Interim Management Statement
Interim Report
EUROPA OIL & GAS (HOLDINGS) plc
For the six months ended 31 January 2011
Chairman's Statement
Your Company has had an active first 6 months of the year, participating in
new wells in Romania and the UK. Seismic acquisition took place in three
Romanian licences, providing the platform for exploration activity beyond 2011.
Production was, however, adversely affected by harsh winter conditions and
averaged over the period some 12% down on the same period last year.
The Government decision to increase the Supplementary Charge poses a challenge
for the UK oil industry. The effect of this change shifts the commercial
balance towards exploration rather than existing field development in the UK.
In your Company's case, the UK portfolio is well-placed to respond, allowing
for the exploration of new reserves in drillable prospects where the Field
Allowance would offset the Supplementary Charge. Consequently, the 2012 UK
programme will be geared more to exploration than development.
The exceptionally cold winter weather shut down our UK facilities for two
weeks. Production was also affected during drilling operations for the new
WF-9 well at West Firsby and as a result average daily production over the
period was 151bopd. The Company target of 500bopd remains in place but is
unlikely to be met by financial year-end.
Turning to Romania, the Barchiz-1 well in the Brates concession area recovered
oil from a shallow reservoir interval. The primary target of the well was not
reached for technical reasons and still remains a viable prospect. Europa hopes
to be able to deepen the well as soon as practicable.
Also in Romania, plans to appraise the Voitinel gas discovery have progressed
following incorporation of the 2010 seismic data into the interpretation model.
The group is now planning an appraisal well for later in 2011, designed to
prove commerciality of the base case reserves, followed by an exploration well
in 2012 in the southern part of the play.
In France, the Berenx prospect continues to receive a great deal of attention.
Recent improved processing and interpretation of existing seismic has confirmed
the Company's view that this is a very important asset for future value growth.
Acquisition of 3D seismic on the Berenx project is planned for later in 2011 in
order to more accurately quantify the upside in this potentially company-making
project.
We look forward to progress on all our projects over the coming 12 months.
Bill Adamson
Chairman, 19 April 2011
Operations Report
Europa operates exploration, production and appraisal assets across three core
EU jurisdictions - UK, France and Romania.
During the 6 months to 31 January 2011, two key activities took place: the
drilling of the Barchiz-1 exploration well and the drilling of the West Firsby
WF-9 development well. Both of these are covered in some detail below.
In Romania, the Barchiz-1 exploration well, targeting an Oligocene thrust-belt
oil prospect, was drilled. The well did not reach its planned target horizon
due to two factors: a thicker than anticipated Eocene section and a poor
formation integrity test in the 9 5/8" casing limiting the depth of drilling.
In effect the drilling was terminated before reaching the main exploration
objective.
In the shallow part of the well, in the order of 500m depth, two intervals were
calculated as being oil-bearing in low permeability sand units in the upper part
of the Oligocene sandstone reservoir. Two drill stem tests were performed over
these intervals, recovering small amounts of 20API oil on test. The pour point
of the oil is close to the reservoir temperature, resulting in a viscous
reservoir fluid. The sidetrack, as discussed below, will test the main
Oligocene sand, of better quality but water-wet in the original wellbore, in an
updip location possibly bringing it into the oil leg.
Analysis of the seismic and well data indicates the probability of a repeat
section of Oligocene reservoir sands beneath the current well depth. This is
suggested by correlating with a down-dip offset well to the south. As a
consequence, the prospect has not been fully tested and Europa proposed
deepening the well by drilling a sidetrack from the original wellbore. The JV
partner has elected not to participate in this drilling, meaning they will be
required to pay a significant penalty if they elect to participate in a
subsequent development.
Also in Romania, plans to appraise the Voitinel gas discovery have progressed
following incorporation of the 2010 seismic data into the interpretation model.
The joint venture is now planning an appraisal well for later in 2011, located
some 3km south of the discovery well and designed to prove commerciality of the
base case reserves. Success in this well will pave the way for early development.
A further well is planned on the southern part of the play, to test the upside
reserves potential, in early 2012.
In the UK, a series of well workovers on the West Firsby Field brought WF-6 back
into production. In December, drilling commenced on the WF-9 development well,
targeting a structurally high part of the northern part of the field. The well
was successfully placed at high angle in the two main reservoir zones,
resulting in over 100m of drilled thickness of net sand in each zone.
WF-9 tested on beam pump at 80bopd from the lower zone and 40bopd from the
upper zone. The near term objective is to test both zones on jet pump and
decide on a long term production strategy. In the meantime, WF-7 has been
re-completed following pressure losses due to downhole equipment problems.
Progress was made on a number of other projects, notably the Berenx appraisal
project in France. Berenx is a proven gas-bearing HPHT structure which requires
testing of the reservoir fracture system to quantify reserve size, which could
be in excess of 1.5TCF. Here, the 3D seismic volume supplied by Total was first
reprocessed by GES in Hungary, followed by state of the art depth beam
migration by CGG Veritas. The resulting improvement in data quality has led to
greater confidence in the technical rationale for extending the 3D coverage to
the west of the Berenx wells. Consequently the Company is in discussions with
seismic contractors Tesla-IMC to acquire a survey of up to 100km2 later in 2011.
On the exploration front elsewhere in the portfolio, there are plans to acquire
a 3D survey over the Wressle Prospect in the Easy Midlands, where Europa holds
a 50% operated interest, as a pre-cursor to drilling an exploration well in
2012. In the Weald, Europa continues to work towards securing permission to
drill the Holmwood exploration well (40% operated interest), also in 2012. The
Romanian exploration effort continues with the acquisition in 2010 of further
seismic in the Carpathian thrust belt oil play in the Cuejdiu and Bacau
licences. This will be followed by similar seismic in the Brodina licence in
2011.
Going forward, Europa anticipates further production enhancement of existing
wells in the UK, along with appraisal and exploration activity across the
three core areas.
Licence Interests Table
Country Project Equity Operator Status
UK Crosby Warren 100% Europa Production
Oilfield
UK West Firsby 100% Europa Production
Oilfield
UK Whisby Oilfield 65% BPEL Production
(W4 well only)
UK PEDL143 40% Europa Exploration, Holmwood-1 well planned
(Weald) 2012
UK PEDL150 75% Europa Exploration West Whisby
(SW Lincoln)
UK PEDL180 50% Europa Exploration, 3D seismic & Wressle
(NE Lincs) prospect 2012
UK PEDL181 50% Europa Exploration
(NE Lincs)
UK PEDL222 50% Europa(*) Inactive
(Torksey Area)
Romania EIII-1 Brodina 28.75% Aurelian Exploration, Seismic, Voitinel-2 &
Block Solca-1
Romania EPI-3 Brates 20% MND Exploration, Barchiz-1 sidetrack &
Block Tazaul Mare prospect
Romania EIII-3 Cuejdiu 17.5% Aurelian Exploration
Block
Romania EIII-4 Bacau 19% Raffles(*) Exploration
Block
France Béarn des Gaves 100% Europa Exploration, 3D seismic, Berenx
France Tarbes val 100% Europa Field development, exploration
d'Adour
Western Bir Lehlou 100% Europa Inactive - force majeure
Sahara Block
Western Hagounia Block 100% Europa Inactive - force majeure
Sahara
* Subject to approval
Unaudited consolidated statement of comprehensive income
6 months to 6 months to Year to
31 Jan 11 31 Jan 10 31 Jul 10
(audited)
£000 £000 £000
Revenue 1,468 1,405 3,091
Other cost of sales (889) (841) (1,836)
Exploration write off - (738) (1,008)
Impairment of producing fields - - (1,012)
Total cost of sales (889) (1,579) (3,856)
-------- -------- --------
Gross profit/(loss) 579 (174) (765)
Administrative expenses (248) (229) (709)
Finance income 60 7 37
Finance costs (83) (176) (262)
-------- -------- --------
Profit/ (loss)before tax 308 (572) (1,699)
Taxation (681) (205) (263)
-------- -------- --------
Loss for the period (373) (777) (1,962)
Other comprehensive Income
Exchange( losses)/gains arising
on translation of foreign ops (88) 72 56
-------- -------- --------
Total comprehensive loss for the period
attributable to the equity shareholders
of the parent (461) (705) (1,906)
======== ======== ========
Pence Pence Pence
per share per share per share
Loss per share (eps)
Basic eps (0.40)p (1.07)p (2.60)p
Diluted eps (0.40)p (1.07)p (2.60)p
Unaudited consolidated statement of financial position
31 Jan 11 31 Jan 10 31 Jul 10
(audited)
£000 £000 £000
Assets
Non-current assets
Intangible assets 10,730 8,966 9,751
Property, plant and equipment 5,672 5,409 4,504
-------- -------- --------
Total non-current assets 16,402 14,375 14,255
-------- -------- --------
Current assets
Inventories 58 34 38
Trade and other receivables 674 727 587
Current tax asset - - 335
Cash and cash equivalents 1,751 3 4
-------- -------- --------
Total current assets 2,483 764 964
-------- -------- --------
Total assets 18,885 15,139 15,219
======== ======== ========
Liabilities
Current liabilities
Trade and other payables (2,011) (1,924) (1,797)
Current tax liabilities - (398) (2)
Derivative (48) (44) (55)
Short-term borrowings (114) (292) (900)
-------- -------- --------
Total current liabilities (2,173) (2,658) (2,754)
-------- -------- --------
Non-current liabilities
Long-term borrowings (240) (762) (352)
Deferred tax liabilities (3,917) (2,855) (3,240)
Long-term provisions (1,441) (1,180) (1,395)
-------- -------- --------
Total non-current liabilities (5,598) (4,797) (4,987)
-------- -------- --------
Total liabilities (7,771) (7,455) (7,741)
-------- -------- --------
Net assets 11,114 7,684 7,478
======== ======== ========
Capital and reserves attributable
to equity holders of the parent
Share capital 1,139 751 822
Share premium 10,881 6,260 7,132
Merger reserve 2,868 2,868 2,868
Forex reserve 320 424 408
Retained earnings (4,094) (2,619) (3,752)
-------- -------- --------
Total equity 11,114 7,684 7,478
======== ======== ========
Unaudited consolidated statement of changes in equity
Share Share Merger Forex Retained Total
capital premium reserve reserve earnings equity
£000 £000 £000 £000 £000 £000
Unaudited
Balance at 1 Aug 09 626 4,692 2,868 352 (1,878) 6,660
Total comprehensive income
/ (loss) for the period - - - 72 (777) (705)
Share based payments - - - - 36 36
Issue of share capital
(net of issue costs) 125 1,568 - - - 1,693
------- ------- ------- ------- ------- -------
Balance at 31 Jan 10 751 6,260 2,868 424 (2,619) 7,684
======= ======= ======= ======= ======= =======
Audited
Balance at 1 Aug 09 626 4,692 2,868 352 (1,878) 6,660
Total comprehensive income
/ (loss) for the year - - - 56 (1,962) (1,906)
Share based payments - - - - 88 88
Issue of share capital
(net of issue costs) 196 2,440 - - - 2,636
------- ------- ------- ------- ------- -------
Balance at 31 Jul 10 822 7,132 2,868 408 (3,752) 7,478
======= ======= ======= ======= ======= =======
Unaudited
Balance at 1 Aug 10 822 7,132 2,868 408 (3,752) 7,478
Total comprehensive loss
for the period - - - (88) (373) (461)
Share based payments - - - - 31 31
Issue of share capital
(net of issue costs) 317 3,749 - - - 4,066
------- ------- ------- ------- ------- -------
Balance at 31 Jan 11 1,139 10,881 2,868 320 (4,094) 11,114
======= ======= ======= ======= ======= =======
Unaudited consolidated statement of cash flows
6 months to 6 months to Year to
31 Jan 11 31 Jan 10 31 Jul 10
(audited)
£000 £000 £000
Cash flows from operating activities
Loss after tax (373) (777) (1,962)
Adjustments for:
Share based payments 31 36 73
Depreciation 134 233 498
Exploration write-off - 738 1,008
Impairment of pp&e - - 1,012
Finance income (60) (7) (37)
Finance expense 83 176 262
Taxation expense 681 205 263
(Increase)/decrease in trade and
other receivables (150) (233) (66)
(Increase)/decrease in inventories (20) (19) (23)
(Decrease)/increase in trade and
other payables (277) 55 592
-------- -------- --------
Cash generated from operations 49 407 1,620
Income tax refund/( paid) 329 (190) (597)
-------- -------- --------
Net cash from operating activities 378 217 1,023
======== ======== ========
Cash flows used in investing activities
Purchase of pp&e (333) (67) (222)
Purchase of intangible assets (1,416) (1,307) (3,075)
-------- -------- --------
Net cash used in investing
activities (1,749) (1,374) (3,297)
======== ======== ========
Cash flows from financing activities
Proceeds from issue of share capital
(net of issue costs) 4,066 1,693 2,653
Proceeds from shareholder loan 90 - -
Repayment of borrowings (512) (260) (469)
Finance costs (33) (62) (101)
-------- -------- --------
Net cash from financing activities 3,611 1,371 2,083
======== ======== ========
Net increase / (decrease)in cash
and cash equivalents 2,240 214 (191)
Exchange (loss)/gain on cash and
cash equivalents (14) 9 8
Cash and cash equivalents at
beginning of period (475) (292) (292)
-------- -------- --------
Cash and cash equivalents at
end of period 1,751 (69) (475)
======== ======== ========
Cash and cash equivalents comprises:
Cash 1,751 3 4
Multi-currency facility - (72) (479)
-------- -------- --------
Net cash and cash equivalents 1,751 (69) (475)
======== ======== ========
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 England and Wales. 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 London Stock Exchange AIM
market.
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 19 April 2011.
The condensed interim financial information for the period 1 August 2010 to 31
January 2011 is unaudited. In the opinion of the Directors the condensed
interim financial information for the period presents fairly the financial
position, and results from operations and cash flows for the period in
conformity with the generally accepted accounting principles consistently
applied. The condensed interim financial information incorporates unaudited
comparative figures for the interim period 1 August 2009 to 31 January 2010 and
the audited financial year to 31 July 2010.
The financial information contained in this interim report does not constitute
statutory accounts as defined by section 435 of the Companies Act 2006. The
report should be read in conjunction with the consolidated financial statements
of the Group for the year ended 31 July 2010.
The comparatives for the full year ended 31 July 2010 are not the Company's
full statutory accounts for that year. A copy of the statutory accounts for
that year has been delivered to the Registrar of Companies. The auditors'
report on those accounts was unqualified, did not include references to any
matters to which the auditors drew attention by way of emphasis without
qualifying their report and did not contain a statement under section 498 (2) -
(3) of the Companies Act 2006.
The information has been prepared on the going concern basis.
2 Summary of significant accounting policies
The condensed interim financial information has been prepared using policies
based on International Financial Reporting Standards (IFRS and IFRIC
interpretations) issued by the International Accounting Standards Board
("IASB") as adopted for use in the EU. The condensed interim financial
information has been prepared using the accounting policies which will be
applied in the Group's statutory financial information for the year ended 31
July 2011.
This results in the adoption of the following standards:
* IFRS 1 - Additional exemptions for --> first[Author:DJ] -time adopters
* IFRS 2 - Amendment - Group cash-settled share based payment transactions
* Improvements to IFRSs
* IAS 32 - Amendment - Classification of rights issues,
* IFRIC19 - Extinguishing financial liabilities with equity instruments,
* IFRS 1 - Amendment - first-time adopters of IFRS,
* IAS24 - Revised - Related party disclosures,
* IFRIC 14 -Amendment to IFRIC 14 - IAS 19 Limit on a defined benefit asset
minimum funding requirements and their interaction
The revision to IAS 1, includes the requirement to present a Statement of
Changes in Equity as a primary statement and introduces the possibility of
either a single Statement of Comprehensive Income (combining the Income
Statement and a Statement of Comprehensive Income) or to retain the Income
Statement with a supplementary Statement of Comprehensive Income. The first
option has been adopted by Europa Oil and Gas. As this standard is concerned
with presentation only it does not have any impact on the results or net assets
of the Group. In addition IFRS 8 "Segmental reporting" will affect the
disclosure notes of the financial statements for the full year.
3 Share capital
At each period end reported, the Company's authorised share capital amounted to
£1,500,000 represented by 150,000,000 ordinary shares of 1p each.
On 10 September 2009 the Company issued 12,500,000 shares at 14p, raising (net
of broker commission) £1,693,000. At 31 January 2010 the Company's issued share
capital was £750,637 being 75,063,730 ordinary shares of 1p.
On 26 April 2010 and 4 May 2010 the Company issued a further 3,892,857 and
3,250,000 shares respectively at 14p, raising in total £943,000 net of broker
commission. At 31 July 2010 the Company's issued share capital was £822,066
being 82,206,587 ordinary shares of 1p.
On 15 October 2010 and 7 January 2011 the Company issued a further 13,360,810
shares at 11.5p and 18,339,333 shares at 15p respectively. This raised in total
£4,066,000 net of broker commission of £221,000. At 31 January 2011, allotted,
called up and fully paid share capital was £1,139,067 being 113,906,730
ordinary shares of 1p each. All the authorised and allotted shares are of the
same class and rank pari passu.
4 Earnings per share (eps)
Basic earnings per share has been calculated on the loss after taxation divided
by the weighted average number of shares in issue during the period. Diluted
earnings per share uses an average number of shares adjusted to allow for the
issue of shares, on the assumed conversion of all in-the-money options and
warrants.
As the inclusion of the potential ordinary shares would result in a decrease in
the loss per share in the current period they are considered not to be dilutive
and, as such, the diluted loss per share calculation is the same as the basic
loss per share in the period to 31 January 2011.
The calculation of the basic and diluted loss per share is based on the
following:
6 months to 6 months to Year to
31 January 31 January 31 July
2011 2010 2010
(audited)
£000 £000 £000
Losses
Loss after taxation (373) (777) (1,962)
Number of shares
Weighted average number of ordinary 92,613,172 72,346,339 75,520,873
shares for the purposes of basic eps
Weighted average number of ordinary 92,697,737 72,346,339 75,546,893
shares for the purposes of diluted eps
5 Taxation
Consistent with the year end treatment, current and deferred tax assets and
liabilities have been calculated at tax rates that are expected to apply to
their respective period of realisation. The increase in the rate of
Supplementary Charge from 20% to 32% applied to UKCS profits from 24 March
2011, as announced in the recent Budget, caused an increase of £825,000 in
deferred tax liability.
6 Related party transactions
The £90,000 shareholder loan which was provided on 14 September 2010 was repaid
on 15 February 2011.
Further information:
Europa Oil & Gas
Paul Barrett / Phil Greenhalgh Tel: +44 1235 467362
finnCap
Sarah Wharry / Henrik Persson, Corporate Finance Tel: +44 207 220 0567
Joanna Weaving, Corporate Broking Tel: +44 207 600 1658
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