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Paladin Resources (PLR)

  Print      Mail a friend       Annual reports

Tuesday 18 September, 2001

Paladin Resources

Interim Results

Paladin Resources PLC
18 September 2001



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

             Interim Results for the half year ended 30 June 2001

Paladin, the oil and gas exploration and production company with producing
interests in the North Sea, Indonesia and the USA, announces its interim
results for the half year ended 30 June 2001.

HIGHLIGHTS

Strong results underpin rationale of acquisition led strategy:

-         Average production of 15,636 boepd (1H 2000: 6,610 boepd)

-         Turnover of £49.8 million (1H 2000: £17.6 million)

-         Operating profit of £25.7 million (1H 2000: £6.1 million)

-         Pre-tax profit of  £23.8 million (1H 2000: £6.1 million)

-         Post-tax profit of £10.4 million (1H 2000: £3.3 million)


Completion of acquisition of Enterprise Oil's Danish oil and gas interests:

-         Group production expected to average 22,000 boepd in the fourth
          quarter

-         Potential for significant reserve upgrades

Malcolm Gourlay, Chairman of Paladin, commented:

'These results underline the success of the Group's strategy over the last
four years. Paladin is today a significant oil producer with a substantial
position in the North Sea. With strong oil prices set to continue, the current
outlook for the Group is extremely healthy.'

                  18 September 2001


ENQUIRIES:

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

College Hill                                 Tel:     020 7457 2020
James Henderson
Archie Berens


                            PALADIN RESOURCES plc

                         ('Paladin' or 'the Company')

             Interim Results for the half year ended 30 June 2001

                             CHAIRMAN'S STATEMENT

Introduction

Following record financial results for 2000, I am pleased to report further
significant progress in the trading performance of the Group for the first
half of 2001. This is the direct result of a material uplift in production
compared to 2000, following completion of the acquisition of Petro-Canada's
Norwegian oil and gas interests in January and continuing strong oil prices.
As a result, earnings for the first half of the year have risen to a level
equivalent to full year earnings in 2000.

I am also pleased to report substantial progress in the continuing development
of the Group. The recent completion of the acquisition of Enterprise Oil's
Danish oil and gas interests, and the UKCS Blake Field being brought on stream
ahead of schedule in late June, are expected to boost production to 22,000
boepd for the fourth quarter of 2001 and will help the Group move towards its
stated near-term production and reserve targets of 35,000 boepd and 120 MMboe
respectively. With strong oil prices expected to continue, the current outlook
for the Group is extremely healthy.

Results

In the six months to 30 June 2001, turnover increased by 182% to £49.8
million, compared to £17.6 million for the first six months of 2000. Operating
profit for the period was £25.7 million (1H 2000: £6.1 million).  Net interest
paid, reflecting higher debt levels following completion of the Norwegian
acquisition, was £1.9 million (1H 2000: £0.1 million) resulting in a pre-tax
profit of £23.8 million, as compared to £6.1 million for the same period last
year.

After a tax charge of £13.4 million, retained profit for the period was £10.4
million  (1H 2000: £3.3 million, full year 2000: £10.4 million), representing
earnings of 4.97 pence per share, as compared to 1.65 pence per share for the
first six months of 2000.

Operations

Net production for the half year was 2,543,900 barrels of oil and NGLs, and
1,717 million cubic feet of gas, an average of 15,636 boepd and an increase of
137% from 6,610 boepd for the same period in 2000.

United Kingdom

Good progress has been made on the Group's UK North Sea assets. First
production was achieved from the Blake Field in June 2001 (Paladin 2.4 per
cent), two months ahead of schedule with a ten per cent saving against
budgeted costs. Following successful field commissioning, gross production is
currently in excess of 50,000 bopd. A well to appraise the flanks of the Blake
Field has recently spudded with results expected in late October.

Production efficiency has improved on the Bittern Field (Paladin 2.4 per
cent), where gross production is currently running at approximately 65,000
boepd. Front-end engineering contracts have been awarded for the Goldeneye
development (Paladin 15 per cent in Block 20/4b), which is now expected to
receive project sanction around year-end.

In late May, the Company announced the results of successful exploration well
13/29b-7 (Paladin 20 per cent) - this well tested oil at rates of up to 2,200
bopd and proved up a northern extension of the Ross Field. Discussions are
underway with the existing participants regarding incorporation of this area
into the Ross Unit.

Overall, UK interests contributed 1,468 boepd (9.4 per cent) to total Group
production in the first half of the year.

Norway

Some deferral of production was experienced in the first half as a result of
operational issues, although the subsurface performance of both Njord (Paladin
7.5 per cent) and Veslefrikk (Paladin 9 per cent) has been in line with the
Directors' expectations.

In the Njord Field, one of the higher rate production wells was closed in
during February due to mechanical problems and was returned to production in
May following a workover. Current gross production from the field is
approximately 58,000 bopd.

In the Veslefrikk Field, planned infill drilling work has been deferred until
later in the year whilst work on the Huldra Field tie-in to the Veslefrikk
facilities takes place. Current gross production from the Veslefrikk Field is
approximately 38,000 bopd. First production from the Huldra Field (Paladin 0.5
per cent) is scheduled for the fourth quarter.

Overall, Norwegian interests contributed 7,694 boepd (49.2 per cent) to total
Group production in the first half of the year.

Indonesia

The Group's assets in Indonesia have performed in line with expectations. Net
entitlement production averaged 6,006 boepd (1H 2000: 5,929 boepd),
representing 38.4 per cent of  total Group production in the first half of the
year. The South East Sumatra PSC (Paladin 7.5 per cent) and North West Java
PSC (Paladin 2.5 per cent) both saw continuing active reinvestment programmes
to help arrest the natural decline in production from existing fields.

United States

Production for the half year averaged 468 boepd of which 61 per cent was gas;
this represents only 3 per cent of total Group production, and a reduction of
16 per cent in production as compared to the same period last year, reflecting
the sale of peripheral properties in 2000 and natural field decline in the
remaining properties.

International Exploration

Indonesia

Following the evaluation of recently acquired seismic data within the Blora
PSC area (Paladin 13.3 per cent), an exploration well in the southern part of
the contract area is scheduled to be drilled in the fourth quarter.

Romania

During the first half of the year, preparations were made to drill a well to
evaluate the Doina gas discovery. This well, Doina-3, spudded on 29 August.
The well has confirmed the extent of the gas-bearing main reservoir; however,
a shallower reservoir target was not well developed. The well is currently
being plugged and abandoned. Well results will be incorporated into the
existing data base over the coming months.

Tanzania

Discussions are underway with the Tanzanian authorities for a well to be
drilled on the Bigwa prospect in the Dar Es Salaam Platform permit area.
Subject to the outcome of those discussions, the well is expected to spud in
early 2002.

Tunisia

511 km of seismic data were acquired over the Borj el Khadra permit area in
southern Tunisia (Paladin 10 per cent) during April. These data are currently
being interpreted, with exploration drilling anticipated in 2002.

Product Prices/Hedging

Average realised prices remained strong in the first half of 2001 at US$25.27
per boe, compared to US$22.97 per boe over the same period in 2000.

No oil and gas price hedging arrangements were entered into in the first half
of the year.

With increasing UK production and the recent acquisition of producing
interests in Denmark, the Company has entered into a number of oil price swaps
based on dated Brent for the second half of 2001 and first half of 2002 as
part of its overall risk management programme: 50,000 bbl per month for July
to December 2001 at a price of US$24.50 per bbl; 25,000 bbl per month for
September to December 2001 at US$25.20 per bbl; and 100,000 bbl per month for
January to June 2002 at an average price of US$24.11 per bbl. These volumes
represent approximately 20 per cent of the Group's projected North Sea
production over the period.

Finance

Operating cash flow, being defined as earnings before interest, tax and
depletion (and after allowing for movements in working capital), more than
trebled to £28.3 million for the first half, compared to £8.4 million in the
first half of 2000. After payment of £40.8 million for our Norwegian interests
in January (inclusive of adjustments), capital expenditure of £9.6 million (1H
2000: £5.9 million), cash taxes of £5 million (1H 2000: £3.5 million) and net
interest charges of  £2.0 million (1H 2000: £0.6 million), net debt at 30 June
2001 was £51 million, compared with £22.4 million at 31 December 2000. Net
debt immediately following the acquisition of Enterprise Oil Denmark Limited
was £71 million.

Acquisitions and Disposals

Following completion of the acquisition of Petro-Canada's Norwegian oil and
gas interests on 23 January 2001, a number of other acquisition opportunities
were reviewed and, in certain instances, bids were submitted and detailed
negotiations held.

The acquisition of Enterprise Oil's Danish interests was announced on 9 August
and completed on 13 September, following the necessary shareholder and
regulatory approvals. This is a natural addition to our Scandinavian business,
and is expected to boost Group production by approximately 25 per cent in
2002. The transaction fulfils all our stated acquisition criteria, offering
attractive incremental investment opportunities and the potential for
significant reserve upgrades in the future.

The Company has recently been invited to bid for selected State-owned
Norwegian oil and gas interests. This opportunity is under active review.

In the USA, agreement has been reached with St. Mary Land (the Company's
co-venturer) to market our remaining US properties; bids have been received
and are under evaluation. In the event that an acceptable price is achieved,
we would expect to complete the disposal during the fourth quarter.

Board Positions

As indicated in the Chairman's Statement accompanying the 2000 results, Bill
Turcan, former Group Chief Executive of Elementis plc, joined the Board on 17
May, replacing David McGibbon, who retired on the same day.  Paul Chivers
resigned on 21 June due to other business commitments.

Outlook

The Group's net production for the fourth quarter of 2001, following
completion of our Danish acquisition, is expected to average 22,000 boepd.
This level of production, combined with the near-term commodity price outlook,
augurs well for the second half financial performance.


We continue to plan, and evaluate longer-term investment decisions, using a
long-run Brent oil price in the mid-teens in real 2000 terms. On that basis,
we are confident that the asset trading market, both in the UK and
internationally, will continue to offer opportunities for the Company to
acquire assets on terms which have the potential to contribute to the further
development of the Group and add material value for our shareholders.


J Malcolm Gourlay

Chairman

18 September 2001



Group Profit and Loss Account
For the six months ended 30 June 2001


                                           Six months   Six months   Year ended
                                                ended        ended
                                                                    31 December
                                         30 June 2001 30 June 2000         2000
                                    Note
                                                 £000         £000         £000


Turnover                               2
Continuing operations                          23,275       17,642       42,582
Acquisitions                                   26,494            -            -
                                               49,769       17,642       42,582

Cost of sales
Production costs                             (14,655)      (7,125)     (14,746)
Depletion and depreciation                    (8,208)      (2,593)      (7,128)

Gross profit                                   26,906        7,924       20,708
Administrative expenses                       (1,231)      (1,177)      (2,140)
Exceptional administrative expenses    3            -        (642)        (613)

Operating profit                       2
Continuing operations                           9,808        6,105       17,955
Acquisitions                                   15,867            -            -
                                               25,675        6,105       17,955

Interest                                      (1,866)         (40)        (564)

Profit before taxation                 3       23,809        6,065       17,391
Taxation                               4     (13,391)      (2,755)      (7,014)

Retained profit for the period                 10,418        3,310       10,377

Earnings per share                              4.97p        1.65p        5.17p

Earnings per share excluding
exceptional items                               4.97p        1.97p        5.48p
                                                
Weighted average number of shares         209,478,911  200,694,381  200,694,381





Group Statement of Total Recognised Gains and Losses
For the six months ended 30 June 2001


                                       Six months     Six months     Year ended
                                            ended          ended
                                                                    31 December
                                     30 June 2001   30 June 2000           2000

                                             £000           £000           £000


Profit for the period                      10,418          3,310         10,377

Unrealised foreign exchange                 6,860          3,783          4,599
differences

Total recognised gains for the             17,278          7,093         14,976
period



Summary of Net Assets
At 30 June 2001

                                                                            At
                                                  At         At    31 December
                                             30 June    30 June           2000
                                                2001       2000           £000
                                                £000       £000


Fixed assets                                 148,112     84,069         94,120

Current assets
Stock                                          1,236        588            613
Debtors                                       16,089      4,517          7,847
Cash at bank and in hand                          51      1,439          1,046

                                              17,376      6,544          9,506

Creditors: amounts falling due within one   (18,428)    (5,189)        (6,586)
year

Net current (liabilities)/assets             (1,052)      1,355          2,920

Total assets less current liabilities        147,060     85,424         97,040

Long term debt                              (51,071)   (20,462)       (23,411)

Provisions for liabilities and charges       (3,556)      (420)        (1,204)

Net assets                                    92,433     64,542         72,425


Cash Flow Statement
For the six months ended 30 June 2001


                                         Six months    Six months    Year ended
                                              ended         ended   31 December
                                       30 June 2001  30 June 2000          2000
                                               £000          £000          £000


Operating profit                             25,675         6,105        17,955
Depletion and depreciation charge             8,208         2,614         7,128
Increase in working capital                 (5,600)          (35)       (2,672)
Decrease in provisions                            -         (272)         (360)

Net cash flow from operating                 28,283         8,412        22,051
activities

Returns on investments and servicing        (1,957)         (580)       (1,459)
of finance
Taxation                                    (5,000)       (3,494)       (6,592)
Capital expenditure                         (9,581)       (5,866)      (13,055)
Proceeds from sale of fixed assets                -         2,612         2,884
Acquisition of oil and gas assets          (40,819)       (2,500)       (8,164)

Net cash flow before financing             (29,074)       (1,416)       (4,335)
Bank loan borrowings                         25,349           660         3,300
Equity proceeds                               2,730             -             -

Decrease in cash for the period               (995)         (756)       (1,035)

Reconciliation of decrease in cash
to movement in net debt

Decrease in cash for the period               (995)         (756)       (1,035)
Bank loan borrowings                       (25,349)         (660)       (3,300)
Exchange differences                        (2,311)       (1,188)       (1,611)


Movement in net debt for the period        (28,655)       (2,604)       (5,946)

Net debt at the start of the period        (22,365)      (16,419)      (16,419)

Net debt at the end of the period          (51,020)      (19,023)      (22,365)


Notes
(forming part of the interim statement)

1          Basis of preparation

The financial information contained herein does not constitute statutory
accounts within the meaning of Section 240 of the Companies Act 1985.  The
interim financial information has been prepared on the basis of the accounting
policies set out in the Group's accounts for the year ended 31 December 2000.
The figures for the year ended 31 December 2000 have been extracted from the
accounts which have been filed with the Registrar of Companies and which
contained an unqualified report.  The Company's auditors, Ernst & Young LLP,
have reviewed the interim financial information for the six months ended 30
June 2001 and their report is set out on page 12.

2                    Segmental analysis

                                 Continuing operations           Acquired  Total
                                                                 operations
                                                          
                         North Indonesia      UK   Rest of  Total Norway
                       America                       World
                          £000      £000    £000      £000   £000   £000   £000
Six months ended 30
June 2001
Turnover                 1,638    17,037   4,600         - 23,275 26,494 49,769
Operating profit           426     8,065   1,317         -  9,808 15,867 25,675

Six months ended 30
June 2000
Turnover                 1,588    15,636     418         - 17,642      - 17,642
Operating profit/          299     7,396 (1,590)         -  6,105      -  6,105
(loss)

Year ended 31 December
2000
Turnover                 3,006    34,908   4,668         - 42,582      - 42,582
Operating profit/          746    18,075   (371)     (495) 17,955      - 17,955
(loss)

3            Exceptional items

The following amounts have been charged to the profit and loss account:

                            Six months ended Six months ended        Year ended
                                30 June 2001     30 June 2000  31 December 2000
                                        £000             £000              £000

Administrative costs

Abortive acquisition costs                 -            (642)             (613)


4                    Taxation

The provision for taxation is based upon the estimated effective tax rate for
the full year.

5                    Dividend

The Directors do not recommend the payment of a dividend.

Independent Review Report by Ernst & Young LLP



Introduction

We have been instructed by the Company to review the financial information for
the six months ended 30 June 2001, which comprises the Group Profit and Loss
Account, Summary of Net Assets, Cash Flow Statement and Group Statement of
Total Recognised Gains and Losses and the related notes 1 to 5. We have read
the other information contained in the interim report and considered whether
it contains any apparent misstatements or material inconsistencies with the
financial information.

Directors' responsibilities

The interim report, including the financial information contained therein, is
the responsibility of, and has been approved by the Directors. The Directors
are responsible for preparing the interim report in accordance with the
Listing Rules of the Financial Services Authority which require that the
accounting policies and presentation applied to the interim figures should be
consistent with those applied in preparing the preceding annual accounts
except where any changes, and the reasons for them, are disclosed.

Review work performed

We conducted our review in accordance with guidance contained in Bulletin 1999
/4 issued by the Auditing Practices Board for use in the United Kingdom.  A
review consists principally of making enquiries of group management and
applying analytical procedures to the financial information and underlying
financial data and based thereon, assessing whether the accounting policies
and presentation have been consistently applied unless otherwise disclosed.  A
review excludes audit procedures such as tests of controls and verification of
assets, liabilities and transactions.  It is substantially less in scope than
an audit performed in accordance with United Kingdom auditing standards and
therefore provides a lower level of assurance than an audit.  Accordingly we
do not express an audit opinion on the financial information.

Review conclusion

On the basis of our review we are not aware of any material modifications that
should be made to the financial information as presented for the six months
ended 30 June 2001.



Ernst & Young LLP

London



18 September 2001