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Paladin Resources (PLR)

  Print      Mail a friend       Annual reports

Wednesday 21 September, 2005

Paladin Resources

Interim Results

Paladin Resources PLC
21 September 2005

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

Interim Results for the half year ended 30 June 2005

Paladin Resources plc, one of the leading UK independent oil and gas exploration
and production companies, announces its interim results for the half year ended
30 June 2005. These interim results are prepared under International Financial
Reporting Standards ("IFRS"). All comparisons are based on an IFRS restatement
of 2004 UK GAAP financial information, which was announced on 8 September 2005
and is available on the Company's website at www.paladinresources.plc.uk

HIGHLIGHTS

Financial highlights:

•   Revenue up 23 per cent to £177.4 million (1H 2004: £144.6 million)

•   Cash flow from operating activities increased by 70 per cent to £143.5
    million (1H 2004: £84.3 million)

•   Pre-tax profit more than doubled to £101.6 million (1H 2004: £47.3 million)

•   Earnings up by 176 per cent to £39.9 million (1H 2004: £14.4 million)

•   Earnings per share increased by 165 per cent to 11.86 pence (1H 2004: 4.48
    pence)

•   Interim dividend increased to 1.0 pence per share (1H 2004: 0.56 pence per
    share)

Operational highlights:

•   Average production increased by 10 per cent to record levels of 45,795 boepd
    (1H 2004: 41,633 boepd)

•   Brechin Field on stream in late June, on time and on budget

•   Regulatory approval secured for Blane, Enoch and Wood developments, all
    scheduled to come into production in late 2006

•   Exploration success in the UK and Tunisia

Business development highlights:

•   Material production base in Timor Sea, offshore Australia, established
    through two acquisitions totalling US$197 million

•   MonArb position consolidated through acquisition of operated interest in
    nearby Fiddich discovery

•   Active portfolio management through sale of interests in Ross, Blake and
    Njord Fields


Malcolm Gourlay, Chairman of Paladin, commented:

"This has been an excellent six months for Paladin, with average production up
by ten per cent to record levels. Development activity is also at record levels,
with the Paladin-operated Blane, Enoch and Wood developments all scheduled to
come on stream in late 2006. Furthermore, building on the recent exploration
success in the UK and Tunisia, we are planning at least six further exploration
wells in the coming 12 months.

Given the positive outlook for production and commodity prices, the Company is
set for a very strong second half financial performance."


21 September 2005


ENQUIRIES:

Paladin Resources plc                     Tel: (today) 020 7457 2020
                                          Tel: (thereafter) 020 7024 4500

Roy A. Franklin, Chief Executive
Cuth McDowell, Finance Director
College Hill                              Tel: 020 7457 2020

Ben Brewerton
Nick Elwes
Jim Joseph


                            PALADIN RESOURCES plc
                  ("Paladin" or "the Company" or "the Group")

              Interim Results for the half year ended 30 June 2005

                              Chairman's Statement

Introduction

I am pleased to report that your Company has continued to prosper in the first
half of 2005. Average production for the period reached new record levels and,
as a result of this and continuing strong commodity prices, earnings have more
than doubled from the first half of 2004. These operating and financial results
have been complemented by excellent progress in developing the Company's
portfolio of assets for the longer term benefit of shareholders. As detailed
below, the Brechin Field was brought into production on time and on budget,
regulatory approval has been secured for three operated North Sea developments
which are scheduled to come into production in late 2006, and the Company has
had exploration success in the UK and Tunisia. In addition, through a series of
acquisitions the Company now has material producing interests with incremental
upside in the Timor Sea, offshore Australia, and has consolidated its position
around the MonArb Fields as operator of the Fiddich Field, a near-term potential
development.

Results

In the six months to 30 June 2005, revenue increased by 23 per cent to £177.4
million, compared to £144.6 million (as restated) for the first six months of
2004. Profit before tax and finance cost for the period more than doubled to
£107.6 million (1H 2004: £51.1 million as restated). Net finance costs were £6.0
million (1H 2004: £3.8 million as restated), resulting in a pre-tax profit of
£101.6 million, as compared to £47.3 million (as restated) for the same period
last year. Profit after tax for the period rose 176 per cent to £39.9 million,
compared to £14.4 million (as restated) for the first half of 2004, also
exceeding 2004 full year profit after tax of £37.3 million (as restated). First
half earnings per share were 11.86 pence, compared to 4.48 pence per share (as
restated) for the first six months of 2004.

Dividend

In view of the Group's continuing strong operational and financial performance
and the positive outlook for commodity prices, the Board has decided that the
2005 interim dividend should be raised to 1.0 pence per share (1H 2004: 0.56
pence per share). This dividend will be paid on 28 October 2005 to those
shareholders on the register on 14 October 2005.

Subject to operational performance and the outlook for commodity prices
remaining broadly in line with current expectations, the Board anticipates
recommending that a final dividend of 2.0 pence per share be paid to
shareholders following publication of the Group's 2005 results (2004 final
dividend: 1.14 pence per share).

The Group's established dividend policy, namely that the level of payment should
continue to be progressive in real terms but also sustainable in a lower oil
price environment, remains unchanged.

Operations

Net production for the half year was 7.3 million barrels of oil and NGLs, and
6.0 billion standard cubic feet of gas, an average of 45,795 boepd, and an
increase of 10 per cent from 41,633 boepd over the same period in 2004.

United Kingdom

Overall, UK interests contributed 15,120 boepd (33 per cent) to total Group
production in the first half of the year (1H 2004: 13,857 boepd).

Net production from the operated MonArb Fields (Paladin 58.97 per cent) for the
first half was 8,250 boepd, which included the impact of a 27 day planned
maintenance shutdown in June. Good progress is being made both in raising the
well production capacity from this group of fields and in improving the
reliability of the production facilities. Paladin's first operated development
in the North Sea, the Brechin Field, a single horizontal subsea development well
tied back to the existing Arkwright infrastructure, was brought into production
on time and on budget at initial rates in excess of 8,000 bopd and continues to
produce ahead of original expectations. In addition, the first infill well to be
drilled from the Montrose platform for 17 years was completed during August and
brought into production at a rate of approximately 3,500 bopd. As a result,
gross production from the MonArb Fields has recently exceeded 30,000 bopd, more
than 50 per cent higher than when Paladin took over operatorship little more
than two years ago.

Infill drilling on the Montrose Field will continue until mid-2006, complemented
by pre-project work on a North Montrose development and ongoing studies for a
further campaign of infill drilling on the Arbroath Field. The Company also
received formal regulatory approval for development of the Wood Field at an
estimated cost of £80 million by means of a single subsea horizontal production
well tied back to a new compression module on the Montrose platform; this will
process and export associated Wood gas, as well as associated gas from the
existing MonArb Fields. Production from the Wood Field is scheduled to start in
late 2006, peaking at over 5,000 bpd of oil and 21 MMscfd of export gas.

In the first half, the Company also acquired, through two transactions, a 51.8
per cent operated interest in Licence P357 (Block 22/19a), which contains the
Fiddich gas and condensate discovery and lies approximately 20 km to the
southeast of the MonArb Fields. Subject to detailed engineering studies, Fiddich
is a potential development project within Paladin's core area in the North Sea,
offering significant synergies with its existing operated business.

Elsewhere in the UK, the performance of the Bittern and Goldeneye Fields
exceeded expectations, contributing 1,282 boepd and 5,164 boepd respectively.

The Company's interests in the Ross and Blake Fields were sold during the
period. Prior to their disposal, they contributed 424 boepd to Group production,
averaged over the period.

On the development front, within 14 months of acquiring interests in, and
assuming operatorship of, the Blane and Enoch discoveries, which straddle the
UK-Norway median line, Paladin received approval from the UK and Norwegian
Governments for the development of both fields.

The Blane Field (Paladin 36.7 per cent) is being developed at an anticipated
cost of £165 million by three subsea wells tied back to the BP-operated Ula
platform in Norwegian waters. Production is scheduled to start in late 2006 at a
rate of over 14,000 bopd.

The Enoch Field (Paladin 24 per cent) is being developed at an anticipated cost
of £75 million by a single subsea well tied back to the Marathon-operated Brae
platform in UK waters. Production is scheduled to start in late 2006 at a rate
of over 12,000 bopd.

As far as exploration is concerned, a number of attractive Jurassic
structural-stratigraphic prospects have been mapped in Paladin acreage adjacent
to the MonArb Fields. Long-lead time items have been ordered with a view to
drilling two of these prospects in 2006.

The Group also had exploration success with well 15/18b-11, which tested the
Yeoman Prospect (Paladin 20 per cent) and was drilled in mid-year. The well
encountered an 84 ft hydrocarbon column in good quality Palaeocene sandstones
and tested at rates of up to 1,500 bopd of 25 degree API oil from a 15 ft
perforated interval. The commercial viability of this discovery as a potential
satellite development to nearby infrastructure is under evaluation.

Norway

The Group's Norwegian interests contributed 17,129 boepd (37 per cent) to total
production in the first half of the year, broadly in line with expectations (1H
2004: 18,931 boepd).

An active programme of well work and infill drilling has helped to minimise the
depletion rate on our three principal fields, Brage, Veslefrikk and Njord.
Production in the first half was adversely affected by production constraints on
the Veslefrikk Field caused by an earlier than planned maintenance shutdown and
integrity issues with the freefall lifeboats.

In June, the Company announced that it had entered into an agreement to sell its
15 per cent interest in the Njord Field to E.ON Ruhrgas AG for US$90 million in
cash. This transaction was completed recently, following the approval of the
Norwegian regulatory authorities.

On the development front, Paladin, as operator, has continued pre-project
studies on redeveloping the abandoned Yme oilfield in Licence PL316 in the
Egersund Basin. An exploration well on the Aimee Prospect, some 10 km to the
east of the field, will be drilled later this year and any success will have a
significant impact on a redevelopment scheme for Yme. The Company has today
announced that it has entered into an agreement with Pertra AS, under which
Paladin will reduce its interest in Licence PL316 (including the Yme Field) from
50 per cent to 40 per cent, in return for Pertra paying Paladin's share of all
future expenditure on the Licence up to a cap of US$35 million net to Paladin's
40 per cent interest.

Following the Aimee well, an exploration well targeting a Palaeocene reservoir
will be drilled on the Hummer Prospect (Paladin 45 per cent) in Licence PL143CS,
some 10 km to the north of the Blane Field.

Denmark

Overall, Danish interests contributed 3,329 bopd (7 per cent) to total Group
production in the first half of the year (1H 2004: 3,341 bopd). This was
comfortably ahead of expectations, due primarily to the availability of
additional gas handling capacity on the Siri platform, but also to continuing
good reservoir performance from the Siri Field.

A second well drilled on the Sofie discovery encountered hydrocarbons and
results are being evaluated to establish the commercial viability of Sofie as a
satellite to the Siri Field. A well to evaluate the Sissel prospect was drilled
early in the year and was unsuccessful.

Australia

As a result of two transactions totalling US$197 million in late 2004 and early
2005, the Company now has material producing interests in the Laminaria and
Corallina Fields in the Timor Sea, offshore Australia, with potential
incremental upside in field reservoir performance and satellite development
opportunities. Our interests in these fields contributed 5,928 bopd (13 per
cent) to total Group production in the first half of the year, which was broadly
in line with expectations. The results of a sidetrack appraisal well drilled
earlier in the year on the Laminaria Field are under evaluation. A subsequent
exploration well on the North Petalonia Prospect, to the west of the Corallina
Field, was unsuccessful.

The Company has today announced that it has reached agreement with Santos
Limited to acquire one of its wholly-owned subsidiaries, which holds a 25 per
cent interest in PSC 03-01 in the Australia/Timor Leste Joint Petroleum
Development Area, lying immediately to the east of the Laminaria and Corallina
Fields. This acreage, which is operated by Woodside Petroleum, operator of the
Laminaria and Corallina Fields and the Northern Endeavour FPSO, contains a
number of existing discoveries with the potential to be developed as satellites
to the FPSO, as well as further exploration potential. A 3D seismic grid is
shortly to be acquired over the existing discoveries and the more prospective
parts of the PSC area.

Indonesia

The Group's assets in Indonesia have performed broadly in line with
expectations. Net entitlement production averaged 3,318 boepd (7 per cent of
Group production). The marked decrease from the same period last year of 4,925
boepd was due partly to natural production decline in these mature assets, but
principally to markedly higher oil prices, which reduce the level of entitlement
barrels reported.

Tunisia

Net production from the Adam Concession Area in southern Tunisia contributed 971
boepd (2 per cent) to total Group production in the first half of the year,
comfortably ahead of expectations (1H 2004: 579 bopd). Following agreement to
sell associated gas to STEG, the Tunisian state electricity and gas company, and
the commencement of gas sales early in the first half of the year, commercial
discussions continue with respect to the sale of both non-associated gas and
additional volumes of associated gas. Another successful exploration well was
drilled in the first half, Nour-1, which encountered net oil and gas condensate
pay of 48 metres and net gas pay of 10 metres. This is the fourth discovery in
succession for the joint venture in the Adam Concession Area. The well has been
tied back to the existing process and export facilities and was brought into
production within one month following discovery. An exploration well to test the
Janet Prospect will be drilled later this year, with additional exploration
drilling likely in 2006.

Gabon

3D seismic surveys across the southern and northeastern parts of the Gryphon
Marin Permit (Paladin 20 per cent) were acquired in the first half of the year.
These data are now being processed and interpreted and an exploration well is
planned for 2006.

International Financial Reporting Standards

The Company adopted IFRS with effect from 1 January 2004, with the exception of
IAS 32 and IAS 39, which were adopted with effect from 1 January 2005. IFRS has
no impact on the underlying cash flow of the business. The most significant
effects of the transition to IFRS can be seen in note 1 below.

Product Prices/Hedging

Realised prices in the first half of 2005 averaged US$46.22 per boe, compared to
US$33.38 per boe over the same period in 2004. After the impact of oil price
swaps has been taken into account, realised prices averaged US$41.09 per boe
during the first half of the year, compared to US$31.11 per boe during the first
half of 2004. The dollar/sterling exchange rate in the first half of 2005 was
US$1.87/£1.00 as compared to US$1.81/£1.00 for the first half of 2004, resulting
in an average realised sterling oil price before any impact from oil price swaps
of £24.66 per boe for the period (1H 2004: £18.41 per boe).

During 2003 and 2004, the Company entered into a number of oil price swaps based
on Dated Brent for the first half of 2005 as part of its corporate risk
management programme: 1,650,000 barrels were swapped at an average price of
US$24.94 per bbl.

Consistent with the Company's established hedging policy, further oil price
swaps have been entered into from 2003 to date for the period between July 2005
and December 2008 and these are detailed below:

Period                                               Average price
                              Bbl                     (US$ per bbl)

2H 2005                       1,500,000                      27.61
2006                          2,850,000                      32.69
2007                          2,400,000                      41.28

2008                            450,000                      59.59

During 2005, the Company has also entered into a number of financial instruments
based on IPE Natural Gas for the period between July 2005 and December 2006 and
these are detailed below:

Period          Volume (therm)      Swap                Put option    Collar contract
                                    (pence per therm)   (pence per    (pence per therm)
                                                          therm)
3Q 2005         2,300,000           32.08
                2,300,000                                  32.25

4Q 2005         4,600,000           49.38
1Q2006          4,500,000           56.85
                2,250,000                                  40.00
                2,250,000                                                65.00-90.00

2Q 2006         2,275,000           32.95
3Q 2006         2,300,000           31.15

Lifting Costs

Following the adoption of IFRS, production costs include adjustments for the
value of production under or over lifted. Excluding the impact of the Company's
underlift position as at 30 June 2005 and after crediting tariff income, the
underlying lifting cost during the period was US$11.02 per boe, as compared to
US$11.45 per boe in the first half of 2004.

Finance

Cash flow from operating activities increased by 70 per cent to £143.5 million
for the first half, compared to £84.4 million for the first half of 2004. After
capital expenditure of £59.1 million (1H 2004: £36.3 million), cash taxes of
£42.4 million (1H 2004: £26.2 million), payments for acquisitions of £90.1
million (1H 2004: £5.5 million), finance cost payments of £2.6 million (1H 2004:
£1.3 million) and dividend payments of £3.8 million (1H 2004: £3.4 million),
offset by net proceeds of £23.3 million from a placing of shares and £35.7
million from disposals, net debt at 30 June 2005 was £115.0 million, compared
with £107.3 million at 31 December 2004. The increase in net debt has been
driven by the settlement of the consideration for the Australian acquisitions,
which was only partially offset by the Ross and Blake disposal proceeds (£35.7
million) and higher realisations. Following the completion of the Njord
disposal, the Group is in a net positive cash position pending payment of
Norwegian taxes and other items in October.

Business Development

The Company was very active in the management of its asset portfolio in the
first half of 2005. As discussed above, a material producing position with
incremental upside in the Timor Sea, offshore Australia, was successfully
established through the acquisition of interests in the Laminaria and Corallina
Fields. In addition, the Company was able to consolidate its position in the
MonArb area through the acquisition of a 51.8 per cent operated interest in the
Fiddich gas and condensate discovery.

Paladin's interests in the Ross and Blake Fields were sold, primarily on the
grounds of materiality, and agreement was reached to sell the Company's interest
in the Njord Field, which contains significant volumes of gas to be produced
from late 2007 onwards, to a buyer with a substantial European downstream gas
business and a different strategic perspective on the value of uncontracted gas.
The Njord transaction was completed last week.

The Group continues to manage its existing portfolio on an active basis with two
further deals announced today. In Australia, Paladin has built on its existing
producing position in the Timor Sea and added exploration and satellite
development potential, while in Norway the Company has reduced its interest in
the Yme area from 50 per cent to 40 per cent, in return for a carry on future
expenditure of US$35 million net to Paladin's interest.

Notwithstanding current commodity prices, the discipline in the evaluation and
pricing of potential acquisitions that has served shareholders well to date will
remain a keystone in the application of the Company's strategy, as we continue
to review acquisition opportunities to augment the portfolio.

Exploration also remains an important element of the Company's strategy, and
further opportunities to broaden the existing exploration portfolio are under
active review.

Outlook

As outlined above, development activity in the Company is at record levels and
this should provide a major boost to the Company's production over the next two
to three years, with Blane, Enoch and Wood all scheduled to come on stream in
late 2006.

Consistent with the Company's stated strategy to expand its exploration
programme as its production base grows, drilling activity is set to increase in
the coming months. In Norway, operated wells will be drilled on the Aimee and
Hummer Prospects by year-end. In the UK, plans are underway to drill at least
two exploration wells in the MonArb area next year to evaluate deeper Jurassic
exploration prospects. In Tunisia, a further exploration well is scheduled to be
drilled by year-end, and a first well should be drilled in Gabon during 2006.

Since mid-year, the Company has had the benefit of production from the Brechin
Field, which came on stream in late June, and incremental production from the
Montrose Field infill drilling programme. As a result, production for the year
to date (mid-September) has averaged approximately 47,500 boepd. It is
anticipated that annualised net production for the full year will be at similar
levels, with projected production from the rest of the portfolio and additional
production from new Montrose infill wells later in the year more than
compensating for the loss of production from the sale of our interest in the
Njord Field.

Given the positive outlook for production and commodity prices, the Company is
set for a very strong second half financial performance.

                                                              J. Malcolm Gourlay

                                                                        Chairman
                                                               21 September 2005


Group Income Statement
                                                                Six months ended  Six months ended     Year ended
                                                                    30 June 2005      30 June 2004    31 December
                                                                                                             2004
                                                          Note              £000     (as restated)  (as restated)
                                                                                              £000           £000
                                                                                                             
Revenue                                                  2
Sales and tariff income                                                 176,910           144,509        284,149
Interest income                                                             499               105            221
                                                                        177,409           144,614        284,370

Cost of sales
Production cost                                                         (34,130)          (64,268)      (103,170)
Depletion and depreciation                                              (33,250)          (27,248)       (57,109)
                                                                        (67,380)          (91,516)      (160,279)
Gross profit                                             3              110,029            53,098        124,091

Administrative expenses                                                  (2,456)           (2,019)        (4,891)
Profit before finance cost and taxation                  2              107,573            51,079        119,200

Finance cost                                             4               (5,980)           (3,764)       (10,409)
                                                                        101,593            47,315        108,791

Profit before taxation

Taxation                                                                (61,737)          (32,876)       (71,535)
Profit for the period                                                    39,856            14,439         37,256

Earnings per share

Basic                                                                     11.86p             4.48p         11.52p
Diluted                                                                   11.44p             4.34p         11.14p

Weighted average number of shares (thousands)

Basic                                                                    335,965           322,594        323,381
Diluted                                                                  348,455          332,560         334,325

Dividend per share

Paid in respect of the period                                                Nil               Nil          0.56p
Paid in respect of the prior period                                        1.14p             1.05p          1.05p
Proposed for the period                                                    1.00p             0.56p          1.14p



Group Statement of Changes in Equity

                                                                      Six months  Six months ended     Year ended
                                                                           ended      30 June 2004    31 December
                                                          Note      30 June 2005     (as restated)           2004
                                                                            £000              £000  (as restated)
                                                                                                             £000

Opening balance                                                         179,750           155,536        155,536
Adoption of IAS 39                                       1              (19,735)                -              -
Restated opening balance                                                160,015           155,536        155,536

Profit for the period                                                    39,856            14,439         37,256
Foreign exchange differences                             5                7,121            (2,465)        (9,663)
Shares acquired                                                          (3,605)             (250)          (225)
Share based payments                                                        500               561            808
Dividends paid                                                           (3,850)           (3,361)        (5,157)
Cash flow hedges (net of tax)                                           (30,778)                -              -
Issue of shares                                                          23,272               708          1,195
Closing balance                                                         192,531           165,168        179,750



Group Balance Sheet

                                                                    At 30 June        At 30 June  At 31 December
                                                                          2005              2004            2004
                                                                                   (as restated)    (as restated)
                                                     Note                 £000              £000            £000
Non-current assets

Intangible assets                                      6               48,665            53,943          49,113
Property, plant and equipment                          6              421,955           301,383         379,078
Investments                                                                                                   -
Fixed assets                                                          470,620           355,326         428,191
Loans and other receivables                                                 -                 -               -
Deferred tax assets                                                    16,665            11,096          12,379
                                                                      487,285           366,422         440,570
Current assets
Inventories                                                               298             6,386           1,542
Trade and other receivables                                            81,151            30,849          63,661
Cash and cash equivalents                                                   -             2,436             939
                                                                       81,449            39,671          66,142


Total assets                                                          568,734           406,093         506,712

Current liabilities
Trade and other payables                                               47,732            30,308          94,958
Overdraft                                                               3,692                 -               -
Finance debt                                                              934               747             879
Current tax payable                                                    52,063            29,169          42,570
Forward commodity contracts                                            45,695                 -               -
                                                                      150,116            60,224         138,407

Non-current liabilities

Finance debt                                                          110,419            98,743         107,324

Forward commodity contracts                                            38,493                 -               -
Deferred tax liabilities                                                6,920            24,356          23,019
Provisions                                                             70,255            57,602          58,212
                                                                      226,087           180,701         188,555

Total liabilities                                                     376,203           240,925         326,962


Net assets                                                            192,531           165,168         179,750

Paladin shareholders' equity

Called up share capital                                                33,945            32,365          32,471
Share premium                                                         102,046            79,867          80,248
Other reserves                                         7              (54,090)           (3,881)        (10,698)
Retained earnings                                                     110,630            56,817          77,729
Total equity                                                          192,531           165,168         179,750


Group Cash Flow Statement
                                                                        Six months      Six months      Year ended
                                                                             ended           ended     31 December
                                                                           30 June    30 June 2004            2004
                                                                              2005   (as restated)   (as restated)
                                                                              £000            £000            £000
                                                         Note
Cash flow from operating activities after                 8                98,555          56,842         103,756
taxation

Investing activities
Ongoing capital expenditure (excludes                                     (59,105)        (36,254)        (88,666)
capitalised interest)
Acquisition of oil and gas fixed assets                                   (90,059)         (5,491)        (13,552)
Proceeds from sale of oil and gas interests                                35,691               -               -
Net cash used in investing activities                                    (113,473)        (41,745)       (102,218)
Financing activities

Investment in own shares                                                   (3,605)           (250)           (225)
Equity dividend paid                                                       (3,850)         (3,380)         (5,190)
Issue of shares                                                            23,272             708           1,195
Net (decrease)/increase in borrowings                                      (5,078)        (10,437)          3,630
Finance lease payments                                                       (603)           (466)         (1,400)
Net cash generated from/(used in) financing                                10,136         (13,825)         (1,990)
activities
(Decrease)/increase in cash and cash equivalents                           (4,782)          1,272            (452)
                                                                              
Net exchange differences relating to cash
and cash equivalents                                                          151            (106)            121

Cash and cash equivalents at the start of the
period                                                                        939           1,270           1,270
                                                                           
Cash and cash equivalents at the end of the
period                                                                     (3,692)          2,436             939


Notes

(forming part of the Interim Results)

1        Transition to International Financial Reporting Standards

For all periods up to and including the year ended 31 December 2004, Paladin
Resources plc prepared its primary financial statements under UK GAAP. From 1
January 2005, the Group is required to prepare its consolidated financial
statements in accordance with IFRS as adopted by the EC. This change applies to
all financial reporting for accounting periods beginning on or after 1 January
2005. This interim report has been prepared in accordance with the requirement
of IFRS 1, "First Time Adoption of International Reporting Standards", relevant
to interim reports.

Paladin has produced an explanatory note setting out its accounting policies
under IFRS, the major differences between UK GAAP and IFRS and reconciliations
between UK GAAP and IFRS for its 2004 income statement and cash flow, and
balance sheets at 1 January 2004, 31 December 2004 and 1 January 2005. This
information can be found on Paladin's website www.paladinresources.plc.uk. In
addition, reconciliations for 2004 full year and interim periods are shown
below.

The interim and restated prior period financial information has been prepared on
the basis of IFRS (but, as permitted under IFRS, the Directors have elected not
to restate comparative information relating to financial instruments standards
under IAS 32 and IAS 39) and SIC and IFRIC interpretations issued by the IASB
that are expected to be effective for the financial year commencing 1 January
2005; it is also expected to form the basis for comparatives when the financial
results for 2005 are reported. The IFRS in effect at that date may differ owing
to decisions taken by the EC on endorsement, interpretive guidance issued by the
IASB or IFRIC and the requirements of companies legislation in accordance with
IFRS. The accounting policies applied assume that all existing standards in
issue from the IASB will be fully endorsed by the EC.

The Group has continued to apply the full cost accounting policy to both
exploration and development activities. IFRS 6 permits this policy for
exploration and evaluation expenditure. However, as at the date these results
were authorised for issue, there was a lack of clarity in the authoritative
literature concerning the treatment of development expenditure. No agreement has
been reached amongst the UK oil industry and the accounting profession on the
acceptability of applying full cost policies under IFRS to development
expenditure and, as a result, the matter has been referred to IFRIC for
consideration. The timing and outcome of IFRIC's deliberations are currently
uncertain and, until such time as some certainty has been provided on the issue,
the Directors have determined it appropriate to continue to apply the full cost
accounting policies that were in effect immediately prior to the Group's
transition to IFRS, subject to the changes in accounting policy required under
IFRS 6. The Directors will reconsider the appropriateness of the full cost
accounting policy for the Group's annual financial statements in the light of
any guidance or clarification issued by IFRIC.

                                                                                                
                                                                                                          
                                                                                At 30 June     At 31 December
                                                                                      2004               2004
                                                                                      £000               £000

Shareholders' funds under UK GAAP                                                  160,289            169,603
Adjustments
 Recognition of special tax allowances                                              (1,771)            (1,998)
 Exchange movements on tax balances                                                  3,299              8,458
 Dividend accrual                                                                    3,351              3,687

Shareholders' funds under IFRS                                                     165,168            179,750


2                    Segmental analysis
                                                           Continuing operations                                    

                                                                                            Rest of
                                    UK    Australia     Scandinavia    Indonesia   Tunisia    World        Total
                                  £000         £000            £000         £000      £000     £000         £000 
Six months ended 30 June
2005
Revenue                         47,361       24,119          88,289       12,719     4,921        -      177,409
Profit/(loss) before                           
finance cost and taxation       13,095       22,100          63,042        5,662     3,854     (180)     107,573 
                                             
Six months ended 30 June
2004 (restated)
Revenue                         43,186            -          86,301       12,256     2,871        -      144,614
Profit/(loss) before             
finance cost and taxation        4,982            -          39,001        5,637     1,459        -       51,079

Year ended 31 December 2004
(restated)
Revenue                         91,444            -         165,558       22,203     5,165        -      284,370
Profit/(loss) before                           
finance cost and taxation       18,023        1,376          89,669        7,198     3,287     (353)     119,200
                                              

Income from the acquisition of further interests in the Laminaria and Corallina
Fields in Australia from Shell has been included with effect from 1 April 2005
and income from the Ross and Blake Field interests in the UK was included up to
28 February 2005. Income from the Njord Field interests will be included up to
31 August 2005.

3        Gross profit
                                                                                                    Year ended
                                                                  Six months        Six months     31 December
                                                                       ended             ended            2004
                                                                30 June 2005      30 June 2004      (restated)
                                                                                    (restated)
Production (Mboe)                                                     8,289             7,577          15,156
Liftings (Mboe)                                                       7,938             8,075          15,085

                                                                        £000              £000            £000

Revenue                                                             177,409           144,614         284,370
Production cost                                                     (51,446)          (53,836)       (109,024)
Depletion and depreciation                                          (33,250)          (27,248)        (57,109)
Under/(over) lift adjustment                                         17,316           (10,432)          5,854
Gross profit                                                        110,029            53,098         124,091


4        Finance cost
                                                                                                   
                                                                                                          
                                                                                    Six months      Year ended
                                                                 Six months              ended     31 December
                                                                      ended       30 June 2004            2004
                                                               30 June 2005         (restated)      (restated)
                                                                       £000               £000            £000

Interest on finance leases                                             (22)                  -            (74)
Interest on bank loans and overdrafts                               (3,208)            (1,375)         (5,426)
Amortised finance costs                                               (418)              (472)         (1,481)
Interest capitalised                                                     -                221           1,189
Exchange differences                                                   291                  -            (461)
Unwinding of discount on future decommissioning provision           (2,623)            (2,138)         (4,156)
                                                                    (5,980)            (3,764)        (10,409)

5        Unrealised foreign exchange differences

The exchange differences arise as a result of the translation of US dollar
denominated fixed asset balances at the 30 June 2005 rate of US$1.81:£1.00,
compared to the 31 December 2004 rate of US$1.92:£1.00. The rate at 30 June 2004
was US$1.81:£1.00, and at 31 December 2003, US$1.79:£1.00.

6        Fixed assets


                                                                                    Tangible         Intangible
                                                                                        £000               £000
Cost
At 1 January 2005                                                                   535,965             49,113
Acquisitions of oil and gas interests                                                21,937              1,302
Disposals                                                                           (35,691)                 -
Additions                                                                            43,288             11,776
Abandonment                                                                           5,765                  -
Transfers                                                                            16,415            (16,415)
Exchange adjustments                                                                 36,817              2,889

At 30 June 2005                                                                     624,496             48,665

Depletion and depreciation
At 1 January 2005                                                                    156,887                  -
Charge for the period                                                                 33,250                  -
Exchange adjustments                                                                  12,404                  -

At 30 June 2005                                                                      202,541                  -

Net book value
At 31 December 2004                                                                  379,078             49,113

At 30 June 2005                                                                      421,955             48,665


7        Other reserves




                                                             Six months ended      Six months       Year ended
                                                                 30 June 2005           ended 31 December 2004
                                                                                 30 June 2004       (restated)
                                                                                   (restated)             
                                                                         £000            £000             £000

                                                                     (10,698)         (1,416)          (1,416)

Opening balance
Adoption of IAS 39                                                   (19,735)              -                -
Restated opening balance                                             (30,433)         (1,416)          (1,416)
Foreign exchange differences                                           7,121          (2,465)          (9,663)
Cash flow hedges (net of tax)                                        (30,778)              -                -
Shared based payments                                                      -               -              381
At the end of the period                                             (54,090)         (3,881)         (10,698)


8               Reconciliation of profit before finance cost and taxation to
cash flow from operating activities after taxation


                                                                                     Six months       
                                                               Six months ended           ended       Year ended
                                                                   30 June 2005    30 June 2004 31 December 2004
                                                                                     (restated)       (restated)
                                                                           £000            £000             £000


Profit before finance cost and taxation                                107,573          51,079          119,200

Depletion and depreciation charge                                       33,250          27,248           57,382
Increase/(decrease) in provisions                                          500            (306)             688
Movements in working capital                                             2,217           6,357           (5,165)
Cash flow from operating activities                                    143,540          84,378          172,105
Finance costs paid                                                      (2,592)         (1,349)          (7,560)
Taxes paid                                                             (42,393)        (26,187)         (60,789)

Cash flow from operating activities after taxation                      98,555          56,842          103,756


9        Statutory accounts

The financial information contained herein is unaudited and does not constitute
statutory accounts within the meaning of Section 240 of the Companies Act 1985.
The 2004 annual report and accounts have been filed with the Registrar of
Companies and contained an unqualified auditors report.

10      Post balance sheet events

In June, the Company announced that it had entered into an agreement to sell its
15 per cent interest in the Njord Field to E.ON Ruhrgas AG for US$90 million in
cash. This disposal was completed on 12 September 2005.

Independent Review Report to Paladin Resources plc

Introduction

We have been instructed by the company to review the financial information for
the six months ended 30 June 2005, which comprises the Group Income Statement,
Group Balance Sheet, Group Cash Flow Statement, Group Statement of Changes in
Equity, and the related notes 1 to 10. 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.

This report is made solely to the company in accordance with guidance contained
in Bulletin 1999/4 'Review of interim financial information' issued by the
Auditing Practices Board. To the fullest extent permitted by law, we do not
accept or assume responsibility to anyone other than the company, for our work,
for this report, or for the conclusions we have formed.

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.

As disclosed in note 1, the next annual financial statements of Paladin
Resources plc will be prepared in accordance with those IFRSs adopted for use by
the European Union. This interim report has been prepared in accordance with the
requirements of IFRS 1, "First Time Adoption of International Financial
Reporting Standards" relevant to interim reports.

The accounting policies are consistent with those that the directors intend to
use in the next financial statements. There is, however, a possibility that the
directors may determine that some changes to these policies are necessary when
preparing the full annual financial statements for the first time in accordance
with those IFRSs adopted for use by the European Union. In particular, as
disclosed in note 1, the directors are aware that the application of full cost
accounting under IFRS has been referred to the IFRIC Agenda Committee for
consideration.

Review work performed

We conducted our review in accordance with guidance contained in Bulletin 1999/4
'Review of interim financial information' 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 have been applied.  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 2005.

Ernst & Young LLP
London
20 September 2005



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