Interim Results

RNS Number : 9974C

Tower Resources PLC

09 September 2008

 



PRESS RELEASE

9 September 2008 

Tower Resources plc ('Tower' or 'the Company') (AIM:TRP)

Interim Results for the six months ended 30 June 2008

Tower Resources plc, the oil and gas exploration company with interests in sub-Saharan Africa, principally in Uganda and Namibia, has today announced interim results for the six months ended 30 June 2008.

The year to date has seen some important technical and operational developments:

• Namibian potential has been confirmed to be of world class scale

• Seismic analysis and geochemical sampling in Uganda EA5 have demonstrated the probability of an active oil source and migration system 

• Oil samples recovered in EA5 are similar in composition to other seeps in the rift

• Two wells in EA5 are being planned for the first quarter of 2009

Discussions with one company are well advanced for that company to farm in to the Licence in Uganda to earn a 25% interest and an active farm out programme is underway with a number of other parties to meet the balance of funding for the two commitment wells.

As expected the Company reported a loss for the period of £358,828 (2007 £494,428).

Tower Resources Executive Chairman, Peter Kingston, commented:

'It is very exciting to be involved in two high impact projects at the same time, either of which would transform your Company's value in the event of success. Neptune Uganda, Tower's 100% owned subsidiary, is now less than six months away from drilling its first well in Uganda. Two wells are to be drilled and these will provide the first definitive test of value from the Uganda venture. The Namibia seismic evaluation has revealed multi-billion barrel potential in the Tower Licence and a programme of further seismic acquisition and interpretation is currently underway to thoroughly evaluate the chances of success. Drilling in Namibia is now expected to occur in 2010. 

Nearly three years ago, Neptune Petroleum acquired two Licences in sub-Saharan Africa. The Company has now evaluated the potential of each and both have company making potential.'

Contact details:

Tower Resources	www.towerresources.co.uk
Peter Kingston, Chairman	07802 804852
Blue Oar Securities, Broker and NOMAD
John Wilkes	020 7448 4400
Aquila Financial Limited, (PR)
Peter Reilly	0118 979 4100

In accordance with AIM guidelines, Peter Kingston, who is a Petroleum Engineer having more than 40 years of experience in technical, executive and advisory roles in the oil exploration and production industry, and is Executive Chairman of the Company, is the qualified person that has reviewed and approved the technical information contained in this announcement. 

Forward Looking Statements

This regulatory news release contains estimates as to volumes based upon seismic and AVO data. These estimates are not necessarily representative of future production volumes. Seismic evaluation work is normally followed by exploratory drilling work and evaluation of drilling results is then used to update estimates.  The reader is cautioned that assumptions used in the preparation of their estimates may prove to be incorrect. All such estimates involve substantial known and unknown risks and uncertainties, certain of which are beyond the Company's control. Reservoir quality and quantity, seal, structural timing, hydrocarbon source issues, faulting, and the availability of any further 3D seismic data over the target are but a few of the many risk factors that typify each and every drilling prospect.  Please refer to the Company's Admission Document available from the Company's web site for a list of risk factors. The Company's actual results could differ materially from those expressed in, or implied by, these estimates and, accordingly, no assurances can be given that any of the events anticipated by the estimates will transpire or occur, or if any of them do so, what benefits the Company will derive therefrom. With all drilling proposals, one is provided with the full range of potential return on investment: from nil (dry hole) to huge (high side estimate). All subsequent estimates, whether written or oral, attributable to the Company or persons acting on its behalf are expressly qualified in their entirety by these cautionary statements. Furthermore, the estimates contained in this news release are made as at the date of this news release.  Investors are strongly advised to consult a qualified professional oil and gas industry advisor before making any investment decision

Glossary

'Unrisked'	A statement or figure that does not include any discount for the probability of success.
'AVO'	Amplitude Variation with Offset: A technique involving comparison of seismic data from more than one record point that when used in analysis adds credence to the likelihood that hydrocarbons may be present in possible reservoir horizons.

Notes to Editors  

Tower Resources Plc is an AIM-listed, independent oil and gas exploration company based in London.

The company is focused on sub-Saharan Africa, holding exploration licences in Namibia and Uganda through its two operating subsidiaries Neptune Petroleum (Namibia) Ltd and Neptune Petroleum (Uganda) Ltd.

The company's assets include; blocks 1910A, 1911 and 2011A offshore Namibia and onshore block 5 in Northern Uganda.

Tower also has through its 100% ownership of Comet Petroleum a 50% interest in two exploration licences (Guelta and Bojador) in the Saharawi Arab Democratic Republic.

CHAIRMAN'S STATEMENT

FOR THE SIX MONTHS ENDED 30 JUNE 2008

It is very exciting to be involved in two high impact projects at the same time, either of which would transform your Company's value in the event of success. Neptune Uganda, Tower's 100% owned subsidiary, is now less than six months away from drilling its first well in Uganda. Two wells are to be drilled and these will provide the first definitive test of value from the Uganda venture. The Namibia seismic evaluation has revealed multi-billion barrel potential in the Tower Licence and a programme of further seismic acquisition and interpretation is currently underway to thoroughly evaluate the chances of success. Drilling is now expected to occur in 2010. 

The Namibian project remains fully funded by Arcadia. In Uganda, however, Orca Exploration did not find itself in a position to continue funding the drilling programme on the terms available. We appreciate the contribution, both financial and technical, that Orca have provided during the seismic commitment phase of the project. The Tower Board still believes that the Uganda project is very attractive in terms of low risk and potential reward. Tower remains the 100% Licence holder and is now free to introduce alternative funding partners on terms which reflect current prospectivity after completion of seismic and further geological assessment. Discussions are already well advanced to introduce new Industry funding partners. Discussions with one company are well advanced for that company to farm in to the Licence to earn a 25% interest and an active farm out programme is underway with a number of other parties to meet the balance of funding for the two commitment wells. Several significant oil companies have expressed a serious interest and the Board is confident that another strong partner will be introduced in good time. 

Financial Highlights

The loss for the half-year reporting period to 30 June 2008 was $358,828. Capital expenditure on seismic acquisition programmes, geological surveys and Licence fees amounted to $5,689,988 of which $2,034,226 will be contributed by our farm-in partners. Cash balances at the period end were $852,972.

Tower is still fully funded in Namibia by Arcadia Petroleum Limited. In Uganda, Orca Exploration Inc has contributed a total of $7.6 million to the cost of completed seismic, approximately $600.000 of which is still outstanding but expected to be received shortly. Orca is not taking up its option to fund most of the Uganda two-well commitment programme but good progress has been made in replacing them as funding partners. Tower is expecting to be able to fully meet its commitments in Uganda to drill two wells within the next nine months but has until at least mid 2009 to complete funding arrangements if necessary.

Operations

Uganda

The seismic processing confirmed the structural features identified by the gravity interpretation and gave encouragement that the Licence would contain hydrocarbons. On this basis, your Company applied for and was authorised to continue as the sole Licensee into the Second two-year Exploration Period, lasting until March 2010. The commitments for this phase of exploration are two firm wells and one contingent well.

The seismic processing revealed, for EA5, that the Miocene sediments prevalent in other areas of the Albertine Basin have a maximum thickness of 1500 metres, which is considerably less than originally expected but entirely in line with sediments in Licence EA1 immediately to the south of Tower's Licence EA5. It is also similar to the Butiaba area of Licence EA2 where Tullow has recently made several significant discoveries at depths less than 1000 metres. There is also evidence from the seismic that sediments had been more than 500 metres deeper when source rocks were being deposited. Amplitude anomalies are widespread and AVO analyses also indicate hydrocarbons to be present.

Finally, recently completed geochemistry field surveys have confirmed that there is almost certainly an active, mature hydrocarbon source and migration process taking place which substantially reduces remaining exploration risk. This has always been the main area of risk for exploration in the EA5 area so is very encouraging. Moreover, the samples taken have similar characteristics to surface seeps present in other areas of the Albertine Graben. Overall, the full results of seismic and field work have, in the opinion of your Board, substantially improved the probability of success but the hydrocarbon volume potential has reduced due to thinner sedimentation. Nevertheless, there are at least two structures, confirming the original gravity interpretation, each having 100 million barrel potential and there are a large number of smaller leads and prospects which require further data to fully define.

Two well locations have been selected based on a combination of seismic, gravity and oil seep data and preparations are under way to spud the first well before the end of January 2008. A drilling management team has been put in place and tenders for a rig and services have been sent out. Initial enquiries have established that rigs are available for the required time frame in neighbouring countries and it is still possible that a Uganda-based rig can be deployed. The timetable to gain environmental approvals and to prepare sites is such that drilling in 2008 is impractical. It is more important to achieve high planning and operational standards than to meet a hypothetical timetable. A significant benefit of a slightly later schedule is that all operations can be undertaken well after the rainy season, which is already underway, so that all operations can be carried out when ground conditions are favourable for moving heavy equipment.

The Uganda-based management and organisation, comprising mostly Ugandan nationals, has continued to perform effectively and continues to cement good sustainable local relationships. The continuing social investment programme has been greatly appreciated by local people and Tower intends to build on this during the drilling phase of operations, with a particular emphasis on sustainability and widespread benefit. Further details on these programmes are given on the Company's website.

Namibia

Comprehensive processing and interpretation of the 2-D seismic has confirmed that three giant prospects previously identified are viable exploration targets, having apparent four-way structural closure and strong hydrocarbon indications. Geological modelling has indicated three potentially continuous reservoir sands over these large structures, which can be correlated with high quality sands encountered in the two wells drilled on the Licence. 

I released an announcement on 15 May which stated the Operators view, with which Tower agrees, that these structures have the potential to contain up to 10 billion barrels of recoverable reserves. That announcement also contained a paragraph headed 'Forward looking statements' that cautioned the reader about some of the risks inherent in confirming that potential. The programme of work since then, which is expected to continue for the coming 12 months, is focussed on the acquisition and interpretation, using AVO and geological modelling techniques, of additional 2-D seismic data. As part of this programme, about 3000 kms of new 2-D seismic data will be acquired between November this year and March 2009, which is the benign weather period. The objective of this programme is to confirm the prospectivity of all three structures and to evaluate with close spaced data the reservoir continuity on at least one of the prospects. This would then allow a well location to be chosen with some confidence. It is now unlikely that a well could be started in 2009 but 2010 is certainly viable. 

It has been reported by one of the participants in exploration well Kunene 1, drilled in Block 1711 located in the Namibe Basin, about 200 kms north of Tower's most northerly prospect, that substantial gas shows were encountered and that the well would be tested No announcements have yet been made as to the result of the testing. The apparent presence of significant gas is encouraging for prospectivity in the Tower acreage. 

Other Ventures

Little progress has been made to date with negotiations pertaining to the conditional Licence award in Tanzania and it is not clear that agreement will be reached. The acquisition of two Licences in West Sahara, via the purchase of Comet Petroleum, has been completed but it is expected to be some years before the political uncertainties can be resolved. Accordingly, Uganda and Namibia remain the principal areas of activity of your Company.

Corporate Outlook

Nearly three years ago, Neptune Petroleum acquired its two Licences in sub-Saharan Africa. The Company has now evaluated the potential of each and both have company making potential. Some corporate value has been added as optimism has increased but the first test of upside value should be over by the end of the first quarter of 2009. There are still uncertainties but the Tower Board is confident that one or both of the current opportunities will reward the patience of shareholders who have given support during the assessment period. I thank you for your continuing interest and support.

Peter Kingston

Chairman

CONSOLIDATED INCOME STATEMENT

FOR THE SIX MONTHS ENDED 30 JUNE 2008

		Six months ended 30 June 2008	Six months ended 30 June 2007
	Notes	(Unaudited)	(Unaudited)
		$	$
Revenue		-	-
Cost of Sales		-	-
Gross Profit		-	-
Administrative expenses before charge for share based payments		(398,058)	(475,008)
Share based payments	9	-	(109,769)
Total administrative expenses		(398,058)	(584,777)
Group operating loss		(398,058)	(584,777)
Finance income		39,230	90,349
Loss before taxation		(358,828)	(494,428)
Taxation		-	-
Loss for the period		(358,828)	(494,428)
Attributable to:
Equity holders of the Company		(358,828)	(494,428)
Loss per share (cents)
Basic	3	(0.07)c	(0.10)c
Diluted	3	(0.07)c	(0.10)c

The results shown above relate entirely to continuing operations, inclusive of acquisitions.

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

FOR THE SIX MONTHS ENDED 30 JUNE 2008

	Share capital	Share premium	Share based payments reserve	Retained Losses	Total Equity
	$	$	$	$	$
Six months ended 30 June 2008
Balance at 1 January 2008	1,052,505	14,926,206	545,660	(2,435,240)	14,089,131
Share issues	1,443	92,492	-	-	93,935
Loss for the period	-	-	-	(358,828)	(358,828)
Balance at 30 June 2008	1,053,948	15,018,698	545,660	(2,794,068)	13,824,238
Six months ended 30 June 2007
Balance at 1 January 2007	897,874	12,012,890	174,841	(1,315,437)	11,770,168
Share issues less costs	153,429	2,883,658	-	-	3,037,987
Loss for the period	-	-	109,769	(494,428)	(384,659)
Balance at 30 June 2007	1,051,303	14,896,548	284,610	(1,809,865)	14,422,596

  CONSOLIDATED BALANCE SHEET

AS AT 30 JUNE 2008

		30 June 2008 (Unaudited)	31 December 2007 (Audited)
	Notes	$	$
ASSETS
Non Current Assets
Plant and Equipment	4	138,218	106,967
Goodwill	5	7,959,502	7,979,502
Intangible exploration and evaluation assets	5	4,461,287	711,590
		12,579,007	8,798,059
Current Assets
Trade and other receivables	6	2,301,689	3,121,389
Cash and cash equivalents		852,972	5,534,815
		3,154,661	8,656,204
Total Assets		15,733,668	17,454,263
LIABILITIES
Current Liabilities
Trade and other Payables	7	(1,909,430)	(3,365,132)
Total Liabilities		(1,909,430)	(3,365,132)
Net Assets		13,824,328	14,089,131
EQUITY
Capital and Reserves
Share Capital	8	1,053,948	1,052,505
Share Premium	8	15,018,698	14,926,206
Share-based payments reserve		545,660	545,660
Retained Losses		(2,794,068)	(2,435,240)
Shareholders Equity	10	13,824,238	14,089,131

  CONSOLIDATED CASH FLOW STATEMENT

FOR THE SIX MONTHS ENDED 30 JUNE 2008

	Six months ended 30 June 2008 (Unaudited)	Six months ended 30 June 2007 (Unaudited)
	$	$
Cashflow outflow from operating activities
Group operating loss	(398,058)	(584,777)
Adjustment for items not requiring an outlay of funds:
Depreciation of plant and equipment	15,979	566
Share-based payments charge	-	109,769
Operating loss before changes in working capital	(382,079)	(474,442)
Decrease in receivables and prepayments	518,956	7,532
(Decrease)/increase in trade and other payables	(1,455,700)	7,295
Cash used in operations	(1,318,823)	(459,615)
Interest received	39,230	90,349
Net cash used in operating activities	(1,279,593)	(369,266)
Investing activities
Funds used in exploration and evaluation	(5,689,988)	(931,716)
Funds received from farm-in partners	2,334,968	-
Payments to purchase plant and equipment	(47,230)	(7,758)
Net cash used in investing activities	(3,402,250)	(939,474)
Financing activities
Proceeds from issue of ordinary share capital	-	3,065,835
Share issue costs	-	(28,748)
Net cash from financing activities	-	3,037,087
(Decrease)/increse in cash and cash equivalents	(4,681,843)	1,728,347
Cash and cash equivalents at beginning of period	5,534,815	2,456,825
Cash and cash equivalents at end of period	852,972	4,185,172

  NOTES TO THE HALF-YEARLY FINANCIAL REPORT

FOR THE SIX MONTHS ENDED 30 JUNE 2008

1. Basis of preparation and going concern

This half-yearly financial report, which includes a condensed set of financial statements of the Company and its subsidiary undertakings ('the Group') has been prepared using the historical cost convention and in accordance with the International Financial Reporting Standards ('IFRS') including IAS 34 'Interim Financial Reporting' and IFRS 6 'Exploration for and Evaluation of Mineral Reserves', as adopted by the European Union ('EU')

This condensed set of financial statements for the six months ended 30 June 2008 is unaudited and does not constitute statutory accounts as defined in Section 240 of the Companies Act 1985. They have been prepared using accounting bases and policies consistent with those used in the preparation of the audited financial statements of the Company and the Group for the year ended 31 December 2007 and those to be used in the year ending 31 December 2008. The financial statements for the year ended 31 December 2007 have been delivered to the Registrar of Companies and the auditors' report on those financial statements was unqualified and did not contain a statement made under Section 237(2) or Section 237(3) of the Companies Act 1985.

This half-yearly financial report was approved by the Board of Directors on 4 September 2008.

Going concern

Although during the six months ended 30 June 2008, the Group made a loss of $358,828 and had net operating cash outflows of $1,279,593, the half-yearly financial report has been prepared on the going concern basis for the following reasons.

The Directors are of the opinion that the Group has sufficient cash to fund its activities based on projected cash flow information in excess of twelve months from the date of approval of this half-yearly financial report. Management continues to monitor all working capital commitments and balances on a weekly basis and believes that they have identified appropriate levels of financing for the Group to continue to meet its liabilities as they fall due for at least the next twelve months. Specifically, the Board is encouraged by the responses received to date from third parties to fund the planned well programme in Uganda. Discussions with one company are well advanced for that company to farm in to the Licence to earn a 25% interest and an active farm out programme is underway with a number of other parties to meet the balance of funding for the two commitment wells.

In common with many similar groups, the Group raises finance for its exploration and appraisal activities in discrete tranches. On its projects certain assumptions have been made with regard to working capital management. If the timing of cash inflows and outflows were to change the Group may be required to seek additional bridging finance to meet any shortfall. At this time, based on the latest cash flow projections and consideration of the options available, the Board does not believe that it is necessary to secure additional third party financing. 

Given the current economic climate and with a possible shortfall between funds expected to be available and on-going expenditure requirements, a degree of uncertainty remains over the receipt and timing of the inflow of finance and this could cast doubt on the Group's ability to continue as a going concern. If this were the case the Group would be unable to continue realising its assets and discharging its liabilities in the normal course of business. However, at the date of approving these financial statements the Group's cash position is positive and it is trading as a going concern.

  2. Segmental reporting

For the purposes of segmental information, the operations of the Group are focused on Africa and comprise one class of business: the exploration and evaluation for hydrocarbon liquids and gas.

The Company acts as a holding Company.

The Group's operating loss arose from its operations in Africa. In addition, all the Group's assets (except for the majority of current assets which are based in Europe) are based in Africa.

3. Loss per ordinary share

The basic loss per ordinary share has been calculated using the loss for the financial period of $358,828 (six months ended 30 June 2007 - loss of $494,428) and the weighted average number of ordinary shares in issue of 537,179,239 (six months ended 30 June 2007 - 516,740,847).

The diluted loss per share has been considered using a weighted average number of shares in issue and to be issued of 542,776,976 (30 June 2007: 520,252,775). The diluted loss per share has been kept the same as the basic loss per share as the conversion of the share options decreases the basic loss per share, thus being anti-dilutive.

4. Plant and equipment

	$
Cost
At 1 January 2008	109,961
Additions during the period	47,230
At 30 June 2008	157,191
Depreciation
At 1 January 2008	2,994
Charge for the period	15,979
At 30 June 2008	18,973
Net book value
At 30 June 2008	138,218
At 31 December 2007	106,967

5. Intangible assets

	Exploration and evaluation assets	Goodwill	Total
	$	$	$
Cost
1 January 2008	711,590	7,979,502	8,691,092
Assets acquired with subsidiary undertaking	93,935	-	93,935
Additions during the period	5,689,988	-	5,689,988
Monies receivable under farm-out agreements	(2,034,226)	-	(2,034,226)
At 30 June 2008	4,461,287	7,979,502	12,440,789
Amortisation and impairment
1 January 2008	-	-	-
Amortisation for the period	-	-	-
At 30 June 2008	-	-	-
Net book value
At 30 June 2008	4,461,287	7,979,502	12,440,789
At 31 December 2007	711,590	7,979,502	8,691,092

Goodwill is the difference between the amount paid on the acquisition of the subsidiary undertaking and the aggregate fair value of its separable net assets - of which oil and gas exploration expenditure is the primary asset. Goodwill is capitalised as an intangible fixed asset and in accordance with IFRS3 is not amortised but tested for impairment annually or when there are any other indications that its carrying value is not recoverable. As such, goodwill is stated at cost less any provision for impairment in value. If a subsidiary undertaking is subsequently sold, goodwill arising on acquisition is taken into account in determining the profit and loss on sale.

Goodwill arose on the acquisition of the Company's subsidiary undertaking, Neptune Petroleum Limited. During the period the Company acquired Comet Petroleum Limited ('Comet'). Comet owns two licences, has no other assets or liabilities and is not currently trading.

The Directors have considered the fair value of the assets acquired and they believe the acquisition cost of $93,935 represents the fair value of these licences. The aggregate assets and liabilities, and the fair value adjustment arising on consolidation, was therefore as follows:    

	Book values	Fair value adjustment	Fair values
	$	$	$
Exploration and evaluation assets	63,575	30,358	93,933
Investments	2	-	2
Net assets acquired	63,577	30,358	93,935
Goodwill arising on acquisition	-	-	-
Total cost of acquisition	-	-	93,935
Satisfied by:
Shares issued as consideration to vendors (note 8)	-	-	93,935

The acquisition terms of Comet includes an initial consideration of $93,935 which equates to the verified back costs incurred by Comet in respect of its 50% interests in its two licences in The Saharawi Arab Democratic Republic ('SADR').     Further deferred consideration will be triggered as a consequence of Comet's licences becoming operative, which will occur in the event that SADR reaches agreement with Morocco to become an independent nation state.

The deferred contingent consideration payable for Comet will be determined through an independent valuation of Comet's share of assets at that time, subject to a minimum consideration of £500,000 per licence and a maximum consideration of £1,500,000 per licence. The deferred consideration will be satisfied by the issue of shares by the Company.

The acquisition of Comet is a related party transaction by virtue of Comet being owned jointly by Peter Taylor and Peter Blakey, both of whom are Directors and shareholders of the Company

Of the total amount for intangible exploration and evaluation ('E & E') assets $4,367,352 represents costs incurred in relation to the Group's Ugandan and Namibian licences and the $93,935 represents costs incurred by Comet in respect of its licence in the Western Sahara at the date of acquisition. All these amounts will be written off to the income statement as exploration expenses unless commercial reserves are established or the determination process is not completed and there are no indicators of impairment. The outcome of ongoing exploration and evaluation, and therefore whether the carrying value of E & E assets will ultimately be recovered, is inherently uncertain. The Directors have assessed the value of the exploration and evaluation expenditure carried as intangible assets and in their opinion no provision for impairment is currently necessary.

  6. Trade and other receivables

	30 June 2008	31 December 2007
	$	$
Monies due under farm-out agreement	1,594,000	1,894,742
Other receivables	503,977	220,275
Guarantee deposit	203,712	1,006,372
	2,301,689	3,121,389

In August 2008 the Group received $1 million of the monies due at 30 June 2008 under farm-out agreements.

7. Trade and other payables

	30 June 2008	31 December 2007
	$	$
Payables and accruals	920,094	2,855,559
Withholding tax payable	989,336	509,573
	1,909,430	3,365,132

Neptune Petroleum (Uganda) Ltd, in conjunction with other exploration companies operating in Uganda, have made representations to the Government of Uganda regarding the requirement to account for local withholding tax on services purchased from non-Ugandan suppliers of equipment and consultancy services in connection with its exploration programme in Uganda. Although the company is optimistic that these representations will result in it being granted an exemption, waiver or deferment, in whole or in part, from this liability, it has decided to accrue in these financial statements the estimated potential maximum liability of $989,336, which its local auditors have advised will be payable in the event that the aforesaid representations are unsuccessful.

8. Share capital and share options

	30 June 2008	31 December 2007
	$	$
Authorised
10,000,000,000 ordinary shares of 0.1p each	19,900,000	19,900,000
Allotted, called up and fully paid
537,829,422 (2007: 537,107,878) ordinary shares of 0.1p each	1,053,948	1,052,505

The share capital issues during the six months ended 30 June 2008 were as follows:

	Number of 0.1p shares	Share capital at nominal value	Share premium
		$	$
At 1 January 2008	537,107,878	1,052,505	14,926,206
Shares issued for purchase of subsidiary undertaking	721,544	1,443	92,492
At 30 June 2008	537,829,422	1,053,948	15,018,698

In June 2008 the Company acquired the entire issued share capital of Comet Petroleum Ltd for a consideration of $93,935 satisfied entirely by the issue of 721,544 shares. The fair value of assets acquired and goodwill arising on that acquisition is summarised in note 5 above. 

  Details of the share options outstanding at 30 June 2008 were as follows:

	Number of share options
At 1 January 2008	12,000,000
Granted during the period	-
Exercised during the period	-
Lapsed during the period	-
At 30 June 2008	12,000,000

Date of Grant	Number of options	Option price	Exercisable between
21 December 2005	3,000,000	1.5p	21/12/05 – 21/12/10
28 February 2006	1,000,000	1.5p	28/02/07 – 28/02/11
28 February 2006	2,000,000	1.5p	28/02/09 – 28/02/11
8 February 2007	1,000,000	3.125p	08/02/07 – 08/02/12
3 May 2007	3,000,000	2.25p	03/05/08 – 03/05/12
20 September 2007	2,000,000	2.75p	20/09/08 – 20/09/12

The Company's closing share price during the period ranged between 2.75p and 11p. The closing share price on 30 June 2008 was 4.78p per share.

9. Share-based payments

	Six months ended 30 June 2008	Six months ended 30 June 2007
	$	$
The Group recognised the following charge in the income statement in respect of its share based payment plans:
IFRS 2 charge	-	109,769

The above charge is based on the requirements of IFRS 2 on share-based payments. For this purpose, the weighted average estimated fair value for the share options granted during the period is calculated using a Black-Scholes option pricing model in respect of options. The volatility measured at the standard deviation of expected share price return is based on statistical analysis of the share price over the period. For the six months ended 30 June 2007 this was calculated at 212% the risk free rate was taken as 5.5%. No share options have been granted during the period ended 30 June 2008 so no charge has been recognised in the income statement.  

10. Reconciliation of movements in shareholders' funds - equity only

	Six months ended 30 June 2008	Year ended 31 December 2007
	$	$
Opening shareholders’ funds	14,089,131	11,770,168
Loss for the period	(358,828)	(1,119,803)
Shares issues less costs	93,935	3,067,938
Share-based payments	-	370,819
Closing shareholders' funds	13,824,238	14,089,122

  11. Exploration and evaluation expenditure commitments

In order to maintain its interests in the oil and gas permits which have been granted to it, the Group is obliged to meet certain expenditure commitments and other obligations. The timing and amount of those commitments and obligations are subject to the work programmes required pursuant to the permit conditions and, depending upon the results of the work performed, may vary significantly from budgeted or forecast levels. Exploration or evaluation results in any of the licence areas may also result in variations being required to those work programmes and applicable expenditure may be increased or decreased accordingly. It is the Group's policy to seek joint operating partners at an early stage in order to reduce its commitments.

	30 June 2008	31 December 2007
	$	$
At the balance sheet date the budgeted aggregate amount payable for exploration and evaluation expenditure commitments was:
within not more than one year	17,600,000	3,571,900
between one and two years	Nil	16,000,000
	17,600,000	19,571,900

12. Decommissioning expenditure

The Directors have considered environmental issues and the need for any necessary provision for the cost of rectifying any environmental damages which may be required under local legislation and the Group's license obligations. In their view, no provision is necessary at 30 June 2008 for any future costs of decommissioning or rectifying any environmental damage.

13. Events after the balance sheet date

Major events that have occurred subsequent to 30 June 2008 are discussed in the Chairman's Statement.

 

END

 

 

IR IFFSVAVITIIT