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Paladin Resources (PLR)

  Print      Mail a friend       Annual reports

Tuesday 28 March, 2000

Paladin Resources

Final Results - Year Ended 31 December 1999

Paladin Resources PLC
28 March 2000

                           PALADIN RESOURCES plc
                       ('Paladin' or 'the Company')

          Preliminary Results for the year ended 31 December 1999

Paladin, the oil and gas exploration and production company with interests
in the North Sea, USA and Indonesia, announces its preliminary results for
the year ended 31 December 1999.


*    Turnover more than doubled to £18.6 million (1998: £9.1 million)

*    Profit before tax of £3.4 million (1998: loss of £1.2 million)

*    49 per cent increase in average net production to 5,487 boepd (1998:
     3,683 boepd)

*    Reserves increased by 79 per cent to 38.1 MMboe (1998: 21.3 MMboe)

*    Canadian and US disposal programme largely complete

*    South East Sumatra performing exceptionally well, with excellent
     prospects for further development
*    Recent acquisitions performing in line with or ahead of expectations

*    All planned development wells at Bittern drilled: oil-in-place
     estimates confirmed

Roy Franklin, Chief Executive of Paladin, said today:

' Our reserves and production have increased significantly during the year
and  we  are currently enjoying the benefit of high oil prices.  With  our
strong  financial  position we are well placed to take  on  further  value
adding projects.'

                                             28 March 2000


Paladin Resources plc                        Tel: 020 7534 2900
Roy Franklin, Chief Executive

College Hill                                 Tel: 020 7457 2020
James Henderson
Archie Berens
                           CHAIRMAN'S STATEMENT

I am pleased to report that significant progress was made in growing the
Company in 1999, against the background of a rapidly changing business
environment for exploration and production companies such as Paladin.

The US$36 million acquisition of Warrior Oil Company in October doubled
our stake in the South East Sumatra Production Sharing Contract to 7.5 per
cent and brought a 2.5 per cent foothold in the adjacent Offshore North
West Java Production Sharing Contract. The £10.5 million acquisition of
Statoil UK's interests in the Blake and Goldeneye discoveries in the UK
sector of the North Sea in December complemented the Warrior acquisition,
giving the Company exposure to two likely near-term UK developments which
will contribute to Group production in the medium term.

By December, the Group's remaining gas interests in Canada had been sold
for C$15 million and letters of intent had been entered into to sell
certain of the remaining US interests for US$3 million.  Remaining
reserves in the USA following completion of these sales are now
concentrated in a small number of mainly operated properties and
constitute only 10 per cent of the Group's total reserve base.


Much stronger oil prices in the second half of 1999 combined with two and
a half months contribution from the Warrior acquisition led to an overall
operating profit for the year of £2.8 million (1998: loss of £1.3
million). Retained profit for the year was £1.8 million, compared to a
retained loss of £1.3 million in 1998. Profit per share was 0.92 pence
(1998: loss of 1.04 pence per share).

Production and Development

Net production for the year amounted to 1.6 million barrels of oil and 2.2
billion cubic feet of gas, an average of 5,487 boepd and an increase of 49
per cent from 3,683 boepd in 1998. Oil represented 81 per cent of
production during the year (1998: 64 per cent). With the increasing shift
in emphasis away from North America, 74 per cent of 1999 production came
from Indonesia (1998: 44 per cent), and only 26 per cent came from North
America  (1998: 56 per cent), the direct result of disposals and natural
decline in Canada and the USA combined with the impact of the Warrior

A continuing active reinvestment programme of infill drilling, workovers
and incremental developments has maintained gross production from the
South East Sumatra PSC at rates in excess of 140,000 bopd. We recognise
similar potential for exploitation activity in the adjacent Offshore North
West Java PSC in which the Company acquired a 2.5 per cent interest
through the Warrior acquisition.


We now anticipate that the Bittern Field will be on stream early in the
second quarter of 2000. While the project progressed well during 1999 and
remains within budget, the FPSO 'Triton' was delayed in sailing from
Teesside for installation at the field for three months due to the absence
of a suitable weather window.  The FPSO is now on location at the Bittern

I am pleased to report that a development plan for the Blake Field, in
which the Company now holds a fixed 2.4 per cent interest, received
Government approval. The field is being developed as a subsea satellite to
the nearby Ross Field and is scheduled to be on stream in the second half
of 2001.

Overall the Group invested £9.7 million on production and development
projects - £4.8 million in Indonesia, £3.9 million in the UK and £1.0
million in North America.

Exploration and Appraisal

In the UK, Paladin participated in two wells in 1999. As reported in the
interim results, a farm-in well on Block 21/5b which earned Paladin a 12.5
per cent interest was unsuccessful. An appraisal well of the Goldeneye
discovery in Block 20/4b (Paladin 15 per cent) confirmed the extent of the
accumulation into the Block.  Development concepts are under

In Tanzania, further seismic was acquired to better define prospects for
drilling in 2000. It is planned to drill one or two wells later in the

Following the acquisition of ARCO's exploration interests in the Romanian
Black Sea, the Company initiated planning for a 1,600 km seismic survey
over the Doina gas discovery and adjacent exploration acreage. This survey
will be carried out during the second quarter, with a view to drilling at
least one well in late 2000 or early 2001. In December, the Company signed
a contingent gas sales agreement with Enron for any gas produced from this
acreage. In return for Enron securing a potential source of gas on known
terms, the Company can benefit from Enron's marketing strength in Eastern


As detailed below, the Group's proven and probable reserves at 31 December
1999 had increased by 79 per cent to 38.1 MMboe compared to 21.3 MMboe at
1 January 1999. The bulk of this increase resulted from the acquisition of
Warrior Oil Company, albeit offset by the disposal of the Group's Canadian
oil and gas properties. Net positive revisions to previous estimates
represented some 45 per cent of 1999 production.

Reserves in Indonesia now constitute 78 per cent of total Group reserves
with 12 per cent in the UK (in the Bittern and Blake Fields) and 10 per
cent in the USA.


Board Positions

Jay Hellums has indicated his intention to retire from the Board at the
forthcoming Annual General Meeting.  It is anticipated that he will be
replaced as the Enron nominee on the Board by Paul Chivers, VP and
Regional CFO of Enron Europe Limited.

Outlook and Strategy

Whilst current oil prices are obviously having a very beneficial effect on
near term cash flows, we continue to plan on a long term Brent oil price
in the mid-teens in reviewing investment opportunities and acquisitions.
The impact of near-term peaks, and indeed troughs, in the oil price is
factored into evaluation of such opportunities using the forward oil price

Paladin's strategy is to grow through both acquisition and exploration,
with the objective of securing reserves and production on a commercially
attractive basis. The Warrior and Statoil UK acquisitions represent good
progress in 1999. Whilst we anticipate that the pace of asset
rationalisation from larger companies as a result of mergers and improved
business focus will continue through 2000 and beyond, the  challenge will
be in financing acquisitions against the backdrop of difficult equity and
debt markets for exploration and production companies.

1999 has been a year of rapidly changing fortunes for the industry and as
a result one of great challenges and uncertainty for staff. I would like
to take this opportunity, on behalf of shareholders, to thank the
Directors and staff for their commitment and professionalism over the last
twelve months.

J Malcolm Gourlay
28 March 2000


Oil and Gas Prices

A much stronger oil market in the second half of 1999 provided a
significant increase in average realised oil prices in Indonesia ($15.32
per barrel in 1999 as a whole compared to $10.53 per barrel during the
five month period of ownership in 1998).

In the USA, realised oil prices averaged $17.02 per barrel (1998: $12.72
per barrel), while realised gas prices were also stronger at $2.33 per
Mscf (1998: $2.09 per Mscf).  Canadian gas price realisations improved to
C$2.55 per Mscf (1998: C$2.08 per Mscf).

Operational Review

Paladin's 1999 production amounted to 1.629 MMbbl of oil and 2.24 Bscf of
gas from the USA, Canada and Indonesia. Exploration activity continued in
the UK, Indonesia and Tanzania. Details are given below for each region.


South East Sumatra

Paladin increased its interest in the South East Sumatra PSC to 7.5%
following the acquisition of Warrior Oil Company's 3.8% working interest
in October 1999.

Production was maintained at an average of 140,375 bopd through a
continuous programme of infill drilling and satellite field development.
Reserves additions generated from this programme, together with successful
exploration drilling, has resulted in the 1999 production of 51 MMbbl
being replaced at a proven and probable level. Paladin's entitlement share
of production was 3,696 bopd averaged over the full year.

A total of 83 delineation and development wells were drilled during 1999
together with 9 exploration wells of which 3 were successful in
discovering potentially commercial oil accumulations. The operator has
continued to exploit the contract area efficiently and has not only
performed admirably in maintaining the reserve replacement record but has
also reduced operating and drilling costs. The cost of exploration
drilling has been decreased by almost an order of magnitude, thus allowing
the current prospect inventory to be drilled quickly and cheaply. It is
planned to continue the current level of activity through 2000 and to
initiate a water flood project on part of the Widuri field which, if
successful, would lead to a field wide project as well as giving
encouragement for increased recovery in many other fields in the PSC.

Offshore North West Java

Paladin acquired its 2.5% working interest in the ARCO operated Offshore
North West Java PSC through the acquisition of Warrior Oil Company.

The Offshore North West Java contract area is located offshore to the
north and west of Jakarta, Indonesia. The area is petroleum rich and
contains 46 producing oil and gas fields. Oil is stored and loaded
offshore  for  export  and  gas is sold  to  the Indonesian electricity
company, PLN, for power generation in Jakarta and to the Indonesian gas
distribution company, PGN, for onward sale to industrial consumers. Over 1
billion barrels of oil have been produced from the area to date and
significant additional potential remains for both oil and gas to be
exploited through infill drilling, satellite developments and exploration

Gross average production for 1999 from the PSC was 74,310 bopd and 258
MMscfd. Paladin's share of this production on an entitlement basis was 211
bopd and 1 MMscfd (total 383 boepd) when averaged over the full year.

Plans for 2000 include implementation of a waterflood project on the E-
Main/FK fields, further gas development and exploration drilling.


Paladin acquired a 13.3% interest in the Blora PSC Onshore West Java as
part of the Warrior acquisition and, following the departure of Mobil from
the partnership, Paladin's interest increased to 19%. The contract area is
located to the west of the Cepu oil fields which have produced in excess
of 150 MMbbl of oil.

During 1999, the partnership drilled the Rembang-1 well which tested gas
and associated oil. A second well is planned for 2000 to test for the
presence of an oil rim to the gas accumulation.  Discussions are in
progress with a potential new partner to take up a 30% working interest in
the PSC by farming in to the drilling of Rembang-2.

A significant number of prospects and leads have been identified in the
contract area with a diversity of plays and trap types. Additional seismic
is planned for 2000 to mature these prospects for drilling.


United Kingdom


During 1999, all the planned development wells on the field (four oil
producers and two water injectors) were drilled. These wells all
encountered the reservoir and fluid contacts as predicted and have
therefore confirmed the field oil-in-place estimates. All the wells have
been completed and tested and are ready to be put into service.

Construction and pre-commissioning of the FPSO 'Triton' was completed at
Teesside in late November when the vessel was ready to sail to the field
for hook-up. Unfortunately, the required 5 day good weather window to
allow the vessel to sail safely from the Tees to anchor in the field did
not materialise until mid-March 2000. Oil production from Bittern is
expected to commence shortly, after the vessel is anchored in the field,
at a rate of 60,000 bopd (1,496 bopd net to Paladin) with gas export
following some two months later.

Drilling of the Storen prospect has also been delayed; this is now
expected to be drilled in 2001 which, if successful, would allow time for
completion and subsea hook-up for first production when Bittern comes off


Paladin acquired an interest in the Blake Field in December 1999 through
its purchase of Statoil (U.K.) Limited's 20% working interest in Block
13/29b, giving Paladin a fixed 2.4% interest in the field.

The field development plan was approved by the DTI in January 2000. The
development, operated by BG, is initially planned to be restricted to a
core area of thick, excellent quality channel sands. However, significant
upside exists in wings to these channel sands and in underlying laminated
sands, both of which have been proven to be oil and gas bearing. Reserves
could therefore be significantly higher than those forming the basis of
the approved development plan.

The field will be a subsea development producing to the Talisman-operated
Ross FPSO, with gas exported into the Frigg system. Production is planned
to commence in 2001 at a plateau rate of 40,000 bopd (960 bopd net to


Paladin acquired an interest in the Goldeneye discovery through its
purchase of a 15% working interest Block 20/4b from Statoil in December
1999. The accumulation, which extends into Block 14/29a, has been
delineated by four wells and contains over 300 ft of gas sands and a 24 ft
oil rim. Gas has been tested at up to 41.5 MMscfd in the appraisal wells.
Alternative conceptual development schemes are under consideration and
therefore no reserves have as yet been booked.


Block 21/5b

Paladin participated in exploration well 21/5b-5 in 1999 through its farm-
in with Enterprise Oil to earn a 12.5% interest in the Block. The well
targeted Eocene sands in the Jarvis prospect. Although good sands were
present, the well did not encounter hydrocarbons. The licence will be

North America


US oil production was 534 bopd and gas production was 2.65 MMscfd, an
average of 975 boepd (1998: 1,505 boepd). The decrease in production
compared with 1998 was mainly due to the full year impact of the disposal
of 50% of the Company's working interests in the Fort Chadbourne, Rhoda
Walker, Parks and Newburg Spearfish fields.

A 3D seismic survey was acquired across the Fort Chadbourne and Parks
fields; Paladin was carried through the first $1.5 million of gross costs
as part of the Collaboration Agreement with King Ranch Energy entered into
in 1998. The survey is currently being interpreted and it is expected that
further investment opportunities in these fields will be identified.

As other regions of the business were growing through acquisition, a
review of growth opportunities for the USA was undertaken and, in mid-
1999, it was concluded that these were unlikely to compete, in terms of
potential to add value, with opportunities in the UK and internationally.
Therefore in the latter part of the year the US business was marketed,
resulting in a number of properties being sold, with the core operated
properties (Fort Chadbourne, Parks and Rhoda Walker) being retained. The
Abilene office building has now been sold and a reduced operating
organisation is being established in new rented accommodation.


Total average annual oil and gas production from Canada amounted to 22
bopd and 2.5 MMscfd respectively, an average of 434 boepd (1998: 571

It was decided during the year that the Canadian assets were not core to
Paladin's strategy.  They were therefore sold in November for
approximately C$15 million.


Paladin acquired a 75% operated working interest in an Exploration and
Production Sharing Agreement, covering Blocks XIII (Pelican) and XV
(Midia) in the Black Sea, through its purchase of ARCO Midia in September
1999. Block XV contains the Doina gas discovery which comprises gas
bearing, thinly interbedded sandstones which tested at a rate of 17 MMscfd
in the discovery well. There is significant appraisal potential in the
Doina structure, which if proved up could result in a commercial
development. Paladin will imminently be acquiring 1,600 km of high
resolution seismic across the area and plans for drilling in late 2000 or
early 2001 are underway. There are a number of attractive prospects and
leads in the Blocks characterised by direct hydrocarbon indicators on the
seismic data.

Paladin's working interest in the EPSA is likely to increase to 80%
following the conclusion of Justinian Explorations Ltd's assignment of its
8.3% working interest to Paladin and Sterling Resources. Paladin is
presently discussing a potential farm-in to the EPSA with several other

Acquisition of the interest in this EPSA brings Paladin its first
operatorship outside North America and, if drilling is successful, could
result in an important development in the area with exciting follow up
potential. The contingent gas sales agreement with Enron, which was signed
in December, provides access to Enron's marketing strength in developing
gas markets.


Paladin holds a 20% working interest in a PSC covering the Kisangire
Block, Dar es Salaam Platform and Mafia Island Basin onshore and offshore
Eastern Tanzania operated by Canop Worldwide Corporation.

Following reprocessing and interpretation of some of the existing seismic
data, a further 185 km of seismic were acquired over the Kisangire Block
and Rufiji Delta area. These data have now been integrated with the
existing data set and a number of attractive prospects in a variety of oil
and gas plays have been identified. It is planned to drill one or two
wells during the year.

Financial Review

The Group has adopted FRS12 (Provisions and contingencies) for the year
ended 31 December 1999 and the accounting policy for the recognition of
dismantlement costs has been amended accordingly, although this has had no
effect on prior years.  The Group has also adopted FRS13 (Derivatives and
other financial instruments) and this has resulted in further disclosure.

Turnover amounted to £18.6 million (1998: £9.1 million), a 104% increase
resulting from a combination of the Indonesian PSC acquisitions (offset by
the Canadian disposals and lower US production) and higher average
realised prices.

Production costs averaged £4.36 per boe (1998: £3.90 per boe) reflecting
the dominance of Indonesian entitlement barrels in the 1999 production
mix.  There was a small increase in depletion expense to £2.40 per boe
(1998: £2.36 per boe), with an improvement in the Indonesian rate more
than offset by a higher North American rate which resulted primarily from
the disposal of Canadian assets.

Operating cash flow before interest, tax and depletion, but after
administration costs of £2.0 million, was strong at £8.8 million (1998:
£1.4 million). The increase was mainly due to contributions from the
acquisitions in Indonesia and higher average realisations.

Capital expenditure of £11.3 million was split between exploration (£1.6
million) and production and development (£9.7 million).  Net interest
income was £0.7 million.

The sale of Aberdeen Petroleum (Canada) Limited and other peripheral
Canadian properties raised £4.8 million after tax, whilst £35.0 million
was invested in the acquisition of Warrior (South East Sumatra, Offshore
North West Java and Blora), ARCO Midia (Romania) and interests from
Statoil (Blake and Goldeneye).

Paladin's reinvestment programme over 1999 resulted in net debt of £16.4
million by year end (versus net cash of £17.4 million at year end 1998).
At the year end, $45 million of the $75 million bilateral unsecured
revolving credit facility provided by the Chase Manhattan Bank was

Group Taxation

The tax charge for the year of £1.6 million relates primarily to Indonesia
(£1.4 million) with the balance arising in connection with the disposal of
the Group's interests in Canada.

Year 2000

The Company has been addressing the potential threat to its business
arising from the Year 2000 date change. A programme was initiated in late
1998 to identify all systems directly involved in the Group's business
which used computer software or embedded chips, to verify whether they
were Year 2000 compliant, and to take any necessary remedial action to
ensure compliance. That programme was completed successfully and the Group
has not experienced any business interruptions arising as a consequence of
the Year 2000 date change. The Company has not incurred any material costs
in confirming compliance.

Roy A. Franklin
Chief Executive
28 March 2000

Production and Reserves
for the year ended 31 December 1999
                                  1999                       1998         
                              Mbbl          bopd         Mbbl         bopd
US                             195           534          262          717
Canada                           8            22           18           49
Indonesia                    1,426         3,907          586        1,607
Total Oil Production         1,629         4,463          866        2,373
                              Bscf        MMscfd         Bscf       MMscfd
US                            0.97          2.65         1.72         4.73
Canada                        0.90          2.47         1.15         3.13
Indonesia                     0.38          1.03            -            -
Total Gas Production          2.24          6.14         2.87         7.86
                              Mboe         boepd         Mboe        boepd
Total Oil Equivalent         2,003         5,487        1,344        3,683
Proven and Probable                                                       
                                                         1999         1998
                                                         Mbbl         Mbbl
US                                                      2,393        2,760
Canada                                                      -          110
Indonesia                                              26,043       10,900
United Kingdom                                          4,360        2,730
Total Oil Reserves                                     32,796       16,500
                                                         Bscf         Bscf
US                                                       8.99         9.27
Canada                                                      -        17.56
Indonesia                                               21.13            -
United Kingdom                                           1.77         1.74
Total Gas Reserves                                      31.88        28.57
                                                         Mboe         Mboe
Total Reserves Oil                                     38,110       21,262

                       Group Profit and Loss Account
                    for the year ended 31 December 1999

                                     1999    1999            1998
                       Note          £000    £000            £000

Ongoing activities                 14,672                    9,095
Acquisitions                        3,915                        -

                                          18,587             9,095
Cost of sales                                                     
Production costs                                                  
(excluding                        (8,740)                  (5,245)
exceptional item)
Exceptional                         (169)                        -
production costs
Depletion and                     (4,899)                  (3,178)
                                          (13,808)         (8,423)
Gross profit                              4,779                672
Administrative                            (1,992)          (1,964)

profit/(loss)                       1,094                  (1,292)
Ongoing activities                  1,693                        -

                                          2,787            (1,292)
Net interest income                       660                  116

Profit/(loss) on                                                  
ordinary activities                       3,447        (1,176)
before taxation
Taxation                                  (1,607)        (91)

Retained                                  1,840        (1,267)
profit/(loss) for the

Profit/(loss) per                                      
Basic                    1                       0.92p     (1.04p)
Diluted                                          0.92p     (1.04p)

           Group Statement of Total Recognised Gains and Losses
                    for the year ended 31 December 1999

                                             1999                1998
                                             £000                £000

Profit/(loss) for the year                  1,840             (1,267)
Foreign exchange differences                1,185               (346)
Total recognised gains/(losses) for the     3,025             (1,613)

                            Group Balance Sheet
                            at 31 December 1999
                                             1999           1998
                                             £000           £000
Fixed assets                                                
Tangible fixed assets                        78,319         40,482
Investments                                       4              4
                                             ______         ______
                                             78,323         40,486
                                             ______         ______
Current assets                                              
Stock                                           516            498
Debtors                                       5,905          2,939
Cash at bank and in hand                      2,195         22,227
                                             ______         ______
                                              8,616         25,664
                                             ______         ______
Creditors: amounts falling due               (10,184)       (6,717)
within one year
                                             ______         ______
Net current (liabilities)/assets             (1,568)        18,947
                                             ______         ______
Total assets less current                    76,755         59,433
Creditors:  amounts falling due              (18,614)       (4,811)
after one year
Provisions for liabilities and               (692)          (198)
                                             ______         ______
Net assets                                   57,449         54,424
Capital and reserves                                        
Called up share capital                      20,069         20,069
Share premium                                28,222         28,222
Merger reserve                               13,670         17,252
Profit and loss account                      (4,512)        (11,119)
                                             ______         ______
Equity shareholders' funds                   57,449         54,424
                         Group Cash Flow Statement
                    for the year ended 31 December 1999

                                      1999               1999       1998
                                      £000               £000       £000

Cash flow from operating                                8,815      1,403
Returns on investments and                                              
servicing of finance
Interest received                     1,044                        1,185
Interest paid                          (877)                      (1,197)
Net cash inflow/(outflow) from                                
returns on                                                167        (12)
investment and servicing of                                         
Taxation                                              (2,546)       (300)
Capital expenditure                                  (10,737)     (3,800)
Acquisitions and disposals                                    
Acquisition of oil and gas          (35,030)                     (22,002)
interests                             6,058                       11,268
Sale of oil and gas interests

Net cash outflow from                                         
acquisitions and disposals                           (28,972)    (10,734)

Net cash outflow before use of                                
liquid resources and financing                       (33,273)    (13,443)

Management of liquid resources                                
Decrease/(increase) in funds                                  
held on short term deposit                             19,032    (15,786)
Proceeds from issue of share          -                           40,874
Increase/(repayment) of              13,223                      (10,141)
Net cash inflow from financing                         13,223     30,733
(Decrease)/increase in cash in                         (1,018)     1,504
the year
Reconciliation of net cash
flow to movement in net debt
(Decrease)/increase in cash in                        (1,018)      1,504
the year
(Increase)/repayment of                              (13,223)     10,141
(Decrease)/increase in funds                                  
held on short term deposit                           (19,032)     15,786
Change in net debt resulting                         (33,273)     27,431
from cash flows
Exchange differences                                    (562)         30
Movement in net debt in the                          (33,835)     27,461
Net funds/(debt) at the start                         17,416     (10,045)
of the year                                                      
Net (debt)/funds at the end of                       (16,419)     17,416
the year

(forming part of the financial statements)

1.   Earnings/(loss) per share

     The earnings per share is calculated on a retained profit of
     £1,840,000 (1998: loss of £1,267,000) and a weighted average number
     of 200,694,381 ordinary shares (1998: 122,300,431 shares).

     The diluted earnings per share is calculated on a retained profit of
     £1,840,000 (1998: loss of £1,267,000) and a weighted average number
     of 200,917,358 ordinary shares (1998: 122,389,595) calculated as

                                                1999           1998
                                           thousands      thousands
     Basic weighted average number of        200,694        122,300
     Dilutive potential ordinary                                   
       Employee share options                    223             89
                                             200,917        122,389

2.   Dividend

     The Directors do not recommend the payment of a dividend (1998: nil).

3.   The  financial  information set out above  does  not  constitute  the
     Company's statutory accounts for the year ended 31 December  1999  or
     1998 but is derived from those accounts.  Statutory accounts for 1998
     have been delivered to the Registrar of Companies, and those for 1999
     will  be  delivered following the Company's Annual  General  Meeting.
     The  auditors  have  reported on those accounts; their  reports  were
     unqualified  and did not contain statements under section  237(2)  or
     (3) of the Companies Act 1985.

4.   Reconciliation of operating profit/(loss) to operating cash flows

                                                 1999          1998
                                                 £000          £000
     Operating profit/(loss)                    2,787       (1,292)
     Depreciation and depletion                 4,899         3,228
     Loss on sale of tangible fixed                 -            35
     Increase in stocks                          (18)         (287)
     Increase in debtors                        (342)         (862)
     Increase in creditors                      1,008           642
     Increase/(decrease) in                       481          (61)
     Net cash flow from operating               8,815         1,403