Final Results
Europa Oil & Gas (Holdings) plc
Preliminary Announcement
Final results for the year ended 31 July 2007
Europa Oil & Gas (Holdings) plc (EOG), the independent oil & gas exploration
and production group with assets in Europe and North Africa, today announces
its final results for the 12 months ended 31 July 2007.
Activity during the last 12 months:
* Acquired the Crosby Warren Oilfield, UK East Midlands - increased output
* Independent Reserves Assessment of UK assets increased P50 remaining net
reserves by 75%
* Commenced drilling development well Crosby Warren-2Y in the UK East
Midlands
* Agreed terms with Gemini for the repayment of a loan in relation to the
West Firsby Field
* Sold 77,150 net barrels of crude oil in the UK
* Acquired prospect-defining seismic in PEDL150, near the Whisby Field, East
Midlands
* Awarded a Promote Licence covering a large Carboniferous prospect in the
East Irish Sea (UKCS)
* Submitted Planning Application for Holmwood-1 well, UK Weald Basin
* Ratified PSC on West Darag Concession, Egypt
* Awarded Béarn des Gaves Permit in the Aquitaine Basin, France
* Commenced drilling the appraisal well Costisa-2 (Romania), to evaluate the
gas sands in Costisa-1
* Drilled two unsuccessful exploration wells in Romania for shallow gas
* Reached agreement to sell the Company's interest in Bilca and Fratauti
Gasfields, Romania
* Acquired further exploration seismic in Romania
Financial Highlights:
* Turnover of £3.122m (2006: £2.825m)
* Operating loss of £0.860m after exploration and appraisal write-downs
(2006: £1.019m profit)
* Loss before tax of £1.699m (2006: £0.844m profit)
* Loss after tax of £2.126m (2006: £0.639m loss)
* Secured from Royal Bank of Scotland debt funding to purchase Crosby Warren
Oilfield and in addition a financing facility of up to £2m
* 958,919 ordinary shares issued for net proceeds of £190,000
Post balance sheet events:
* Completion of Crosby Warren-2Y well as a producer
* Testing operations commenced on Costisa-2Y
* Drilled Boistea-1, a deep Sarmatian exploration well in Romania, preparing
to test
* Relocated to new UK office
Chairman's Statement
The past year has seen significant activity for the Company, on both
operational and licensing fronts. During the year, Europa commenced drilling
two wells as Operator and participated in a further two. The Company also
participated in two seismic acquisition campaigns and acquired 3 more licences
in its Europe-North Africa core areas. In addition, a restructuring of the
Company's Romanian portfolio has led to monetizing of reserves and reducing the
risk profile of its forward exploration programme.
UK onshore production remains the backbone of Europa's cash generation and its
three producing assets in the East Midlands produced 77,150 barrels of crude
during the year representing 80% of the group turnover of £3.122 million. The
remaining 20% of the group turnover was from the Bilca Gasfield in Romania.
The Directors decided that it was in the Company's interest to restructure its
Romanian portfolio to enable more resources and funds to be directed towards
its UK producing interests. This restructuring resulted in monetizing the Bilca
Gasfield asset whilst reducing the Company's interest in the Cuejdui and Bacau
exploration concessions.
At the end of the reporting period, Europa engaged ERC to undertake a review of
reserves in the Company's East Midlands fields and the conclusions are that
there are P50 remaining reserves net to Europa of 1.0mmbo, an increase of 75%
on previous estimates. Despite the UK Treasury's opportunistic supplemental tax
levy on all UK oil production, ERC report a healthy post-tax net present value
of these assets of between £4.4 and £12.9 million. These findings are discussed
later in the statement.
An appraisal of the gas shows encountered in the Romanian Costisa-1 well was
spudded in May 2007 and reached TD in August. A gross interval of 43 metres
yielded strong gas shows of over 50% formation gas although the drill stem
test, conducted after year-end, resulted in the testing of gas at
non-commercial rates. The low flow rates were probably as a result of low
permeability reservoir. In order to increase productivity in the well, a
proppant fracture stimulation is being contemplated.
With regards to exploration activity, in addition to the Europa-operated
Costisa-2 well, Europa participated in two Romanian exploration wells during
the year, both of which were unsuccessful. A third exploration well in Romania,
Boistea-1, was spudded after year-end and will be tested in early November.
Seismic acquisition campaigns were undertaken in the East Midlands and Romania.
The seismic in the East Midlands was designed to mature a number of leads to
prospect status in the PEDL150 licence to the southwest of Lincoln. The
Romanian seismic, acquired following year-end, was designed to develop a
drilling location for the Voitinel exploration well. It is anticipated that
both a PEDL150 well and Voitinel will be drilled in 2008.
Field development operations were also undertaken during the year, where the
Crosby Warren-2 well was sidetracked to drain an unswept area of the field. The
initial data indicate reservoir pressure is higher than anticipated, close to
the bubble point of the oil and the strong gas flows encountered immediately
following perforating are probably being liberated as the well is drawn down to
produce. The well is now on pump and early indications are that the well will
need a fracture stimulation treatment similar to that required on Crosby
Warren-1, which has produced in excess of 600,000 barrels of oil post-frac.
On the new ventures front, Europa has increased its holdings in all its core
areas - UK, onshore Europe and North Africa. In the UK East Midlands, the
Company acquired a 100% interest in the Crosby Warren oilfield. Offshore UK,
Europa was awarded a licence in the 24th Round covering Blocks 109/5 and 112/30
in the East Irish Sea Basin. Onshore Europe, the Company was awarded an
exploration licence in the Aquitaine Basin of southwest France, close to the
super-giant Lacq and Meillon gasfields.
As part of Europa's exploration strategy in North Africa, the West Darag
onshore Egypt concession was ratified by the government and exploration work is
due to start later in 2007.
The Company has funded its capital programme primarily through production
incomes and a credit facility with the Royal Bank of Scotland. During the
reporting period, Europa enjoyed oil and gas revenues of £3.12 million, 10% up
on the previous period. The Directors have accepted a write-down of exploration
and appraisal assets in Ukraine and Romania totalling £1.59 million, resulting
in an operating loss of £0.86 million.
Finally, the Company has relocated its head office functions to new offices
outside Oxford. This step was taken to pull all the expertise within the
Company into one central focus point and will maximise operational efficiency.
We are looking forward to 2008 - several high profile wells are expected to be
drilled with significant reserves potential in the UK and Romania. Work on
increasing production in our East Midlands fields will continue and we
anticipate another busy and fruitful year ahead.
Sir Michael Oliver, Chairman
Operations Report
Licence Interests Table
Block/Field Country Operator Equity Comments
West Firsby UK Europa 100% Production
Crosby Warren UK Europa 100% Production
Whisby-4 UK Blackland 65% Production
PEDL150 UK Europa 50% Gravel Pits-1 well planned
for 2008
PEDL143 UK Europa 40% Holmwood-1 well planned for
2008
109/5 & 112/30 UK Europa 50% Large Carboniferous Prospect
EPI-3 Brates (E/W) Romania Europa/MND 52.8/20% Costisa-1 well testing
EIII-1 Brodina Romania Aurelian 27.5% Voitinel-1 well planned for
2008
EIII-3 Cuejdui Romania Aurelian 17.5% Boistea-1 well testing
EIII-4 Bacau Romania Aurelian 19% Lillechi-1 well planned
later in 2007
Horodok Ukraine Europa 70% Asset sale planned
West Darag Egypt Europa 60% G&G work planned for 2008
Béarn des Gaves France Europa 100% Seismic processing/
interpretation
Hagounia/Bir SADR Europa 100% Limited fieldwork possible
Lehlou 2008
Note: this table assumes full take-up of farmin options in the Romanian
Licences and PEDL150
United Kingdom
Europa operates five licences in the UK: three in the East Midlands Oil
Province, one in the Weald Basin and one in the East Irish Sea Basin. In
addition, the Company holds a non-operated interest in production from a
further East Midlands oilfield.
With the acquisition of the Crosby Warren Field (100%), oil production has
increased and, despite a two month-long shutdown of production from West
Firsby, total portfolio oil production for the year totalled 77,150 barrels, a
similar volume to the previous reporting period.
Immediate production increases were achieved at Crosby Warren on acquisition
and a second production well was drilled in July 2007. The initial sidetrack
showed the reservoir to be deep to prognosis and a decision was made to
initiate a second sidetrack to the south of the field, resulting in a reservoir
penetration at a similar depth to the existing producer, Crosby Warren-1. The
well was drilled underbalanced to reduce reservoir damage and subsequently
perforated after year-end across the upper part of the Beacon Hill Flags
reservoir. Strong gas flows were encountered at volumes and pressures beyond
the capability of the existing production facilities. Consequently, the well
was shut-in whilst site modifications were carried out.
The well has now been completed and put on pump. Early indications are that the
well will require a fracture stimulation treatment to reach its full potential,
as did the Crosby Warren-1 well, which then went on to produce over 600,000
barrels of oil to date.
Work is planned in the coming months on West Firsby Field (100%) to decrease
water production by utilising water shutoff treatments. It is hoped that by
reducing the water production by shutting off high water producing zones, the
pumps will lift higher oil volumes. This will be undertaken on a trial basis on
the shut-in WF4 well, before moving on to other wells if successful. In
addition, work is anticipated to commence in early 2008 on re-completing WF8 as
a producer. Over the period, West Firsby produced 32,536 barrels (2006: 40,430
bbls), down on the previous period primarily as a result of a two month
shut-down earlier in 2007.
On the exploration front, a planning application for drilling the Holmwood-1
exploration well on the PEDL143 licence (40%) was lodged in April 2007 and
following extensive modifications to satisfy the planning authority's requests
for clarification, was re-submitted in September 2007. There is as yet no firm
timetable as to when this application may be determined.
50km of new seismic data were acquired over the PEDL150 licence (50%)[1], to the
southwest of Lincoln. This survey was designed to high-grade a number of
exciting leads to drillable prospect status. Whilst these data are still being
interpreted, preliminary results confirm several prospects on the licence, the
most encouraging being the Gravel Pits Prospect, located 2km to the southeast
of the Whisby Field. This prospect has a robust four-way dip closure with a
common spill-point to that of the Whisby Field. Thick reservoir development in
the nearby Caledonian Farm-1 well, which had strong oil shows outside mapped
closure, suggests the Gravel Pits structure may have a much thicker reservoir
than that developed at Whisby. Subject to agreeing a wellsite location and
obtaining planning permission, we hope to be in a position to drill this well
in 2008. Europa will be partly carried by Valhalla on the well, resulting in
Europa paying 25% of the well costs.
Europa was awarded a licence covering two blocks in the East Irish Sea in the
24th Round of Licensing, 109/5 and 112/30 (50%). This licence contains a large
undrilled Carboniferous prospect, named Ellen Vannin, which has potential for
P50 gas-in-place volumes of 1.5 trillion cubic feet.
Following the year-end, the licence covering 41/24a and 41/25a in the UK North
Sea, lapsed. Europa was not willing to drill an appraisal well on the existing
gas condensate discoveries due to a combination of low gas prices and high
drilling costs, rendering the base case reserves in the project uneconomic.
UK Reserves Review
Towards the end of the reporting period, ERC undertook a review of the
producing oil assets of Europa in the East Midlands. The review did not cover
the Company's contingent or prospective resources in the UK or elsewhere.
The main conclusions of the ERC review, covering Europa's 65% interest in the
Whisby-4 well and its 100% interest in the West Firsby and Crosby Warren
Oilfields, is that Europa's net reserve base in these fields is between a P90
figure of 0.5 million barrels of oil (mmbo) and a P10 figure of 1.8 mmbo.
ERC estimated that the remaining commercial reserves of oil attributable to
Europa in aggregate mmbo (millions of stock tank barrels) as at 31 July 2007
were as follows:
P90: 0.5 mmbo P50: 1.0 mmbo P10: 1.8 mmbo
Using a long term nominal Brent oil price of US$70 per stock tank barrel, ERC
have estimated the post tax net present value discounted at 10 per cent as at
30 June 2007 of the commercial reserves as follows:
P90: £4.4mm P50: £8.3mm P10: £12.9mm
Romania
The company has now participated in 7 wells in the Romanian Carpathians, 3 of
which were discoveries, 1 potential discovery, 1 non-commercial discovery, 1
dry hole and 1 well awaiting testing. The Directors regard the Romanian
Carpathians as an area containing all the necessary ingredients for success
using a modern approach to oil and gas exploration. Europa has historically
held a strong acreage position in the area and this strength in depth gives the
Company the ability to restructure its Romanian portfolio and reduce its risk
exposure in the area without compromising the potential benefits of future
exploration drilling success.
Consequently, Europa restructured its portfolio in Romania during 2007,
including the sale of its interest in the Bilca and Fratauti Gasfields, though
the transaction has not yet completed. The transaction envisages the sale of
Europa's 27.5% interest in the Bilca-Fratauti Gas Field to Aurelian Oil & Gas
plc and in parallel a partial farming out of interests in the Cuejdui EIII-3
and Bacau EIII-4 licences. Europa's full 27.5% interest is retained in the
Brodina EIII-1 concession outside the Bilca-Fratauti fields, including the
large Voitinel prospect. In addition, Europa farmed out a portion of its
majority interest in the eastern part of the EPI-3 concession, containing the
Costisa project, Aurelian earning up to 27.25% interest by funding 75% of
Europa's share of costs up to a ceiling of €2.32 million gross costs. Details
of the effects of this transaction can be seen in the Licence Interest table.
During the reporting period, Europa participated in the drilling of two
exploration wells in the EIII-1 Brodina concession (27.5%), Arbore-1 and East
Radauti-1. Arbore-1 encountered a thin sand which according to wireline log
data was gas-bearing. It flowed gas at sub-commercial rates on test. East
Radauti-1 encountered the reservoirs as predicted, but these were water-bearing
and the well may be used as a water disposal well for the Bilca development.
Substantial prospectivity remains in the EIII-1 concession area, principally in
the central part of the block where a large structure has been identified,
named Voitinel. New seismic designed to identify a drilling location on this
large feature was acquired in August 2007 and it is anticipated the well will
be drilled in early 2008. The operator's estimate of P50 prospective resources
in the Badenian and Sarmatian sandstones in the Voitinel structure is 150
billion cubic feet.
In the Cuejdui EIII-3 concession (17.5%)[2], the Boistea-1 well, with a projected
total depth of 2,400 metres, was spudded in late August 2007 and is anticipated
to complete in November. It is targeting multiple Sarmatian gas reservoir
targets. Europa's costs are being carried on the well for 10% of its 17.5%
interest under the terms of the farmout agreement with Aurelian. A gas sand
encountered in the well will be tested in early November.
Drilling is planned in the Bacau EIII-4 concession (19.5%)[3] and the Lilieci-1
well, located some 20 km south of the giant Roman Field, will be drilled to a
planned depth of 2,800 metres. It is anticipated this well, which will test
three target horizons, will be drilled following the completion of operations
at Boistea-1. Under the terms of the Aurelian Sale and Purchase Agreement,
Europa's share of costs will be borne by Aurelian for this well.
Drilling commenced in May 2007 on the Costisa-2 appraisal well in the Brates
EPI-3 concession (East) (53%)[4]. This well has been technically challenging,
requiring two sidetracks before reaching the target horizon, an untested
sandstone sequence of Burdigalian age with strong gas shows. The well was
drilled into the Burdigalian sandstone sequence a short distance from the
Costisa-1 penetration and some 10 metres up dip. The well encountered similar
strong gas shows to the original well and taking into consideration the dip of
the beds, the drilled sequence thickness was comparable at 27 metres. The two
intervals displaying the best log porosity were perforated and flowed gas at up
to 0.8 million cubic feet per day. However, due to low productivity from the
well, the flow was not sustainable. The obvious conclusion to be drawn from the
test data is that the formation is of low permeability, though this does not
concur with the geological and petrophysical data. Consequently, the well was
suspended to plan stimulation work and it is anticipated that a proppant
hydraulic frac job will be undertaken later in the year.
Egypt
On 5 June 2007, the Government of the Arab Republic of Egypt ratified the
Production Sharing Agreement covering the onshore West Darag concession (60%).
This concession, situated to the northwest of the Gulf of Suez, is
underexplored, there being only three wells drilled in an area the equivalent
size to 20 UK North Sea blocks.
The northern part of the block is especially promising in terms of large
Mesozoic structures whilst the east of the block shows potential for smaller
structures adjacent to the Gulf of Suez oil system.
Exploration work, including geological and geochemical fieldwork, will commence
in the cool season in early 2008.
France
The French Government ratified the onshore Béarn des Gaves Permit (100%) in the
Aquitaine Basin of southwest France on the 23rd March 2007. Over 1,000km of
seismic data has been delivered by the previous operator and the reprocessing
and re-interpretation of these data will be the main element of the work
programme in the first phase of the licence.
Ukraine
Europa plans to discontinue its operations in Ukraine and has entered into
discussions with a third party interested in acquiring the asset.
Western Sahara
Limited geological fieldwork is possible in the eastern part of the Bir Lehlou
Block, situated in the Tindouf Basin. The Tindouf Basin, which extends into
Algeria, is an under-explored basin with a thick Palaeozoic sequence containing
source rocks and reservoirs. Exploration drilling by the Spanish prior to 1975
has proven gas in the basin and there are oil seeps at surface. Planning the
field campaign will be time consuming and it is hoped it can be achieved before
summer 2008. Currently, no work is possible in the Hagounia Block.
Paul Barrett
Managing Director
Finance Report
Results for the year
Group turnover for the year was £3.122m (2006: £2.825m).
UK oil sales during the year ended 2007 were 77,150 bbls (211 bbls/d) (2006:
78,105 bbls (214 bbls/d)) achieving an average price of $62.98/bbl (£32.36/bbl)
(2006: $62.88/bbl (£35.34/bbl)). The Crosby Warren oil field which was
purchased on the 1st December 2006 contributed 8 months worth of sales during
the financial year. The West Firsby oil field was shut in for approximately two
months during the year while essential maintenance was undertaken. Whilst the $
value of each barrel of oil sold was higher in the 2007 financial year the
adverse movement in the £/$ exchange rate resulted in lower recorded turnover
of oil sales when stated in £'s.
Total gas sales were £0.625m (2006: £nil) principally from the Bilca gas field
in Romania which commenced production in October 2006. Europa sold its share in
the Bilca Gas field effective 1st April 2007. The Crosby Warren field also
sells a very small quantity of gas.
In Ukraine, Europa achieved no sales during the year (2006: 9,004 boe (27 boe/
d) achieving sales of £0.065m (£7.24/boe)).
The cost of sales was higher in 2007 due to additional activities in the year
with production from the Bilca gas field and Crosby Warren oil field resulting
in increased operating, depletion and amortisation costs.
Administrative expenses increased slightly but below UK inflation during the
year.
Interest receivable and similar income was higher due to exchange rate gains
offsetting reduced income on cash balances held on interest bearing accounts or
money market deposits.
During the year, Europa restructured its financing by entering into a £2m
facility with its bankers as well as a loan to enable the purchase of the
Crosby Warren oilfield. In addition, Europa agreed terms to settle a loan with
Gemini Oil & Gas Limited. As a consequence interest payable and similar charges
were higher during the year as a result of increased bank and loan interest and
related charges resulting from this restructuring. In addition, the increased
exchange rate loss for the year was offset by lower underwriting costs in
relation to the issue of shares and drawdown of funds using the Committed Share
Finance Facility entered into with the Headstart group of funds in 2006.
Increased charges were also incurred due to the provision for decommissioning
costs with the purchase of the Crosby Warren oil field and a similar provision
for the Bilca gas field whilst in Europa ownership.
Due to a continued difficult business environment in obtaining a long term
production licence and a gas price imposed by the authorities set below
production cost Europa has taken the prudent decision to write off exploration
and appraisal costs in relation to activities in the Ukraine. A small amount of
costs in relation to Poland was also written off.
The results for 2007 show a loss on ordinary activities before taxation of £
1.699 million (2006: profit of £0.844m).
Adjusting the loss on ordinary activities before taxation for the loss on sale
of fixed assets and the exploration and appraisal costs that have been written
off, the underlying profit before tax from production operations during the
year is £0.482m (2006: £0.982m).
Taxation
The total tax charge on UK activities during the year is £417,885 (2006: £
1,482,684)
There is a small amount of current tax £411 (2006: £1,158) due on Ukraine
activities and similarly £9,183 (2006: £nil) due on Romanian activities.
However, a review has determined that provision for current or deferred tax on
overseas activities (other than the Ukraine and Romanian current tax) is not
required since the overall components would result in a tax charge of £nil.
The total tax charge for the year (current and deferred) is £0.427m (2006: £
1,484m).
The results for 2007 show a loss on ordinary activities after taxation of £
2.127 million (2006: loss of £0.639m).
Committed share finance facility
On the 1 June 2006 the Company entered into an agreement with the Headstart
Group of funds under which a share finance facility of up to £1.5 million was
made available. The facility can be drawn down in monthly increments of up to £
100,000 in exchange for the issue of new ordinary shares and is available at
any time up to 1 December 2008. During the year the Company made two draw downs
of £100,000 issuing 958,919 ordinary shares. As at the 31 July 2007 £1.3
million was available for drawdown under the share finance facility. Any draw
down of the facility is at the sole discretion of Europa.
Cashflow
Net cash inflow from oil and gas production operations after administrative
expenses was £1,955,160 (2006: £1,783,172).
Servicing of finance resulted in a cash outflow of £237,986 (2006: £105,740)
being principally the net position of interest payments on loans and overdraft
and interest earned on cash deposits.
Tax paid during the year was £89,594 (2006: £1,653). UK corporation tax
payments of £80,000, £9,183 in relation to production income in Romania and the
£411 balance in Ukraine.
The outflow from capital expenditure of £2,779,150 (2006: £3,241,873) relates
mainly to exploration and development activities in the UK, Romania, and North
Africa.
Taking into account the initial payment received for the sale of Europa's share
in the Bilca gas field and a net redemption on loans received and repaid and
proceeds from the issue of shares the net cash inflow during the year was £386
(2006: outflow of £1,828,629).
The cash balance at the end of the year net of overdraft was £148,874 (2006: £
148,488).
Financial risk
Europa's activities are subject to a range of financial risks the main ones
being in relation to commodity prices, liquidity within the business and of
counterparties, exchange rates and loss of operational equipment or wells.
These risks are managed through ongoing review taking into account the
operational, business and economic circumstances at that time.
Commodity price
With the continued robust commodity price environment Europa has not considered
it necessary to use financial instruments to hedge sales generated by its oil
or gas production activities.
Liquidity
Cash forecasts are prepared frequently and reviewed by management and the
board. The facility with Headstart provides up to £1.3m of potential funds at
Europa's discretion. Further funds are available to the extent that they have
not been utilised under the £2m facility provided by Europa's bankers. The
principal interest rate risk is on the interest charge from utilisation of this
£2m facility.
Currency risk
Sales revenue is generated primarily in US dollars and these funds are matched
where possible against expenditures within the business. However, most capital
and operating expenditures are in either Euros or Sterling. This has resulted
in a currency exposure as US dollar funds have been used to purchase Euros or
Sterling.
Exploration, drilling and operational risk
The business of exploration and production of oil and gas involves a high
degree of risk. Few properties that are explored are ultimately developed into
producing oil and gas fields.
Significant expenditure is required to establish the extent of oil and gas
reserves through seismic surveys and drilling and there can be no certainty
that oil and gas reserves will be found. The exploration and development of oil
and gas assets may be curtailed, delayed or cancelled by unusual or unexpected
geological formation pressures, oceanographic conditions, hazardous weather
conditions or other factors.
There are numerous risks inherent in drilling and operating wells, many of
which are beyond the Company's control. The Group's operations may be
curtailed, delayed or cancelled as a result of environmental hazards,
industrial accidents, occupational and health hazards, technical failures,
shortage or delays in the delivery of rigs and/or other equipment, labour
disputes and compliance with governmental requirements.
Drilling may involve unprofitable efforts, not only with respect to dry wells,
but also with respect to wells which, though yielding some petroleum, are not
sufficiently productive to justify commercial development or cover operating
and other costs. Completion of a well does not assure a profit on the
investment or recovery of drilling, completion and operating costs.
Appropriate insurance cover is obtained annually for all of Europa's
exploration, development and production activities.
Accounting policies
The accounting policies for the year remain unchanged from those used in 2006
and the accounting standard FRS 20 `Share based payments' has been adopted for
the first time. In order to provide comparative information a prior period
adjustment has been made to the results for the 12 month period ended 31 July
2006 to show the charge that would have been applicable had FRS20 been adopted
at that time.
Europa in consultation with its advisers will prepare to report consolidated
financial statements in conformity with International Financial Reporting
Standards (IFRS) for the year ending 31 July 2008.
K E Ainsworth
Finance Director
CONSOLIDATED PROFIT AND LOSS ACCOUNT
For the year ended 31 JULY 2007 (unaudited)
Discontinued Acquired Continuing 2007 Restated
Operations Operations Operations
2006
£ £ £ £ £
Turnover 617,770 469,518 2,034,305 3,121,593 2,825,075
Cost of sales
* Operating costs (133,328) (183,190) (662,201) (978,719) (623,800)
* Exploration and - - (1,588,232) (1,588,232) (137,947)
appraisal
write-off
* Depletion and (443,502) (53,011) (500,412) (996,925) (626,385)
amortisation
(576,830) (236,201) (2,750,845) (3,563,876) (1,388,132)
Gross (loss)/ profit 40,940 233,317 (716,540) (442,283) 1,436,943
Administrative - - (418,196) (418,196) (417,146)
expenses
Operating (loss)/ 40,940 233,317 (1,134,736) (860,479) 1,019.797
profit
Loss on sale of fixed (593,573) - - (593,573) -
asset
Interest receivable 1,393 - 148,142 149,535 130,259
and similar income
Interest payable and (7,051) (12,790) (374,677) (394,518) (305,810)
similar charges
(Loss)/profit on (558,291) 220,527 (1,361,271) (1,699,035) 844,246
ordinary activities
before taxation
Tax on profit on
ordinary activities
* Current 384,255 (401,892)
- Deferred (811,734) (1,081,950)
(427,479) (1,483,842)
Retained loss for the (2,126,514) (639,596)
financial year
Basic loss per share (3.45)p (1.05)p
Diluted loss per share (3.45)p (1.05)p
Discontinued (0.91p) -
operations basic and
diluted loss per share
Continuing operations (2.54)p (1.05)p
basic and diluted loss
per share
CONSOLIDATED STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES
For the year ended 31 JULY 2007 (unaudited)
2007 2006
£ £
Loss on ordinary activities after taxation (2,126,514) (569,366)
Currency translation difference on foreign 4,432 49,972
currency net investment
Total recognised losses relating to the year (2,122,082) (519,394)
Prior year adjustment in respect of share (70,231) -
option plans
Total recognised losses since previous (2,192,312) (519,394)
financial statements
CONSOLIDATED BALANCE SHEET as at 31 JULY 2007 (unaudited)
2007 Restated
2006
£ £
Fixed assets
Intangible assets 4,726,061 4,833,698
Tangible assets 4,693,343 5,401,211
9,419,404 10,234,909
Current assets
Stock 110,233 45,383
Debtors 2,076,305 519,024
Cash at bank 629,372 148,488
2,815,910 712,895
Creditors: amounts falling due within one (3,374,288) (837,016)
year
Net current liabilities (558,378) (124,121)
Total assets less current liabilities 8,861,026 10,110,788
Creditors: amounts falling due after more (316,075) (651,583)
than one year
Provision for liabilities (2,331,351) (1,364,273)
Net assets 6,213,600 8,094,932
Capital and reserves
Called up share capital 620,239 610,650
Share premium 4,596,970 4,406,560
Merger reserve 2,868,033 2,868,033
Profit and loss account (1,871,642) 209,689
Shareholders' funds 6,213,600 8,094,932
CONSOLIDATED CASHFLOW STATEMENT
For the year ended 31 JULY 2007 (unaudited)
2007 2006
£ £
Net cash inflow from operating activities a 1,955,160 1,783,172
Returns on investments and servicing of
finance
Interest received 13,648 46,250
Interest paid (251,634) (151,990)
Net cash outflow from returns on investments (237,986) (105,740)
and servicing of finance
Taxation
UK tax paid (80,000) -
Overseas tax paid (9,594) (1,653)
Net cash outflow from taxation (89,594) (1,653)
Capital expenditure
Purchase of fixed assets (2,779,150) (3,241,873)
Receipt from sale of Bilca gas field fixed 1,000,000 -
asset
Net cash outflow from capital expenditure (1,779,150) (3,241,873)
and financial investment
Net cash outflow before financing (151,570) (1,566,094)
Financing
Loans received 789,722 -
Loans redeemed (827,765) (220,035)
Issue of share capital 189,999 -
Underwriting & due diligence fee - (42,500)
Net cash inflow/(outflow) from financing 151,956 (262,535)
Increase/(decrease) in cash in the year c 386 (1,828,629)
NOTES TO THE CONSOLIDATED CASHFLOW STATEMENT
For the year ended 31 JULY 2007 (unaudited)
a Reconciliation of operating (loss)/ profit to net cash inflow from
operating activities
2007 Restated
2006
£ £
Operating (loss)/profit (860,479) 1,019,797
FRS 20 Share based payments charge 40,751 70,230
Depreciation including exploration & appraisal 2,586,699 764,332
write-off
(Increase)/decrease in stock (64,850) 6,048
Increase in debtors (598,029) (31,066)
Increase/(decrease) in creditors 851,068 (46,169)
Net cash inflow from operating activities 1,955,160 1,783,172
b Reconciliation of net cash flow to 2007 2006
movement in
Net debt
£ £
Increase/(decrease) in cash in the 386 (1,828,629)
period
Net cash outflow from changes in debt 23,072 220,035
Change in net debt resulting from cash 23,458 (1,608,594)
flows
Translation differences 55,943 56,137
Net (debt)/funds at start of year (697,942) 854,515
Net debt at end of year (618,541) (697,942)
NOTES TO THE CONSOLIDATED CASHFLOW STATEMENT
For the year ended 31 JULY 2007 (unaudited)
c Analysis of At 31 Cashflow Non cashflow Translation At 31
changes in net July 2006 movement differences July 2007
debt
£ £ £ £ £
Cash at bank net 148,488 386 - - 148,874
of overdraft
148,488 386 - - 148,874
Loans due within (194,847) 339,147 (606,443) 10,803 (451,340)
one year
Loans due after (651,583) (316,075) 606,443 45,140 (316,075)
one year
(846,430) 23,072 - 55,943 (767,415)
Net debt (697,942) 23,458 - 55,943 (618,541)
NOTES
For the year ended 31 July 2007
1. The accounting standard FRS20 `Share based payments' has been adopted for
the first time during the year to the 31 July 2007. In order to provide
comparative information a prior period adjustment has been made to the results
for the 12 month period ended 31 July 2006.
2. Other than the adoption of the accounting standard FRS20 the unaudited
results have been prepared on the basis of the accounting policies adopted in
the annual accounts for the 12 month period ended 31 July 2006.
3. The preliminary report for the year to 31 July 2007 was approved by the
Directors on 30 October 2007.
4. The calculation of basic earnings per share is based on the weighted average
shares in issue throughout the 12 month period. The diluted earnings per share
include employee share options.
5. The summarised financial information has been extracted from the unaudited
accounts of the Group for the year ended 31 July 2007. The above information
does not amount to statutory accounts within the meaning of the Companies Act
1985. The statutory accounts for the period ended 31 July 2006 have been
delivered to the Registrar of Companies. The auditors reported on those
accounts; their report was unqualified and did not contain a statement under
either section 237 (2) or section 237 (3) of the Companies Act 1985. The
auditors have not reported on the accounts for the year ended 31 July 2007, nor
have any such accounts been delivered to the Registrar of Companies as at the
date of this announcement.
[1] Subject to Valhalla exercising its option over a well, otherwise remains at 75%.
[2] Following farmout of 11.25% interest to Aurelian.
[3] Following farmout of interest to Aurelian.
[4] Following exercise of all Aurelian's options under the farmout agreement.
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