Half-yearly Report
EUROPA OIL & GAS (HOLDINGS) PLC
INTERIM REPORT
FOR THE SIX MONTHS ENDED
31 JANUARY 2008
Chairman's Statement
I am pleased to report significant progress during the 6 months to
31 January 2008. There has been increasing production from existing
facilities, the identification of exciting drillable prospects in several
areas, and the award of a key new licence in the Aquitaine Basin, onshore
France.
Production volumes and an increasing oil price combined to generate
revenues of £1.8m in the six month period (2007 £1.3m). Costs were tightly
controlled and operating profit was £1.0m (2007 £0.4m).
In December 2007, the company relocated its headquarters to an
office in Abingdon, Oxfordshire. Phil Greenhalgh, formerly with Whatman plc, a
FTSE 250 company, joined Europa as Finance Director on 7 January 2008. Phil
has excellent qualifications and substantial financial experience and was
recruited to strengthen the financial proficiency of the Company. Roderick
Corrie, possessing a financial markets background, also joined the Board as a
non-executive director during the period. Phil and Roderick were both
appointed to the Board on 22 January 2008.
The Directors expect that several wells will be drilled in the
coming 12 months:
- the Gravel Pits-1 well, UK onshore, where Europa's costs are
partially carried.
- the Liliechi-1 well, Romania onshore, where Europa's costs are
fully carried
- the Voitinel-1 well, Romania onshore and
- the Holmwood-1 well, UK onshore.
UK
The UK East Midlands properties continue to provide the Company
with solid oil production. The natural decline of the fields has been offset
by increasing the production from the Crosby Warren (Scunthorpe) and West
Firsby (Lincoln) Oilfields. During the period, Europa's UK assets produced a
daily average of 234 barrels of oil, marginally up on the preceding 12 month
period. Minor amounts of gas continue to be sold in the UK.
During the period, the Crosby Warren 2Y well was completed as an
oil producer from a 3 metre interval. The well was put on 24 hour pump in mid
January and thus only a small contribution from this well has been recorded
during this reporting period. Water cut has been acceptable and it is planned
to open up a further 8 metres of oil pay above the existing perforations in
the near future. This, along with work on the Crosby Warren 1 well, will
further increase production volumes from the field over the next 6 months.
The loan over the West Firsby oilfield was discharged at the end of
November 2007. The field has performed very well over the period and
consequently, further production enhancement work, notably additional
perforations, will be completed in 2008.
Production from the Whisby-4 well on the oilfield to the south of Lincoln has
been stable and predictable.
The exploration portfolio in the UK has been enhanced with the
interpretation of seismic data acquired in 2007 in the PEDL150 licence,
southwest of Lincoln. This has strengthened the case for drilling the Gravel
Pits prospect, confirmed as a robust four-way dip-closed structure up-dip from
a well with strong oil shows and situated 2km southeast of the Whisby
oilfield. A planning application to drill the Gravel Pits-1 well has been
lodged with Lincolnshire County Council.
An environmental assessment report on the planned Holmwood-1
exploration well in Surrey has been recently updated and is nearing
completion. A planning application is scheduled to be submitted to in the
coming months.
Romania
During the period, Europa participated in the drilling of the
Boistea-1 well, situated in the EIII-3 Cuejdui licence. The well encountered a
gas-bearing Sarmatian sandstone unit which was subsequently tested and flowed
gas on test at a final sustained rate of 10mcm/d (350 mcfpd) after an 8 hour
flowing period before being shut-in for an extended period for build-up
analysis. Operational problems both before and during this test have led to
uncertainties in the interpretation of the test. From wireline log
information, the formation was expected to flow at higher rates. The
discrepancy is due primarily to wellbore damage resulting from the well having
to be killed following perforating. The other factor is low permeability, but
the presence of kill fluids in and around the wellbore are likely to have had
a significant negative effect on flow rates.
Consequently, Europa has expressed its support for an acid wash and
hydraulic frac treatment (`frac') to obtain access to virgin formation for a
subsequent flow test. The Operator will advise partners of when this frac can
take place and we will report the results in due course.
It is anticipated that the Voitinel-1 well, located on the Voitinel
Prospect in the EIII-1 Brodina licence, will spud in the later part of 2008.
New seismic data acquired in 2007 has been integrated into the interpretation
which has confirmed the integrity of this large four-way dip-closed prospect,
having multiple targets in the Tertiary molasse and platform sequences.
Europa completed the drilling of the Costisa-2 well in the EPI-3
Brates licence in September 2007. The well was tested and flowed gas at
unsustainable rates. Europa is currently discussing the option to fracture
stimulate or plug and abandon the well.
Europa participated in a 200km 2D seismic acquisition survey over
the western and central parts of the EPI-3 licence. This seismic programme was
designed to evaluate the extension of the Moinesti Oilfields (typical field
sizes of between 30 and 50 million barrels of recoverable oil) into the
licence area and identify a drilling location for 2009. A six month extension
of the current phase of the licence has been obtained to allow for this
drilling decision to be made by November 2008.
France
The period saw a second onshore French permit awarded to Europa,
covering an area of 470km2 north of the city of Tarbes in the Aquitaine Basin.
The Tarbes Val d'Adour permit, issued in January 2008, is for a four year
initial term. Several oilfields have been exploited in the surrounding area
and the permit area contains two known fields: Osmets and Jacque. These oil
producing fields were shut-in in 1986 when oil prices were exceptionally low.
An initial review of the data indicates that the Osmets-2 well contains up to
9 metres of proven undeveloped oil pay above existing perforations. Work
continues on the evaluation of the two oilfields, with a view to possible
field re-development.
This evaluation highlighted the deep gas discovery in the Béarn des
Gaves Permit, also in the Aquitaine Basin. This discovery, made near the
Berenx wells in 1975, was not tested at the time due to the very high
pressures encountered. Work will focus on attracting a partner with the
necessary expertise to test this discovery.
Other Areas
In Egypt, Europa has commenced operations from a new Cairo office
and anticipates a significant exploration push later in 2008.
Europa is marketing its Ukraine business for a possible sale.
Exploration interests in Western Sahara continue to await a
political resolution.
Finance
The group completed its preparations to adopt International
Financial Reporting Standards (IFRS) in the period and provided
reconciliations for the year to 31 July 2007 in an announcement dated 22 April
2008.
On 19 November 2007 Europa issued £100,000 of new share capital to
the Headstart Group of funds under the 1 June 2006 share finance facility.
A deferred tax asset held in Europa Oil & Gas (Holdings) of
£205,000 was considered as not recoverable in the near term and has been
derecognised in the period.
For the calculation of the depletion charge within cost of sales,
the group adopted the findings of the reserves report issued by Energy
Resource Consultants Limited dated 31 July 2007.
Outlook
We look forward to building on the work of the past six months,
notably in drilling up to 4 exploration wells in the coming 12 months and
undertaking field rehabilitation work designed to further increase the
Company's revenue stream into 2009.
Sir Michael Oliver
Chairman
Europa Oil & Gas (Holdings) plc
28 April 2008
Table of Licences
Country Project Equity Operator Status
UK Crosby Warren Oilfield 100% Europa Production, well work planned
UK West Firsby Oilfield 100% Europa Production, well work planned
UK PEDL143 (Holmwood) 40% Europa Exploration, Holmwood-1 well planned 2009
UK PEDL150 (SW Lincoln area) 50%* Europa Exploration, Gravel Pits-1 well planned 2008
UK UKCS 109/5 & 112/30 50% Europa Exploration, 1.6tcf prospect
UK Whisby Oilfield 65% BPEL Production from W4 well
(W4 only)
Romania Brates Block East 80% MND Costisa-2 Appraisal
Romania Brodina Block 28.75% Aurelian Exploration, Voitinel-1 well planned 2008
Romania Brates Block West 20% MND Exploration, drill/drop decision pending
Romania Cuejdiu Block 17.5%* Aurelian Boistea-1 reservoir stimulation planned
Romania Bacau Block 19%* Aurelian Liliechi-1 well planned 2008, fully carried
Ukraine Horodok Gasfield 70% Europa Pilot production phase
France Béarn des Gaves + Tarbes val d'Adour 100% Europa Exploration, new awards,possible field redevelopment
Egypt West Darag Onshore 60%* Europa Exploration
W. Sahara Bir Lehlou & Hagounia Blocks 100% Europa Exploration
Poland Blocks 434, 435 2.5% roy Medusa/RWE Further drilling planned
* subject to various contractual arrangements
Nexia Smith & Williamson
Independent Review Report To Europa Oil & Gas (Holdings) Plc
Introduction
We have been engaged by the Company to review the condensed set of
financial statements in the half-yearly report for the six months ended 31
January 2008 which comprises a consolidated income statement, consolidated
balance sheet, consolidated statement of changes in equity, consolidated
interim cashflow statement and related notes 1 to 7.
We have read the other information contained in the half-yearly
report and considered whether it contains any apparent misstatements or
material inconsistencies with the financial information in the condensed set
of financial statements.
This report is made solely to the Company in accordance with the
terms of our engagement to assist the Company in meeting the requirements of
the AIM Rule 18. Our review has been undertaken so that we might state to the
Company those matters we are required to state to it in this report and for no
other purpose. To the fullest extent permitted by law, we do not accept or
assume responsibility to anyone other than the Company for our review work,
for this report or for the conclusions we have reached.
Directors' responsibilities
The half-yearly report is the responsibility of, and has been
approved by, the directors. The directors are responsible for preparing the
half-yearly report in accordance with AIM Rule 18.
As disclosed in the notes to the financial statements, the annual
financial statements of the group are prepared in accordance with IFRS as
adopted by the European Union. It is the responsibility of the directors to
ensure that the condensed set of financial statements included in this
half-yearly report have been prepared on a basis consistent with that which
will be adopted in the Group's annual financial statements.
Our responsibility
Our responsibility is to express to the Company a conclusion on the
condensed set of financial statements in the half-yearly report based on our
review.
Scope of review
We conducted our review in accordance with International Standard
on Review Engagements (UK and Ireland) 2410 "Review of Interim Financial
Information Performed by the Independent Auditor of the Entity" issued by the
Auditing Practices Board for use in the United Kingdom. A review of interim
financial information consists of making enquiries, primarily of persons
responsible for financial and accounting matters, and applying analytical and
other review procedures.
A review is substantially less in scope than an audit conducted in
accordance with International Standards on Auditing (UK and Ireland) and
consequently does not enable us to
obtain assurance that we would become aware of all significant
matters that might be identified in an audit. Accordingly we do not express an
audit opinion.
Conclusion
Based on our review, nothing has come to our attention that causes
us to believe that the condensed set of financial statements in the
half-yearly report for the six months ended 31 January 2008 is not prepared,
in all material respects, in accordance with the requirements of the AIM
rules.
Nexia Smith & Williamson 25 Moorgate
Chartered Accountants London
Registered Auditors EC2R 6AY
Date: 28 April 2008
The maintenance and integrity of the Europa Oil & Gas (Holdings) Plc web site
is the responsibility of the directors; the work carried out by the auditors
does not involve consideration of these matters and, accordingly, the auditors
accept no responsibility for any changes that may have occurred to the
accounts since they were initially presented on the web site.
Legislation in the United Kingdom governing the preparation and
dissemination of financial information may differ from legislation in other
jurisdictions.
Consolidated income statement
Unaudited Unaudited
Year to
6 months 6 months 31 July
to 31 January 2008 to 31 January 2007 2007
£000 £000 £000
Continuing operations
Revenue 1,793 1,256 2,504
Cost of sales (673) (722) (3,032)
----- ----- -----
Gross profit/(loss) 1,120 534 (528)
Administrative expenses (170) (158) (418)
Other operating expenses - (18) (79)
----- ----- -----
Operating profit/(loss) 950 358 (1,025)
Finance income 10 85 148
Finance expense (80) (122) (388)
----- ----- -----
Profit /(loss) before tax 880 321 (1,265)
Income tax expense (762) (234) (408)
----- ----- -----
Profit/(loss) for the period from
continuing operations 118 87 (1,673)
Discontinued operations
Profit/(loss) for the period from
discontinued operations - 34 (558)
----- ----- -----
Profit/(loss) for the period 118 121 (2,231)
=== === ===
Earnings/(loss) per share (pence):
From continuing operations
Basic and diluted earnings/(loss) per
share 0.19 0.14 (2.71)
=== === ===
From discontinued operations
Basic and diluted earnings/(loss) per
share - 0.06 (0.91)
=== === ===
From continuing and discontinued
operations
Basic and diluted earnings/(loss) per
share 0.19 0.20 (3.62)
=== === ===
Consolidated balance sheet
Unaudited Unaudited
31 January 31 January 31 July
2008 2007 2007
£000 £000 £000
ASSETS
Non-current assets
Intangible assets 6,470 5,153 4,514
Property, plant and equipment 5,457 5,758 4,693
----- ----- -----
11,927 10,911 9,207
----- ----- -----
Current assets
Inventories 20 39 36
Trade and other receivables 727 753 2,003
Current tax asset - - 73
Cash and cash equivalents 45 354 630
----- ----- -----
792 1,146 2,742
----- ----- -----
Total assets 12,719 12,057 11,949
----- ----- -----
LIABILITIES
Current liabilities
Trade and other payables (2,222) (397) (2,865)
Current tax payable (167) (538) -
Short-term borrowings (1,353) (257) (533)
----- ----- -----
(3,742) (1,192) (3,398)
----- ----- -----
Non-current liabilities
Long-term borrowings (310) (630) (316)
Deferred tax liabilities (2,081) (1,301) (1,847)
Long-term provisions (448) (649) (438)
----- ----- -----
Total non-current liabilities (2,839) (2,580) (2,601)
----- ----- -----
Total liabilities (6,581) (3,772) (5,999)
----- ----- -----
Net assets 6,138 8,285 5,950
=== === ===
EQUITY
Share capital 626 620 620
Share premium 4,691 4,597 4,597
Merger reserve 2,868 2,868 2,868
Retained earnings (2,047) 200 (2,135)
----- ----- -----
Total equity 6,138 8,285 5,950
=== === ===
Consolidated statement of changes in equity (unaudited)
Share Share Merger Retained Total
capital premium reserve earnings equity
£000 £000 £000 £000 £000
Balance at 1 August 2006 611 4,406 2,868 50 7,935
Changes in equity for first half
of 2006/7
Exchange difference on
translation of
foreign operations - - - 16 16
----- ----- ----- ----- -----
Net income recognised directly in
equity - - - 16 16
Profit for the period - - - 121 121
----- ----- ----- ----- -----
Total recognised income and
expense
for the period - - - 137 137
Share based payments - - - 13 13
Issue of share capital 9 191 - - 200
----- ----- ----- ----- -----
Balance at 31 January 2007 620 4,597 2,868 200 8,285
=== === === === ===
Balance at 1 August 2006 611 4,406 2,868 50 7,935
Changes in equity for year
Exchange difference on
translation of
foreign operations - - - 5 5
----- ----- ----- ----- -----
Net income recognised directly in
equity - - - 5 5
Loss for the year - - - (2,231) (2,231)
----- ----- ----- ----- -----
Total recognised income and
expense
for the year - - - (2,226) (2,226)
Share based payments - - - 41 41
Issue of share capital 9 191 - - 200
----- ----- ----- ----- -----
Balance at 31 July 2007 620 4,597 2,868 (2,135) 5,950
Consolidated statement of changes in equity (unaudited) - continued
Share Share Merger Retained Total
capital premium reserve earnings equity
£000 £000 £000 £000 £000
Balance at 1 August 2007 620 4,597 2,868 (2,135) 5,950
Changes in equity for first
half
of 2007/8
Exchange difference on
translation of
foreign operations - - - - -
----- ----- ----- ----- -----
Net income recognised directly
in equity - - - -
Profit for the period - - - 118 118
----- ----- ----- ----- -----
Total recognised income and
expense for the period - - - 118 136
Share based payments - - - (30) (30)
Issue of share capital 6 94 - - 100
----- ----- ----- ----- -----
Balance at 31 January 2008 626 4,691 2,868 (2,047) 6,138
=== === === === ===
Consolidated interim cash flow statement
Unaudited Unaudited
6 months 6 months
to 31 to 31 Year to
January January 31 July
2008 2007 2007
£000 £000 £000
Cash flows from operating activities
Profit/(loss) after taxation 118 121 (2,231)
Adjustments for:
Share based payments (30) 13 41
Depreciation including exploration and
appraisal write off
266 595 2,587
(Profit)/loss on sale of fixed assets 10 - 594
Finance income (9) (87) (150)
Finance expense 67 127 395
Taxation expense recognised in income
statement 762 234 408
Decrease / (increase) in inventories 16 (22) (20)
Decrease / (increase) in trade and
other receivables 276 (94) (598)
(Decrease) / increase in trade and other
payables (202) 25 851
----- ----- -----
Cash generated from operations 1,274 912 1,877
Interest paid (50) (55) (252)
Income taxes paid (300) - (90)
----- ----- -----
Net cash from operating activities 924 857 1,535
----- ----- -----
Cash flows from investing activities
Purchase of property, plant and equipment (3,423) (922) (2,700)
Proceeds from sale of property, plant and
equipment 1,009 - 1,000
Interest received 10 4 14
----- ----- -----
Net cash used in investing activities (2,404) (918) (1,686)
----- ----- -----
Cash flows from financing activities
Proceeds from issue of share capital 100 200 200
Underwriting and due diligence fee (5) - (10)
Proceeds from long-term borrowings - 460 790
Repayment of borrowings (47) (393) (828)
----- ----- -----
Net cash from financing activities 48 267 152
----- ----- -----
Net (decrease)/increase in cash and cash
equivalents (1,432) 206 1
Exchange loss on movement of cash
and cash equivalents (11) - -
Cash and cash equivalents at beginning
of period 149 148 148
----- ----- -----
Cash and cash equivalents at end of
period (1,294) 354 149
=== === ===
Notes to the consolidated interim statement
1 Nature of operations and general information
Europa Oil & Gas (Holdings) plc ("Europa Oil & Gas") and
subsidiaries' ("the Group") principal activities consist of investment in oil
and gas exploration, development and production.
Europa Oil & Gas is the Group's ultimate parent company. It is
incorporated and domiciled in Great Britain. The address of Europa Oil & Gas's
registered office head office is 11 The Chambers, Vineyard, Abingdon,
Oxfordshire OX14 3PX. Europa Oil & Gas's shares are listed on the Alternative
Investment Market of the London Stock Exchange.
The Group's consolidated interim financial information is presented
in Pounds Sterling (£), which is also the functional currency of the parent
company.
The consolidated interim financial information has been approved
for issue by the Board of Directors on 28 April 2008.
The financial information set out in this interim report does not
constitute statutory accounts as defined in Section 240 of the Companies Act
1985. The Group's statutory financial statements for the year ended 31 July
2007, prepared under UK GAAP, have been filed with the Registrar of Companies.
The auditor's report on those financial statements was unqualified and did not
contain a statement under Section 237(2) of the Companies Act 1985.
2 Summary of significant accounting policies
This interim financial information has been prepared by applying
the IFRS-compliant accounting policies published on the group's website,
www.europaoil.com.
3 Basis of preparation
The interim consolidated financial information is for the six
months ended 31 January 2008 and has been prepared following the recognition
and measurement principles of IFRS because they are part of the period covered
by the Group's first IFRS financial statements for the year ending 31 July
2008. The standard IAS34 Interim Financial Reporting has not been applied as
this is only mandatory for fully listed entities.
The interim financial information does not include all of the
information required for full annual financial statements, and should be read
in conjunction with the consolidated financial statements of the Group for the
year ended 31 July 2007. The information has been prepared on the going
concern basis and under the historical cost convention.
The consolidated interim financial information has been prepared in accordance
with the accounting policies referred to above which are based on the
recognition and measurement principles of IFRS in issue as adopted by the
European Union (EU) and are effective or are expected to be adopted and
effective at 31 July 2008, our first annual reporting date at which we are
required to use IFRS accounting standards as adopted by the EU.
Europa Oil & Gas's audited consolidated financial statements were
prepared in accordance with United Kingdom Accounting Standards (United
Kingdom Generally Accepted Accounting Practice) until 31 July 2007. The date
of transition to IFRS was 1 August 2006. The comparative figures in respect of
2007 have been restated to reflect changes in accounting policies as a result
of adoption of IFRS. The disclosures required by IFRS 1 concerning the
transition from UK GAAP to IFRS are given in the reconciliation schedules
published on the group's website.
The accounting policies have been applied consistently throughout the Group
for the purposes of preparation of the consolidated interim financial
information.
4 Share capital
At each reported period end, the company's authorised share
capital amounted to £1,500,000 represented by 150,000,000 ordinary shares of
1p each. At 31 January 2008, allotted, called up and fully paid share capital
was £625,637, being 62,563,730 ordinary shares of 1p each.
All the authorised and allotted shares are of the same class and rank pari
passu.
5 Earnings per share
The calculation of the basic earnings per share is based on the
earnings attributable to ordinary shareholders divided by the weighted average
number of shares in issue during the period.
The calculation of diluted earnings per share is based on the basic
earnings per share, adjusted to allow for the issue of shares and the post tax
effect of dividends and/or interest, on the assumed conversion of all dilutive
options and warrants and other dilutive potential ordinary shares.
During each reported period the company's average share price was
lower than the exercise price of the share options in issue. Therefore the
share options in issue have no dilutive effect and there is no difference
between the basic and diluted earnings per share.
The calculation of the basic and diluted earnings/(loss) per share is based on
the following:
Earnings/(losses)
6 months to 6 months to Year to
31 January 31 January 31 July
2008 2007 2007
£000 £000 £000
Earnings/(losses) for the purposes
of basic earnings/(loss) per share 118 121 (2,231)
=== === ===
Number of shares
6 months to 6 months to Year to
31 31 31 July
January 2008 January 2007 2007
Weighted average number of ordinary
shares for the purposes of basic
and diluted
earnings/(loss) per share 62,239,253 61,396,334 61,709,613
==== ==== ====
Discontinued operations
The discontinued operations basic and diluted loss per share has been
calculated using:
6 months to 6 months to Year to
31 January 31 January 31 July
2008 2007 2007
£000 £000 £000
Earnings/(losses) for the purposes
of basic
earnings/(losses) per share - 34 (558)
=== === ===
Continuing operations
The continuing operations basic and diluted earnings / (loss) per share has
been calculated using:
6 months to 6 months to Year to
31 January 31 January 31 July
2008 2007 2007
£000 £000 £000
Profits / (losses) for the purposes
of basic
earnings / (losses) per share 118 87 (1,673)
=== === ===
6 Dividends
No dividends have been paid to equity shareholders during the periods covered
by the interim financial information.
7 Post Balance Sheet Events
On 7 March 2008 the company received a loan of Euro 650,000 from
The Sherborne Trust, a discretionary trust of which Mr CW Ahlefeldt-Laurvig is
a beneficiary. Mr Ahlefeldt-Laurvig is a director of the company. The loan is
expected to be repaid in the third quarter of 2008.
On 2 April 2008 the Sherborne Trust loan was assigned to Mr CW
Ahlefeldt-Laurvig and Mrs M Ahlefeldt-Laurvig.
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