Final Results

Europa Oil & Gas (Holdings) PLC 01 November 2005 EUROPA OIL & GAS (HOLDINGS) PLC PRELIMINARY RESULTS FOR THE YEAR ENDED 31 JULY 2005 Europa Oil & Gas (Holdings) plc ('Europa' or the 'Company'), the independent oil & gas exploration and production group with assets in the UK and continental Europe, today announces its preliminary results for the year ended 31 July 2005. Financial Highlights • Turnover of £2.399m (18 months to 31 July 2004 £1.952m) • Operating profit of £0.842m (18 months to 31 July 2004 £0.694m) • Profit after tax of £0.354m (18 months to 31 July 2004 £0.298m) • Cash of £1.977m at 31 July 2005 • Net assets of £8.614m • Earnings per share of 0.64p Operational Highlights • Production from the UK and Ukraine during the period averaged 288 barrels of oil equivalent per day (boe/d) • Successful drilling of Bilca-2 in Romania to prove up additional reserves to the west of Bilca-1. Bilca-2 was retained for use as a future gas producer • Drilling of Fratauti-1 discovery well in Romania which tested an aggregate 12.7 million standard cubic feet per day (mmscf/d) (over 2,000 boe/d) from several zones • Approval by the Romanian government for the Bilca Area Gas Development • Costisa-1 well in Romania spudded in early February 2005, currently drilling at 4,034 metres as at 31 October • Drilling of West Firsby-8 well, production currently suspended • Quad 41 preliminary engineering and drilling studies undertaken • Geochemical survey on UK onshore licence PEDL150 near the Whisby Field Corporate • During November 2004 Europa successfully floated on AIM and completed a placing of 20,000,000 shares at 25p each that raised £4.3m after expenses. At the time of the placing, one warrant for every two shares placed was also issued • Exercise of 1,065,000 warrants raising an additional £319,500 and increasing the total ordinary shares in issue to 61,065,000 Recent Events • Award of the Bilca Development construction contract and construction start-up • Farm-out of Whisby Exploration Area to Valhalla Oil & Gas Limited. The agreement with Valhalla covers the seismic and the drilling of the first exploration well at a cost of under 20p in the pound to Europa • Approval by UK government as a UK Offshore Operator and two year extension of Quad 41 North Sea licence Chairman's Statement I am very pleased to report Europa's first annual results as a quoted company and to be able to demonstrate significant progress on a number of key projects. Over the past year, the management has pursued an active exploration and development programme, participating in the drilling of four new wells: two exploration, one development and one appraisal. These included the discovery well, Fratauti-1 and the successful appraisal well, Bilca-2, both of which are in Romania. This drilling success further enhances Europa's strong drilling track record. Currently, the Company continues to benefit from its UK onshore oil production operations with steady production and high oil prices. This distinguishes the Company from many of its peers who are focused on exploration and lack development and production activities. The successful wells, Fratauti-1 and Bilca-2, now form part of the Bilca Area Gas Development. This production is due onstream in 2006 and will add significantly to Europa's daily production. At a time of high commodity prices this production, combined with the UK onshore production, will generate significant cashflows in the coming year to enable us to fulfil our current exploration and development programme from existing cash reserves. A third Romanian well, the Costisa-1 well, spudded in February 2005 is currently drilling. The prospect remains well-defined at the main Badenian target with other secondary potential. Europa has an excellent acreage position in the Romanian Carpathians, an area which has produced 5 billion barrels of oil and 3 trillion cubic feet (tcf) of gas to date and is still relatively underexplored. The Company is planning to acquire seismic data in 2006 to assess the southern extension of the proven Bilca play. Further drilling in the second half of 2006 is anticipated. The Company drilled the West Firsby Field WF8 development well in the UK in March 2005, targeting an unproven area of the field. Due to operational difficulties, the results were inconclusive and hence disappointing. The West Firsby Field offers undeveloped reserves potential and management is working to resolve this situation. Elsewhere, work in the UK onshore is progressing apace. The Directors believe that Holmwood is one of the strongest undrilled onshore prospects in the UK. Work is ongoing on planning the drilling operation which we hope can go ahead in 2006. The recent farm-out of a proportion of the Company's interest in the Whisby Area Exploration Acreage allows the work programme to be undertaken at a significantly reduced cost to Europa. The excellent terms obtained on the farm-out demonstrate the quality of the Whisby Area Exploration Acreage and work has already begun to identify a drilling location. The Company, now recognised as an offshore operator by the DTI, will be drilling an appraisal well on the Quad 41 licence during the next two years. The Quad 41 discoveries produced at rates up to 35 mmscf/d (approximately 5,800 boe/d) and development of these fields would put Europa firmly in a new peer group. In Ukraine the Company continues to produce and sell gas and awaits the transition to a full production licence. Further low risk but high reward opportunities are being pursued in the region. The Directors are committed to adding further assets to Europa's portfolio, with both discovered and undiscovered resources. Currently, applications have been lodged in two EU countries for new exploration acreage and a number of other new venture and acquisition opportunities are actively being pursued in the region. The Directors are very pleased with the results of the last year. The activity has increased reserves with production set to increase significantly in 2006. The Directors are confident that the coming year will be as successful and that shareholder value will continue to grow. Sir Michael Oliver Chairman 1 November 2005 For further information, contact: Europa Oil & Gas (00 33 563 33 18 97) Paul Barrett Westhouse Securities LLP (0161 838 9140) Tim Feather Also see www.europaoil.com Operational Update Romania The Costisa-1 well, the culmination of over five years of exploration effort on the EPI-3 Block, was spudded in February. Difficult drilling conditions have led to much slower progress than originally envisaged and, as at 31 October, the well was at a depth of 4,034 metres. The target is estimated to lie at around 4,250 metres. Nothing seen in the drilling data to date downgrades the primary target prospectivity. The Bilca Project, situated in the EIII-1 Brodina Block is on track to achieve commercial gas production in the first half of calendar year 2006. In this reporting period, Europa has participated in two wells, a successful appraisal of the western part of the Bilca feature and the nearby Fratauti-1 discovery well, the latter flowing at an aggregate rate of 12.7 mmscf/d from three zones. As a consequence, there are three gas wells, including the Bilca-1 well drilled in 2004, ready to supply the planned Bilca facilities. In August 2005, the Romanian Government approved the construction of the Bilca facilities and, following a tender process, the construction contract was awarded in October 2005 to Condmag and Inspet. Construction of the facilities began immediately following the contract award. In parallel, gas sales arrangements are being finalised and will be announced shortly. The Brodina Block consortium, in which Europa has a 28.75% interest, is committed to the commencement of production in the first half of 2006 and maximising sales volumes. To this end the consortium has obtained permission to drill a fourth Bilca area well on a strong Bilca-style prospect. On the Brodina Block 200km of seismic is planned in 2006 in order to evaluate a large area devoid of seismic and well data between the Bilca area and the producing Todiresti gasfield to the south. A seismic acquisition programme is also planned in 2006 over the Bacau and Cuejdui Blocks, to the south of the Brodina Block. These blocks are relatively unexplored, though the limited data available indicates that the Bilca play along with deeper plays are present. It is hoped the 2006 seismic programme will define at least one drilling location for 2007. UK North Sea Europa holds 100% equity in licence P1131, containing the 41/24 and 41/25 discoveries, near shore gas condensate accumulations which flowed on test at rates of up to 35mmscf/d (approximately 5,800 boe/d). The Company has recently agreed terms with the DTI to move into the next phase of the licence. It is anticipated that a high angle appraisal well will be drilled during the current licence phase and if successful, it will be retained as a future producer in the field development. Onshore UK In the East Midlands Oil Province, the W4 well on the Whisby field produced over 60,000 barrels (bbls) in the year with a continued low water cut, demonstrating the long term durability of the production stream. On the surrounding Whisby exploration licence (PEDL150), a geochemical survey undertaken in early 2005 highlighted areas of prospectivity for further work. This work will take the form of 40 km of new 2D seismic in the second quarter of 2006 followed by an exploration well. The Company has successfully farmed out a 50% interest to Valhalla Oil & Gas Limited in return for funding the acquisition of the seismic and 75% of the well cost. Pre-planning work, including ecological, archaeological and engineering surveys, has been undertaken on the Holmwood licence (PEDL143) in the Weald Basin. Planning permission to drill a well on the Holmwood Prospect, a robust four-way dip closure at Portland Sandstone level, is expected to be submitted in the fourth quarter of 2005 and it is hoped that the well will be drilled in 2006. During the financial year, Europa drilled the West Firsby field WF8 well, a sidetrack of a watered-out producer. This sidetrack encountered significant reservoir sands, but produced water when put onto production. Remedial work was undertaken to shut off the water zone, but operational difficulties prevented the work from being completed. Further remedial options are being evaluated. Ukraine The Europa-operated pilot production scheme on the Horodok gas field produced 80 million cubic feet (mmcf) over the period. The Company has applied to convert the pilot production on the Horodok gas field to a full production licence giving the right to operate the field for the next 15 years. The field is currently producing 35 boe/d, net to Europa, and further drilling is planned to realise the full potential of the field following granting of the long term licence. Forward Programme The Company is looking forward to another active year, primarily in Romania and the UK. We expect to be participating in at least two wells, and potentially as many as four, in 2006, along with seismic surveys and other exploration activity. A key milestone will be first gas from the Bilca Project, which is expected to take the Company towards the 1,000 boe/d mark by the end of 2006. The Company continues to pursue new venture opportunities. Currently applications for new acreage have been lodged in several jurisdictions with more pending. The Company is focused on the Europe/North Africa region for these new venture opportunities. Presented below are the Financial Review and Results. Paul Barrett Managing Director 1 November 2005 Financial Review Results for the year Turnover for the year was £2.399m (2004: £1.952m) mainly from UK onshore oil production. UK sales barrels during 2005 were 92,510 bbls (253 bbls/d) achieving an average price of $46.58/bbl (£25.10/bbl). Prices achieved have risen sharply and during the month of September oil sales have averaged $62.08/bbl. In Ukraine, Europa sold the equivalent of 12,787 boe (35 boe/d) during the year achieving sales of £0.077m (£6.00/boe). The results for the year to 31 July 2005 show a profit after tax of £0.354 million compared to £0.298 million for the 18 months to 31 July 2004. Total production and sales volumes during the year were similar to the prior 18 month period and consequently the increase in gross profit reflects improved commodity prices particularly for oil. This improvement in the underlying performance of the business has been offset by an increase in administrative expenses reflecting the cost of becoming a quoted company. In addition increased interest charges have been incurred under the terms of a loan from Gemini Oil & Gas Limited in connection with the West Firsby licence. During the fourth quarter of 2005 a trigger point will be achieved which will result in a substantially reduced future interest charge on the loan. Placing & AIM Admission In November 2004 Europa successfully floated on AIM raising £4.29m net of expenses through a placing of 20,000,000 shares at 25p each. At that time one warrant for every two shares placed was also issued. The 10,000,000 warrants are exercisable at 30 pence per share. During March 2005 1,065,000 of these warrants were exercised raising an additional £319,500. Total shares currently in issue are 61,065,000. Certain members of the board, management and employees of the company have rights in respect of options totalling 1,065,000 shares exercisable at 25p each. Cash flow Net cash inflow from oil and gas production operations after administrative expenses was £953,631 (2004: £1,005,076). The outflow from capital expenditure of £2,492,947 (2004: £3,379,586) relates mainly to exploration and development activities in the UK and Romania. Servicing of finance resulted in cash outflow of £454,074 (2004: £375,101) being principally the net position of interest payments on a loan and interest earned on cash deposits. Taking into account the money received from the placing and subsequent exercise of warrants, the net cash inflow during the year was £2,230,608 (2004: outflow of £267,476). The cash balance at the end of the year was £1,977,117 (2004: £48,789). Financial Risk Europa's activities are subject to a range of financial risks the main ones being 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 rise in commodity prices, 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 board is keen to ensure that adequate financial headroom exists at least a year ahead. In order to ensure that funds remain liquid and available for operational requirements or business opportunities, cash balances are put on short term deposit. Currency Risk Sales revenue is generated primarily in US dollars and these funds have been matched against capital expenditure and payments on the loan. Sterling expenditure is provided from existing cash balances in this currency. Operational Risk 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 2004. Europa in consultation with its advisors will prepare to report consolidated financial statements in conformity with International Financial Reporting Standards (IFRS) for the year ending 31 July 2008 at the latest. Summary The financial results for the year to 31 July 2005 are in line with the Company's expectations. Europa is well placed to continue the growth of its projects in the UK and continental Europe. Ewen Ainsworth Finance Director CONSOLIDATED PROFIT AND LOSS ACCOUNT For the year ended 31 July 2005 18 Months Ended 31 July 2005 2004 £ £ Turnover 2,399,014 1,952,051 Cost of sales - Operating costs (504,908) (476,745) - Depletion and amortisation (754,441) (665,722) 1,259,349 1,142,467 Gross profit 1,139,665 809,584 Administrative expenses (297,337) (115,900) Operating profit 842,328 693,684 Interest receivable 179,809 493 Interest payable and similar charges (666,011) (375,594) Profit on ordinary activities before taxation 356,126 318,583 Tax on profit on ordinary activities (2,226) (20,539) Retained profit for the financial year 353,900 298,044 Basic Earnings per share 0.64p 0.75p Diluted Earnings per share 0.64p 0.75p CONSOLIDATED STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES For the year ended 31 July 2005 18 Months Ended 31 July 2005 2004 £ £ Profit on ordinary activities after taxation 353,900 298,044 Currency translation difference on foreign currency net investment 18,233 (2,462) Total recognised gains and losses relating to the period 372,133 295,582 CONSOLIDATED BALANCE SHEET as at 31 July 2005 18 Months Ended 31 July 2005 2004 £ £ Fixed assets Intangible assets 4,478,852 2,958,861 Tangible assets 3,256,512 3,019,071 7,735,364 5,977,932 Current assets Debtors 580,218 284,433 Cash at bank and in hand 1,977,117 48,789 2,557,335 333,222 Creditors: amounts falling due within one year (525,037) (3,792,621) Net current assets/(liabilities) 2,032,298 (3,459,399) Total assets less current liabilities 9,767,662 2,518,533 Creditors: amounts falling due after more than one year (883,906) (1,191,158) Provision for liabilities and charges (269,430) (300,000) Net assets 8,614,326 1,027,375 Capital and reserves Called up share capital 610,650 1,000 Share premium 4,406,560 669,425 Merger reserve 2,868,033 - Profit and loss account 729,083 356,950 Shareholders' funds 8,614,326 1,027,375 CONSOLIDATED CASH FLOW STATEMENT For the year ended 31 July 2005 18 Months Ended 31 July 2005 2004 £ £ Net cash inflow from operating activities 953,631 1,005,076 Returns on investments and servicing of finance Interest received & similar income 88,003 493 Interest paid & similar charges (542,077) (375,594) Net cash outflow from returns on investments and servicing of (454,074) (375,101) finance Taxation Tax paid (3,180) (29,343) Net cash outflow from taxation (3,180) (29,343) Capital expenditure Purchase of fixed assets (2,492,947) (3,379,586) Net cash outflow from capital expenditure (2,492,947) (3,379,586) Net cash outflow before financing (1,996,570) (2,778,954) Financing Loans (redeemed)/received (275,966) 2,511,478 Issue of share capital net of issue costs 4,503,144 - Net cash inflow from financing 4,227,178 2,511,478 Increase/(decrease) in cash in the year 2,230,608 (267,476) CONSOLIDATED CASH FLOW STATEMENT For the year ended 31 July 2005 Reconciliation of operating profit to net cash outflow from operating activities 18 Months Ended 31 July 2005 2004 £ £ Operating profit 842,328 693,684 Depreciation 754,441 665,722 (Increase)/decrease in debtors (260,446) 93,391 Decrease in creditors (339,833) (747,721) Increase/(decrease) in Provision (42,859) 300,000 Net cash inflow from operating activities 953,631 1,005,076 Reconciliation of net cash flow to movement in net (debt) /funds £ £ Increase/(decrease) in cash in the period 2,229,975 (267,476) Net cash inflow/(outflow) from changes in debt 265,788 (2,577,362) Change in net funds resulting from cash flows 2,495,763 (2,844,838) Currency translation adjustment 10,810 251,548 Non cash movement 2,584,974 - Net debt at 1 August 2004/1 February 2003 (4,237,032) (1,643,742) Net funds/(debt) at 31 July 2005/31 July 2004 854,515 (4,237,032) Analysis of changes in net debt Exchange At 31 July Cash Non Cash Gain/ At 31 July 2004 Flow Movement (Loss) 2005 £ £ £ £ £ Cash at bank and in hand 48,789 1,927,695 - 633 1,977,117 Overdrafts (302,280) 302,280 - - - (253,491) 2,229,975 - 633 1,977,117 Loans due within one year (2,792,383) (32,144) 2,584,974 857 (238,696) Loans due after one year (1,191,158) 297,932 - 9,320 (883,906) (3,983,541) 265,788 2,584,974 10,177 (1,122,602) Net debt (4,237,032) 2,495,763 2,584,974 10,810 854,515 NOTES TO THE ACCOUNTS For the year ended 31 July 2005 1. The results for the period are all derived from continuing operations. 2. The results have been prepared on the basis of the accounting policies adopted in the annual accounts for the 18 month period ended 31 July 2004. 3. The preliminary report for the year to 31 July 2005 was approved by the Directors on 1 November 2005. 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 2005. 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 2004 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 2005, nor have any such accounts been delivered to the Registrar of Companies as at the date of this announcement. 6. At the time of the placing and admission to AIM, the shareholders of Europa Oil & Gas Limited exchanged their entire shareholding for 39,999,998 ordinary shares in Europa Oil & Gas (Holdings) plc. Merger accounting has been adopted in respect of this transaction. Accordingly, the accounts have been prepared as if Europa Oil & Gas (Holdings) plc had been in existence throughout the period. The comparative figures for the prior 18 month period are based on those consolidated figures published for Europa Oil & Gas Limited. The profit and loss account for the current 12 month period reflects the result of Europa Oil & Gas (Holdings) plc from the date of its incorporation on 31 August 2004 and those of its subsidiaries for the 12 month period to 31 July 2005. 7. The consolidated cash flow statement for the year to 31 July 2005 includes in the reconciliation of net cash flow to movement in net (debt)/funds and analysis of changes in net debt a non cash movement of £2,584,974. This represents loans and other funds due to directors which were converted to shares at the time Europa Oil & Gas Limited exchanged their entire shareholding for ordinary shares in Europa Oil & Gas (Holdings) plc. This information is provided by RNS The company news service from the London Stock Exchange

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