Final Results

RNS Number : 8764X

Infrastrata PLC

14 December 2010

 



14 December 2010                                                                         For Immediate Release

InfraStrata plc

("InfraStrata", the "Company" or the "Group")

Final results for the year ended 31 July 2010

InfraStrata plc (AIM: INFA), the independent gas storage and infrastructure specialist, is pleased to announce final results for the year ended 31 July 2010.

Operational highlights

·      Portland Project

o  On 1 October 2010, eCORP Oil & Gas Limited acquired 50% of the Portland Project in return for funding the next phase of the project development

o  Construction of the well site and drilling of the first cavern well will be the initial activity during 2011

o  Project will be brought to the market in 2012 after further engineering design work has been completed

o  Income stream will benefit the Company through a technical services agreement

·      Islandmagee Project

o  Planning application submitted in March 2010

o  Planning application determination expected during first half of 2011

o  Partner to be introduced to fund the next phase of the project development

·      Exploration activities

o  The Company has sought to pursue conventional and unconventional oil and gas exploration where synergies exist with its UK gas storage projects

o  A petroleum exploration licence over the central part of the Larne-Lough Neagh Basin in Northern Ireland has been offered and is expected to be awarded in Q1 2011

Financial highlights

·      Loss for period of £1,248,461 (2009; £1,281,002)

·      Loss per share of 1.71p (2009; 1.82p)

·      Cash and cash equivalents as at 31 July 2010 of £1,260,982 (2009; £3,066,502)

·      Capitalised expenditure on gas storage projects during the year of £3,939,621 (2009; £5,729,823)

·      The Company placed 2,500,000 new ordinary shares on 5 November 2009 to raise £2,500,000 before expenses

Commenting on outlook, Andrew Hindle, Chief Executive said:

"The Company looks forward to progressing the Portland Project with eCORP. The focus will be the drilling of the first cavern borehole.  Islandmagee Storage Limited looks forward to the Planning Application determination which is anticipated before the end of the 2010/11 financial year. In addition, the Company is also making applications for petroleum licences where they believe synergies exist between existing projects and the licence areas applied for."

For further information please contact:

InfraStrata plc

Andrew Hindle, Chief Executive Officer                                                                          020 8332 1200

Craig Gouws, Chief Financial Officer

Financial PR - Buchanan Communications

Richard Darby                                                                                                                      020 7466 5000

James Strong

Nominated Advisor and Broker - Seymour Pierce

Jonathan Wright / Jeremy Porter - Corporate Finance                                                  020 7107 8000

Richard Redmayne - Corporate Broking

Notes to Editors:

Background on InfraStrata plc

InfraStrata plc is developing two gas storage projects in the United Kingdom at Portland, Dorset (50% interest) and at Islandmagee, Country Antrim, Northern Ireland (65% interest). The two projects could between them provide over 10% of the total UK and Ireland peak daily demand in the latter part of this decade. InfraStrata has also recently announced that it has been offered a petroleum exploration licence in Larne-Lough Neagh Basin in Northern Ireland.

Further information is available on the Company's website www.infrastrata.co.uk.

Chief Executive's Report

InfraStrata has during the last financial year continued to focus its activities on developing and financing its projects. The global oversupply of liquefied natural gas (LNG), caused largely by unconventional gas production displacing import demand in the US, has been depressing forward winter gas prices and reducing the volatility in prices. This has created a difficult environment for gas storage investment.  In consequence, the Company decided during the course of the last year, to expand its sphere of interest based upon its existing assets and areas of executive expertise, where the Company found there to be natural synergies. In this respect, the Company has sought to lessen its total dependency upon developing gas storage projects across an international portfolio, to one of broadening its range of assets within two core areas in the UK, to include conventional and unconventional oil and gas exploration.

The creation of new gas storage capacity is of strategic national importance to the UK.  In the medium term the Company expects increasing global demand to absorb the excess LNG capacity and for the volatility to return to the gas market to provide the price signals for renewed investment in equity and capacity in gas storage facilities in the UK, thereby increasing the value of the InfraStrata assets.

Portland Project

In October 2010 the Company announced that legal agreements had been completed with US independent energy company eCORP International, LLC ("eCORP") relating to InfraStrata's interests in the Portland gas storage project.

On 1 October 2010, a subsidiary of eCORP, eCORP Oil & Gas UK Limited undertook to fund the first cavern well and thereby acquired the right to match the project expenditure invested to date by InfraStrata of £22.9m in return for 50% of the share capital of the project company, Portland Gas Limited. Infrastrata, through its subsidiary InfraStrata UK Limited, will retain 50% of the share capital in Portland Gas Limited.

These funds will be used to develop the Portland Project further before bringing it to market during 2012. Under the terms of the agreement with eCORP, the drilling of the first cavern well during 2011 will be the initial activity. Data will be acquired to better define the pressure ranges over which the caverns can be operated to maximise the responsiveness of the caverns to short term gas demand requirements (the 'extrinsic value' of the project) and finalise elements of the cavern design. InfraStrata will also benefit from an income stream through a technical services agreement.

The Company is pleased to be moving into a new phase in the development of the Project. During 2011 it will be progressing plans with stakeholders to move the Portland Project forward and work on the ground with the start of construction of the well site during Q2 2011.

Islandmagee Project

The Islandmagee Project is an important element of InfraStrata's portfolio and the Company remains hopeful that following submission of a planning application in March 2010, this strategic asset for Northern Ireland will be granted planning permission in the first half of 2011 to enable drilling of the first cavern well to commence before the end of 2011. Front End Engineering Design will commence following acquisition of data from the well, leading to the point when the decision to proceed to full construction is expected to be taken during 2012.

InfraStrata and partner Mutual Energy are committed to introducing a partner into the project to fund the next stage of development. In June 2010 the Company announced that it had signed a Memorandum of Understanding ("MOU") with eCORP relating to a proposed investment in the Islandmagee Project. eCORP, the Company and its partner Mutual Energy agreed in November 2010 to extend the terms of the MOU until 30 April 2011, but on a non-exclusive basis. The Company opened an online data room in November in conjunction with project partner Mutual Energy Limited, and entered into discussions with several major companies who have expressed an interest in a potential equity participation in the project. The process is intended to be short with a target for completion within Q1 2011.

Asset portfolio development

During 2010, the Company took the decision to focus its resources on the UK gas market, and to enhance the existing gas storage business within its two core areas. This includes conventional and unconventional petroleum exploration, where the Company can use its existing geological and geophysical knowledge and databases to leverage initial funding for the projects. The Company sees an excellent strategic fit between gas production and storage in close proximity to each other.

In November 2010 the Company was offered a petroleum exploration licence over the central part of the Larne-Lough Neagh Basin in Northern Ireland. The offer is in response to an application made to the Department of Enterprise, Trade and Investment ("DETI") in Northern Ireland in August 2010. The Company expects that DETI should be in a position to issue the licence in Q1 2011 after it has completed the drafting of the terms and conditions of the licence, taking into account the outcome of its consultation with other departments and agencies. InfraStrata will be the operator of the licence. The licence covers an area of 663 square kilometres, and the existing Islandmagee gas storage project is located within the boundary.

Following a licence award, seismic data would be acquired during 2011 and it is hoped that interpretation of this data would lead to an exploration well being drilled within two years. Ideally such a well could form part of a programme to include drilling for the Islandmagee Project subject to the granting of planning permission for that project.

In response to the decision to focus its resources on its UK projects, the Company has decided to seek a buyer for its entire interests in the gas storage projects in Spain and Germany, which are both at the exploration application stage.

Outlook

The 2010/11 financial year will be an active time for the business. The Company looks forward to progressing the Portland Project with eCORP. The focus will be the drilling of the first cavern borehole.  Islandmagee Storage Limited looks forward to the Planning Application determination which is anticipated before the end of the 2010/11 financial year. In addition, the Company is also making applications for petroleum licences where they believe synergies exist between existing projects and the licence areas applied for.

InfraStrata plc (formerly Portland Gas plc)

Consolidated statement of comprehensive income

for the year ended 31 July 2010

___________________________________________________________

	Notes		2010		2009
			£		£
Continuing operations
Revenue			-		-
Cost of sales			-		-
Gross profit/(loss)			-		-
Administrative expenses			(397,358)		(386,396)
Operating loss			(397,358)		(386,396)
Finance income			23,645		173,439
Loss before taxation			(373,713)		(212,957)
Taxation			-		-
Loss for the year from continuing operations			(373,713)		(212,957)
Loss for the year from discontinued operations	5		(874,748)		(1,068,045)
Loss for the year attributable to the equity holders of the parent			(1,248,461)		(1,281,002)
Other comprehensive income			-		-
Total comprehensive loss for the year attributable to the equity holders of the parent			(1,248,461)		(1,281,002)
Basic and diluted loss per share	2
Continuing operations			0.51p		0.30p
Discontinued operations			1.20p		1.52p
Continuing and discontinued operations			1.71p		1.82p

InfraStrata plc (formerly Portland Gas plc)

Consolidated statement of financial position

as at 31 July 2010

_________________________________________________________

			2010		2009
	Note		£		£
Non-current assets
Plant and equipment			7,280		20,346,503
Intangible assets			-		1,821,551
Total non-current assets			7,280		22,168,054
Current assets
Other receivables			110,732		149,356
Available for sale financial assets			12,500		12,500
Cash and cash equivalents			1,260,982		3,066,502
			1,384,214		3,228,358
Assets classified as held for sale	4		26,511,034		-
Total current assets			27,895,248		3,228,358
Current liabilities
Trade and other payables			(278,606)		(925,202)
Liabilities directly associated with assets classified as held for sale	4		(4,061,668)		-
Total current liabilities			(4,340,274)		(925,202)
Net current assets and net assets held for sale			23,554,974		2,303,156
Total assets less current liabilities			23,562,254		24,471,210
Non-current liabilities
Obligations under contractual and operating lease agreements due after one year			-		(2,185,741)
Net assets			23,562,254		22,285,469
Shareholders' funds
Share capital			7,380,420		7,038,473
Share premium			11,381,095		8,576,705
Merger reserve			8,988,112		8,988,112
Shares to be issued			-		746,337
Share based payment reserve			302,435		177,189
Retained earnings			(4,489,808)		(3,241,347)
			23,562,254		22,285,469

InfraStrata plc (formerly Portland Gas plc)

Consolidated statement of changes in equity

for the year ended 31 July 2010

__________________________________________________________

	Share capital	Share premium	Merger reserve	Shares to be issued	Share based payment reserve	Retained earnings	Total equity
	£	£	£	£	£	£	£
Balance at 31 July 2008	7,038,473	8,576,705	8,988,112	-	38,498	(1,960,345)	22,681,443
Loss for the year	-	-	-	-	-	(1,281,002)	(1,281,002)
Total comprehensive loss for the year	-	-	-	-	-	(1,281,002)	(1,281,002)
Commitment to issue shares	-	-	-	746,337	-	-	746,337
Share based payments	-	-	-	-	138,691	-	138,691
Balance at 31 July 2009	7,038,473	8,576,705	8,988,112	746,337	177,189	(3,241,347)	22,285,469
Loss for the year	-	-	-	-	-	(1,248,461)	(1,248,461)
Total comprehensive loss for the year	-	-	-	-	-	(1,248,461)	(1,248,461)
Shares issued	341,947	2,804,390	-	(746,337)	-	-	2,400,000
Share based payments	-	-	-	-	125,246	-	125,246
Balance at 31 July 2010	7,380,420	11,381,095	8,988,112	-	302,435	(4,489,808)	23,562,254

InfraStrata plc (formerly Portland Gas plc)

Consolidated statement of cash flows

for the year ended 31 July 2010

__________________________________________________________

			2010		2009
	Note		£		£
Net cash (used in) operating activities	3		(1,409,715)		(1,175,444)
Investing activities
Interest received			23,645		173,439
Purchase of intangible assets			(569,274)		(530,729)
Purchase of plant and equipment			(2,250,176)		(4,678,611)
Proceeds on disposal of plant and equipment			-		883
Net cash (used in) investing activities			(2,795,805)		(5,035,018)
Financing activities
Proceeds on issue of ordinary shares			2,400,000		-
Net cash generated from financing activities			2,400,000		-
Net (decrease) in cash and cash equivalents			(1,895,520)		(6,210,462)
Cash and cash equivalents at beginning of year			3,066,502		9,276,964
Cash and cash equivalents at end of year			1,260,982		3,066,502
Cash and cash equivalents consist of:
Cash at bank			£1,260,982		£3,066,502

InfraStrata plc (formerly Portland Gas plc)

Notes to the financial statements

for the year ended 31 July 2010

1.	Basis of preparation
	The financial information set out in this announcement does not comprise the Company's statutory accounts for the years ended 31 July 2010 or 31 July 2009. The financial information has been extracted from the statutory accounts of the Company for the years ended 31 July 2010 and 31 July 2009. In the current financial year, the Company has adopted International Financial Reporting Standard 8 'Operating Segments' and International Accounting Standard 1 'Presentation of Financial Statements' (revised 2007). The adoption of these standards did not have any effect on the financial position or performance of the Group. There was no other change to the Group's accounting policies for the year ended 31 July 2010 as compared to those published in the statutory accounts for the year ended 31 July 2009.  The Directors prepared the statutory accounts on the going concern basis which assumes that the Group will continue in operational existence without significant curtailment in its activities for the foreseeable future. The Group requires additional funding in order to progress the development of the Islandmagee gas storage project in which it holds a 65% interest and to pay future general and administrative costs. The immediate future development costs of the Portland gas storage project will be funded by partners. The Directors believe that the disposal of an interest in Islandmagee Storage Limited is the best way of maximising shareholder value by allowing an entity other than InfraStrata plc to develop this project. It is expected that such a disposal will provide working capital for the Group and will transfer responsibility for funding the immediate future development of the Islandmagee gas storage project to the new partner. It is further proposed to sell the Group's entire interests in Portland Gas ESP S.L. and Sager Meer Energy GmbH. The Directors consider that there exists a material uncertainty which casts significant doubt upon the ability of the Group to continue as a going concern and therefore to realise its assets and discharge its liabilities in the normal course of business. There can be no certainty that the disposal of an interest in Islandmagee Storage Limited will proceed within the timeframe currently expected. Nevertheless after making inquiries and considering all the relevant factors in relation to the proposed disposals, the Directors are of the opinion that they will be able to complete any necessary funding and have therefore prepared cash flow forecasts for the Group on this basis. These projections indicate that the Group will have adequate cash resources to meet its obligations as they fall due for a period of not less than one year from the date of approval of the statutory accounts. For this reason, they continue to adopt the going concern basis of accounting in preparing the statutory accounts. If for any reason the uncertainty described above cannot be successfully resolved, the going concern basis may no longer be appropriate. The statutory accounts from which this financial information has been extracted do not include any adjustments that would result if the Group and Company were unable to continue as a going concern. The auditors reported on the statutory accounts for the years ended 31 July 2010 and 2009; their reports were unqualified and did not contain a statement under either Section 498 (2) or Section 498 (3) of the Companies Act 2006 or Section 237 (2) or Section 237 (3) of the Companies Act 1985 respectively. However, in their report on the statutory accounts for the year ended 31 July 2010, the auditors drew attention to the uncertainties regarding the Group's ability to continue as a going concern by way of an emphasis of matter paragraph. The statutory accounts for the year ended 31 July 2009 have been delivered to the Register of Companies; those for the year ended 31 July 2010 were approved by the Board on 13 December 2010 and will be delivered to the Registrar of Companies following the Company's Annual General Meeting.
2.	Loss per share			2010 £	2009       £
	Loss
	The loss for the purposes of basic and diluted loss per share bring the net loss attributable to equity shareholders:
	Continuing operations			373,713	212,957
	Discontinued operations			874,748	1,068,045
	Continuing and discontinued operations			1,248,461	1,281,002
	Number of shares
	Weighted average number of ordinary shares for the purposes of basic earnings per share			73,023,939	70,384,727
	Basic earnings per share
	Continuing operations			0.51p	0.30p
	Discontinued operations			1.20p	1.52p
	Continuing and discontinued operations			1.71p	1.82p
	In accordance with IAS 33, diluted earnings per share calculations are not presented as the assumed conversion of outstanding share options would be anti-dilutive; as such the diluted earnings per share is equal to the basic loss per share.

3.	Cash (used in) operations								2010			2009
									£			£
	Operating loss for the year from continuing operations								(397,358)			(386,396)
	Depreciation								21,070			21,880
	Profit on disposal of plant & equipment								-			367
	Decrease in trade and other receivables								38,624			156,164
	(Decrease) in trade and other payables								(83,280)			(38,105)
	Share option expense								125,246			138,691
	Cash (used in) discontinued operations								(1,114,017)			(1,068,045)
	Cash (used in) continuing and discontinued operations								(1,409,715)			(1,175,444)
	Cash flows arising from discontinued activities								2010			2009
									£			£
	Cash (used in) discontinued operations								(1,114,017)			(1,068,045)
	Investing activities								(2,819,450)			(5,209,340)
	Financing activities								-			-
4.		Assets held for sale and discontinued operations
		On 28 June 2010 a Memorandum of Understanding ("MOU") was signed with US independent energy company eCORP International, LLC ("eCORP") relating to InfraStrata's gas storage projects.  The disposal group largely comprises the assets described in this note. In respect of the Portland Project eCORP Oil & Gas UK Limited undertook to fund the first cavern well and thereby acquired the right to match the project expenditure invested to date by InfraStrata (£22.9m) in return for 50% of the share capital of the project company, Portland Gas Ltd. The transaction was completed after year end. Under the terms of the MOU the Company and Mutual Energy are continuing discussions with eCORP to acquire 40% of the share capital of Islandmagee Storage Limited. The terms of the MOU have been extended to 30 April 2011, but not on an exclusive basis. The Company will dispose of its interest in the share capital of Sager Meer Energy GmbH and Portland Gas ESP S.L. its gas storage projects in Germany and Spain. Whilst the assets held for sale are classified as current assets, due to the nature of the arrangements described above, the Group does not expect to receive cash inflows equivalent to, or in excess of, the book value of the assets so classified.
													£
		Assets classified as held for sale
		Property, plant and equipment											23,664,983
		Intangible assets - gas storage development costs											2,414,342
		Trade and other receivables											334,553
		Cash and cash equivalents											97,156
													26,511,034
		Liabilities classified as held for sale
		Current liabilities
		Trade creditors and accruals											73,400
		Other taxation and social security											4,182
		Accruals											114,857
		Other contractual agreements											700,000
													892,439
		Non-current liabilities
		Obligations under lease agreements												2,168,286
		Other contractual agreements												1,000,943
														4,061,668
5.	Discontinued operations									2010 £		2009 £
	Revenue									-		-
	Net operating costs									874,748		1,068,045
	Loss from operations									874,748		1,068,045
	Loss before tax									874,748		1,068,045
	Tax charge									-		-
	Loss after tax									874,748		1,068,045
	The results for the discontinued activities of the Group for the year ended 31 July 2009 have been re-presented, as required by IFRS 5, so that the disclosures relate to all operations that have been discontinued by 31 July 2010 for all periods presented.
6.	Approval
	The preliminary announcement was approved by the Board on 13 December 2010.

 

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