Half-yearly Report
Europa Oil & Gas (Holdings) plc
(`Europa')
Production doubled in '06 with much to drill in `07
Interim results for the six months ended 31 January 2007
Europa Oil & Gas (Holdings) plc, (AIM:EOG), the independent oil & gas
exploration and production group with projects in the UK, Romania, Ukraine,
France, Egypt and Western Sahara today announces its interim results for the
six months ended 31 January 2007.
Financial
* Turnover of £1.652m (6 months to 31 January 2006 £1.447m)
* Operating profit of £0.385m (6 months to 31 January 2006 £0.490m)
* Profit after tax of £0.125m (6 months to 31 January 2006 £0.398m)
* Earnings per share of 0.20p (0.65p at 31 January 2006)
* Cash of £0.353 million (£1.034m at 31 January 2006)
* Net assets of £8.448 million (£9.033m at 31 January 2006)
* 958,919 ordinary shares issued for net proceeds of £190,000
Operational
* Ended the period at approximately 600 barrels of oil equivalent per day
(boepd).
* Acquired 100% of the Crosby Warren Oilfield
* Production levels at Crosby Warren up by 100%, based on 6-monthly averages
pre- and post-acquisition date
* Commissioned the Bilca Field production facilities and commenced gas sales
* Acquired further seismic south of Bilca, identifying two prospects for
drilling
Recent Events
UK
* Awarded Blocks 109/5 and 112/30 in the UK 24th Round of Licensing
* Completed seismic acquisition on PEDL150 licence
* Conducted essential maintenance on the West Firsby facilities
* Submitted Planning Applications for Holmwood-1 and Crosby Warren-2Z
Romania
* Spudded Radauti East-1, the first of five exploration wells scheduled for
2007
* Modified plans for Costisa-1Z re-entry to drill a replacement well,
designated Costisa-2
France
* Obtained final award of Béarn des Gaves licence on 23rd March.
General Corporate
* Recruited finance manager.
New Ventures
* Received government approval for West Darag PSA, Egypt
Further information:
Paul Barrett
Managing Director, Europa Oil & Gas (Holdings) plc +33 5 63 33 18 97
Jonathan Wright / Parimal Kumar
Seymour Pierce Limited +44 20 7107 8000
Chairman's Statement
The six months to 31 January 2007 have seen the start-up of gas production from
the Bilca Field complex in Romania, and the acquisition of Crosby Warren, its
third producing property in the East Midlands. Europa ended the six month
period with production of approximately 600 barrels of oil equivalent per day
which underpins our assertion that Europa is better placed than many of its AIM
peers to grow into a significant European oil and gas company.
The commissioning of the Bilca facilities in Romania was a culmination of over
five years of exploration and development activity on the EIII-1 licence. This
has resulted in production net to Europa of approximately 300 boepd. It is a
significant achievement to have taken these assets from exploration play to
production, in a country where private sector energy production is in its
infancy.
The Crosby Warren Oilfield, situated in the East Midlands Oil Province, was
producing an average of 35 boepd for the six months prior to the acquisition
date. Subsequently, on acquisition Europa instigated a production optimisation
programme. The first phase of this programme has resulted in production levels
at an average 70 boepd for the six months following acquisition. Additional
work is being planned in the short term to further increase production from the
field.
Compared with the same period last year, Turnover has increased by 14% to £
1.652 million, whereas Operating Profit has declined by 21% to £0.385 million.
The increase in Turnover is starting to show the effect of the Romania gas
production which came onstream in late 2006, but has been offset somewhat by
lower crude oil revenues than in the previous period. The lower crude oil
revenues are due to the adverse movement in the £ to $ exchange rate. Operating
costs in the Company rose as a result of a significant uplift in the number of
active projects with the addition of Bilca and Crosby Warren. The lower
Operating Profit is principally due to the reduction in realised £ sterling
value of crude sales. Earnings per share were 0.20p.
Europa is set to embark on a strong drilling programme in Romania in 2007 and
spudded the first well of this campaign, Radauti East-1, on 17 April 2007. The
Romanian programme consists of three further exploration wells and the drilling
of the Costisa-2 well. In the UK, Europa has lodged a planning application for
an exploration well at Holmwood in the Weald Basin of southern England. In the
East Midlands, a seismic programme has been completed in the PEDL150 licence,
where a further exploration well is anticipated to follow.
In addition to the Company's strong exploration acreage portfolio that has been
developed over the years, the UK government has recently awarded Europa a
further licence in the East Irish Sea, where a large drillable prospect has
been identified.
Europa currently has production from four fields and has ambitious drilling
plans for 2007, including a full re-appraisal of the Costisa-1 well. With 5 new
exploration wells planned in Romania alone in 2007, we are confident that
Europa's historical record in exploration success will continue and we look
forward to reporting the outcome of these activities in the year ahead.
Operations Review
UK
Production from the group's two onshore oil interests: West Firsby and Whisby,
was augmented by the acquisition, in November 2006, of a 100% interest in the
DL001 licence, containing the Crosby Warren Oilfield. Net oil production rates
at the end of 2006 were 106 bopd from West Firsby, 89 bopd from Whisby and 70
boepd from Crosby Warren.
Production at Whisby continued strongly and the well is anticipated to continue
to deliver significant cashflow for several years. Production at West Firsby
held steady throughout the period, whilst Crosby Warren production was doubled
from historical levels due to more rigorous production operations initiated
from the effective date of the acquisition.
Work continued on the preparation of a full Environmental Impact Study to
support the planning application for the drilling of the Holmwood-1 exploration
well on the PEDL143 licence in Surrey.
On the Company's P1131 `Quad 41 ` licence, work continued to identify
development options for the gas discoveries, including offshore electricity
generation, onshore gas treatment and gas storage.
Romania
The main development in Romania during the period was the commissioning of the
Bilca production facilities, which takes gas production from two Bilca wells
and the Fratauti-1 well. Production commenced 27th September 2006 and
stabilised at a rate of some 180,000 m3 per day (approx. 1,050 boepd).
During 2006, further seismic data was acquired over the Brodina Block, covering
a large area to the south of the Bilca development and over the large Voitinel
lead in the west of the licence. Two prospects were identified for drilling in
the eastern part of the block: Arbore and East Radauti. These are relatively
shallow gas sand targets and will be drilled in 2007. The seismic data over
Voitinel confirmed a large structure which it is anticipated will be drilled in
late 2007, following further work to define a drilling location.
Planning work continued on the re-drill of the Costisa-1 well, which
encountered strong gas shows in a sandstone at 1,000 metres depth. After an
assessment of the sidetrack logistics, it was decided to re-drill the well from
a nearby location, designated Costisa-2.
Ukraine
During 2006, as a result of a Presidential Decree, all state-produced gas was
to be sold at a heavily discounted price to offset the effect of higher Gazprom
import prices. However, NaftoGaz Ukriany, the gas regulator, interpreted this
that all gas produced with state partners would be subject to this lower price.
To avoid this, Europa produced into gas storage and sought clarification on
this matter. The courts have since ruled in Europa's favour.
As Ukraine accounts for only 3% of Europa's overall production volumes, the
diversion of gas into storage has not materially affected turnover.
Recent Events and Current Outlook
UK
The Company lodged a planning application with Surrey County Council for the
Holmwood-1well. .
A seismic acquisition programme of 50km of 2D data has been completed on the
PEDL150 licence, surrounding the Whisby Field to the west of Lincoln. These
data were designed to mature a number of exploration leads to drillable
prospect status and it is hoped one of these can be drilled later in 2007.
The West Firsby Field was shut-in during April 2007 for essential maintenance,
following increases in H2S levels. During this shut-down, the opportunity was
taken to undertake reservoir pressure measurements, anticipated to lead to a
re-design of the artificial lift systems to increase pump efficiency.
The Company was awarded two blocks in the UK 24th round of offshore licensing,
109/5 and 112/30. These blocks, situated in the East Irish Sea, some 25 km west
of the Morecambe Field, contain a large undrilled structure at Carboniferous
level with potential for up to 1.5 tcf (2.5 billion boe) of reserves.
Romania
Drilling commenced on the Radauti East-1 well on the 17 April 2007. This is the
start of a five well campaign in Romania, the first two of which result from
the 2006 seismic campaign. The Arbore-1 well will follow on directly after
Radauti East-1.
Europa now plans to drill the Costisa-2 well as a replacement for Costisa-1Z,
some 200m from the original location. Plans are at an advanced stage for a June
spud.
Later in 2007, the Boistea-1 and Schineni-1 wells are expected to be drilled in
the EIII-3 Cuejdiu and EIII-4 Bacau blocks, respectively.
Ukraine
After seeking court clarification on the gas sales issue described above, the
Court of Appeal on 11 April 2007 upheld the original decision in favour of
Europa to allow it to sell at market prices. The Company is therefore now
seeking to sell the gas currently held in storage and recommence gas sales.
New Ventures
The Company was informed in March 2007 that the West Darag Production Sharing
Agreement had been approved by the People's Assembly in Egypt. consequently,
this large licence, situated along the northwestern margin of the Gulf of Suez,
is anticipated to be signed in May 2007.
On 26 March 2007, the Company was informed by the French Ministry of Industry
that the award had been made of the Béarn des Gaves permit, situated adjacent
to the Lacq and Meillon fields in the Aquitaine Basin of southwest France.
Conclusion
At the time of writing, Europa is passing into an extremely exciting phase -
that of drilling several prospects on which the team have been working for
several years. The directors are confident that success this year with the
drillbit will flow through to increased shareholder value.
Sir Michael Oliver
Chairman
CONSOLIDATED PROFIT AND LOSS ACCOUNT
For the six month period ended 31 January 2007
Continuing Acquired 6 6 12
Operations
Operations Months Months Months
Ended 31 Ended 31 Ended 31
January January
July
2007 2006
2006
£ £ £ £ £
Turnover 1,529,401 122,944 1,652,345 1,447,086 2,825,075
Cost of sales
* Operating costs (432,265) (64,176) (496,441) (348,878) (623,800)
* Exploration & - - - - (137,947)
appraisal write-off
* Depletion and (576,764) (18,209) (594,973) (417,033) (626,385)
amortisation
(1,009,029) (82,385) (1,091,414) (765,911) (1,388,132)
Gross profit 520,372 40,559 560,931 681,175 1,436,943
Administrative expenses (175,631) - (175,631) (190,813) (387,346)
Operating profit 344,741 40,559 385,300 490,362 1,049,597
Interest receivable and 87,212 33,131 130,259
similar income
Interest payable and (127,578) (124,770) (305,810)
similar charges
Profit on ordinary 344,934 398,723 874,046
activities before
taxation
Tax on profit on ordinary (220,134) - (1,483,842)
activities
Retained profit/(loss) 124,800 398,723 (609,796)
for the financial period
Basic earnings/(loss) per 0.20p 0.65p (1.00)p
share
Diluted earnings/(loss) 0.20p 0.65p (1.00)p
per share
RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS
For the six month period ended 31 January 2007
6 6 12
Months Months Months
Ended 31 Ended 31 Ended 31
January January July
2007 2006 2006
£ £ £
Retained profit/ (loss) for the financial 124,800 398,723 (609,796)
period
Currency translation difference on foreign 15,473 - 49,972
currency net investment
Issue of shares 200,000 - -
Costs relating to share incentive plans 12,870 20,215 40,430
Net increase/ (decrease) is shareholders' 353,143 418,938 (519,394)
funds
Opening shareholders' funds 8,094,932 8,614,326 8,614,326
Closing shareholders' funds 8,448,075 9,033,264 8,094,932
CONSOLIDATED BALANCE SHEET as at 31 January 2007
6 6 12
Months Ended Months Ended Months
31 January 31 January Ended 31
July
2007 2006
2006
£ £ £
Fixed assets
Intangible assets 5,303,762 4,249,761 4,833,698
Tangible assets 5,758,016 4,829,551 5,401,211
11,061,778 9,079,312 10,234,909
Current assets
Stock 57,768 38,654 45,383
Debtors 753,138 485,016 519,024
Cash at bank and in hand 353,632 1,034,063 148,488
1,164,538 1,557,733 712,895
Creditors: amounts falling due within one (1,185,966) (448,568) (837,016)
year
Net current (liabilities)/assets (21,428) 1,109,165 (124,121)
Total assets less current liabilities 11,040,350 10,188,477 10,110,788
Creditors: amounts falling due after more (629,713) (879,337) (651,583)
than one year
Provision for liabilities and charges (1,962,562) (275,876) (1,364,273)
Net assets 8,448,075 9,033,264 8,094,932
Capital and reserves
Called up share capital 620,240 610,650 610,650
Share premium 4,596,970 4,406,560 4,406,560
Merger reserve 2,868,033 2,868,033 2,868,033
Profit and loss account 362,832 1,148,021 209,689
Shareholders' funds 8,448,075 9,033,264 8,094,932
CONSOLIDATED CASH FLOW STATEMENT
For the period ended 31 January 2007
6 6 12 Months
Ended 31
Months Months July
Ended 31 Ended 31
January January 2006
2007 2006
£ £ £
Net cash inflow from operating activities 929,158 964,758 1,783,172
(a)
Returns on investments and servicing of
finance
Interest received 4,419 30,157 46,250
Interest paid (55,162) (103,108) (151,990)
Net cash outflow from returns on (50,743) (72,951) (105,740)
investments and servicing of finance
Taxation
Tax paid - - (1,653)
Net cash outflow from taxation - - (1,653)
Capital expenditure
Purchase of fixed assets (939,908) (1,716,267) (3,241,873)
Net cash outflow from capital expenditure (939,908) (1,716,267) (3,241,873)
and
financial investment
Net cash outflow before financing (61,493) (824,460) (1,566,094)
Financing
Loans received 459,721 - -
Loans redeemed (393,084) (118,594) (220,035)
Issue of share capital 200,000 - -
Underwriting & due diligence fee - - (42,500)
Net cash inflow/(outflow) from financing 266,637 (118,594) (262,535)
Increase/(decrease) in cash in the period/ 205,144 (943,054) (1,828,629)
year (b)
NOTES TO THE CONSOLIDATED CASH FLOW STATEMENT
For the period ended 31 January 2007
(a) Reconciliation of operating profit to
net cash inflow from operating
activities
6 6 12
Months Months Months
Ended 31 Ended 31 Ended 31
January January July
2007 2006 2006
£ £ £
Operating 385,300 490,362 1,049,597
profit
Non cash 12,870 20,215 40,430
items
Depreciation 594,973 417,766 764,332
including
exploration
& appraisal
write-off
(Increase)/ (12,385) 12,777 6,048
decrease in
stock
(Increase)/ (94,064) 39,099 (31,066)
decrease in
debtors
Increase/ 42,464 (15,461) (46,169)
(decrease)
in creditors
Net cash 929,158 964,758 1,783,172
inflow from
operating
activities
(b) Analysis of changes in At 31 July Cash Translation At 31
net debt January
2006 Flow Differences 2007
£ £ £ £
Cash at bank and in hand 148,488 205,144 - 353,632
148,488 205,144 - 353,632
Loans due within one (194,847) (66,637) 4,100 (257,384)
year
Loans due after one year (651,583) - 21,870 (629,713)
(846,430) (66,637) 25,970 (887,097)
Net (debt)/ funds (697,942) 138,507 25,970 (533,465)
(b) Analysis of changes in At 31 July Cash Non Cash At 31
net debt January
2005 Flow Movement 2006
£ £ £ £
Cash at bank and in hand 1,977,117 (943,054) - 1,034,063
1,977,117 (943,054) - 1,034,063
Loans due within one (238,696) 121,593 - (117,103)
year
Loans due after one year (883,906) 4,569 - (879,337)
(1,122,602) 126,162 - (996,440)
Net funds/(debt) 854,515 (816,892) - 37,623
NOTES TO THE CONSOLIDATED CASH FLOW STATEMENT
For the period ended 31 January 2007
(b) Analysis of changes At 31 July Cash Flow Non Cash Translation At 31
in net debt 2005 movement differences July 2006
£ £ £ £ £
Cash at bank and in 1,977,117 (1,828,629) - - 148,488
hand
1,977,117 (1,828,629) - - 148,488
Loans due within one (238,696) 220,035 (194,847) 18,661 (194,847)
year
Loans due after one (883,906) - 194,847 37,476 (651,583)
year
(1,122,602) 220,035 - 56,137 (846,430)
Net funds/(debt) 854,515 (1,608,594) - 56,137 (697,942)
(c) Reconciliation of net cash flow to movement in net (debt) /funds
6 6 12
Months Months Months
Ended 31 Ended 31
Ended 31 January July
January
2006 2006
2007
£ £ £
Increase/ (decrease) increase in cash in 205,144 (943,054) (1,828,629)
the period
Cash (inflow)/outflow from changes in (66,637) 126,162 220,035
debt
Change in net funds resulting from cash 138,507 (816,892) (1,608,594)
flows
Non cash movement - - -
Translation differences 25,970 - 56,137
Net (debt)/ funds at start of the (697,942) 854,515 854,515
financial period
Net (debt)/ funds at end of financial (533,465) 37,623 (697,942)
period
NOTES TO THE ACCOUNTS
For the period ended 31 January 2007
1. The results for the period are all derived from continuing operations.
2. The accounting standard FRS20 `Share based payment' has been adopted for
the first time during the six month period to the 31st January 2007. In
order to provide comparative information a prior period adjustment has been
made to the results for the 12 month period ended 31st July 2006 and the 6
month period ended 31st January 2006.
3. 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.
4. The interim report for the six months to 31 January 2007 was approved by
the Directors on the 30th April 2007.
5. The calculation of basic earnings per share is based on the weighted
average shares in issue throughout the six month period. The diluted
earnings per share include employee share options.
6. The interim results are unaudited and do not constitute statutory financial
statements as defined in section 240 of the Companies Act 1985.
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