Half Year Results

RNS Number : 9135M

Soco International PLC

24 August 2011

 



SOCO International plc

("SOCO" or the "Company")

HALF YEAR RESULTS

SOCO International plc, an international oil and gas exploration and production company with interests in Vietnam, the Republic of Congo (Brazzaville), the Democratic Republic of Congo (Kinshasa) and Angola, announces its Half Year Results for the period ended 30 June 2011.

HIGHLIGHTS

·      Te Giac Trang ("TGT") produced First Oil at 06:55h local time on 22 August; plateau production during Phase I is expected to be approximately 55,000 barrels of oil per day ("BOPD")

·      The TGT Full Development Plan has been approved by PetroVietnam;  including preparations for Phase II development drilling in the second half of 2011 which should add approximately 40,000 BOPD to TGT plateau production when it comes on stream in August 2012

·      The Te Giac Den licence extension has been granted by the Government of Vietnam; seismic acquisition will commence later this month

·      A three well exploration campaign is due to commence offshore Congo (Brazzaville) in early September 2011

·      SOCO's cash and cash equivalents at 30 June 2011 were $213.1 million

ENQUIRIES:

SOCO International plc

Roger Cagle, Deputy Chief Executive and Chief Financial Officer

Tel: [phone]

Pelham Bell Pottinger

James Henderson

Victoria Geoghegan

Tel: [phone]

CHAIRMAN AND CHIEF EXECUTIVE'S STATEMENT

The primary focus for the first half of 2011 was preparation for the start up of production at the Te Giac Trang ("TGT") field, offshore Vietnam.  TGT is by far the largest production project that the Company has ever been involved in and no small project by any metric.  The fact that initial production began on 22 August 2011, just days from the targeted date set two years ago is a testament to the hard work invested in the project by SOCO, its partners and the staff of the Hoang Long Joint Operating Company, which is operator of the project.

The TGT field development and product characteristics differ considerably from the Ca Ngu Vang field ("CNV"), also offshore Vietnam, which has been producing for the past two years.  CNV produces a highly volatile oil from Basement with a high gas to oil ratio ("GOR") via the facilities at the Bach Ho oilfield.  Field exploitation depends on fracture interconnectivity to efficiently deplete the reservoir.  TGT by contrast has a significantly lower GOR and produces from a much shallower Clastics sandstone reservoir, with a series of sand/shale intervals.  Oil is produced into a dedicated Floating Production Storage and Offloading Vessel ("FPSO").  Gas will be sold via the same Bach Ho interconnection as that which handles gas from CNV.

TGT is currently producing at approximately 16,000 barrels of oil per day ("BOPD").   Production is expected to ramp up to test the name plate capacity, 55,000 BOPD, of the FPSO by year end.  A sales contract has been signed for the first two cargoes of TGT pre-assay crude to be sold to Vitol at a modest premium to Brent.  After assay results are confirmed, expectations are that the crude would fetch a higher premium.

Elsewhere in Vietnam, we were granted an extension to the appraisal period for Te Giac Den ("TGD") where exploration drilling has thus far produced mixed signals.  A focused 3D seismic acquisition programme will be conducted over the area in the second half of this year.  Should the seismic offer encouragement, we would expect to drill another well before the extension expires at the end of October 2012.

The first well of up to a three well exploration programme offshore Congo (Brazzaville) is expected to spud in early September and drill a pre-salt target on the Marine XI Block with estimated pre-drill unrisked mean recoverable resources of 165 million barrels.  The rig is currently under tow, following a refurbishment in South Africa.  A 2D seismic acquisition programme on the Nganzi Block, onshore the Democratic Republic of Congo, is planned for the fourth quarter 2011, focusing on the Chela formation.  Should we get encouragement from the seismic interpretation, we anticipate phase II drilling to commence in the summer of 2012.

First half 2011 after tax profit from continuing operations was $6.8 million. This compares to $3.7 million after tax profit from continuing operations for the same period last year.  Capital expenditures were $65.0 million for the first half of 2011 ($51.6 million in the first half of 2010).

As we are in the early stages of production from TGT with work just starting on Phase II development and beginning another extensive exploration cycle, the Directors do not recommend a dividend.

OPERATIONS 

VIETNAM

Block 16-1, Te Giac Trang ("TGT")

Activity in the Cuu Long Basin, offshore Vietnam, during the first half of 2011 was primarily directed towards bringing the TGT field onstream culminating in the first flow of crude oil and wet gas on 22 August 2011. The field is currently producing at 16,000 BOPD with plateau production anticipated to be c.55,000 BOPD and gas production approximately 30 million cubic feet per day.

During the first half of 2011, in the lead up to First Oil, Phase I development drilling continued on TGT and was concluded with the completion of the four "batch" drilled development wells, TGT-4P to -7P, and the start and completion of the eighth development well, TGT-8P. The resulting petrophysical analysis has indicated that the wells confirm the reservoir model. 

The final stages of preparation for First Oil included the installation of the topsides on the jacket on the wellhead platform on TGT's H1 area and the deployment of theFPSO, the Armada TGT 1, which arrived on location in July.  The vessel has undergone 22 months of conversion work by BAB-VSP, a joint venture between BAB Armada and Vietsovpetro, in the Keppell Shipyard in Singapore.  At name plate capacity, the FPSO is capable of processing 55,000 BOPD and 45,000 barrels of water per day and storing 620,000 barrels.

TGT's Full Development Plan was approved by the Government of Vietnam in May 2011 and incorporates the accelerated Phase II development with installation of a second unmanned production platform on the H4 fault block. The installation of the H4 jacket is now complete and the drilling deck installed. The topsides are being constructed in Vietnam for installation in early 2012. Phase II development drilling is expected to commence in September 2011 and production in the summer of 2012.

Block 16-1, Te Giac Den ("TGD")

The Government of Vietnam's agreement to the extension period for the TGD Appraisal area was also received in May 2011. The initial extension period is from 1 January 2011 to 30 April 2012.  An additional six months extension will be automatic (through 31 October 2012) in the event that the Company elects to drill a well. A seismic vessel has been identified and will commence acquisition later this month.

Block 9-2, Ca Ngu Vang ("CNV")

At the CNV producing field in Block 9-2 offshore Vietnam, operated by the Hoan Vu Joint Operating Company, Vietsovpetro, the operator of the Bach Ho processing facilities, will install additional dedicated test separation facilities on the Bach Ho central processing platform complex in order to more accurately measure liquid and gas production from the CNV production stream entering the Bach Ho facilities.  The benefit to the Company will be a more accurate allocation of CNV oil, gas and gas liquids production within the Bach Ho production system. During the first half of 2011, CNV production net to the Company's interest has averaged 2,339 barrels of oil equivalent per day ("BOEPD"). 

AFRICA

REPUBLIC OF CONGO (BRAZZAVILLE)

Marine XI and Marine XIV

Preparations continued during the first half of 2011 to drill up to three exploration wells offshore Congo (Brazzaville), with the first well due to spud in early September.  The ENSCO 5003 rig has been contracted and refurbished and is currently en route to the Lower Congo Basin. The initial well will drill a pre-salt target on the Marine XI Block with estimated pre-drill unrisked mean recoverable resources of 165 million barrels and should take approximately 45 days to drill. The second well will target the Miocene interval above the salt layer on the Marine XIV Block.  With pre-drill unrisked mean recoverable resources of 40 million barrels, the well should take approximately 30 days to drill.

If the first well is successful, an appraisal well is expected to be drilled on the pre-salt target.  If not, the final well in this exploration programme will be drilled on a Miocene target in the Marine XI Block with 70 million barrels of pre-drill mean unrisked recoverable resources.

DEMOCRATIC REPUBLIC OF CONGO (KINSHASA) ("DRC")

Nganzi

Further evaluation of the Nganzi Block, onshore the DRC, incorporating information gathered in the 2010 drilling programme has been completed and indicates remaining prospectivity in the Chela formation. A second 2D seismic acquisition programme is planned for the fourth quarter of 2011, with possible drilling in 2012 prior to the end of the initial exploration period.

Block V

The security review over Block V in the Albertine Rift in the DRC is ongoing.  The Company's initial environmental and social impact assessment ("ESIA") was submitted to the Groupe d'Etudes Environnementales du Congo in March 2011 and following a period of review and consultation with stakeholders, including various departments within the Government of DRC, a final ESIA was submitted in May and was later approved.  An aeromagnetic and aerogravity survey will be conducted later this year and a seismic programme over Lake Edward is planned for early 2012.

ANGOLA

Cabinda North

The seismic acquisition programme that recommenced in May 2010 was completed towards the end of the first half of 2011. Processing of the data has commenced. No drilling is anticipated in Cabinda during the remainder of 2011.

FINANCIAL RESULTS

Ahead of the commencement of production from the TGT field the financial results for the six months ended 30 June 2011 reveal a Company poised to dramatically change its scale of operations in the second half of the year.  Capital expenditure during the period has been focused on the TGT development, which came onstream on 22 August 2011.  The income statement, which, in the first half of 2011 comprises continuing operations from the CNV field, will see a major step-change with the TGT field production expected to to reach 55,000 BOPD by year end.  Despite this capital intensive period the Group continues to hold significant cash balances to enable it to continue its exploration activities elsewhere, especially in its Africa region.  Operating inflows from the TGT field will further add to the Group's capacity to explore in new areas.

INCOME STATEMENT

Operating results

In the first half of 2011, SOCO's oil and gas revenues from continuing operations, which are all derived from the Group's CNV field were higher than the equivalent period last year at $26.4 million (six months to 30 June 2010 - $19.4 million).  During the first six months of 2011, the Group realised an average price, on continuing operations, of $118.09 per barrel of oil sold compared with $82.71 per barrel in the first half of 2010 and an average price of $0.74 per million BTU ($0.96 per thousand standard cubic feet) of gas sold, down from the contractual price of $0.93 per million BTU due to a high hydrogen sulphide content which was rectified in August.  The Group's working interest share of production during the period was 2,339 BOEPD up from 2,200 BOEPD in the first half of 2010 due primarily to both planned and unplanned repair work which led to shutdowns on CNV during the prior period.

Cost of sales on continuing operations in the period was $11.6 million for the six month period to 30 June 2011 up from $4.4 million in the first half of 2010. This increase is mainly associated with a net reduction in oil inventory in the current period of $3.0 million, valued at market price, compared to an increase in oil inventory of $2.7 million in the first half of 2010 and also includes the impacts from the shutdowns mentioned above. The reduction of $3.0 million is the net of a reduction in opening oil inventory entitlement since inception of production of $10.3 million and an increase in oil inventory of $7.3 million during the period, which includes the effects of increased oil prices.  On a per barrel basis, excluding inventory movements, depreciation, depletion and decommissioning costs (DD&A) and royalties, continuing operating costs were approximately $10.00 per barrel compared with $7.20 per barrel in the first half of 2010.  This increase on a per barrel basis is mainly due to higher non-volume related production costs in particular well intervention costs.

DD&A included in cost of sales was $3.0 million for the current reporting period being the same as in the first half of 2010 consistent with similar entitlement production. On a per barrel basis, DD&A decreased slightly from approximately $7.40 per barrel in the first half of 2010 to approximately $7.00 per barrel in the six months ended June 2011.

Administrative costs relating to continuing operations for the first six months decreased from $4.2 million in 2010 to $3.6 million in 2011.  The decrease is primarily attributable to higher direct employee costs incurred in the first half of 2010.

Operating profit from continuing operations for the period was $11.3 million arising from the Group's production operations in Vietnam, compared to $10.8 million for the first half of 2010.

Non-operating results

Other gains and losses increased from $0.4 million in the first half of 2010 to $2.8 million in the current reporting period mainly due to a higher gain in the fair value associated with the subsequent payment amount tied to future oil production from the Group's divested Mongolia interest.

Tax

The tax expense decreased slightly from $7.9 million in the six month period ending 30 June 2010 to $7.7 million in the current reporting period.  Although current taxation has increased consistent with the higher profit in the period, the reduction in deferred tax, arising from timing differences associated with cost recovery, has more than offset the higher current tax charge.

BALANCE SHEET

Intangible assets increased by $18.3 million since year end 2010 and by $36.0 million since 30 June 2010 reflecting the exploration activity in the Group's Africa region, in particular drilling activity in the Nganzi Block and seismic acquisition in the Cabinda North Block.  Property, plant and equipment increased by $53.4 million since the 2010 year end and by $122.1 million over the last 12 months almost entirely due to the TGT field development.

SOCO's cash and cash equivalents at 30 June 2011 were $213.1 million (31 December 2010 - $260.4 million and 30 June 2010 - $258.1 million).  This reduction is a result of the Group's TGT development programme and exploration activity in Africa, as described above, offset by cash inflows from production operations in Vietnam.  

As at 30 June 2011, the Group's only debt was the convertible bonds with a par value of $84.0 million, following the redemption at the option of each bondholder in May 2010 of bonds with a par value of $166.0 million. Further details of the bonds, which were originally issued in 2006 at a par value of $250 million, are in Note 23 to the 2010 Annual Report and Accounts.  If the bonds have not been previously purchased and cancelled, redeemed or converted, the remaining bonds will be redeemed at par value on 16 May 2013.

Long term provisions comprise the Group's decommissioning obligations in South East Asia which have increased to $22.6 million from $11.2 million at 30 June 2010 and from $13.1 million at year end 2010. This reflects the installation of facilities and development well drilling activity at the TGT field prior to commencement of production operations. Further, the balance at 30 June 2010 included a provision for decommissioning the Group's Thailand asset, the sale of which completed in September 2010.

CASH FLOW

Net cash flows from operating activities for the first six months of 2011 comprise the Group's continuing Vietnam operations and amounted to $13.2 million compared to $5.7 million (from continuing operations) in the first half of 2010.  This increase is mainly due to working capital movements, in particular inventory movements as described above.  Capital expenditure for the period ending 30 June 2011 was $65.0 million compared with $51.6 million in the equivalent period last year (which included $9.9 million relating to the Group's disposed of Thailand asset).  The increase reflects the continuing TGT field development programme.  There were no cash flows arising from financing activities in the current period.

Production

During the first half of 2011 the Group's production, net to the Group's working interest, of 2,339 BOEPD was sourced entirely from its CNV field compared to the first half of 2010 when total production was 5,191 BOEPD sourced from its CNV field (2,200 BOEPD) and its now discontinued Bualuang field in Thailand (2,991 BOPD). The CNV field production was also higher than its full year 2010 volume of 2,257 BOEPD, mainly due to reduced 2010 production due to a stuck pipeline inspection gauge.

Related party transactions

There have been no material related party transactions in the period and there have been no material changes to the related party transactions described in Note 31 to the Consolidated Financial Statements contained in the 2010 Annual Report and Accounts. 

Risks and Uncertainties

There are a number of potential risks and uncertainties which could have a material impact on the Group's performance over the remaining six months of 2011 and could cause actual results to differ materially from expected and historical results.  Risks and uncertainties that remain unchanged from those published, along with their mitigation, in the 2010 Annual Report and Accounts are summarised below:

·      Credit risk - in respect of the Group's financial asset at fair value through profit or loss arising on the Group's disposal of its Mongolia interest and short term financial assets.

·      Foreign currency risk - associated with cash balances held in non-US dollar denominations.

·      Liquidity risk - associated with meeting the Group's cash requirements.

·      Interest rate risk - applicable to the Group's cash balances, debt and financial asset.

·      Commodity price risk - associated with the Group's sales of oil and gas.

·      Regulatory risk - arising in countries where the Group has an interest, including compliance with and interpretation of taxation and other regulations.

·      Contractual risk - in relation to contractual terms that may be subject to further negotiation at a later date.

·      Capital risk management - in relation to Group financing.

·      Reserves risk - associated with inherent uncertainties in the application of standard recognised evaluation techniques to estimate proven and probable reserves.

·      Exploration risk - as exploration for, and development of, hydrocarbons is speculative and involves a significant degree of risk, the Group's future value is materially dependent on the success or otherwise of its activities which are directed towards the search, evaluation and development of new oil and gas resources.

·      Partnership risk - associated with the requirement to delegate a degree of decision taking to partners, contractors and local personnel, in particular where SOCO is not the operator.

·      Reputational risk - associated with the conduct of oil and gas activity in locations where social and environmental matters may be highly sensitive both on the ground and as perceived globally. 

·      Political risk - due to location of the Group's projects, often in developing countries or countries with emerging free market systems.

·      Health, safety, environment and social risks - arising due to the nature and location of the Group's activities.

Further information on the above principal risks and uncertainties of the Group is included in the Financial Review section of the 2010 Annual Report and Accounts and in Notes 3 and 4 to the Consolidated Financial Statements in that report.

In addition, the Company recognises its responsibilities in relation to the UK Bribery Act 2010 which came into force on 1 July 2011 and introduces a new corporate offence for acts of bribery orchestrated by its employees, agents and other associated persons.  The Group seeks to mitigate the associated risks by ensuring it has appropriate procedures in place to prevent bribery and that all employees, agents and other associated persons are made fully aware of the Group's policies and procedures.

GOING CONCERN

The Group has a strong financial position and, after making enquiries, the Directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. Consequently the Directors believe that the Group is able to manage its financial and operating risks and, accordingly, they continue to adopt the going concern basis in preparing the Half Year Report.

CORPORATE

Board

In June, the Company announced that Mr Peter Kingston and Mr Martin Roberts retired from the Board as Non-Executive Directors of the Company following the Annual General Meeting.  Mr Kingston served as Chairman of the Audit Committee, Chairman of the Remuneration Committee and as the Company's Senior Independent Director.  Mr Roberts served as a member of the Audit and Remuneration Committees.  The Board thanks Mr Kingston and Mr Roberts for their significant contributions to SOCO.  Mr John Norton has succeeded Mr Kingston as Chairman of the Audit Committee.

Further to the above retirement, Mr Michael Johns was appointed as a Non-Executive Director. Mr Johns serves as the Senior Independent Director, the Chairman of the Remuneration Committee and a member of the Audit Committee.  Mr Johns has had a distinguished career in legal practice with two international law firms and has extensive experience in a broad range of practice areas, including commercial, corporate, corporate finance and energy law. Mr Johns graduated from Oxford University in 1969 and qualified as a solicitor in 1972.  He was a partner at Withers (as it then was) from 1974 until 1987 and joined Ashurst LLP ("Ashurst") as a partner in 1987 where he was the Head of the Energy, Transport & Infrastructure Department from 2001 until 2005.  Mr Johns retired from Ashurst in April 2009 and remained as a consultant to Ashurst until April 2010.  From August 2006 until February 2011, Mr Johns served as a Non-Executive Director of Aer Lingus Group plc.

OUTLOOK

TGT production has just begun and the ramp up to plateau production is expected to take a number of weeks.  During this period, it would not be unusual to experience some unexpected issues that would normally be associated with any start-up of a project of this size.

However, the Company's transition from one of limited production to expectations of substantial production bodes well for the future to support its exploration led strategy.  Whilst the upcoming exploration programme offshore Congo (Brazzaville) offers significant upside potential, it will be modest in terms of overall capital expenditure and activity when compared with past exploration programmes and those expected in the future. 

We expect to commence drilling TGT Phase II development wells in September, with planned production to commence in the summer of 2012.  Once there is a reasonable history of production performance on Phase I and some subsurface confirmation from Phase II, we anticipate revisiting the reserve numbers.

In the meantime, the Company looks to increase its exploration portfolio by focusing on expanding its footprint in areas where it can apply its significant technical experience and knowledge.

Rui de Sousa

Chairman

Ed Story

President and Chief Executive Officer

Responsibility statement

We confirm to the best of our knowledge:

o  The condensed set of financial statements has been prepared in accordance with IAS 34 Interim Financial Reporting;

o  The interim management report includes a fair review of the information required by DTR 4.2.7R (indication of important events during the first six months and description of principal risks and uncertainties for the remaining six months of the year); and

o  The interim management report includes a fair review of the information required by DTR 4.2.8R (disclosure of related parties' transaction and changes therein). 

By order of the Board

Roger Cagle

Chief Financial Officer

23 August 2011

DISCLAIMER

This Half Year Report has been prepared solely to provide additional information to shareholders to assess the Group's strategies and the potential for those strategies to succeed.  The Half Year Report should not be relied on by any other party or for any other purpose.

The Half Year Report contains certain forward-looking statements. These statements are made by the Directors in good faith based on the information available to them up to the time of their approval of this report and such statements should be treated with caution due to the inherent uncertainties, including both economic and business risk factors, underlying any such forward-looking information.

INDEPENDENT REVIEW REPORT TO SOCO INTERNATIONAL PLC

We have been engaged by the Company to review the condensed set of financial statements in the half year financial report for the six months ended 30 June 2011 which comprises the condensed consolidated income statement, the condensed consolidated statement of comprehensive income, the condensed consolidated balance sheet, the condensed consolidated statement of changes in equity, the condensed consolidated cash flow statement and related notes 1 to 6. We have read the other information contained in the half-year financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.

This report is made solely to the Company in accordance with International Standard on Review Engagements (UK and Ireland) 2410 "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board.  Our work has been undertaken so that we might state to the Company those matters we are required to state to it in an independent review report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company, for our review work, for this report, or for the conclusions we have formed.

Directors' responsibilities

The half-year financial report is the responsibility of, and has been approved by, the Directors.  The Directors are responsible for preparing the half-year financial report in accordance with the Disclosure and Transparency Rules of the United Kingdom's Financial Services Authority.

As disclosed in note 2, the annual financial statements of the Group are prepared in accordance with IFRSs as adopted by the European Union.  The condensed set of financial statements included in this half-year financial report has been prepared in accordance with International Accounting Standard 34, "Interim Financial Reporting," as adopted by the European Union.

Our responsibility

Our responsibility is to express to the Company a conclusion on the condensed set of financial statements in the half-year financial report based on our review.

Scope of Review

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410 "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-year financial report for the six months ended 30 June 2011 is not prepared, in all material respects, in accordance with International Accounting Standard 34 as adopted by the European Union and the Disclosure and Transparency Rules of the United Kingdom's Financial Services Authority.

Deloitte LLP

Chartered Accountants and Statutory Auditor

London, United Kingdom

23 August 2011

Condensed consolidated income statement  

		(unaudited)	(unaudited)
		six months ended	six months ended	year ended
		30 Jun 11	30 Jun 10	31 Dec 10
	Notes	$000's	$000's	$000's
Continuing operations
Revenue	3	26,439	19,416	48,390
Cost of sales		(11,582)	(4,437)	(12,395)
Gross profit		14,857	14,979	35,995
Administrative expenses		(3,553)	(4,167)	(6,858)
Operating profit		11,304	10,812	29,137
Investment revenue		742	598	1,301
Other gains and losses		2,835	430	938
Finance costs		(351)	(309)	(525)
Profit before tax	3	14,530	11,531	30,851
Tax	4	(7,717)	(7,855)	(18,548)
Profit for the period from continuing operations		6,813	3,676	12,303
Discontinued operations
Operating profit from discontinued operations		-	20,558	36,473
Other gains and losses on discontinued operations		-	83	1,067
Finance costs of discontinued operations		-	(36)	(53)
Profit on disposal		-	-	80,116
Profit before tax from discontinued operations	3	-	20,605	117,603
Tax	4	-	(12,327)	(28,474)
Profit for the period from discontinued operations		-	8,278	89,129
Profit for the period		6,813	11,954	101,432
Earnings per share (cents)	5
Basic		2.0	3.7	30.9
Diluted		1.9	3.4	28.4

Condensed consolidated statement of comprehensive income

		(unaudited)	(unaudited)
		six months ended	six months ended	year ended
		30 Jun 11	30 Jun 10	31 Dec 10
		$000's	$000's	$000's
Profit for the period		6,813	11,954	101,432
Transfer from other reserves		651	9,989	11,539
Unrealised currency translation differences		4,527	(12,819)	(5,538)
Total comprehensive income for the period		11,991	9,124	107,433

Condensed consolidated balance sheet  

		(unaudited)	(unaudited)
		30 Jun 11	30 Jun 10	31 Dec 10
		$000's	$000's	$000's
Non-current assets
Intangible assets		162,528	126,504	144,256
Property, plant and equipment		746,374	624,308	692,979
Financial asset		40,326	36,846	37,448
		949,228	787,658	874,683
Current assets
Inventories		13,387	18,447	16,405
Trade and other receivables		15,438	14,826	24,377
Tax receivables		432	314	334
Cash and cash equivalents		213,149	258,053	260,438
		242,406	291,640	301,554
Total assets		1,191,634	1,079,298	1,176,237
Current liabilities
Trade and other payables		(37,275)	(31,913)	(45,871)
Tax payables		(1,563)	(13,422)	(2,013)
		(38,838)	(45,335)	(47,884)
Non-current liabilities
Convertible bonds		(79,154)	(76,817)	(77,968)
Deferred tax liabilities		(26,013)	(26,300)	(24,073)
Long term provisions		(22,604)	(11,185)	(13,095)
		(127,771)	(114,302)	(115,136)
Total liabilities		(166,609)	(159,637)	(163,020)
Net assets		1,025,025	919,661	1,013,217
Equity
Share capital		27,534	27,300	27,534
Share premium account		72,622	72,212	72,622
Other reserves		149,022	154,602	149,205
Retained earnings		775,847	665,547	763,856
Total equity		1,025,025	919,661	1,013,217

Condensed consolidated statement of changes in equity  

	Called up share capital	Share premium account	Other reserves	Retained earnings	Total
	$000's	$000's	$000's	$000's	$000's
As at 1 January 2010	24,451	71,077	11,317	656,423	763,268
New shares issued	2,849	1,135	159,047	-	163,031
Share-based payments	-	-	(5,764)	-	(5,764)
Transfer relating to share-based payments	-	-	(516)	516	-
Transfer relating to convertible bonds	-	-	(1,387)	1,387	-
Unwinding of discount on redeemed bonds	-	-	(8,086)	8,086	-
Retained profit for the period	-	-	-	11,954	11,954
Unrealised currency translation differences	-	-	(9)	(12,819)	(12,828)
As at 30 June 2010	27,300	72,212	154,602	665,547	919,661
New shares issued	234	410	-	-	644
Share-based payments	-	-	(3,848)	-	(3,848)
Transfer relating to share-based payments	-	-	(915)	915	-
Transfer relating to convertible bonds	-	-	(635)	635	-
Retained profit for the period	-	-	-	89,478	89,478
Unrealised currency translation differences	-	-	1	7,281	7,282
As at 1 January 2011	27,534	72,622	149,205	763,856	1,013,217
Share-based payments	-	-	491	-	491
Transfer relating to convertible bonds	-	-	(651)	651	-
Retained profit for the period	-	-	-	6,813	6,813
Unrealised currency translation differences	-	-	(23)	4,527	4,504
As at 30 June 2011	27,534	72,622	149,022	775,847	1,025,025

Condensed consolidated cash flow statement   

		(unaudited)	(unaudited)
		six months ended	six months ended	year ended
		30 Jun 11	30 Jun 10	31 Dec 10
	Note	$000's	$000's	$000's
Net cash from operating activities	6	13,181	24,515	36,682
Investing activities
Purchase of intangible assets		(26,092)	(18,686)	(29,438)
Purchase of property, plant and equipment		(38,915)	(32,960)	(122,452)
Decrease in liquid investments 1		-	151,954	151,954
Proceeds on disposal of subsidiary		-	-	85,867
Net cash (used in) from investing activities		(65,007)	100,308	85,931
Financing activities
Share-based payments		-	(6,190)	(10,477)
Repayment of borrowings		-	(165,949)	(165,949)
Proceeds on issue of ordinary share capital		-	163,030	163,674
Net cash used in financing activities		-	(9,109)	(12,752)
Net (decrease) increase in cash and cash equivalents		(51,826)	115,714	109,861
Cash and cash equivalents at beginning of period		260,438	155,619	155,619
Effect of foreign exchange rate changes		4,537	(13,280)	(5,042)
Cash and cash equivalents at end of period		213,149	258,053	260,438

¹ Liquid investments comprise short term liquid investments of between three to six months maturity while cash and cash equivalents comprise cash at bank and other short term highly liquid investments of less than three months maturity.

Notes to the condensed consolidated financial statements

1        General information

The information for the year ended 31 December 2010 does not constitute statutory accounts as defined in section 435 of the Companies Act 2006.  A copy of the statutory accounts for that year has been delivered to the Registrar of Companies.  The auditor's report on those accounts was not qualified, did not include a reference to any matters to which the auditors drew attention by way of emphasis without qualifying the report and did not contain statements under section 498(2) or (3) of the Companies Act 2006.

The half year financial report is presented in US dollars because that is the currency of the primary economic environment in which the Group operates.

             The Directors do not recommend the payment of a dividend.

             The half year financial report for the six months ended 30 June 2011 was approved by the Directors on 23 August 2011.

2        Significant accounting policies

The half year financial report, which is unaudited, has been prepared in accordance with the recognition and measurement criteria of International Financial Reporting Standards (IFRS) as adopted by the European Union and the disclosure requirements of the Listing Rules and using the same accounting policies and methods of computation as applied by the Company in its 2010 Annual Report and Accounts for the year ended 31 December 2010.  The condensed set of financial statements included in this half year financial report has been prepared on a going concern basis of accounting for the reasons set out in the Financial Results section of this report and in accordance with International Accounting Standard 34 Interim Financial Reporting, as adopted by the European Union, and the requirements of the UK Disclosure and Transparency Rules of the Financial Services Authority in the United Kingdom as applicable to interim financial reporting.

3        Segment information

The Group has one principal business activity being oil and gas exploration and production.  The Group's operations are located in South East Asia and Africa and form the basis on which the Group reports its segment information.   There are no inter-segment sales. Segment results are presented below:

Six months ended 30 June 2011 (unaudited)

				Continuing		Discontinued
				operations		operations
	SE Asia	Africa	Unallocated	Total				Group
	$000's	$000's	$000's	$000's		$000's		$000's
Oil sales	26,439	-	-	26,439		-		26,439
Profit before tax	14,524	-	6	14,530		-		14,530

Six months ended 30 June 2010 (unaudited)

Oil sales	19,416	-	-	19,416		46,772		66,188
Profit (loss) before tax	14,932	-	(3,401)	11,531		20,605		32,136

Year ended 31 December 2010

Oil sales	48,390	-	-	48,390		64,660		113,050
Profit (loss) before tax	35,487	-	(4,636)	30,851		117,603		148,454

4        Tax

	(unaudited)		(unaudited)
	six months ended		six months ended		year ended
	30 Jun 11		30 Jun 10		31 Dec 10
	$000's		$000's		$000's
Continuing operations
Current tax	5,777		4,213		10,531
Deferred tax	1,940		3,642		8,017
	7,717		7,855		18,548
Discontinued operations
Current tax	-		12,490		25,622
Deferred tax	-		(163)		2,852
	-		12,327		28,474
Group
Current tax	5,777		16,703		36,153
Deferred tax	1,940		3,479		10,869
	7,717		20,182		47,022

The Group's corporation tax is calculated at 50% of the estimated assessable profit for each period. During each period both current and deferred taxation have arisen in overseas jurisdictions only.

5        Earnings per share

The calculation of the basic and diluted earnings per share is based on the following data:

	(unaudited)		(unaudited)
	six months ended		six months ended		year ended
	30 Jun 11		30 Jun 10		31 Dec 10
	$000's		$000's		$000's
Earnings from continuing operations	6,813		3,676		12,303
Effect of dilutive potential ordinary shares: Interest on convertible bonds	-		68		68
Earnings for the purposes of diluted earnings per share	6,813		3,744		12,371
Earnings from discontinued operations	-		8,278		89,129
Earnings for the purposes of diluted earnings per share on continuing and discontinued operations	6,813		12,022		101,500

	Number of shares ('000)
	(unaudited)		(unaudited)
	six months ended		six months ended		year ended
	30 Jun 11		30 Jun 10		31 Dec 10
Weighted average number of ordinary shares for the purposes of basic earnings per share	336,153		321,951		328,459
Effect of dilutive potential ordinary shares:
Share options and warrants	3,646		9,564		8,172
Ordinary shares of the Company held by the Group	4,267		6,287		5,874
Convertible bonds	8,389		20,834		14,560
Weighted average number of ordinary shares for the purposes of diluted earnings per share	352,455		358,636		357,065

6        Reconciliation of operating profit to operating cash flows

	(unaudited)		(unaudited)
	six months ended		six months ended		year ended
	30 Jun 11		30 Jun 10		31 Dec 10
	$000's		$000's		$000's
Operating profit from continuing operations	11,304		10,812		29,137
Operating profit from discontinued operations	-		20,558		36,473
Operating profit	11,304		31,370		65,610
Share-based payments	491		426		865
Depreciation, depletion and amortisation	3,035		6,290		9,778
Operating cash flows before movements in working capital	14,830		38,086		76,253
Decrease (increase) in inventories	3,018		5,427		(873)
Decrease (increase) in receivables	2,767		(4,320)		(11,193)
(Decrease) increase in payables	(180)		5,021		5,412
Cash generated by operations	20,435		44,214		69,599
Interest received	754		654		1,364
Interest paid	(1,930)		(5,711)		(7,580)
Income taxes paid	(6,078)		(14,642)		(26,701)
Net cash from operating activities	13,181		24,515		36,682
Cash generated from operating activities comprises:
Continuing operating activities	13,181		5,741		12,419
Discontinued operating activities	-		18,774		24,263
	13,181		24,515		36,682

Cash and cash equivalents (which are presented as a single class of asset on the balance sheet) comprise cash at bank and other short term highly liquid investments that are readily convertible to a known amount of cash and which are subject to an insignificant risk of change in value.

 

END

 

 

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