Final Results

RNS Number : 4294G

San Leon Energy PLC

29 June 2012

 



Friday 29 June 2012

San Leon Energy plc

Final audited results for year ended 31 December 2011

San Leon Energy plc ("San Leon", "Group" or the "Company"), the AIM listed company focused on oil and gas exploration in Europe and North Africa today announces its audited final results for the year ended 31 December 2011.

2011 Highlights:

Financial:

· Profit for the year of €15.64m compared to a loss in 2010 of €3.98m with a resulting earnings per share of 1.85 cent compared to a loss per share of 1.02 cent in 2010

· Group net assets increased by €70.69m to €191.92m (2010: €121.23m)

· Cash balances of €26.19m at 31 December 2011 (2010: €67.17m)

Operational:

· Completed 3 shale gas exploration wells in Baltic Basin, Poland with our partners, Talisman

· Completed Siciny-2 well on our 100% owned play in Carboniferous Basin, Poland

· Completed 840km²3D survey over the Durresi Block, Offshore Albania

· Completed 280km² 3D survey over North Porcupine FEL 1/04 licence area, Atlantic Margin Ireland

· Completed 2,200 km 2D seismic survey over Tarfaya and Zag licences in Morocco

· Assigned our working interest in Barryroe exploration licence in exchange for a 4.5% net profit interest with no further financial obligations to San Leon on the project

· Acquisition of a 75% interest in three polish shale concessions from Hutton Energy in June 2012 further expanding San Leon's Polish unconventional gas acreage by an additional 468,512 acres 

Corporate:

· Completed acquisition of Realm Energy International Corporation

· Establishment of an Advisory Committee to assist in strategic development of our asset base

Operational Outlook:

Poland - Baltic Basin

· Vertically fracc and test existing three wells drilled with Talisman in 2013

· Drill 1,000m+ horizontal well with Talisman with multi-staged fracc and testing programme in 2013

· Acquire additional 150km 2D seismic in pending Czersk Concession in Q4 2012/2013

· Drillvertical well in Prabuty Poludnioweconcession in Q1/Q2 2013

Poland - South West Carboniferous Basin

· Test Siciny-2 well including vertical fracc of multiple zones for shale gas and tight gas potential

· Acquire up to 1,000 km² 3D seismic and 500 km ² 2D seismic across Carboniferous basin

· Continue drilling Carboniferous play to test the extent of potential resources in Siciny-2 well

Poland - Permian Basin

· Drill conventional main dolomite play in Nowa Sol for near term oil production

Morocco

· Finalise off-shore farm out process and plan to drill 1-2 wells with new partners

· Finalise processing from the 2,200 km 2D seismic acquisition completed on Zag / Tarfaya and build a prospect inventory for future 3D seismic acquisition and drilling programmes

· Evaluation of results on the Tarfaya Oil Shale project

Albania

· Finalise Pre Stack Depth Migration of 2011 3D survey

· Finalise off-shore farm out process and plan to drill 1-2 wells with new partners

Oisin Fanning, Chairman of San Leon, commented:

"This was another very significant year for San Leon. We made our largest acquisition to date, Realm Energy, further consolidating our position as one of Europe's leading shale players by acreage.  We have an extensive diversified high impact portfolio across a number of regions and plays, giving us exposure to multiple sweet spots; any one of which will add significant value to the Company.

Our core focus remains the same, to realise the inherent value of our asset base, as we look to move into the next exciting phase of our development; becoming cash generative." 

Enquiries to:

San Leon Energy Plc	Tel: + 353 1291 6292
Oisin Fanning, Executive Chairman
John Buggenhagen, Director of Exploration
Macquarie Capital (Europe) Limited	Tel: [phone]
John Dwyer
Paul Connolly
Fox-Davies Capital Limited	Tel: [phone]
David Porter
Westhouse Securities Nominated Adviser	Tel: [phone]
Richard Johnson
College Hill Associates	Tel: [phone]
Nick Elwes
Alexandra Roper

Qualified person

John Buggenhagen has over 15 years experience in the oil & gas industry. He has a Ph.D. and M.Sc. in Geophysics from the University of Wyoming and a B.Sc. in Geophysics from the University of Arizona. He is currently the Director of Exploration for the San Leon Energy Group and based in San Leon's Warsaw office in Poland.

Chairman's review

2011 was another significant year for San Leon Energy. We have continued to add value to our existing diversified and high impact portfolio of assets. We have advanced our scientific knowledge by shooting and interpreting seismic and in the case of Poland, drilling vertical wells. We have also completed our largest acquisition to date, Realm Energy.

The acquisition of Realm Energy provided San Leon Energy with a unique opportunity to increase the Company's exposure to the prospective upside that the Baltic Basin offers. The acquisition provided the Company with a further 500,000 acres in Poland (in the Baltic and Podlase basins), as well as applications in Spain for over two million acres, which have now been awarded to the Company, and in the case of France it has provided 2.35 million acres over which we remain cautiously optimistic. We also expect this deal to bring significant cost and operational synergies across the upcoming drilling programme whilst further enhancing the technical expertise in the Company.

The acquisition also:

• strengthens  San Leon Energy's focus and position as one of the leading shale players in Poland;

• materially increases San Leon Energy's acreage in Poland's Baltic Basin;

• leverages San Leon Energy's in-country technical team to add material value to Realm's assets;

• has the potential to add further shale acreage to the portfolio through any successful licence applications that Realm has made in Spain and France; and

• provides cost and operational synergies for upcoming seismic and drilling programmes.

In June 2012, San Leon Energy also strengthened its overall position further in the Baltic and Carboniferous basins in Poland through our partnership with Hutton Energy. San Leon Energy acquired a 75% working interest in certain Polish assets for US$15 million, providing 468,512 net acres to the Company in two prospective basins. 

Poland 

We have now drilled three wells with our partners Talisman Energy. 

In the northern Baltic Basin the Lewino-1G-2 well was drilled to 3,600 metres into the Upper Cambrian including 310 metres of core. The well encountered continuous gas shows through the Silurian-Ordovician shales and into the Upper Cambrian. The Rogity-1 well was drilled to 2,788 metres including 340 metres of core. The well encountered continuous, liquid rich gas shows throughout the Silurian-Ordovician shales and into the Upper Cambrian. We are currently drilling and nearing total depth in the Szymkowo-1 well in the southern Baltic Basin. So far the well has encountered continuous gas shows in the Silurian shales. An estimated 300 metres of core is planned in the well. Ongoing detailed analysis of the core and well data is being performed in preparation for a future testing programme in Q1/Q2 2013 including potential vertical fraccing, horizontal drilling followed by multistage fraccing and flow-testing

As  mentioned, San Leon Energy has also recently announced that it has purchased a 75% working interest in certain Polish assets held by Hutton Energy for US$15 million with a view to jointly developing these assets. Hutton Energy will be carried  through all the seismic work and associated G&A which will be performed by NovaSeis. The Company sees this partnership with Hutton Energy as very positive bringing significant North American unconventional gas expertise to the venture. 

The acquisition further expands San Leon Energy's unconventional gas acreage by an additional 468,512 net acres in two highly prospective basins - the Baltic Basin and the Carboniferous Basin - whilst also giving the Company an unprecedented acreage position in Poland. We look forward to working  with the Hutton Energy team in developing these assets. 

Morocco

The Company acquired a total of 608km of 2D seismic on our Tarfaya licence and 1,674km of 2D seismic on the Zag licence. Processing and interpretation of this seismic is nearing completion. This work was carried out by NovaSeis, our wireless seismic company. 

On the Tarfaya Oil Shale project, good progress has been made advancing the project. Two wells were drilled 10 metres apart confirming the presence of 30 metres or prospective oil at a depth of 195 metres. A third well was drilled which failed to establish connectivity between the wells, however a comprehensive hydrogeological and geochemical review is being planned to identify alternative locations in deeper zones.

On the Sidi Moussa and the Foum Draa licences San Leon Energy and its partners have completed the work programme for both licences. A data room has been opened on both licences to attract industry partners, with a view to receiving final bids by 15 June 2012. 

Ireland

Barryroe proved to be a highly successful well for our previous partners, Providence and Lansdowne. We were very pleased to see the result not least because we had opted for a 4.5% net profit interest which will give us very good cash flow, but without the inherent costs of this well or development costs in the future. As at the time of our fundraising, none of the partners had anticipated drilling this well, we therefore had not allocated any of that funding towards this well and so this deal was mutually beneficial.

During the year the Company completed a 250 km² 3D seismic survey on the North Porcupine Licence (FEL1/04). We also opened a data room with a view to gaining farm-in partners for the Slyne licence towards the end of last year. Several companies have reviewed the data in the data rooms. We also opened a data room on the North Porcupine licence in Q2 2012 and again several companies have shown interest. We will update the market on both these data rooms as appropriate.

Albania

Last year we completed 840km² of 3D seismic over the Durresi block offshore Albania, less than a year after we were awarded the block in February 2011. The new 3D seismic has identified numerous prospects and leads across the licence with un-risked prospective recoverable resources of more than one billion barrels of oil equivalent across the proven petroleum systems. 

The Company has also recently signed confidentiality agreements with several large exploration and production companies regarding farm-in into the licence; and continues to receive unsolicited interest from other large exploration and production companies. As a result of which, San Leon Energy opened a data room early to select companies. There has been huge interest in our data room, which is now closed; and we will see letters of intent during June with an announcement expected to the market late July/early August. 

We are very excited about the potential of the Durresi Block and believe that it does have huge upside potential.

NovaSeis

NovaSeis, our wireless seismic company, has also been upgraded to allow us to shoot 3D. The team spent eight months in Morocco shooting seismic - across both the Tarfaya and Zag basins - which we are now in the process of interpreting. The equipment has now moved back to Poland where we have completed three new surveys covering the terrain twice as fast and more cost effectively than any campaign in Poland to date. 

Advisory Committee

The Company has created an Advisory Committee which will work alongside the management team when considering macro-issues associated with the industry. This Committee will be made up of a number of experienced industry professionals who have a wealth of experience in the energy industry. It is expected that the Advisory Committee will help San Leon Energy build on the success that the Company has already achieved; and provide senior guidance and invaluable strategic and industry insight, as the Company looks to continue to develop its portfolio of assets. The Advisory Committee is initially made up of Gerard Medaisko, Robert Price and Nick Butler, who also serves  as the Advisory Committee's Chairman.

New website

Over the last months we have also developed our new website. This is aimed at providing our investors and those interested in the Company with much more in-depth information and regular updates. We will also be engaging with our stakeholders via social media in conversations around oil and gas, the unconventional gas industry, as well as San Leon Energy and its strategy, developments and its operations.

Financial

2011 was another pivotal year for San Leon Energy with a profit of €15.6 million against a loss of €3.98 million in 2010.

Outlook

The focus of the Company is to continue to prove-up our extensive shale gas acreage in Poland. Our strategy of adding as much prospective acreage as we can across different basins, but with different parameters such as depth and maturity, is we believe, the right one as it will give us exposure to at least one if not multiple sweet spots, any one of which could add significant value to your Company. 

We are also working diligently towards being cash generative through the drilling of a number of oil wells in July, having already spoken to refineries in both Poland and Germany and are confident that we would be able to monetise any success within 90 days. We will be looking to test flow our carboniferous well Siciny-2 later this year and we are confident that we can monetise any success there in the first half of next year given the pipeline is just 500 metres away from the well. 

Our strategy of diversified plays across not only the portfolio, but also within Poland, will  allow San Leon Energy to recover much of the ground lost to the market due to its perceived disappointment in the very initial horizontal fracc in Poland. This speaks more to the market's lack  of understanding as to how these shale plays are developed than the reality on the ground. Every  well drilled in Poland so far has encountered gas and every player in Poland believes that the 3Legs fracc were a technical success.

PGNIG, who have also drilled a well just north of our Lewino-1G/2 well, are now organising themselves for pad-drilling with a view to being the first in Poland to produce commercial shale gas by late this year or early next year. The Baltic Basin is still at the early stages of its development; but we are, with our partners and other operators in the region, confident that it will become a significant resource for Poland and the rest of Europe.

Consolidated income statement

for the year ended 31 December 2011

		2011	2010
		€	€
Continuing operations
Revenue		1,039,654	592,047
Cost of sales		(566,469)	(447,750)
Gross profit		473,185	144,297
Other income		25,990,204	1,501,100
Administrative expenses		(7,225,224)	(4,215,347)
Exploration costs written-off		(2,684,290)	-
Profit/(loss) from operating activities		16,553,875	(2,569,950)
Finance expense		(1,258,186)	(1,414,193)
Finance income		344,255	8,825
Share of loss of equity-accounted investments		(4,715)	-
Profit/(loss) before income tax		15,635,229	(3,975,318)
Income tax expense		(35,344)	(1,057)
Profit/(loss) for the year attributable to equity holders of the Group		15,599,885	(3,976,375)

Consolidated statement of comprehensive income 

for the year ended 31 December 2011

		2011	2010
		€	€
Profit/(loss) for the year		15,599,885	(3,976,375)
Foreign currency translation differences		915,281	382,768
Total comprehensive income/(loss) for the year		16,515,166	(3,593,607)

Earnings/(loss) per share:
Basic earnings/(loss) per ordinary share		1.85 cent	(1.02) cent
Diluted earnings/(loss) per ordinary share		1.77 cent	(1.02) cent

Consolidated statement of changes in equity

for the year ended 31 December 2011

	Share capital	Share premium	Currency translation reserve	Share based payment reserve	Retained earnings		Attributable to equity holders of the Group		Non-controlling interest		Total equity
2010	€	€	€	€	€		€		€		€
Balance at 1 January 2010	16,059,196	23,976,523	-	2,321,035	(9,323,365)		33,033,389		-		33,033,389
Total comprehensive income for year
(Loss) for the year	-	-	-	-	(3,976,375)		(3,976,375)		-		(3,976,375)
Other comprehensive income
Foreign currency translation differences	-	-	382,768	-	-		382,768		-		382,768
Total comprehensive income for year	-	-	382,768	-	(3,976,375)		(3,593,607)		-		(3,593,607)
Transactions with owners recognised directly in equity
Contributions by and distributions to owners
Issue of shares	19,533,715	55,313,322	-	-	-		74,847,037		-		74,847,037
Issue of shares related to business combinations	3,463,832	12,203,515	-	-	-		15,667,347		-		15,667,347
Share options and warrants exercised	43,037	95,855	-	-	-		138,892		-		138,892
Share based payment	-	-	-	1,133,534	-		1,133,534		-		1,133,534
Effect of share options exercised	-	-	-	(37,424)	37,424		-		-		-
Total transactions with owners	23,040,584	67,612,692	-	1,096,110	37,424		91,786,810		-		91,786,810
Balance at 31 December 2010	39,099,780	91,589,215	382,768	3,417,145	(13,262,316)		121,226,592		-		121,226,592
2011
Balance at 1 January 2011	39,099,780	91,589,215	382,768	3,417,145	(13,262,316)		121,226,592		-		121,226,592
Total comprehensive income for year
Profit for the year	-	-	-	-	15,599,885		15,599,885		-		15,599,885
Other comprehensive income
Foreign currency translation differences	-	-	915,281	-	-		915,281		-		915,281
Total comprehensive income for year	-	-	915,281	-	15,599,885		16,515,166		-		16,515,166
Transactions with owners recognised directly in equity
Contributions by and distributions to owners
Issue of shares related to business combination	15,352,623	26,926,235	-	-	-		42,278,858		-		42,278,858
Issue of shares	1,542,267	3,938,527	-	-	-		5,480,794		-		5,480,794
Share options and warrants exercised	663,921	437,243	-	-	-		1,101,164		-		1,101,164
Share based payment	-	-	-	2,792,554	-		2,792,554		-		2,792,554
Effect of share options exercised	-	-	-	(748,211)	748,211		-		-		-
Share to be issued on Realm acquisition on conversion of exchangeable shares	-	-	-	-	-		-		5,685,721		5,685,721
Shares issued to Realm shareholders	-	-	-	-	-		-		(3,162,540)		(3,162,540)
Total transactions with owners	17,558,811	31,302,005	-	2,044,343	748,211		51,653,370		2,523,181		54,176,551
Balance at 31 December 2011	56,658,591	122,891,220	1,298,049	5,461,488	3,085,780		189,395,128		2,523,181		191,918,309

Consolidated statement of financial position

as at 31 December 2011

		2011	2010
		€	€
Assets
Non-current assets
Intangible assets		140,263,276	76,064,855
Equity accounted investments		3,026,864	-
Property, plant and equipment		9,278,608	2,398,186
Other non-current assets		816,928	-
Financial assets - net profit interest		39,197,977	-
		192,583,653	78,463,041
Current assets
Inventory		757,669	-
Trade and other receivables		8,064,400	1,593,592
Other financial assets		502,620	1,491,802
Cash and cash equivalents		26,197,963	67,168,659
		35,522,652	70,254,053
Total assets		228,106,305	148,717,094
Equity and liabilities
Equity
Called up share capital		56,658,591	39,099,780
Share premium account		122,891,220	91,589,215
Share based payment reserve		5,461,488	3,417,145
Currency translation reserve		1,298,049	382,768
Retained profit/(loss)		3,085,780	(13,262,316)
Attributable to equity holders of the Group		189,395,128	121,226,592
Non-controlling interest		2,523,181	-
Total equity		191,918,309	121,226,592
Non-current liabilities
Provisions		5,345,211	5,345,211
Loans and borrowings		2,671,219	7,886,287
Deferred tax liabilities		9,329,447	-
		17,345,877	13,231,498
Current liabilities
Trade and other payables		12,113,951	5,759,517
Loans and borrowings		5,177,144	8,499,487
Provisions		1,551,024	-
		18,842,119	14,259,004
Total liabilities		36,187,996	27,490,502
Total equity and liabilities		228,106,305	148,717,094

Consolidated statement of cash flows

for the year ended 31 December 2011     

		2011	2010
		€	€
Cash flows from operating activities
Profit/(loss) before tax		15,635,229	(3,975,318)
Adjustments for:
Depletion and depreciation		522,726	55,316
Loss on disposal of property, plant and equipment		-	5,089
Finance expense		1,258,186	1,414,193
Finance income		(344,255)	(8,825)
Share based payments charge		866,038	428,438
Foreign exchange		(1,283,211)	(6,624)
Gain on assignment of Barryroe licence		(22,408,037)	-
Exploration costs written-off		2,684,290	-
(Increase) in stocks		(757,669)	-
(Increase) in trade and other receivables		(6,030,610)	(760,769)
Increase in trade and other payables		3,111,101	891,230
Share of loss of equity-accounted investments		4,715	-
Tax paid		(37,979)	(2,870)
Net cash (used) in operating activities		(6,779,476)	(1,960,140)
Cash flows from investing activities
Expenditure on exploration and evaluation assets		(39,440,563)	(10,190,443)
Joint venture partner share of exploration costs		8,999,859	2,879,848
Purchases of property, plant and equipment		(7,353,565)	(2,225,931)
Interest received		318,206	8,825
Net cash acquired with subsidiary		5,216,546	244,092
Release of bank guarantees		941,883	-
Net cash (used) in investing activities		(31,317,634)	(9,283,609)
Cash flows from financing activities
Proceeds from issue of share capital, net of costs		6,302,541	75,140,429
Repayment of convertible loan		(2,150,000)	(600,000)
Proceeds from drawdown of other loans		-	2,343,321
Repayment of other loans		(7,360,572)	-
Interest paid		(370,798)	(520,566)
Net cash (used) in/generated from financing activities		(3,578,829)	76,363,184
Net (decrease)/increase in cash and cash equivalents		(41,675,939)	65,119,435
Effect of foreign exchange fluctuation on cash and cash equivalents		705,243	66,705
Cash and cash equivalents at start of year		67,168,659	1,982,519
Cash and cash equivalents at end of year		26,197,963	67,168,659

Notes to the Financial Statements

General

San Leon Energy plc ("the Company") is a company incorporated in Ireland. The Group financial statements consolidate those of the Company with those of its subsidiaries (together referred to as "the Group").

The financial information presented in this report has been prepared using accounting policies consistent with International Financial Reporting Standards ("IFRS") as adopted by the European Union and as set out in the Group's annual financial statements in respect of the year ended 31 December 2011. The financial information herein does not include all the information and disclosures required in the annual financial statements, however the full financial statements are included within the Annual Report which are being distributed to shareholders and which are available on the Company's website www.sanleonenergy.com. It will also be filed with the Company's Annual Return in the Companies Registration Office.

The financial information herein for the prior year ended 31 December 2010 represents an abbreviated version of the Group's statutory financial statements and which full financial statements have been filed with the Companies Registration Office.

The auditors' report in the Annual Report for the year ended 31 December 2011 contains the following emphasis of matter paragraph:

Emphasis of matter - Carrying value of Intangible Assets and Financial Assets - Net Profit Interest

In forming our opinion, which is not qualified, we have considered the adequacy of disclosures made in Note 9 and Note 14 to the financial statements in relation to the Directors' assessment of the carrying value of the Group's Intangible Assets amounting to €140.3 million and the carrying value of the Group's Financial Assets - Net Profit Interest amounting to €39.2 million. The financial statements do not include adjustments that would result if the Group could not recover the full carrying value of the Intangible Assets or the full carrying value of the Financial Assets - Net Profit Interest.

 

END

 

 

FR BKFDBABKDFAB