534       (22)
Cash outflow/(inflow) from reduction/(increase) in debt                                          13,727    (8,600)
Revaluation of bank loan - exchange difference                                                        -       240
Impairment borne by finance provider                                                             10,830    53,412
Unpaid gas price hedges and interest on loan                                                    (13,083)   (4,672)

Change in net debt resulting from cash flows                                                     13,008    40,358

Net (debt) / funds at start of the year
Cash at bank and in hand                                                                          3,265     3,297
Debts due within one year                                                                       (19,675)  (10,000)
Debts due after one year                                                                              -   (50,055)

                                                                                                (16,410)  (56,758)

Net debt at the end of the year                                                                  (3,402)  (16,400)

Represented by:
Cash at bank and in hand                                                                          4,799     3,265
Debts due within one year                                                                        (8,201)  (19,675)

                                                                                                 (3,402)  (16,410)

Liquid resources represent short term deposits not qualifying as cash



13. Notes to Consolidated Cash Flow Statement continued

                                               Unpaid    Unpaid    Impairment
(c) Analysis of net (debt) / funds      At 1      gas  interest         borne                             At 31
                                    January     price        On    by finance                          December
                                        2005   hedges       loan     provider     Repaid     Cash          2005
                                      £'000     £'000      £'000        £'000      £'000    £'000         £'000

Cash at bank and in hand              3,265         -         -             -          -    1,534         4,799         
       
Debt due within one year            (19,675)  (10,856)   (2,227)       10,830     13,727        -        (8,201)

                                    (16,410)  (10,856)   (2,227)       10,830     13,727    1,534        (3,402)


(d) Disposal of ROSL

The Group disposed of its Oil Services division on 16 December 2005. (see 
note 3)
                                                                                                        £'000

Tangible fixed assets                                                                                   9,073
Stocks                                                                                                    222
Investments                                                                                             1,586
Debtors                                                                                                 4,034
Creditors                                                                                              (2,305)

                                                                                                       12,610
Loss on disposal                                                                                         (809)

Cash inflow from disposal                                                                              11,801


The ROSL group contributed £0.7 million to the net operating cash flows.


14. Litigation

Following a jury verdict in October 2003, the Texas State Court issued a
Preliminary judgement on 1 April 2004 against Ramco Energy plc, Ramco Oil
Limited and certain other defendants in a case alleging breach of contract
arising from confidentiality and non-circumvention obligations. These
obligations arose while Ramco was considering investment in an oilfield
development project in Kazakhstan which Ramco subsequently decided not to
pursue. Ramco's appeal, and the plaintiff's cross appeal, were heard in Houston
on 26 April 2005. On 6 June 2006, the Fourteenth Texas Court of Appeals
delivered its decision on the appeals lodged by both parties to the lawsuit. The
original judgment issued to Anglo Dutch in 2004 was reversed in its entirety.
The decision concluded by stating 'we reverse the trial court's judgement and
render judgement that the Plaintiffs take nothing against the Ramco Parties.'

The arrestments and inhibitions which had been obtained by the plaintiffs from
the Court of Session, which had been hampering the Group's ability to carry out
its business, have now been lifted.

The plaintiffs have filed a motion with the Court of Appeals for a re-hearing,
but the Directors do not consider that is necessary to alter the existing
provision in Ramco's accounts which should cover the costs of this anticipated
procedure.

Because of the uncertainty surrounding the range of possible outcomes, the
Directors considered it was not possible to make a reliable estimate of the
likely outcome of the appeal process beyond providing an estimate of the legal
costs of pursuing the appeals, and accordingly a provision of $1,000,000
(£559,000) was made in 2003. £181,000 was utilised during 2005 (2004: 217,000)
leaving a remaining provision of £161,000 (2004: £342,000). When Preliminary
legal fees have been quantified and recovery of costs resolved, any balance
remaining of the accounts provision will be released to the profit and loss
account.


15. Contingent Liabilities

a) Ramco Energy plc granted a parent company guarantee in respect of its wholly
owned subsidiary Medusa Oil and Gas Limited (Medusa) to Jugopetrol A.D. Kotor
(JPK) on 11 February 2003. The guarantee covers the obligations of Medusa
arising from an agreement with JPK to carry out a specified work programme in
connection with their interests in Montenegro. In February 2005 Ramco and
Hellenic, JPK's parent company, restructured their relationship in Montenegro.
This guarantee expired on 15 February 2006.

b) Ramco Energy plc, on behalf of the Seven Heads co-venturers, has entered into
an agreement with Bord Gais Eireann('BGE') to underwrite a proportion of the
costs incurred by BGE in relation to the upgrade and refurbishment of the
Midleton gas compressor station. The maximum liability under this agreement is
€6 million but is reduced annually each October according to the amount of
tariff revenue received by BGE from shippers of Seven Heads gas. Ramco have
assessed their worst case liability at €5.0 million. The net present value of
this liability is €2.8 million. In light of the expectation that the Seven Heads
gas field will continue to produce gas for several more years no provision is
currently considered necessary.

Following the sale of Ramco Celtic Sea Limited in February 2006 any and all
exposure of Ramco to this contingent liability is covered by a back to back
undertaking with Marathon Seven Heads Limited and guaranteed by Marathon Oil
Corporation.


16. Post Balance Sheet Events

(a) Sale of Ramco Celtic Sea Limited

On 2 February 2006 the Company concluded the sale of its subsidiary, Ramco
Celtic Sea Limited, which held its 86.5% interest in the Seven Heads gas field
for £5.3 million in cash, net of expenses, to Marathon International Petroleum
Hibernia Limited. All of the proceeds of the sale, after costs, flowed to the
Company's project finance lenders and retired sums due to them. The carrying
value of the interest in the gas field had been reduced to the realisable amount
at 31 December 2005 and consequently no gain or loss on disposal arose.


(b) Flotation of Lansdowne Oil and Gas plc

On 22 February 2006 the Company announced that it had placed its Irish
exploration assets under the control of a recently established subsidiary,
Lansdowne Oil and Gas plc ('Lansdowne'), which had completed a £750,000 private
placing to provide working capital for the exploration assets.

On 21 April 2006 the issued share capital of Lansdowne was admitted to trading
on the AIM market in conjunction with a placing of 1,882,353 shares at an issue
price of 85p which raised £1.6 million before expenses. At the placing price,
Lansdowne had a market capitalisation of £17.7 million. The Company, through its
subsidiaries, retained an 86.25% interest in Lansdowne following the issue of
the new capital.


(c) Litigation

On 6 June 2006, the Fourteenth Texas Court of Appeals delivered its decision on
the appeals lodged by both parties to the Tenge lawsuit. The original judgement
issued to Anglo Dutch in 2004 was reversed in its entirety. The decision
concluded by stating 'we reverse the trial court's judgement and render
judgement that the Plaintiffs take nothing against the Ramco Parties' (see note
14)


(d) Placing of shares

On 5 April 2006 the Company issued 520,322 new ordinary shares of 10p each at a
price of 28.5p to the pension fund of Stephen Remp, Chairman. The placing raised
£148,000 to supplement working capital.

On 1 June 2006 the company issued 400,400 ordinary shares of 10p each to the
pension fund of Stephen Remp at a price of 12.5p per share and also 952,380
ordinary shares of 10p each to an institutional investor at a price of 10.5p
each. The placing raised £150,000.


(e) Office building

Following the disposal of our Oil Services division and our only producing
assets the Seven Heads gas field we have considerably reduced our head office
staffing levels and our existing office is now too large for our needs. As a
result we have concluded the sale of the building for £1.5 million and we will
shortly be relocating to new offices.


(f) Bulgaria

In January 2005 we announced that we had converted our 20% working interest in
the A Lovech block onshore Bulgaria into an 11 % interest carried through a
planned extensive 3D seismic programme. A change in ultimate ownership of the
operator in this project Anschutz Bulgaria Limited was the catalyst for a change
to the plan for the block, with the objective of accelerating a drilling
programme. We have in the past few weeks agreed a revised deal where our
interest reverts to its former level of 20% but we are fully carried through
this years work programme. The work programme includes a smaller


16. Post Balance Sheet Events continued

seismic survey and use of the operators proprietary technology aimed at firming
up a well site for drilling in 2007.


17. Comparative information

Due to the fall in production of the Seven Heads gas field the Directors
consider that it is more appropriate to show the hedge costs in the cost of
sales rather than turnover. The prior periods have been restated to reflect this
with no effect on the gross profit or net loss.

The comparative financial information is based on statutory accounts for the
year ended 31 December 2004. Those accounts, upon which the auditors have issued
an unqualified opinion, have been delivered to the Registrar of Companies.


18. Annual Report and Financial Statements

The auditors have indicated that it is their intention to issue a modified
opinion on the financial statements to draw attention to the matters discussed
in note 1.

The Annual Report and Financial Statements will be mailed to shareholders and is
available from the company's website, www.ramco-plc.com.



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