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Paladin Resources (PLR)

  Print      Mail a friend       Annual reports

Wednesday 21 March, 2001

Paladin Resources

Final Results

Paladin Resources PLC
21 March 2001

                            PALADIN RESOURCES plc

                   ('Paladin','the Company' or 'the Group')

           Preliminary Results for the year ended 31 December 2000

Paladin, the oil and gas exploration and production company with producing
interests in the UK, Norway, Indonesia and the USA announces its preliminary
results for the year ended 31 December 2000.


  * Average production increased by 26% to 6,940 boepd (1999: 5,487 boepd)

  * Turnover increased by 129% to £42.6 million (1999: £18.6 million)

  * Operating profit of £18.0 million (1999: £2.8 million)

  * Post-tax profit of £10.4 million (1999: £1.8 million)

  * Cash flow from operations of £22.1 million (1999: £8.8 million)

  * Credit facility refinanced by new US$150 million syndicated loan

  * New core area added since the year-end with completion of US$76 million
    acquisition of Petro-Canada's Norwegian assets

  * Group production currently at around 17,000 boepd

  * New targets to double production and reserves over the next three years
    to 35,000 boepd and 120 MMboe respectively

Malcolm Gourlay, Chairman of Paladin, commented:

'Last year was a record year for Paladin in all respects: financial results,
production and reserves. Going forward, we intend to build on this success
through further acquisitions and exploration. With a strong management team
and financial headroom in place, we are confident that we are on track to
double the size of the Group over the next three years.'

                                                                 21 March 2001
Paladin Resources plc                              Tel: 020 7534 2900

Roy A. Franklin, Chief Executive

Cuth McDowell, Finance Director
College Hill                                       Tel: 020 7457 2020

James Henderson

Peter Rigby

                             CHAIRMAN'S STATEMENT

I am pleased to report that Paladin made excellent progress on all fronts in

Record levels of production combined with strong commodity prices have
delivered record financial results.

Our Indonesian interests continue to perform well. In the UKCS, the Bittern
Field came on stream in April, and development of the Blake Field is well
underway, under budget, and on schedule for first production in the second
half of 2001. Joint studies to identify the optimal development scheme for
Goldeneye are also well advanced with the objective of approving a field
development plan this year.

In September, we announced the US$76 million acquisition of Petro-Canada's
Norwegian oil and gas interests and, following the necessary regulatory
approvals, the transaction was completed this January. This was a landmark
deal for us, increasing our reserve base by more than 50%. As a result of the
acquisition, Group production in 2001 is expected to more than double. The
Norwegian oil and gas industry is currently in a phase of substantial change
with significant opportunities for new entrants; we are now well placed to
take best advantage of such opportunities. Although the transaction was
completed after our year-end, in view of its significance, an unaudited
pro-forma balance sheet has been incorporated to illustrate its effects.

Financially, we are in a strong position to pursue further opportunities. A
new US$150 million syndicated revolving credit facility led by J P Morgan was
signed in December. Following completion of our Norwegian acquisition, there
was headroom of US$73 million in this facility.


Production of 6,940 boepd (1999: 5,487 boepd) combined with continuing strong
commodity prices led to an operating profit for the year of £18.0 million
(1999: £2.8 million). Retained profit for the year was £10.4 million compared
to £1.8 million in 1999. Earnings per share were 5.17 pence (1999: 0.92


Net production for the year totalled 2.1 million barrels of oil and 2.4
billion cubic feet of gas, an average of 6,940 boepd, a record for the Group,
and an increase of 26% from 5,487 boepd in 1999. A full year's contribution
from the Warrior Oil interests acquired in October 1999 resulted in 83% of the
Group's production coming from Indonesia in 2000 (1999: 74%), the balance
coming from the Bittern Field in the UK (10% (1999: nil)) and the limited
remaining properties in the USA (7% (1999: 26%)). The acquisition of producing
oil and gas interests in Norway will see a significant geographic rebalancing
of our production in 2001.

Overall, the Group invested £10.6 million on production and development
projects - £7.3 million in Indonesia, £2.9 million in the UK and £0.4 million
in the USA.


The Group invested £3.4 million on exploration activities during the year.

In Indonesia a total of 11 wells were drilled, resulting in 3 discoveries;
these will be tied in to existing infrastructure in due course and help
continue the recent history of reserve replacement.

Elsewhere, drilling locations have been firmed up in our Romanian Black Sea
and Tanzanian acreage. We anticipate drilling in both areas later in the year.

In September, the Company signed an agreement to farm-in to LASMO's interest
in the Borj El Khadra permit in southernmost Tunisia adjacent to recent major
discoveries in eastern Algeria. Through carrying certain of LASMO's costs to a
pre-determined limit, Paladin will earn a 10% interest in this attractive
exploration acreage.


As detailed elsewhere, the Group's proven and probable reserves at 31 December
2000 were 38.1 MMboe, the same level as at the start of the year with net
positive revisions of 3.65 Mmboe, matching the combination of reserves
produced in the year and US reserves sold. The acquisition of Petro-Canada's
oil and gas interests in Norway was announced in September with completion of
the transaction occurring in January 2001. On a pro-forma basis, as of 1
January 2001, this acquisition increases the Company's proven and probable
reserves base by 53% to 58.2 MMboe.

Following the acquisition, reserves in Norway constitute 35% of the total,
with 54% in Indonesia, 7% in the UK and the balance of 4% in the USA.

Board Positions

David McGibbon has indicated his intention to retire at the forthcoming Annual
General Meeting, having served as a Non-executive Director since the Company's
listing in 1994. I would like to thank David for his contribution over that
time, particularly during the transition to a new management team and
implementation of a new strategy for the Company in 1997.

It is intended that his replacement on the Board, following the Annual General
Meeting, will be Bill Turcan, former Group Chief Executive of Elementis plc
(previously known as Harrisons & Crosfield plc).

Strategy and Outlook

Paladin's strategy is to grow through both acquisition and exploration with
the objective of securing reserves and production on a commercially attractive
basis. Financial performance has been at record levels in 2000 and, with the
recent completion of our Norwegian transaction, near-term targets of Group
reserves of 50 MMboe and production of 13,500 boepd set in 1998 have now been

With Group production now at a level of some 17,000 boepd, we are major
beneficiaries of continuing high commodity prices, which places the Company in
a strong financial position. Nonetheless, we continue to plan and evaluate
longer-term investment proposals and acquisition opportunities using a Brent
oil price in the mid-teens in real terms.

On the basis of the anticipated performance from existing assets, and using
the financial headroom in our revolving credit facility, the Company has set
new targets for continued growth; namely, to double production and reserves in
the next 3 years to 35,000 boepd and 120 MMboe respectively. I am confident
that there will be further attractive acquisition opportunities for
well-financed companies such as Paladin resulting from continuing
rationalisation in the industry which will enable us to achieve these targets.

2000 has been an exciting year for Paladin with major progress in all aspects
of the business. I would like to take this opportunity, on behalf of
shareholders, to thank the Directors and staff for their commitment, hard work
and professionalism over the last twelve months.

                                                             J Malcolm Gourlay


                                                                 21 March 2001

                              OPERATIONAL REVIEW

Operational Review

Paladin's 2000 production amounted to 2.142 MMbbl of oil and NGL and 2.39 Bscf
of gas from Indonesia, the UK and the USA, an average of 6,940 boepd.
Exploration activity continued in the UK, Indonesia, Tanzania and Romania and
commenced in Tunisia. Details are given below for each region.


South East Sumatra

Paladin has held an interest in the South East Sumatra PSC since 1998 and
subsequently increased its holding to 7.5% following the acquisition of
Warrior Oil Company in 1999.

Gross production from the PSC averaged 126,645 bopd during 2000 (1999: 140,375
bopd). The underlying production decline in this mature asset has been reduced
through continued infill drilling and satellite field developments. In
addition to these, the water flood scheme in the Widuri field, implemented
during 1999 and 2000, has had very encouraging results which have helped to
limit production decline and have contributed to reserves replacement.
Paladin's entitlement share of production was 4,484 bopd for the year.

Offshore North West Java

Paladin's interest in the Offshore North West Java PSC remained at 2.5% during
the year.

Gross production from the PSC averaged 66,012 bpd of oil and NGL (1999: 74,310
bpd) and 269 MMscfd of gas (1999: 258 MMscfd). Paladin's entitlement share of
production amounted to 1,297 boepd.

The gas supply contract with PGN was renegotiated during the year; as a
result, the contract was extended to 2009 and total remaining gas sales were
increased by around 50Bscf.

During the year, BP took over the operatorship as a consequence of its
corporate takeover of ARCO. BP has reviewed its investment plans for the PSC
and as a result has proposed an exploration well and a number of additional
infill wells to be drilled in the course of 2001. This is an encouraging step
towards unlocking the remaining potential of the area.


An appraisal well, Rembang-2, was drilled on the Rembang discovery at the end
of the year. This well confirmed the presence of gas with a high CO2 content
downdip from the discovery well. Paladin's share of costs in this well were
carried by a farminee, Amerada Hess, which resulted in Paladin's working
interest reverting to 13.3%.

Additional seismic data were acquired in 2000. Following integration of these
data with results of Rembang-2, a further exploration drilling programme is
likely to be pursued during 2001.

United Kingdom


The FPSO 'Triton' was anchored at the field in mid-March and, following
hook-up and final commissioning, first production from the Bittern Field
occurred in mid-April. Following an initial period of constrained production
while the sales gas compressors were commissioned, oil production has
gradually been increased to peak rates in excess of the nominal 60,000 bopd
capacity. Average gross production for the year was 24,686 bpd of oil and NGL
and 19 MMscfd of sales gas. During the year, agreement was reached to fix the
field equity split at 50:50 between the Block 29/1a and Block 29/1b partners.
Paladin's interest in the unit has now become 2.422% (previously 2.494% on a
provisional basis). Paladin's share of production for 2000 was 681 boepd.


Following approval of the Field Development Plan in January 2000, Blake
development drilling commenced in April. Two oil producers and a water
injector have been successfully drilled, completed and tested. The drilling
and testing results have exceeded initial expectations, leading to an upgrade
in field STOIIP and reserves. Development drilling will continue through 2001.
The field is being developed as a subsea tie-back to the Ross FPSO which is
scheduled to go off-station for topside modifications in the second quarter of
2001. The project is on schedule for first production in the third quarter of
2001. The planned plateau production is 40,000 bopd (960 bopd net to Paladin),
although this is under review in the light of better than expected well


Subsurface and development studies have progressed following agreement with
the owners of the adjacent licences, into which the field extends, to enter
into joint studies to identify the optimal development scheme for Goldeneye
(Paladin interest 15% in Block 20/4b). The most likely development scheme is
based on a wellhead platform with reservoir fluids transported via a dedicated
pipeline for onshore processing, although an alternative scheme, based on a
joint development with other fields in the area, is also being considered.


Paladin's net production for the year averaged 210 bopd (1999: 534 bopd) and
1.6 MMscfd of gas (1999: 2.6 MMscfd) from its three operated properties, Fort
Chadbourne, Parks and Rhoda Walker. Paladin's working interests range from 34%
to 50% in these properties.

In Fort Chadbourne, production has been maintained through an infill drilling
and workover programme. Similar plans exist for 2001. A workover programme has
also been undertaken in Parks and Rhoda Walker with more limited success.
Upside potential exists in Parks through the implementation of a pattern
waterflood; this is planned to commence during 2001.

Whilst high oil and gas prices during 2000 have resulted in very strong cash
flow from the US properties, their relative contribution to the recently
enlarged Paladin has reduced to the extent that they are no longer a material
part of the Group.


During 2000, 1,600 km of high resolution seismic were acquired over the Midia
and Pelican Blocks (Paladin 80%). Interpretation of these data has been
completed and an appraisal well location on the Doina discovery has been
identified. Planning for drilling this well is now underway; it is expected
that drilling will commence in the third quarter of 2001. In the event that
this well is successful, it is anticipated that a further well will be drilled
on an adjacent satellite prospect. A number of other prospects in different
plays have also been identified; these will be considered for drilling in the


Following interpretation of the extensive seismic data set, a number of
prospects have been identified in the onshore and offshore eastern area of the
licences (Paladin 20%) for possible drilling. Drilling activity has been
delayed primarily because of rig availability. However, it is hoped that
drilling can commence in mid-2001.

Interpretation of seismic data has confirmed the lower prospectivity in the
western part of the licence. Accordingly, seismic acquisition costs of £0.5
million in that area have been written off.


In September 2000, Paladin signed an agreement with LASMO to farm-in to the
Borj el Khadra permit in southern Tunisia. Paladin will earn a 10% interest in
the permit by carrying certain of LASMO's costs through a seismic acquisition
and one well drilling programme. It is planned to commence the 500km seismic
programme in March 2001 with a view to drilling in 2002. The permit is in a
prospective part of the Ghadames Basin close to the producing El Borma Field,
and adjacent to recent significant discoveries in eastern Algeria.

Acquisitions and Disposals

In the USA, the Group reduced its holdings to three operated properties
following the sale of a number of minor interests in the early part of the
year for £2.9 million.

In September, the Company announced the US$76 million acquisition of
Petro-Canada's Norwegian oil and gas interests. These comprise a 7.5% interest
in the producing Njord Field, a 9.0% interest in the producing Veslefrikk
Field, and a 0.5% interest in the Huldra Field which is currently under
development and scheduled to come on stream in the second half of 2001. As a
result of this acquisition, reserves have increased by more than 50%, and the
Group's production will more than double in 2001.

                                                               Roy A. Franklin

                                                               Chief Executive

                                                                 21 March 2001

                               FINANCIAL REVIEW

The Group has adopted FRS 15 (Tangible Fixed Assets) for the year ended 31
December 2000 and the policy concerning accounting for the cost, valuation and
depreciation of fixed assets has been expanded accordingly.

The combination of a full year's contribution from the Group's acquisition of
Warrior Oil Company, the start-up of production from the Bittern Field and
strong commodity prices throughout 2000 resulted in a 129% increase in
turnover to £42.6 million (1999: £18.6 million). The Group's average realised
oil and gas prices were US$26.98 per bbl (1999: US$16.20 per bbl) and US$2.82
per Mscf (1999: US$1.69 per Mscf) respectively.

Production costs averaged US$8.79 per boe (1999: US$7.07 per boe). This
increase in production costs is primarily a consequence of the dominance of
Indonesian entitlement barrels in overall Group production. As oil prices in
2000 were significantly higher than those in 1999, Indonesian costs were
recovered from fewer barrels, which led to higher entitlement unit costs.
South East Sumatra gross operating costs were also higher than those in 1999.

There was a minor increase in depletion expense to US$3.90 per boe (1999:
US$3.89 per boe) with an improvement in the Indonesian rate arising from
reserve upgrades offset by the higher rates attributable to UK production. The
2000 depletion charge also includes a £0.5 million write-off of expenditure
incurred in respect of Tanzanian activities.

Retained profits for the year were substantially higher at £10.4 million
(1999: £1.8 million), reflecting higher commodity prices and production

Operating cash flow before interest, tax and depletion, but after
administration costs of £2.8 million (including £0.6 million exceptional
abortive acquisition costs), was strong at £22.1 million (1999: £8.8 million).
The increase was mainly due to contributions from Indonesian acquisitions and
higher commodity prices.

Capital expenditure of £14.0 million was split between production and
development (£10.6 million) and exploration (£3.4 million). Net interest
expense was £0.6 million (1999: income of £0.7 million).

During the year, pre-payments of £5.7 million were incurred in connection with
the acquisition of Petro-Canada's Norwegian interests, whilst disposal
proceeds of £2.9 million were raised from the sale of peripheral US
properties. In addition, the final payment of £2.5 million was made in
connection with the acquisition of the Company's interest in the Bittern

Year-end net debt increased to £22.4 million (1999: £16.4 million), primarily
as a result of continued investment in existing assets and the pre-payment in
respect of the Norwegian acquisition. Debt facilities were refinanced during
the year by means of a US$150 million syndicated reducing revolving credit
facility. At the year-end, US$115 million of the new facility was undrawn,
which reduced to US$73 million following completion of the Norwegian
acquisition in January.

The main economic factors affecting the Company's results are the price of
oil, which is denominated in US dollars, and the dollar/sterling exchange
rate, as results are ultimately reported in sterling. The Group policy is to
hedge oil and gas price exposure up to a maximum of 50% of production and to
ensure that currency exchange exposures are controlled and minimised. However,
given the strength of oil prices during the year and the natural hedge
provided through Indonesian PSC arrangements, no price hedges were considered
appropriate for 2000 oil production. Small amounts of Group gas production
were hedged for part of the year only. Cash flows during the year were funded
by way of US dollar borrowing which ensured that exposure to adverse exchange
rate movements was minimised.

Group Taxation

The Group's taxation charge for the year comprised a current charge in respect
of Indonesian activities and a deferred tax charge in respect of UK
activities. Taxable profits in North America are expected to be fully covered
by prior year losses and ongoing capital expenditure.

The Group currently only provides for deferred tax in respect of timing
differences between the recognition of profits for tax and accounting purposes
to the extent they are expected to reverse in the future. As a result of this
policy, provision has only been made in respect of UK timing differences.
FRS19, issued at the end of 2000, requires full provision to be made for
substantially all timing differences. However, given the current uncertainty
surrounding certain aspects of this standard and, in particular, the option to
discount the impact of the differences, the Group does not propose to
implement the standard at present; it is currently expected that it will be
adopted in 2002.

                                                                 Cuth McDowell

                                                              Finance Director

                                                                 21 March 2001

 Production and Reserves

                                                2000               1999

                                            Mbbl  bopd         Mbbl  bopd
Oil and NGL
Indonesia                                   1,846 5,044        1,426 3,907
UK                                          219   598          --    --
USA                                         77    210          195   534
Canada                                      --    --           8     22

Total Oil Production                        2,142  5,852       1,629 4,463

Gas                                         Bscf  MMscfd       Bscf  MMscfd
Indonesia                                   1.62  4.42         0.38  1.03
UK                                          0.18  0.50         --    --
USA                                         0.59  1.60         0.97  2.65
Canada                                      --    --           0.90  2.47

Total Gas Production                        2.39   6.52        2.24  6.14

                                            Mboe  boepd        Mboe  boepd
Total Oil Equivalent Production             2,540 6,940        2,003 5,487

Proven and Probable Reserves

                                              (Note 5)
                                                  2000      2000     1999

                                                 MMbbl     MMbbl    MMbbl
Oil and NGL
Indonesia                                        27.78     27.78    26.04
UK                                                4.04      4.04     4.36
USA                                               1.22      1.22     2.39
Canada                                              --        --       --
Norway                                           18.72        --       --

Total Oil Reserves                               51.76     33.04    32.79

Gas                                               Bscf      Bscf     Bscf
Indonesia                                        21.57     21.57    21.13
UK                                                1.78      1.78     1.77
USA                                               7.29      7.29     8.99
Canada                                              --        --       --
Norway                                            8.26        --       --

Total Gas Reserves                               38.90     30.64    31.88

                                                 MMboe     MMboe    MMboe
Total Reserves Oil Equivalent                    58.24     38.15    38.11

Group Profit and Loss Account

for the year ended 31 December 2000
                                                  Note 2000       2000    1999

                                                       £000       £000    £000
Turnover                                                        42,582   18,587

Cost of sales
Production costs (excluding                            (14,746)          (8,740)
exceptional item)
Exceptional production costs                            --                 (169)
Depletion and depreciation                              (7,128)          (4,899)
                                                               (21,874) (13,808)

Gross profit                                                    20,708    4,779

Administrative expenses (excluding exceptional          (2,140)          (1,992)
Exceptional administrative expenses                     (613)                --
                                                                (2,753)  (1,992)
Operating profit                                                17,955    2,787
Net interest (expense)/income                                     (564)     660

Profit on ordinary activities before taxation                   17,391    3,447
Taxation                                                        (7,014)  (1,607)

Retained profit for the year                                    10,377    1,840

Earnings per share                               1
Basic                                                            5.17p   0.92p
Diluted                                                          5.16p   0.92p

Group Statement of Total Recognised Gains and Losses

for the year ended 31 December 2000
                                                                 2000      1999
                                                                 £000      £000

    Profit for the year                                        10,377     1,840

    Foreign exchange differences                                4,599     1,185

    Total recognised gains for the year                        14,976     3,025

Group Balance Sheet

at 31 December 2000
                                                Unaudited Pro-forma
                                                (see note 5)
                                                2000          2000     1999
                                                £000          £000     £000
Fixed assets
Tangible fixed assets                           137,727       94,120   78,319
Investments                                     --            --       4

                                                137,727       94,120   78,323
Current assets
Stock                                           1,777         613      516
Debtors                                         14,766        7,847    5,905
Cash at bank and in hand                        1,137         1,046    2,195
                                                17,680        9,506    8,616
Creditors: amounts falling due within one year  (21,790)      (6,586)  (10,184)

Net current assets/(liabilities)                (4,110)       2,920    (1,568)

Total assets less current liabilities           133,617       97,040   76,755

Creditors: amounts falling due after one year   (55,118)      (23,411) (18,614)

Provisions for liabilities and charges          (3,344)       (1,204)  (692)

Net assets                                      75,155        72,425   57,449

Capital and reserves
Called up share capital                         21,069        20,069   20,069
Share premium                                   29,952        28,222   28,222
Merger reserve                                  --            --       13,670
Profit and loss account                         24,134        24,134   (4,512)

Equity shareholders' funds                      75,155        72,425   57,449

The financial statements were approved by the Board of Directors on 20 March
2001 and signed on its behalf by:

RA Franklin                            C J McDowell
Chief Executive                        Finance Director

Group Cash Flow Statement

for the year ended 31 December 2000
                                                         2000   2000   1999
                                                   Note  £000   £000   £000

Cash flow from operating activities                  4          22,051  8,815
Returns on investments and servicing of finance
Interest received                                        143            1,044
Interest paid                                            (1,602)        (877)

Net cash (outflow)/ inflow from returns on                      (1,459) 167

investment and servicing of finance

Taxation                                                        (6,592)(2,546)
Capital expenditure
Ongoing capital expenditure (excludes capitalised        (13,055)      (10,737)
Acquisition of oil and gas interests                     (5,664)       (35,030)
Sale of oil and gas interests                            2,884         6,058
Deferred acquisition cost                                (2,500)
Net cash outflow from capital expenditure                      (18,335)(39,709)

Net cash outflow before use of liquid resources                (4,335) (33,273)
and financing

Management of liquid resources
Decrease in funds held on short term deposit                    -      19,032

Financing                                                       3,300  13,223
Increase in borrowings

Net cash inflow from financing                                  3,300  13,223

Decrease in cash in the year                                    (1,035)(1,018)

Reconciliation of net cash flow to movement in net
Decrease in cash in the year                                    (1,035)(1,018)
Increase in borrowings                                          (3,300)(13,223)
Decrease in funds held on short term deposit                    -      (19,032)

Change in net debt resulting from cash flows                    (4,335)(33,273)
Exchange differences                                            (1,611)(562)

Movement in net debt in the year                                (5,946)(33,835)

Net (debt)/funds at the start of the year                       (16,419)17,416

Net debt at the end of the year                                 (22,365)(16,419)


(forming part of the financial statements)

1     Earnings per share

        The earnings per share is calculated on a retained profit of £
        10,377,000 (1999: profit of £1,840,000) and a weighted average number
        of 200,694,381 ordinary shares (1999: 200,694,381 shares).

        The diluted earnings per share is calculated on a retained profit of £
        10,377,000 (1999: profit of £1,840,000) and a weighted average number
        of 201,121,706 ordinary shares (1999: 200,917,358) calculated as

                                                         2000              1999

                                                    thousands         thousands
Basic weighted average number of shares               200,694           200,694

Dilutive potential ordinary shares:
Employee share options                                    427               223
                                                       ______            ______

                                                      201,121           200,917

2     Dividend

     The Directors do not recommend the payment of a dividend (1999: nil).

 3. The financial information set out above does not constitute the Company's
    statutory accounts for the years ended 31 December 2000 or 1999 but is
    derived from those accounts. Statutory accounts for 1999 have been
    delivered to the Registrar of Companies, and those for 2000 will be
    delivered following the Company's Annual General Meeting. The auditors
    have reported on these accounts; their reports are unqualified and did not
    contain statements under section 237(2) or (3) of the Companies Act 1985.

 4. Reconciliation of operating profit to operating cash flows

                                                                2000      1999
                                                                £000      £000

            Operating profit                                    17,955    2,787

            Depreciation and depletion charge                   7,128     4,899

            Increase in stocks                                  (97)      (18)

            Increase in debtors                                 (1,882)   (342)

            (Decrease)/increase in creditors                    (693)     1,008

            (Decrease)/increase in provisions                   (360)     481

        Net cash inflow from operating activities               22,051    8,815

5     Post Balance Sheet Events

        Norwegian acquisition and share issue

        On 23 January 2001, the Group completed the acquisition of certain
        interests from Petro-Canada and on the same date 10 million new
        ordinary shares were issued to Petro-Canada for a cash consideration
        of 27.3p per share.

        The unaudited pro-forma balance sheet illustrates what the balance
        sheet would have been had the acquisition been completed on 31
        December 2000. The basic consideration for the acquisition of US$76
        million has been adjusted to reflect movements between the effective
        date of 1 July 2000 and completion. The resulting net amount was
        settled in cash. The adjustment to fixed assets also includes interest
        paid on the consideration and acquisition costs.

        The pro-forma statement of proven and probable reserves illustrates
        what the reserves would have been had the acquisition been completed
        on 31 December 2000.