Interim Results

RNS Number : 9082Z

Petroneft Resources PLC

30 September 2009

 

30 September 2009

PetroNeft Resources plc

PetroNeft Resources plc ('PetroNeft' or 'the Company') the oil exploration and production company with assets in the Tomsk Oblast, Western Siberia, Russia is pleased to report its results for the 6 months ended 30 June 2009.

Highlights, including post balance sheet events

• Successful Equity placing raising US$27.5 million 
• Crude Oil Transportation and Custody Transfer agreement signed with Imperial Energy
• Phase 1 project costs to first oil reduced by 58% to $25 million (previously $60 million)
• Company now fully funded to reach year-round oil production in Q3 2010 
• Oil production expected to reach approximately 4,000 bopd by the end of 2010

Dennis Francis, Chief Executive Officer of PetroNeft Resources plc commented:

'The recent successes of the fund raising and the pipeline agreement have put PetroNeft on a firm footing to reach year-round production in 2010 which will enable the Company to generate its own revenues and ultimately expand its reserve base both within Licence 61 and through the numerous business development opportunities we are seeing in the current climate.'

For further information, contact:

Dennis Francis, CEO, PetroNeft Resources plc	[phone]
Paul Dowling, CFO, PetroNeft Resources plc	[phone]
John Frain/Brian Garrahy, Davy (NOMAD and Joint Broker)	[phone]
Jeffrey Auld/Elijah Colby, Canaccord Adams Limited (Joint Broker)	[phone]
Nick Elwes/Simon Whitehead, College Hill	[phone]

Forward Looking Statements

This announcement contains forward-looking statements. These statements relate to the Company's future prospects, developments and business strategies. Forward-looking statements are identified by their use of terms and phrases such as 'believe', 'could', 'envisage', 'potential', 'estimate', 'expect', 'may', 'will' or the negative of those, variations or comparable expressions, including references to assumptions.

The forward-looking statements in this announcement are based on current expectations and are subject to risks and uncertainties that could cause actual results to differ materially from those expressed or implied by those statements. These forward-looking statements speak only as at the date of this announcement.

PetroNeft Resources Plc

 Chairman's Statement 

Dear Shareholder,

Major progress achieved

To date, 2009 has seen major progress for PetroNeft. In late 2008 the move to year-round production was put on hold. Since then we have achieved significant cost savings and completed a new, improved agreement for the transportation of our oil to market. Most recently we have raised the necessary funds to bring the Company to first oil in 2010. Year-round production is expected to commence in the third quarter of 2010 with rates expected to reach 4,000 barrels of oil per day ('bopd') by the end of 2010, and reach 12,000 bopd in 2012.

Significant cost savings achieved 

In 2008 the total funding requirement for the Phase 1 project to develop the Lineynoye and West Lineynoye oil fields was estimated to be over US$60 million. Since the project was put on hold in October 2008 we have been working to reduce this funding requirement which led to the reduction of the funding requirement by almost 60% to approximately US$25 million through the following key savings and efficiencies:

• Weakening of the Russian Rouble against the US Dollar

• Use of only one drilling rig in the first year instead of two

• Revised pipeline route including utilisation of existing facilities at the pipeline tie-in point

• Reduction and modification of field facilities

Transportation Agreement with Imperial Energy

On 26 August 2009 PetroNeft entered into a Crude Oil Transportation and Custody Transfer agreement with Imperial Energy. Under the terms of the agreement, Imperial will accept PetroNeft's crude oil using existing tank facilities at the Kiev-Eganskoye field and transport the crude to its custody transfer point at Zavyalovo for transfer into the Transneft system. The agreement is effective for 25 years and the tariff is subject to adjustments based on the Russian Consumer Price Index.

The overall tariff and associated capital cost structure has material cost and operational advantages for PetroNeft compared to the previous export option to the north. The fact that the new pipeline route is entirely within the Tomsk Oblast, whereas the northern route also entered the Khanty-Mansiysk District, will significantly reduce the various permits and approvals associated with the pipeline. In addition, the new pipeline route from Lineynoye to Kiev-Eganskoye runs adjacent to the Tungolskoye and newly discovered Kondrashevskoye oil fields, creating useful synergies for future phases of development. 

The Company will construct the approximately 70km pipeline segment from Lineynoye to Kiev-Eganskoye this coming winter. The Company has already acquired over 90% of the pipe required and this has been in storage at a river port to the north of Licence 61.  

Successful financing

PetroNeft successfully raised US$27.5 million in September 2009 through a placing of new shares with international institutional and private investors. This funding enables the Company to fully execute the Phase 1 project to develop the Lineynoye and West Lineynoye oil fields and become self financing from oil production revenues. As detailed in note 5 below an EGM to approve the placing will be held on 15 October 2009.

It remains the Board's intention to fund the Company with a mixture of debt and equity. Discussions are ongoing with Banks regarding debt finance which could be utilised for business development purposes or to accelerate the appraisal and development programme on Licence 61.

PetroNeft Resources Plc

 Chairman's Statement (continued)

Business Development

We continue to actively examine a number of acquisition opportunities in the Tomsk region and Russia in general and hope to update shareholders in more detail in the coming months.

Financial results for the period

The net loss for the period was US$2,390,656 (June 2008: US$1,421,950). The main reason for the increase in losses relates to a foreign exchange loss of US$771,814 on US Dollar denominated loans from PetroNeft to its Russian subsidiary Stimul-T whose functional currency is the Russian Rouble.

Revenue from oil sales in the period amounted to US$518,058 generating a gross profit of US$127,297.

Corporate

On 31 March 2009 Executive Director Des Burke retired from the Board. Des was a founding Director of PetroNeft and established many of the key relationships with advisers and early investors in the Company. 

Conclusion

PetroNeft is now on course to begin year round production in 2010. The commencement of production means that the Group will generate significant surplus cash in the coming years to enable it to expand its reserve base both within Licence 61 and through business development opportunities in Tomsk, Russia and the FSU.

David Golder

Non-Executive Chairman

PetroNeft Resources Plc

Interim Consolidated Income Statement
For the 6 months ended 30 June 2009
		Unaudited				Audited
		6 months ended		6 months ended		Full year ended
		30 June 2009		30 June 2008		31 December 2008
		US$		US$		US$
Revenue		518,058		-		-
Cost of sales		(390,761)		-		-
Gross profit		127,297		-		-
Administrative expenses		(1,626,148)		(1,315,672)		(4,823,513)
Exchange (loss)/gain on intra group loans		(771,814)		(79,656)		(3,010,932)
Group operating loss		(2,270,665)		(1,395,328)		(7,834,445)
Finance revenue		12,593		46,304		128,487
Loss for the period for continuing operations before taxation		(2,258,072)		(1,349,024)		(7,705,958)
Income tax expense		(132,584)		(72,926)		(206,010)
Loss for the period attributable to equity holders of the parent		(2,390,656)		(1,421,950)		(7,911,968)
Loss per share attributable to ordinary equity holders of the parent:
Basic and diluted - US dollar cent		(1.04)		(0.74)		(3.81)

PetroNeft Resources Plc

Interim Consolidated Balance Sheet
as at 30 June 2008
		Unaudited				Audited
		30 June 2009		30 June 2008		31 December 2008
		US$		US$		US$
Assets
Non-current Assets
Oil and gas properties		22,533,643		9,746,883		23,769,980
Property, plant and equipment		2,011,819		2,137,970		1,867,397
Exploration and evaluation assets		17,646,274		31,391,327		18,684,771
Leasehold land payments		185,813		186,110		181,009
		42,377,549		43,462,290		44,503,157
Current Assets
Trade and other receivables		1,060,361		1,046,106		3,067,736
Cash and cash equivalents		1,287,677		2,064,159		2,168,197
		2,348,038		3,110,265		5,235,933
Total Assets		44,725,587		46,572,555		49,739,090
Equity and Liabilities
Capital and Reserves
Called up share capital		2,919,041		2,386,502		2,919,041
Share premium account		57,193,950		41,240,213		57,193,950
Share based payments reserve		2,115,911		1,628,609		1,904,829
Retained loss		(14,671,507)		(5,790,833)		(12,280,851)
Currency translation reserve		(6,824,789)		2,935,283		(5,024,070)
Other reserves		336,000		336,000		336,000
Equity attributable to equity holders of the parent		41,068,606		42,735,774		45,048,899
Non-current Liabilities
Provisions		239,793		137,292		254,646
Deferred tax liability		679,568		445,634		546,984
		919,361		582,926		801,630
Current Liabilities
Trade and other payables		2,737,620		3,253,855		3,888,561
		2,737,620		3,253,855		3,888,561
Total Liabilities		3,656,981		3,836,781		4,690,191
Total Equity and Liabilities		44,725,587		46,572,555		49,739,090

PetroNeft Resources Plc

Interim Consolidated Statement of Changes in Equity
For the 6 months ended 30 June 2009
	Unaudited
	Share Capital		Share Premium		Other reserves		Translation reserve		Retained Losses		Total
	US$		US$		US$		US$		US$		US$
At 1 January 2009	2,919,041		57,193,950		2,240,829		(5,024,070)		(12,280,851)		45,048,899
Loss for the period	-		-		-		-		(2,390,656)		(2,390,656)
Currency translation adjustments	-		-		-		(1,800,719)		-		(1,800,719)
Total recognised income and expense	-		-		-		(1,800,719)		(2,390,656)		(4,191,375)
Share-based payment expense	-		-		211,082		-		-		211,082
At 30 June 2009	2,919,041		57,193,950		2,451,911		(6,824,789)		(14,671,507)		41,068,606
At 1 January 2008	2,343,864		40,252,836		1,513,665		1,466,092		(4,368,883)		41,207,574
Loss for the period	-		-		-		-		(1,421,950)		(1,421,950)
Currency translation adjustments	-		-		-		1,469,191		-		1,469,191
Total recognised income and expense	-		-		-		1,469,191		(1,421,950)		47,241
Shares issued on exercise of warrant	41,621		958,379		-		-		-		1,000,000
Share options exercised	1,017		28,998		-		-		-		30,015
Share-based payment expense	-		-		450,944		-		-		450,944
At 30 June 2008	2,386,502		41,240,213		1,964,609		2,935,283		(5,790,833)		42,735,774

PetroNeft Resources Plc

Consolidated Cash Flow Statement
For the 6 months ended 30 June 2009
		Unaudited				Audited
		6 months ended		6 months ended		Full year ended
		30 June 2009		30 June 2008		31 December 2008
		US$		US$		US$
Loss before taxation		(2,258,072)		(1,349,024)		(7,705,958)
Adjustment to reconcile loss before tax to net cash flows
Non-cash
Depreciation and amortisation		79,702		131,583		238,013
Share-based payment expense		211,082		450,944		727,164
Unwinding of fair value discount on decommissioning		-		-		17,062
Deduct finance revenue		(12,593)		(46,304)		(128,487)
Working capital adjustments
Decrease in trade receivables		2,007,375		2,756,709		475,005
Increase in trade payables		734,585		1,902,707		2,918,821
Income tax paid		-		-		(25,387)
Net cash flows from operating activities		762,079		3,846,615		(3,483,767)
Investing activities
Purchase of oil and gas properties		(971,997)		(2,938,228)		(15,047,118)
Purchase of property, plant and equipment		(758,971)		-		(1,008,545)
Exploration and evaluation payments		(11,660)		(8,457,836)		(6,744,993)
VAT refund		-		-		3,311,690
Finance revenue		12,593		46,304		128,487
Net cash used in investing activities		(1,730,035)		(11,349,760)		(19,360,479)
Financing activities
Proceeds from exercise of share options		-		30,015		30,015
Proceeds from exercise of warrant		-		1,000,000		1,000,000
Proceeds from issue of share capital		-		-		17,152,320
Transaction costs of issue of shares		-		-		(666,044)
Net cash received from financing activities		-		1,030,015		17,516,291
Net (decrease) in cash and cash equivalents		(967,956)		(6,473,130)		(5,327,955)
Translation adjustment		87,436		232,994		(808,143)
Cash and cash equivalents at the beginning of the period		2,168,197		8,304,295		8,304,295
Cash and cash equivalents at the end of the period		1,287,677		2,064,159		2,168,197

PetroNeft Resources Plc

Notes to the interim condensed consolidated financial statements

for the six months ended 30 June 2009

1.    Corporate information

The interim condensed consolidated financial statements of the Group for the six months ended 30 June 2009 were authorised for issue in accordance with a resolution of the Directors on 29 September 2009.

PetroNeft Resources plc ('the Company', or together with its subsidiaries, 'the Group') is a Company incorporated in Ireland under the Companies Acts, 1963 to 2009. The Company is listed on the Alternative Investment Market ('AIM') of the London Stock Exchange and the Irish Enterprise Exchange ('IEX') of the Irish Stock Exchange. The address of the registered office is One Earlsfort Centre, Earlsfort Terrace, Dublin 2. The Company is domiciled in the Republic of Ireland. 

The principal activities of the Group are those of oil and gas exploration, development and production.  

2.    Accounting policies

2.1    Basis of Preparation

The interim condensed consolidated financial statements for the six months ended 30 June 2009 have been prepared in accordance with IAS 34 Interim Financial Reporting. 

The interim condensed consolidated financial statements do not include all the information and disclosures required in the annual financial statements, and should be read in conjunction with the Group's annual financial statements as at 31 December 2008 which are available on the Group's website - www.petroneft.com.

The interim condensed consolidated financial statements are presented in US dollars ('US$').

2.2    Significant Accounting Policies

The accounting policies adopted in the preparation of the interim condensed consolidated financial statements are consistent with those followed in the preparation of the Group's annual financial statements for the year ended 31 December 2008.

3.	Cash and cash Equivalents
	For the purpose of the interim consolidated cash flow statement, cash and cash equivalents are comprised of the following:
			Unaudited				Audited
			30 June 2009		30 June 2008		31 December 2008
			US$		US$		US$
	Cash at bank and in hand		1,287,677		2,064,159		2,168,197
			1,287,677		2,064,159		2,168,197

4.

Income tax

The major components of income tax expense in the interim consolidated income statement are:

Unaudited

Audited

6 months ended

6 months ended

Full year ended

30 June 2009

30 June 2008

31 December2008

US$

US$

US$

Current income tax

Current income tax charge

-

-

31,734

Deferred income tax

Relating to origination and reversal of temporary differences

132,584

72,926

174,276

132,584

72,926

206,010

5.    Events after the balance sheet date

    On 27 August 2009 the Company announced that it had entered into a 25 year Crude Oil Transportation and Custody Transfer agreement as detailed in the Chairman's statement above.    

    On 21 September 2009 the Company announced the placing of 120,640,209 new Ordinary Shares at STG£0.14 per Ordinary Share, raising gross proceeds of approximately US$27.5 million. Of these, 22,922,303 were issued on 24 September 2009 while the remainder, 97,717,906 Ordinary Shares are conditional, inter alia, on admission of such Ordinary Shares to trading on AIM and IEX and upon receiving shareholder approval to complete the Second Tranche Placing at an extraordinary general meeting of the Company to be held on 15 October 2009 ('EGM'). A circular to convene the EGM was issued to shareholders on 22 September 2009.

 

END

 

 

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