Interim Results

KERN RIVER PLC 13 July 1999 KERN RIVER plc INTERIM RESULTS FOR THE 6 MONTHS ENDED 31 MARCH 1999 CHAIRMAN'S INTERIM STATEMENT Our results for the period have been adversely affected by the extremely low Crude Oil prices prevailing during the period. The average for the six month period was barely $10 a barrel although market prices have now recovered appreciably from the low point seen in March 1999. The situation has been monitored closely so that our business and operational decisions have been carefully weighed to ensure sustained production with the minimum outlay. Income for the interim period stemmed almost entirely from the Starks Field in Louisiana where we maintained, in the period, an average monthly production of around 5,500 barrels per month. The overall loss for the half year ended 31st March 1999 was £85,064 (1998 £75,080). Whilst all involved in the business of oil production suffered from last Winter's depressed market for Crude Oil, there has been clear evidence of an improvement during the last three months. There are further signs that the oil industry is gaining confidence to be able, over time, to secure much better prices. Your Board is encouraged by this general optimism since, by on-going development of our fields at both Starks and Nukern, there is good potential to realise maximum value from our Proven Reserves (which total almost 5.5 million barrels). The location and nature of these reserves are an added attraction and opportunities to secure their timely development are under consideration. Starks Field, Louisiana. We have continued economically to re-work existing wells, aiming both to protect the reservoir and to maintain rates of production. Sales for the six month period were some 24,700 barrels; this being the net figure after customary adjustments, including mineral owners' entitlements. Although oil values were their lowest for several years, shut-in is not a viable option. At the beginning of the period we were realising only $12.50 per barrel for our Louisiana Crude but this continued to fall to reach a low of $8.50 per barrel by March 1999. This compared with some $14 per barrel in March 1998 and contrasts with the high of $23.50 per barrel received for the oil we sold in March 1997. Nonetheless, throughout, there has remained a consistent relationship between the price of our Louisiana production and certain marker Crudes. Thus the convincing signs of recovery now being seen in International prices, with, for instance, Brent having shown a rise of $5per barrel in the three months ending early July, should bring corresponding benefit to Starks. Nukern Lease, California. Production at Nukern remains at the minimum necessary to maintain the lease. The Board is focused on how best to realise value for shareholders. Working Capital During the period a total of £60,000 was drawn down against the conditional loan facility whereby Villiers Group plc assists with the funding of our Working Capital. On behalf of the Directors, I would like to assure you of our continuing efforts to achieve best value for shareholders whilst we emerge from what has clearly been a difficult time for the entire oil industry. We remain intent on maximising the return from our substantial reserves of oil. Neville A. Brown, Chairman 13th July 1999 KERN RIVER plc CONSOLIDATED PROFIT AND LOSS ACCOUNT FOR THE 6 MONTHS ENDED 31 MARCH 1999 6 months 6 months Year ended ended ended Note 31 March 31 March 30 Sept. 1999 1998 1998 1 (unaudited) (unaudited) (audited) £'000 £'000 £'000 Turnover 150 214 387 Cost of sales (233) (208) (399) --------- --------- -------- Gross profit/(loss) (83) 6 (12) Administrative expenses (49) (59) (107) Exchange gain/(loss) 44 (34) (47) --------- --------- -------- Operating loss (88) (87) (166) Net interest receivable 3 12 20 --------- --------- -------- Loss on ordinary activities before taxation (85) (75) (146) Taxation - - - --------- --------- -------- Loss attributable to the Group (85) (75) (146) ======== ========= ======== Basic and diluted loss per share (p) 3 (0.74p) (0.65p) (1.28p) ======== ======== ======== All results are from continuing operations. STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES Loss for the period (85) (75) (146) Currency translation differences 160 (146) (204) --------- --------- -------- Total recognised gains and losses 75 (221) (350) ========= ========= ======== KERN RIVER plc CONSOLIDATED BALANCE SHEET AS AT 31 MARCH 1999 31 March 31 March 30 Sept. 1999 1998 1998 (unaudited) (unaudited) (audited) Fixed assets Tangible assets 6,443 6,043 6,053 --------- --------- --------- Current assets Debtors 42 126 71 Cash at bank and in hand 112 372 203 --------- --------- --------- 154 498 274 Creditors: amounts falling due within one year (130) (883) (73) --------- --------- --------- Net current assets /(current liabilities) 24 (385) 201 --------- --------- --------- Total assets less current liabilities 6,467 5,658 6,254 Creditors: amounts falling due after more than one year (1,609) (746) (1,471) --------- --------- --------- Total net assets 4,858 4,912 4,783 ========= ========= ========= Capital and reserves Called up share capital 2,875 2,875 2,875 Share premium 381 381 381 Exchange equalisation reserve (147) (294) (351) Merger reserve 2,198 2,198 2,198 Profit and loss account (449) (248) (320) --------- --------- --------- Equity shareholders' funds 4,858 4,912 4,783 ========= ========= ========= KERN RIVER plc CONSOLIDATED CASH FLOW STATEMENT FOR THE 6 MONTHS ENDED 31 MARCH 1999 6 months 6 months Year ended ended ended 31 March 31 March 30 Sept. 1999 1998 1998 (unaudited) (unaudited) (audited) £'000 £'000 £'000 Cash flow from operating activities 48 (112) (156) Returns on investments and servicing of finance Interest received 3 12 20 Capital expenditure and financial investment Purchase of tangible fixed assets (121) (217) (342) -------- -------- -------- Decrease in cash in the period (70) (317) (478) ======== ======== ======== RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET DEBT Decrease in cash in the period (70) (317) (478) Increase in debt (60) - - Translation differences (99) 14 96 -------- ------- -------- Movement in net debt in the period (229) (303) (382) Net debt at beginning of the period (1,268) (886) (886) -------- ------- -------- Net debt at end of period (1,497) (1,189) (1,268) ======== ======= ======= RECONCILIATION OF OPERATING LOSS TO CASH FLOW FROM OPERATIONS Operating loss (88) (87) (166) Depreciation and depletion charges 50 63 92 Decrease/(increase) in debtors 29 (86) (31) Increase/(decrease) in creditors 57 (2) (51) -------- ------- -------- Net cash flow from operations 48 (112) (156) ======== ======= ======== KERN RIVER plc NOTES TO THE INTERIM ACCOUNTS FOR THE 6 MONTHS ENDED 31 MARCH 1999 1. The financial information set out in this report does not constitute full accounts for the purposes of Section 240 of the Companies Act 1985. The interim accounts for the six months ended 31 March 1999 and 31 March 1998 are unaudited. The comparative figures for the financial year ended 30 September 1998 are not the Company's statutory accounts for the financial year but are abridged from those accounts which have been reported on by the Company's auditors, whose report was unqualified. The interim accounts have been prepared on the basis of the accounting policies set out in the annual financial statements of the Group for the year ended 30 September 1998. The interim accounts were approved by the directors on 13 July 1999. 2. Amounts denominated in US Dollars have been converted at the closing rate on 31 March 1999 of £1 to $1.61 (31 March 1998 - $1.67; 30 September 1998 - $1.70). The results of the US subsidiary undertaking have been translated at the average rate ruling in the accounting period of £1 to $1.64 (31 March 1998 - $1.64; 30 September 1998 - $1.66). 3. The figure for loss per share is based on the loss attributable to the Group of £85,064 (31 March 1998 - £75,080; 30 September 1998 - £146,693) and on the weighted average number of ordinary shares in issue during the period of 11,500,000 (31 March 1998 and 30 September 1998 - 11,500,000). No dividend is proposed. 4 The Group has assessed the effect on it of the risks and uncertainties associated with the Year 2000 issue. It has reviewed its internal operating systems and believes them to be compliant. It has also received assurances from its licensed operator that its systems are Year 2000 compliant. Copies of this interimreport are being sent to all shareholders, further copies can be obtained from the Company's registered office. Kern River plc Registered Office: Claremont Works, Claremount Road Halifax HX3 6AW Registered in England No. 3262305 For further information please contact: Neville A Brown, Chairman 01277 227686 Garry Butterfield, Finance Director 01902 772409

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