Interim Results
Regal Petroleum PLC
27 September 2007
For Immediate Release 27 September 2007
REGAL PETROLEUM PLC
INTERIM RESULTS FOR THE SIX MONTHS
ENDED 30 JUNE 2007
Regal Petroleum plc ('Regal', 'the Company' or 'the Group'), the oil and gas
exploration and production company, today announces its un-audited results for
the six months ended 30 June 2007 and an update on the Company's progress.
In accordance with the requirements of AIM, these results are reported under
International Financial Reporting Standards ('IFRS') as opposed to UK Generally
Accepted Accounting Practices ('UK GAAP') which were adopted in previous
financial periods. The un-audited results include comparative IFRS financial
statements for the six months ended 30 June 2006 and the year ended 31 December
2006 audited results.
Highlights include:
Ukraine
• The Company announced on 14 September 2007 that it has entered into an
exclusive Memorandum of Understanding with the private oil and gas company,
MND Exploration and Production Limited ('MND'). Under the terms of the
proposed transaction, which is for a 50% interest in the assets, KKCG Oil and
Gas BV, MND's holding company in The Netherlands, will invest a total of
$330,000,000 in the development of the MEX-GOL and SV fields. The proposed
transaction is subject to due diligence and the negotiation of transaction
documentation.
• Average production for the six month period was 4.44 mmcf of gas per day and
303 barrels of condensate per day (total equivalent of 1,093 boepd).
Production is currently averaging 5.59 mmcf of gas per day and 308 barrels
per day of condensate (total equivalent of 1,304 boepd).
• In May 2007, the Company connected the SV-10 well to the existing Regal-owned
MEX-GOL facility. This increased the Company's wells in production to five:
MEX-102, MEX-3, GOL-1, GOL-2 and SV-10.
• Operations remained cash flow positive and profitable during the six month
period to June 2007.
• Gas prices increased from an average for the last five months of 2006 of $3.05
per mscf to $4.02 per mscf for the first six months of 2007, an increase of
approximately 32%.
• Average condensate sales price achieved by the Company for the six months to
end June 2007 was $55 per barrel (excl VAT) compared to $41 per barrel
in the same period of 2006.
• The Company signed a contract with Chernihivnaftagasgeologia ('CNGG') for
the drilling of the MEX-103 well in late July 2007 and expects drilling to
commence in the fourth quarter of 2007.
• A 3D seismic survey covering approximately 100 square kilometres of the
MEX-GOL licence area commenced in January 2007 and was completed in late May
2007.
• Following shareholder approval at an Extraordinary General Meeting on 25 May
2007, in mid-June 2007 the Company completed the acquisition of Alberry
Limited's shares in Regal Petroleum Corporation Limited under the Subscription
and Services Agreement. As consideration for such acquisition 13,910,623
ordinary shares of 5 pence each in the capital of the Company were allotted
and issued to Alberry Limited.
Romania
• Suceava Block: The Company's farm-in partner, Aurelian Oil and Gas Plc
('Aurelian'), acquired 160 kilometres of 2D seismic data in the block and is
planning to spud an exploration well (Dornesti-1-Sud) in late October or
early November 2007 to test a shallow gas target. This well will complete
the earn-in work programme under the farm-in agreement with Aurelian.
• Barlad Block: Regal plans to spud the first of two planned exploration wells
in October 2007. These wells are targeted at the same shallow gas reservoirs
as the Dornesti-1-Sud well and are expected to be completed in the fourth
quarter of 2007.
Egypt
East Ras Budran: In early 2007 Apache, as concession operator, acquired a 3D
seismic survey over the central portion of the concession. The resulting 3D
seismic data has been processed and interpreted. The first of two exploration
wells ('ERB-A-1X') was spudded in June 2007 and this well has now reached its
target depth (11,921 feet TVD) and has been flow tested. The well was opened for
a 12 hour period and produced at an average rate of 1,901 bopd from the target
Darat Limestone. This well will be suspended as a future production well and an
appraisal well, ('ERB-A-2X'), is under consideration. The drilling of the second
exploration well ('ERB-B-1X') will be commenced shortly.
Corporate activity
• Mirabaud were appointed as joint broker in mid February 2007.
Board & Senior Management
• Mr Gordon Stein was appointed as Chief Financial Officer on 15 January
2007 following the resignation of Mr Roger Phillips as Finance Director.
Financial highlights
• Gross profits increased from $0.8 million to $3.8 million when comparing
the six month periods ending June 2006 and June 2007 respectively.
• Turnover increased to $6.5 million (30-Jun-06: $4.9 million). This increase is
primarily attributable to an uninterrupted six months of continued production
in the first half of 2007 in Ukraine, together with new production following
the hook-up of the SV-10 well in May 2007, whereas the same period in 2006 was
marred by intermittent disruption to production due to court enforced
shut-ins.
• Loss for the period of $10.4 million (30-Jun-06: loss of $3.7 million), with
loss per share of 8.1 cents (30-Jun-06: loss per share of 2.9 cents). The
increased loss was primarily due to significant administration costs
being incurred following the successful outcome of the legal cases in
Ukraine at the end of 2006, in addition to share based charges accounted for
in accordance with the requirements of IFRS 2 'Share Based Payments'.
• Capital cash expenditure of $3.4 million (30-Jun-06: $7.3 million).
• Net cash of $9.4 million (30-Jun-06: $25.6 million) at period end and net
assets of $62.8 million (30-Jun-06: $123.4 million). At the date of this
announcement the Company had cash in hand of approximately $7.5 million.
• In September 2007 the Company secured a $15 million Revolving Credit
Facility with Bank of Scotland.
OPERATIONAL STATEMENT
Ukraine
Mekhediviska/Golotvschinska ('MEX-GOL') and Svyrydivske ('SV') fields (working
interest 100%)
The Ukraine production operations continue to be profitable and generate
positive cashflow for the Group. During the six-month period to 30 June 2007 the
Company achieved a Gross Profit percentage of 58%.
Partial Divestment
In February 2007, the Company appointed Tristone Capital Limited to carry out a
strategic review of options for the Company's MEX-GOL and SV fields (the
'Fields') in Ukraine. Since April 2007, Tristone Capital Limited has been
advising the Company on a partial divestment of the Fields with the objective of
identifying a strategic partner to assist the Company in accelerating their
development.
The Company announced on 14 September 2007 that it has entered into an exclusive
Memorandum of Understanding ('MOU') with the private oil and gas company, MND
Exploration and Production Limited ('MND'). Under the terms of the proposed
transaction, which is for a 50% interest in the assets, KKCG Oil and Gas BV,
MND's holding company in The Netherlands, will invest a total of $330,000,000 in
the development of the MEX-GOL and SV fields. The terms of the MOU allow the
Company and MND to conduct due diligence and negotiate transaction documentation
on an exclusive basis, but it must be stressed however that, save in respect of
certain matters, the MOU is non-binding and conditional upon due diligence and
the execution of transaction documentation and there is no certainty that any
transaction or the proposed transaction will reach completion.
Production
Average production for the six month period to June 2007 was 4.44 mmcf of gas
per day and 303 barrels of condensate per day (total equivalent of 1,093 boepd).
In May 2007, the Company completed the 4.3 kms pipeline which connected the
SV-10 well to the existing Regal-owned MEX-GOL facility. The SV-10 well was
originally drilled in 1998 and was subsequently worked-over by Regal in late
2006 using coiled tubing and nitrogen lift. The well was flow tested from mid
November 2006 to February 2007 during which time average flow rates of
approximately 46,000 m3/d of gas (1.62 mmcf/d) and 8.5 m3/d (50 bopd) of
condensate were achieved. With SV 10 coming into production in May 2007, this
increased the Company's wells in production to 5: MEX-102, MEX-3, GOL-1, GOL-2
and SV-10.
Production is currently averaging 5.59 mmcf of gas per day and 308 barrels per
day of condensate (total equivalent of 1,304 boepd).
Seismic
A 3D seismic survey covering approximately 100 square kilometres of the MEX-GOL
production licence area, was acquired during the period. This data has been
processed and interpreted by Ukrgeofizika in Ukraine and is expected to assist
in the full field development.
Drilling
The Company continued to prepare for additional drilling on the MEX-GOL field in
accordance with the requirements of its Field Development Plan. Regal has been
in discussions since early 2007 with Chernihivnaftagasgeologia ('CNGG') to
restart the drilling of MEX-103, the next planned production well. A drilling
contract for that well was signed in late July 2007 and the Company expects
drilling to commence in the fourth quarter of 2007.
Several other production wells are in the process of being permitted and
preliminary discussions have been initiated with a number of potential drilling
companies able to provide equipment and services. The drilling of further wells
is expected to get underway in early 2008. Additionally, Regal is considering
methods to prolong production from its five existing production wells and has
recently completed a logging programme.
Alberry Limited
On 18 June 2007, the Company announced that it had completed the acquisition
from Alberry Limited of its 15% interest in Regal Petroleum Corporation Limited
('RPC') and that RPC was subsequently a wholly owned subsidiary of Regal. In
consideration for the acquisition of this shareholding interest, 13,910,623
ordinary shares of 5 pence each in the capital of the Company were allotted and
issued to Alberry Limited. These shares rank pari passu with the Company's
existing ordinary shares of 5 pence each and such shares were admitted to
trading on AIM on 21 June 2007.
Romania
Suceava Block (working interest 50%)
Pursuant to the agreed work programme with Regal's farm-in partner Aurelian Oil
and Gas Plc ('Aurelian'), it is planned to spud the Donesti-1-Sud exploration
well in late October or early November 2007. This well is part of Aurelian's
earn-in work programme and accordingly the well costs are to be fully carried by
Aurelian. A second contingent exploration well may be drilled in late 2007/early
2008, depending on the success of the first well. If such a well is approved by
the partners, Regal will be required to fund its own share of the well costs.
Barlad Block (working interest 100%)
Regal has contracted a rig to drill two exploration wells in the fourth quarter
of 2007, with the first well planned to spud in October 2007. All necessary
preparations are in place and long lead items have been received for these two
wells, which will test shallow Sarmatian gas prospects similar to those being
pursued in the Suceava block to the north. The wells are each expected to take
less than 30 days to drill and, if successful, will lead to testing being
conducted at a later date. The close proximity of existing gas infrastructure
allows relatively small gas accumulations to be commercially exploited.
Egypt
East Ras Budran Concession (working interest 25%)
Apache Khalda Corporation LDC ('Apache'), the Company's joint venture partner in
the Eas Ras Budran concession in Egypt, acquired a 3D seismic survey in early
2007. In addition two exploration wells ('ERB-A-1X' and 'ERB-B-1X') are
committed to be drilled on the concession and the first exploration well,
ERB-A-1X, was spudded in June 2007. This well has recently reached its target
depth (11,921 feet TVD) in the Darat Limestone and has been flow tested. The
well was opened for a 12 hour period and produced at an average rate of 1,901
bopd. Wellsite estimates of average flow rate of 1,910 bopd and oil gravity of
approximately 17 degree API have subsequently been confirmed by the operator as
1,901 bopd and 16-16.2 degree API.
The ERB-A-1X well has confirmed the presence of commercial production from the
Darat Limestone which has previously been tested in a nearby location by Tullow
Oil Plc in 1999. The well is less than 1 km from the existing Ras Budran onshore
oil processing and export facilities which have available ullage. The well was
designed to intersect the reservoir at the optimal angle (near horizontal) to
maximise production potential. Apache has indicated that it will submit a Notice
of Commercial Discovery with the Egyptian authorities shortly. The ERB-A-1X well
will be suspended as a future production well and an appraisal well,
('ERB-A-2X'), is under consideration.
The second exploration well, ERB-B-1X, will be drilled shortly using the same
rig, and will explore potential reservoirs in a different part of the
concession.
Greece
Kavala Oil S.A. (working interest 95%)
The operational management of Kavala Oil S.A. has continued to be undertaken by
Greek local management, with the assistance of the unionised workforce. The
Company has received no operational or financial information relating to the
first half of the year from Kavala Oil S.A. which continues to function without
any financial assistance or investment from the Company.
The Company has recently entered into a conditional agreement for the sale of
its entire holding in Eurotech S.A. to a Greek buyer. Subject to satisfaction of
certain conditions, completion of such sale is expected to occur in the fourth
quarter of 2007, following which further information will be provided.
Liberia
Blocks 8 & 9 (working interest 25%)
The two production sharing agreements in respect of Blocks 8 and 9 still await
ratification by the Liberian Government. The Government has sought clarification
on various terms of these agreements and discussions with the Government and
NOCAL, the State oil company, are continuing.
FINANCIAL STATEMENT
Review of Results
The financial results for the six months ended 30 June 2007 indicate an
improvement in the profitability of the Ukraine operations following the
satisfactory conclusion of the legal dispute over the validity of the production
licences in December 2006. A full six months of continued production in the
first half of 2007, together with new production following the hook-up of the
SV-10 well in May 2007, compares very favourably to the same period in 2006
which was marred by intermittent disruption to production due to the court
enforced shut-ins. Together with increased commodity prices (see below), gross
profits subsequently increased from $0.8 million to $3.8 million when comparing
the six month periods ending 30 June 2006 and 2007 respectively.
Turnover for the six months was $6.5 million (30-Jun-06: $4.9 million) which is
attributable to gas and condensate sales in Ukraine. The average gas price
achieved for the first six months of 2007 was $141.95 per 1,000 m3 (excl. VAT)
or $4.02 per mscf. This compares very favourably to average prices in the first
six months of 2006 of $94.99 per 1,000 m3 and $2.69 per mscf. The Company
believes the trend of increasing gas prices appears set to continue in the
coming years as Russia progressively seeks to eliminate the discount paid by
Ukraine for imported gas. This will further underpin value in the Ukrainian
field development operations.
The Company continues to achieve good condensate prices, although the price
environment is subject to relatively high price fluctuations due to seasonal
demand cycles in Ukraine (eg. the harvesting season). The average condensate
sales price achieved by the Company for the six months to 30 June 2007 was $55
per barrel (excl. VAT) compared to $41 per barrel in the same period of 2006,
although the above-mentioned price fluctuations meant that the Company has
achieved as high as $69 per barrel in 2007 for certain condensate shipments and
as low as $47 per barrel.
The loss for the period of $10.4 million (30-Jun-06: loss of $3.7 million)
partially reflects an increase in activity and administration costs following
the successful outcome of the legal cases in Ukraine at the end of 2006,
together with share based charges accounted for in accordance with the
requirements of IFRS 2 'Share Based Payments'.
Other administrative costs have increased from $5.2 million in the first six
months of 2006 to $7.4 million in 2007, with the main increase in costs being an
additional $1.1 million in consultancy and professional fees as the Company
seeks to accelerate the development of its Ukrainian fields and find a strategic
partner through a partial divestment. Other administrative charges also include
a charge of $0.6 million as recognition of a future National Insurance liability
on share options (30-Jun-06: no comparable charge) and a movement in foreign
exchange translation losses of $1.0 million between the comparable periods in
2006 and 2007.
In accordance with IFRS 2, the Company is required to recognise the fair value
of long-term equity based awards which have been granted in the current and
prior periods, which are available to be exercised in the current and future
periods. A charge of $7.4 million has been made for the six month period to June
2007, representing equity awards to new directors, senior managers and external
service providers who have been appointed since mid 2006. Due to the volatility
of the share price in the past two years, the requirements of IFRS have resulted
in a large Income Statement charge for the period in which the awards were made.
This charge has been verified by an independent firm specialising in the
valuation of awards that fall within the scope of IFRS 2. The majority of these
equity awards are expected to vest in the coming years as the directors and
management continue to deliver results in line with shareholder expectations.
At the end of June 2007 the Company had cash in hand of $9.4 million and the
Group had no external borrowings at that time.
At the date of this announcement the Company had cash in hand of approximately
$7.5 million and has access to a further $12.0 million from a $15.0 million
one-year revolving credit facility which has recently been entered into with
Bank of Scotland.
The capital cash expenditure of $3.4 million (30-Jun-06: $7.3 million)
represented the continued investment toward development and exploration in
Romania, Egypt and Ukraine. Activity will increase significantly in the second
half of 2007 as drilling commences in all three countries and this will be
reflected by an increase in capital expenditure during this period when compared
to the first six months.
CORPORATE ACTIVITY
Board and Senior Management Appointments
Mr Gordon Stein was appointed as Chief Financial Officer on 15 January 2007
following the resignation of Mr Roger Phillips as Finance Director.
It is anticipated that additional Directors may be appointed in the fourth
quarter of 2007 and a search for new Directors has been underway since mid year.
Advisors
Mirabaud Securities Limited was appointed as joint broker in mid February 2007.
Responsibility
The Directors accept responsibility, collectively and individually, for the
information contained in this document. To the best of the knowledge and belief
of the Directors (who have taken all reasonable care to ensure that such is the
case), the information contained in this document is in accordance with the
facts and does not omit anything likely to affect the import of such
information.
In accordance with the guidelines of the AIM market of the London Stock
Exchange, Neil Ritson BSc (Hons) Geophysics, FGS, Chief Executive Officer of
Regal Petroleum plc, is the qualified person that has reviewed the technical
information contained in this press release.
Definitions:
$ United States dollar
bopd barrels of oil per day
boepd barrels of oil equivalent per day
kms kilometres
mmcf million cubic feet
mscf thousand standard cubic feet
m3 /d cubic metres per day
mmcf/d million cubic feet per day
TVD true vertical depth
For further information, please contact:
Regal Tel: 020 7408 9500
Neil Ritson, Chief Executive Officer
Francesco Scolaro, Chairman
Evolution Securities Tel: 020 7071 4300
Robert Collins
Mirabaud Securities Tel: 020 7321 2508
Pav Sanghera
Buchanan Communications Tel: 020 7466 5000
Bobby Morse
Ben Willey
Attached Consolidated Income Statement
Consolidated Balance Sheet
Consolidated Cash Flow Statement
Consolidated Statement of Recognised Income and Expenditure
Consolidated Statement of Changes in Equity
Notes to the Accounts
Independent review report by the Auditors
Regal Petroleum plc
Consolidated Income Statement for the period ended 30 June 2007
30-Jun-07 30-June-06 31-Dec-06
(unaudited) (unaudited) (audited)
$'000 $'000 $'000
Notes
Revenue 2 6,473 4,861 10,811
Cost of sales (2,704) (4,086) (8,285)
----------------------- ------ --------- --------- --------
Gross profit 3,769 775 2,526
Ukraine settlement costs - - (54,801)
Share based (charge)/credit 3 (7,337) 91 (387)
Other administrative expenses (7,440) (5,182) (20,467)
----------------------- ------ --------- --------- --------
Total administrative expenses (14,777) (5,091) (75,655)
Other operating income 697 - 858
----------------------- ------ --------- --------- --------
Operating loss (10,311) (4,316) (72,271)
Impairment of financial asset - - (43,700)
Finance revenue 267 679 1,182
Finance costs - (1) (2)
----------------------- ------ --------- --------- --------
Loss on ordinary activities
before taxation (10,044) (3,638) (114,791)
Tax on loss on ordinary (394) (32) (489)
activities
----------------------- ------ --------- --------- --------
Loss for the financial period (10,438) (3,670) (115,280)
----------------------- ------ --------- --------- --------
Loss per ordinary share (cents)
Basic and diluted 4 (8.1) (2.9) (89.8)
----------------------- ------ --------- --------- --------
All amounts for the six months ended 30 June 2007 and 2006 relate to continuing
activities.
The notes on pages 15 to 17 form part of these interim accounts.
Regal Petroleum plc
Consolidated Balance Sheet as at 30 June 2007
30-Jun-07 30-June-06 31-Dec-06
(unaudited) (unaudited) (audited)
$'000 $'000 $'000
Non-current assets
Intangible assets 23,711 20,487 20,672
Property, plant and equipment 32,168 33,321 29,620
Financial asset - 43,700 -
----------------- --------- --------- --------
55,879 97,508 50,292
Current assets
Inventories 63 40 37
Trade and other receivables 1,759 3,515 3,368
Investments - 117 -
Cash and cash equivalents 9,440 25,478 13,048
----------------- --------- --------- --------
11,262 29,150 16,453
Current liabilities
Trade and other payables (2,601) (3,086) (2,171)
----------------- --------- --------- --------
Net current assets 8,661 26,064 14,282
----------------- --------- --------- --------
Non-current liabilities
Creditors (33) - -
Provisions (1,736) (207) (950)
----------------- --------- --------- --------
(1,769) (207) (950)
----------------- --------- --------- --------
Net assets 62,771 123,365 63,624
----------------- --------- --------- --------
Equity
Called up share capital 12,379 10,934 10,934
Share premium account 265,899 217,640 217,640
Other reserves 18,199 8,294 10,598
Equity reserves - - 49,049
Profit and loss account (233,706) (113,503) (224,597)
----------------- --------- --------- --------
Total equity 62,771 123,365 63,624
----------------- --------- --------- --------
The notes on pages 15 to 17 form part of these interim accounts.
Regal Petroleum plc
Consolidated Cash Flow Statement for the period to 30 June 2007
30-Jun-07 30-June-06 31-Dec-06
(unaudited) (unaudited) (audited)
$'000 $'000 $'000
Notes
Operating activities
Cash generated from operations 5 (844) (2,874) (18,024)
Interest received 263 678 1,183
Interest paid - (1) (2)
Taxation paid (274) (34) (491)
---------------------- ------- --------- --------- --------
Net cash used in operating
activities (855) (2,231) (17,334)
---------------------- ------- --------- --------- --------
Investing activities
Proceeds from sale of intangible
fixed assets - - 4,245
Purchase of intangible assets (2,112) (4,124) (7,966)
Purchase of property, plant and
equipment (1,256) (3,168) (1,926)
---------------------- ------- --------- --------- --------
Net cash used in investing
activities (3,368) (7,292) (5,647)
---------------------- ------- --------- --------- --------
Financing activities
Funds received in connection with
share options 655 - 80
---------------------- ------- --------- --------- --------
Net cash from financing 655 - 80
activities
---------------------- ------- --------- --------- --------
Net decrease in cash and cash
equivalents (3,568) (9,523) (22,901)
Cash and cash equivalents at
beginning of period 13,048 34,916 34,916
Effect of foreign exchange rate
changes (40) 202 1,149
Other non-cash movements - - (116)
---------------------- ------- --------- --------- --------
Cash and cash equivalents at end
of period 9,440 25,595 13,048
---------------------- ------- --------- --------- --------
Regal Petroleum plc
Consolidated Statement of Recognised Income and Expenditure
for the six months ended 30 June 2007
30-Jun-07 30-June-06 31-Dec-06
(unaudited) (unaudited) (audited)
$'000 $'000 $'000
Loss for the financial period (10,438) (3,670) (115,280)
Exchange differences on translation of
subsidiaries and associates 1,593 2,312 4,285
--------------------- --------- --------- --------
Total recognised losses relating to
the financial period (8,845) (1,358) (110,995)
--------------------- --------- --------- --------
Regal Petroleum plc
Consolidated Statement of Changes in Equity
for the six months ended 30 June 2007
Share Share Equity Shares Merger Capital Foreign Profit Total
capital premium share to be reserve contribution exchange and loss
account option issued reserve account
reserve
$'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000
Balance at 31 December 2005 10,934 217,640 1,791 - (3,204) 7,477 9 (109,831) 124,816
Loss for the period - - - - - - - (3,670) (3,670)
Share based credit - - (91) - - - - - (91)
Exchange differences - - - - - - 2,312 - 2,312
Other - - - - - - - (2) (2)
--------------------------- --------- -------- ------- ------- -------- -------- ------ --------- --------
Balance at 30 June 2006 10,934 217,640 1,700 - (3,204) 7,477 2,321 (113,503) 123,365
--------------------------- --------- -------- ------- ------- -------- -------- ------ --------- --------
Balance at 31 December 2005 10,934 217,640 1,791 - (3,204) 7,477 9 (109,831) 124,816
Loss for the period - - - - - - - (115,280) (115,280)
Share based charge - - 387 49,049 - - - - 49,436
Cost of shares vesting - - - - - - - 80 80
Exchange differences - - - - - - 4,285 - 4,285
Transfer for options
exercised or expired - - (147) - - - - 147 -
Other - - - - - - - 287 287
--------------------------- --------- -------- ------- ------- -------- -------- ------ --------- --------
Balance at 31 December 2006 10,934 217,640 2,031 49,049 (3,204) 7,477 4,294 (224,597) 63,624
--------------------------- --------- -------- ------- ------- -------- -------- ------ --------- --------
Loss for the period - - - - - - - (10,438) (10,438)
Issued shares 1,445 48,259 - (49,049) - - - - 655
Share based charge - - 7,337 - - - - - 7,337
Exchange differences - - - - - - 1,593 - 1,593
Transfer for options exercised - - (1,329) - - - - 1,329 -
--------------------------- --------- -------- ------- ------- -------- -------- ------ --------- --------
Balance at 30 June 2007 12,379 265,899 8,039 - (3,204) 7,477 5,887 (233,706) 62,771
--------------------------- --------- -------- ------- ------- -------- -------- ------ --------- --------
Regal Petroleum plc
Notes forming part of the financial statements for the six months ended 30 June
2007
1 Basis of preparation
The interim financial report has been prepared using accounting policies in
accordance with International Financial Reporting Standards (IFRS) for the first
time.
The same accounting policies and methods of computation are followed in the
interim financial report as published by the Company on 19 September 2007 in its
IFRS transition document which is available on the Company's website at
www.regalpetroleum.co.uk. That document sets out Regal's preliminary comparative
2006 financial information for the year ended 31 December 2006 and the six
months ended 30 June 2006, restated under IFRS in US dollars, including
reconciliations of the consolidated income statements, consolidated balance
sheets and consolidated cash flow statements between UK GAAP and IFRS. The
document additionally sets out the Group's balance sheet under IFRS at the
transition date of 1 January 2006, including a reconciliation to the UK GAAP
balance sheet at that date.
The interim financial information for the six months ended 30 June 2007 and 30
June 2006 is unaudited and does not constitute statutory accounts as defined in
section 240 of the Companies Act 1985. The auditors have carried out a review of
the interim financial information for these periods and their report is shown in
page 18.
The information for the year ended 31 December 2006 does not constitute
statutory accounts as defined in section 240 of the Companies Act 1985. A copy
of the statutory accounts for that year has been delivered to the Registrar of
Companies. The auditors' report on those accounts was qualified arising from a
limitation in scope in respect of their comparatives.
2 Revenue
Turnover represents amounts invoiced in respect of sales of oil and gas
exclusive of indirect taxes and excise duties and is recognised on delivery of
product.
Regal Petroleum plc
Notes forming part of the financial statements for the six months ended 30 June
2007
3 Share based (charge)/credit
30-Jun-07 30-June-06 31-Dec-06
(unaudited) (unaudited) (audited)
$'000 $'000 $'000
Share based (charge)/credit (7,337) 91 (387)
--------- --------- --------
The current period share based charge relates to equity awards to new directors,
senior managers and external service providers who have been appointed since mid
2006. This charge has been verified by an independent firm specialising in the
valuation of awards that are within the scope of IFRS 2.
All share based awards of the Group to date have been equity settled as defined
by IFRS 2 Share based payments, therefore there has been no adverse cash impact
to the Company arising from these charges. The fair value of these awards has
been determined at the date of grant of the award allowing for the effect of any
market-based performance conditions. The fair value, adjusted by the Group's
estimate of the number of awards that will eventually vest as a result of
non-market conditions, is expensed uniformly over the vesting period.
The fair values were calculated using a binomial option pricing model with
suitable modifications to allow for employee turnover after vesting and early
exercise. Where necessary this model was supplemented with a Monte Carlo model.
The inputs to the model include: the share price at date of grant; exercise
price; expected volatility; expected dividends; risk free rate of interest; and
patterns of exercise of the plan participants.
4 Loss per ordinary share
The calculation of basic loss per ordinary share has been based on the loss for
the period and 129,608,291 ordinary shares, being the average number of shares
in issue for the period to 30 June 2007.
Regal Petroleum plc
Notes forming part of the financial statements for the six months ended 30 June
2007
5 Reconciliation of operating loss to operating cash flow
30-Jun-07 30-June-06 31-Dec-06
(unaudited) (unaudited) (audited)
$'000 $'000 $'000
Operating loss (10,311) (4,316) (72,271)
Depreciation, amortisation and
impairment charges 549 437 2,943
Exchange differences 54 (247) (388)
Movement in provisions 786 11 754
(Increase)/decrease in inventories (26) (2) 1
Decrease in debtors 468 1,669 1,580
Increase/(decrease) in creditors 299 (335) (195)
Current asset investment - - 116
Share option charge/(credit) 7,337 (91) 387
Exceptional share based charge - - 49,049
--------- --------- --------
Net cash generated from operations (844) (2,874) (18,024)
--------- --------- --------
INDEPENDENT REVIEW REPORT BY THE AUDITORS
TO REGAL PETROLUM PLC
Introduction
We have been instructed by the Company to review the financial information for
the six months ended 30 June 2007 set out on pages 10 to 17 which comprises the
consolidated income statement, consolidated balance sheet, consolidated
statement of recognised income and expenditure, consolidated statement of
changes in equity, consolidated cash flow statement and related notes.
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 AIM rules
which require that the half-yearly report must be presented and prepared in a
form consistent with that which will be adopted in the AIM company's annual
accounts having regard to the accounting standards applicable to such annual
accounts.
Review work performed
We conducted our review in accordance with guidance contained in Bulleting
1999/4 issued by the Auditing Practices Board. 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 Auditing Standards and therefore provides a lower level of
assurance than an audit. Accordingly we do not express and 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 2007.
UHY Hacker Young LLP
Chartered Accountants
London
26 September 2007
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