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Paladin Resources (PLR)

  Print      Mail a friend       Annual reports

Wednesday 19 March, 2003

Paladin Resources

Final Results

Paladin Resources PLC
19 March 2003

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

            Preliminary Results for the year ended 31 December 2002

Paladin, the oil and gas exploration and production company with interests in
the UK, Danish and Norwegian sectors of the North Sea, Indonesia and Tunisia
announces its preliminary results for the year ended 31 December 2002


  • Record results:

-  Turnover increased 63 per cent to £170.2 million (2001: £104.7 million)

-  Pre-tax profit increased 75 per cent to £66.0 million (2001: £37.8 million)

-  Profit after tax increased 87 per cent to £20.1 million (2001: £10.8 million 
   as restated)

-  Earnings per share increased 59 per cent to 7.76p (2001: 4.88p as restated)

-  Proposed final dividend of 1p per share to give a total for the year of 1.5p 
   (2001: nil)

-  Cash flow from operations increased 58 per cent to £96.3 million 
   (2001: £61.0 million)

  • Operational highlights:

-  Production increased 60 per cent to 29,117 boepd (2001: 18,255 boepd)

-  Average price realised increased to $23.85 per boe (2001: $22.36 per boe)

-  Exploration success in Tunisia

-  Proven and probable reserves base increased 72 per cent to 108.2 MMboe

  • Corporate activity:

- Targeted acquisition programme significantly strengthened portfolio of assets

- Series of successful acquisitions in UK, Norwegian and Danish sectors of the 
  North Sea

- Announced $153 million acquisition of assets from BP and Amerada Hess - 
  completion of transaction scheduled for Q2 2003

- Sale of West Texas interest for $5.4 million completes exit from USA

  • Production and reserves outlook:

- With completion of agreed 2003 acquisitions by mid-year, production is 
  expected to average circa 45,000 boepd in 2003 against 29,117 boepd in 2002

- Production and reserves targets increased to 100,000 boepd and 250 MMboe 
  respectively in five years

Malcolm Gourlay, Chairman of Paladin, commented:

'2002 has been an excellent year for Paladin with a record financial
performance, the completion of a number of significant acquisitions and positive
results from the Company's exploration programme.  Reflecting the Group's
success in meeting its previous targets through a combination of acquisitions
and exploitation of existing assets, we have set demanding new production and
reserves targets and enter 2003 with a strong platform from which to deliver on
the Company's aggressive growth plans.'

                                                                   19 March 2003

Paladin Resources plc
Roy A. Franklin, Chief Executive                              Tel: 020 7024 4500

College Hill
James Henderson/Phil Wilson-Brown                             Tel: 020 7457 2020

Chairman's Statement

I am pleased to report that 2002 has been an excellent year for Paladin with
substantial progress made in the Company's development and another set of record
operating and financial results.

Production from existing assets was complemented by a significant contribution
from assets acquired during the course of the year, with annual production being
more than 50 per cent higher than in 2001. Commodity prices also remained high,
resulting in a strong financial performance for the year and a robust year-end
financial position.

2002 was also a very active year on the business development front. In the UK,
Norwegian and Danish sectors of the North Sea, the Group increased its exposure
to several of its existing assets either through direct negotiation with other
joint-venture partners or through the exercise of pre-emptive rights. For
limited additional management cost and effort, the Group now holds larger stakes
in a number of its assets which are more material in the context of a growing
corporate portfolio.

The Group also acquired significant stakes in two new assets: a 20 per cent
stake in the Brage Field, offshore Norway, and a 30.82 per cent stake in the
Ross Field, in the UK sector of the North Sea.

In December, the Company announced the proposed acquisition of a package of
operated UKCS interests from BP and Amerada Hess for $153 million. This
transaction, which is expected to complete towards the end of the second
quarter, is a major step forward in the development of your Company.

As the final stage in its rationalisation of those assets originally held by
Pittencrieff Resources plc, the Company recently announced the disposal of its
remaining interests in West Texas for $5.4 million. This sale effectively brings
the Group's involvement in onshore US oil and gas production to an end.

Exploration is an integral part of the Company's strategy, complementing the
Group's emphasis on acquisition and subsequent exploitation. Good progress was
made during the year in building a broader portfolio of exploration interests.
In the UK, the Group successfully applied for three licences in the 20th
Licensing Round and acquired exploration acreage adjacent to the Ross and Blake
Fields. In Norway, terms were agreed to acquire exploration and appraisal
interests from Statoil and Norsk Hydro. Last, but by no means least, in Tunisia
the Group had its first exploration success with discovery of oil in the Adam-1

In support of this active business development programme and to provide headroom
for further growth, the Company completed a successful debt refinancing exercise
with a new $250 million syndicated revolving credit facility led by J.P. Morgan
plc in August and announced a £42 million placing and open offer in December,
which was completed in early January 2003.


A substantial increase in production combined with continuing high oil prices
led to operating cash flow (before interest, tax and depreciation but after
administration costs and working capital movements) of £96.3 million (2001:
£61.0 million) and profit before tax of £66.0 million (2001: £37.8 million). Net
profit for the year almost doubled to £20.1 million (2001: £10.8 million as
restated), resulting in earnings per share of 7.76 pence (2001: 4.88 pence as


After due and careful consideration of the scale and diversity of the Group's
cash flow and future prospects, your Board decided to commence payment of a
dividend at the interim stage in 2002. It is intended that the level of payment
will be progressive in real terms but also sustainable in a lower oil price

The Board will recommend payment of a final dividend of 1.0 pence per share for
2002 to shareholders for approval at the Annual General Meeting, making a total
dividend payment for 2002 of 1.5 pence per share. If approved by shareholders,
the final dividend will be paid on 23 May to those shareholders on the register
on 25 April 2003.


Net production for the year totalled 9.9 MMbbl of oil and NGL and 4.6 Bscf of
gas, a combined average of 29,117 boepd, which is a record for Paladin and
represents an increase of 60 per cent from 18,255 boepd in 2001.

Overall, the Group invested £26.4 million on production and development projects
(2001: £11.4 million): £11.7 million in Norway, £1.4 million in Denmark, £6.9
million in the UK, £6.0 million in Indonesia and £0.4 million in the USA.


The Group invested £3.6 million on exploration activities in the UK, Norway,
Denmark, Indonesia, Romania and Tunisia during the year (2001: £5.6 million).
The Group's exploration portfolio in the UK and Norway was augmented through
licensing rounds and acquisitions, and there was an encouraging oil discovery in
southern Tunisia.


Proven and probable reserves (on an entitlement basis) at 31 December 2002 were
108.2 MMboe compared to 63.1 MMboe at 31 December 2002, a 72 per cent increase.
Net positive revisions of 12.0 MMboe replaced 113 per cent of production in the
year. Acquisitions in the UK, Norway and Denmark added a further 43.7 MMboe to
the Group's reserve base.

Oil and gas reserves constitute 83 per cent and 17 per cent respectively of the
overall reserve base.

On a working interest basis, Group reserves increased to 127.6 MMboe (2001: 80.9

Board Positions

Daniel Stewart-Roberts was appointed as Finance Director and joined the Board on
1 August 2002. A Chartered Accountant, he was Accounting and Tax Director of MOL
Rt., the Hungarian integrated oil and gas business, prior to joining Paladin.

Given the rapid growth in the Group's asset base over the last four years, and
with the appointment of Daniel Stewart-Roberts, Cuth McDowell, who previously
had board responsibility for financial as well as commercial and business
development activities, is now focussing on the latter.

As announced recently, Dr George Watkins CBE joined the Board as an independent
director on 21 February 2003. He joined the Conoco Group in 1973 and held
several senior appointments both in the UK and abroad, finally serving as
Chairman and Managing Director of Conoco (UK) Ltd. from 1993 until his
retirement in 2002. He is also a past President of the UK Offshore Operators

Corporate Governance Developments

There have been a number of important developments in corporate governance
recently, notably the recommendations contained in the Higgs and Smith Reports,
which were published in January 2003. The contents of these reports have been
noted and steps will be taken to ensure early compliance, or to identify reasons
why compliance is not appropriate for your Company, once the revised Combined
Code has been finalised and published.

Strategy and Outlook

Paladin's strategy is to grow through both acquisition and exploration with the
objective of securing reserves and production on a commercially attractive
basis. The natural sellers of interests purchased by Paladin are major oil
companies for whom the interests are no longer material, in terms of either the
scale of future investment or potential rewards. We remain confident that there
will be opportunities to acquire assets in the coming months on terms that will
contribute to the further development of the Group for the benefit of our

Notwithstanding the current oil price and the political uncertainties in the
Middle East, we continue to plan and evaluate acquisition opportunities using a
long-run $ per barrel Brent oil price in the mid-teens in real 2000 terms.
Consistent application of our strategy and discipline in the evaluation and
pricing of acquisition opportunities have served the Group well to date, and
will continue to do so in the future.

The Group's reserves base and production have grown substantially over the past
year. The $153 million proposed acquisition of BP's and Amerada's interests in
the UKCS Montrose, Arbroath and Arkwright Fields, together with related
discoveries and exploration acreage, was announced on 12 December. This is a
major step for the Group not only in terms of the size of the transaction, but
also in that it will involve Paladin taking on operatorship of significant
interests for the first time. Good progress in securing the necessary regulatory
and partner approvals has been made and I anticipate that completion of the
acquisition will occur by the end of the second quarter.

Production has averaged approximately 37,000 boepd for 2003 to date, and
reserves at the beginning of the year were 108.2 MMboe. Completion of the
acquisition of the BP and Amerada interests will result in the Group
substantially exceeding the targets set in 2001 to increase production and
reserves to 35,000 boepd and 120 MMboe respectively by 2004. In the light of the
expected performance from those interests and the Group's other assets, the
Company has set new targets for continued growth, namely to increase production
and reserves to 100,000 boepd and 250 MMboe respectively in five years.

2002 has been a very successful year for Paladin and your Company is well
positioned to make further progress in 2003. The achievements to date are due in
large part to the professionalism, commitment and hard work of the executive
team and their staff. I would like to take this opportunity on behalf of
shareholders to thank them all for their very substantial contribution to the
Company's success over the last twelve months.

J. Malcolm Gourlay
19 March 2003

Operational Review

Paladin's 2002 production amounted to 9.86 MMbbl of oil and NGL and 4.6 Bscf of
gas from field interests in the UK, Norwegian and Danish sectors of the North
Sea, Indonesia and the USA, an average of 29,117 boepd. The geographic balance
of the Group's portfolio continued to shift as a result of acquisitions in
Norway, Denmark and the UK during 2001 and 2002: 45 per cent came from Norway
(2001: 39 per cent), 23 per cent from Denmark (2001: 13 per cent), 10 per cent
from the UK (2001: 11 per cent), 21 per cent from Indonesia (2001: 35 per cent)
and the balance of 1 per cent from the USA (2001: 2 per cent). Exploration
activity continued in the UK, Norway, Denmark, Indonesia, Romania and Tunisia.
Further details are given below for each region.

United Kingdom

Bittern (Paladin 2.4%)

Gross production for the year from the Bittern Field averaged 53,000 bpd of oil
and NGL and 51 MMscfd of gas (1,488 boepd net to Paladin). The field has
continued to perform in line with initial expectations and the production
efficiency of the Triton FPSO has continued to improve.

Blake (Paladin 2.4%)

Gross production for the year from the Blake Field averaged 40,300 bopd (967
bopd net to Paladin). Reservoir performance during 2002 was slightly better than
expected, resulting in the postponement of the additional water injector which
was scheduled to be drilled during the year.

The development plan for the flank area of the field was sanctioned by partners
and approved by the DTI. Drilling of the additional two producers and one water
injector commenced in March 2003. First oil is expected by September 2003.

Ross (Paladin 30.82%)

Paladin acquired its interest in the Ross Field through two transactions: 14.49
per cent from Kerr-McGee and 16.33 per cent from Agip. Paladin's annualised net
production for 2002 from Ross amounted to 293 bopd and 0.6 MMscfd of gas. Gross
production from the field at the beginning of 2003 was approximately 8,200 bopd
and 15 MMscfd of gas. An infill drilling and workover programme is planned for
2003 to improve the recovery efficiency of the reservoir and maintain field

Through its interest in the Ross Field, Paladin also benefits from tariff income
from the processing and transportation of Blake production through the Bleo Holm
FPSO and, as a result, has increased exposure to the performance of the Blake

Goldeneye (Paladin 7.5%)

Government approval for the development of the Goldeneye Field was given in
March 2002; at the same time the Company announced the acquisition of a further
22.5 per cent interest in Block 20/4b, thereby increasing its stake in the
Goldeneye Field to 7.5 per cent, subject to redetermination. Paladin has been
approved as the operator of Block 20/4b.

Development of this gas and condensate field continued on schedule and under
budget during 2002. All the main contracts have been awarded and construction of
the wellhead platform and onshore processing facilities has commenced. First gas
from the field is currently expected in the third quarter of 2004.

Montrose, Arbroath, Arkwright and Carnoustie (Paladin 58.97%) and Wood (Paladin

In December 2002, Paladin announced that it had entered into sale and purchase
agreements to acquire the interests of BP and Amerada Hess in Blocks 22/17, 22/
18, 22/22a and 22/23a including the Montrose, Arbroath and Arkwright Fields and
the Carnoustie and Wood discoveries. On completion, which is expected to occur
towards the end of the second quarter of 2003 following partner and regulatory
approvals, Paladin will become operator of the fields.

The fields are currently producing approximately 20,000 bopd which is exported
through the Forties pipeline. There are numerous investment opportunities,
including infill drilling and workovers in the Montrose and Arbroath Fields,
infill drilling in the Arkwright Field and development of the Wood discovery. It
is anticipated that these investments will result in increased short term
production, prolonged field life and increased ultimate recovery.

An office has been established in Aberdeen and good progress has already been
made in the transition to Paladin operatorship. The Company's operations
contractors, Petrofac Production Services and Helix RDS, are providing valuable
assistance in this process.


Paladin was awarded a 20 per cent interest in each of Blocks 15/18b, 15/19b and
15/28c in the 20th Licensing Round. An exploration well to test the Fox prospect
in Block 15/18b was drilled in February 2003 but was plugged and abandoned as a
dry hole.

As part of the transactions with Kerr-McGee and Agip relating to their interests
in the Ross Field, Paladin also acquired a 20 per cent interest in each of
exploration Blocks 13/16a, 13/21a and 13/22b, and a 15 per cent interest in
Block 13/23a.

Work is currently underway in a number of joint venture study groups with a view
to the Group applying for exploration acreage in the 21st Licensing Round in May


Njord (Paladin 15%)

Paladin increased its stake in the Njord Field to 15 per cent following the
acquisition of the 7.5 per cent Norwegian State interest, which was completed in
June 2002.

Gross production from Njord averaged 32,122 bopd in 2002 (4,058 bopd annualised
net to Paladin).

Drilling activity recommenced in the field in December 2002 with the spudding of
the horizontal tri-lateral well A-10. If successful, this well will
significantly increase the production potential of the field and will improve
the reservoir management and recovery optimisation.

Veslefrikk (Paladin 27%)

Paladin's stake in the Veslefrikk Field increased by 18 per cent to 27 per cent
following the acquisition of TotalFinaElf's interest, which was announced in
November 2002.

Gross production from Veslefrikk averaged 28,900 bpd of oil and NGL and 16
MMscfd of gas during 2002 (3,270 boepd annualised net to Paladin).

A workover and infill drilling programme, which should maintain production at
current levels throughout 2003, began in December 2002. Paladin is actively
working with Statoil, the operator of Veslefrikk, to identify opportunities for
reducing operating costs in the later stages of field life.

Huldra (Paladin 0.5%)

Gross production from Huldra in 2002 averaged 255 MMscfd and 21,900 bpd of
condensate (323 boepd net to Paladin).

Brage (Paladin 20%)

Paladin acquired a 20 per cent interest in the Brage Field from the Norwegian
State in June 2002.

Gross production from the field in 2002 averaged 38,289 bpd of oil and
condensate and 16 MMscfd of gas. Paladin's annualised net production averaged
5,271 bpd of oil and condensate and 1.5 MMscfd of gas (5,526 boepd).

Results from an infill drilling and workover programme and reservoir performance
have both exceeded expectations since the asset was acquired; this has led to an
increase in booked remaining reserves.


The Group entered into an agreement with Norsk Hydro in mid-2002 to acquire a 35
per cent interest in Block 1/2 and a 20 per cent interest in Block 7/1, subject
to regulatory approvals. Block 1/2 contains an extension of the UKCS Blane Field
together with several prospects and leads at Tertiary, Jurassic and Triassic
levels. Paladin has recently been pre-approved as an operator in Norway
following submissions to the relevant authorities during 2002 and, subject to
Government approval in respect of Block 1/2, would anticipate becoming the
operator of Tertiary horizon activity in the near future.

The Group has also entered into an agreement with Statoil to acquire its 30 per
cent interest in Block 1/2 and its 25 per cent interest in each of Blocks 4/4
and 4/5.

Paladin has applied for a number of exploration blocks in the North Sea
Licensing Round 2002. Awards are expected to be made in April 2003.


Siri/Stine (Paladin 30%)

The Group increased its interests in the Siri and Stine Fields in July 2002 by
acquiring additional equity through the partial exercise of its pre-emptive
rights in respect of the sale by Statoil of its interests in the fields.

Gross production from the fields in 2002 averaged 25,600 bopd (6,770 bopd
annualised net to Paladin).

Both the Siri and Stine-2 Fields have continued to out-perform initial
expectations. A vertical appraisal well drilled to test the southern extension
of the Stine-2 Field yielded positive results. An additional well is now being
drilled from the Siri platform to develop this area.

Following the necessary approvals during 2002, the development of the Stine-1
Field, as a subsea satellite to the Siri platform, is now well underway. First
production is expected towards the end of 2003.

The nearby Nini and Cecilie Fields are in the process of being developed as
satellites to the Siri Field. First production from these two fields, with
estimated reserves of 65 million barrels, is scheduled for late 2003. Although
the Group has no direct stake in these fields, it will benefit from their
development through the sharing of Siri operating costs and the receipt of
tariff income.


Drilling of the Sofie prospect, some 20 km to the north east of the Siri Field,
is planned for early 2003 following completion of the Stine-2 development well.
If successful, it could be tied back quickly to the Siri facilities.


South East Sumatra (Paladin 7.48%)

Gross production from the PSC averaged 114,000 bopd during 2002 (Paladin net
entitlement 4,521 bopd). The production decline has continued to be slowed due
to a programme of infill drilling and incremental field developments.

The plan of development for gas reserves in the PSC area has been approved. This
will result in the development of 365 Bscf of gas for sale to PGN at a plateau
rate of 100 MMscfd. This has allowed the Group to book its entitlement share of
these reserves.

Offshore North West Java (Paladin 2.45%)

Gross production from the PSC averaged 49,970 bpd of oil and NGL and 261 MMscfd
of gas (Paladin net entitlement 1,479 boepd).

A programme of infill drilling and incremental gas developments has resulted in
a slowing of the oil production decline and maintenance of gas production
potential. Further scope exists for increased gas sales through the
renegotiation of existing sales contracts.


The Ngawi-1 exploration well was drilled in the southern part of the Blora PSC.
The well was plugged and abandoned as a dry hole. Additional seismic will be
acquired in the contract area during 2003 before further drilling plans can be

United States

Paladin's total net production for the year averaged 329 boepd.

The Group sold its interest in the Fort Chadbourne Field in January 2003 to St.
Mary Energy Company and as a result no longer has any producing interests in the
United States.


Midi and Pelican (Paladin 80%)

The licence for the blocks has been extended for a further two years whilst
technical studies and efforts to bring in another partner continue.


Borj el Khadra (Paladin 10%)

The Adam-1 well, drilled in July 2002, discovered oil and gas in Silurian
sandstones. The well has subsequently been fully tested and completed as a
production well. An initial development plan, based on two wells producing to
Agip's existing production facilities some 12 km away, has been submitted to the
Tunisian authorities. Several analogous leads and prospects have been identified
in the permit area and it is planned to test one of these during the course of
2003. Adam reserves will be booked once the development plan has received formal
approval. The field is expected to come on stream in mid-2003.

Roy A. Franklin
Chief Executive
19 March 2003

Financial Review

Production and profits

Group production increased by 60 per cent to 29,117 boepd (2001: 18,255 boepd).
The average realised price for the year (excluding the effect of hedging)
increased to $23.85 per boe (2001: $22.36 per boe), although this positive
movement was substantially offset by the weaker average US dollar/sterling
exchange rate of $1.50/£1 (2001: $1.44/£1). Tariff income rose to £2.6 million
(2001: £0.5 million). Overall, turnover increased by 63 per cent to £170.2
million (2001: £104.7 million).

Average production costs, before taking into account the benefit of tariff
income, increased to $9.18 per boe (2001: $7.75 per boe). This rise was due in
part to higher oil price related production taxes and to increased insurance

Depletion and depreciation decreased to $4.53 per boe (2001: $4.90 per boe),
reflecting the lower unit acquisition costs of the UK and Scandinavian interests
purchased during the year. A write-off of exploration and appraisal expenditures
of £1.0 million was made in respect of Romania.

Administrative costs were almost unchanged at £2.4 million (2001: £2.5 million),
whilst net interest expense increased slightly to £3.7 million (2001: £3.5

Profit before tax was 75 per cent higher at £66.0 million (2001: £37.8 million),
principally reflecting strong production growth.


Restatement of prior periods

The Group adopted FRS19 during the year. The effect of this standard is a move
from partial to full provisioning for deferred tax. The Group has elected to
make provision on the more conservative undiscounted basis. The implementation
of the standard has resulted in a prior year adjustment, which has decreased
shareholders' funds and increased provisions of the Group by £10.9 million at 1
January 2002. Comparatives have been restated and consequently the retained
profit for the year ended 31 December 2001 has been reduced by £7.5 million to
£10.8 million.

Effective tax rate

The Group's overall effective tax rate on the revised basis was 69.5 per cent
(2001: 71.5 per cent as restated). The decrease is due primarily to the
increased proportion of production arising in Denmark, taxed at a rate of 30 per
cent. This is partially offset by increased Norwegian production. The Group's
effective tax rate is adversely influenced by the increase with effect from 17
April 2002 of the rate of tax applying to UKCS profits from 30 per cent to 40
per cent. Although the cash flow effect of this increase is deferred by the
acceleration of capital allowances introduced at the same time, Paladin believes
the increase to be ill-conceived as it engenders fiscal uncertainty, which will
erode the stability vital for industry and investors when conducting activities
in a mature hydrocarbon province such as the UKCS.

Profit after taxation

As a consequence of the above, profit after taxation for the year was 87 per
cent higher at £20.1 million (2001: £10.8 million as restated).


The Company paid an interim dividend of 0.5 pence per share in October. The
Board will recommend payment of a final dividend of 1.0 pence per share to
shareholders for approval at the Annual General Meeting, bringing the total
dividend for 2002 to 1.5 pence per share.

Cash flow and net debt

Cash flow from operating activities before movements in working capital was 55
per cent higher at £103.1 million (2001: £66.4 million). Working capital
requirements have increased in line with the growth in the Group's activities,
the £3.8 million increase in stocks and the £16.9 million increase in debtors
being only partially offset by the £13.9 million increase in creditors. Taking
these movements into account, cash flow from operating activities amounted to
£96.3 million (2001: £61.0 million), an increase of 58 per cent. Net interest
paid increased to £4.1 million (2001: £3.5 million), while taxation paid rose to
£27.5 million (2001: £14.5 million).

Of the total ongoing capital expenditure of £30.2 million, £25.9 million was
incurred on production and development, £3.6 million on exploration and
appraisal and £0.7 million on other items.

Payments in respect of the acquisition of oil and gas fixed assets related to
the purchase of production and development assets in the UK, Norwegian and
Danish sectors of the North Sea in the amounts (inclusive of adjustments) of
£25.8 million, £26.0 million and £10.4 million respectively. These were partly
offset by the receipt of $9 million (£6 million) resulting from an out-of-court
settlement of legal proceedings brought by the Company alleging breach of an
area of mutual interest clause in the joint operating agreement for the South
East Sumatra PSC. This receipt has been accounted for as a reduction in the
carrying value of the Group's Indonesian interests.

Financing cash flows include the receipt of £9.1 million from the sale and
leaseback of the Njord Field storage tanker. This has been accounted for as a
finance lease and no profit has been recognised on the disposal of the tanker,
in accordance with UK accounting practice.

The dividend payment of £1.3 million represents the interim dividend of 0.5
pence per share.

Year-end net debt increased to £61.6 million (2001: £44.4 million), including
finance lease liabilities of £8.1 million, as a consequence of the acquisitions
made during the year, resulting in a debt to debt-plus-equity ratio at 31
December 2002 of 37 per cent.

In mid-August, the Company signed a $250 million senior secured revolving credit
facility with a syndicate of major international banks led by J.P. Morgan plc.
The facility was used to refinance existing borrowings.

Issue of additional share capital

On 12 December 2002, the Company announced its intention to raise additional
share capital by way of a placing and open offer on the basis of one new share
for every four existing shares in order partially to finance the acquisition of
BP's and Amerada Hess's interests in the Montrose, Arbroath and Arkwright Fields
and the Carnoustie and Wood discoveries. The new shares were admitted to trading
on 10 January 2003 and the proceeds of the issue, which amounted to £42.0
million (£40.4 million net of expenses), have initially been applied to reduce
existing bank debt.

Risk management

The main economic factors affecting the Group's results are the price of oil,
which is denominated in US dollars, and the sterling/US dollar exchange rate, as
the Group reports its results in sterling.

Commodity price risk

The Group's policy is to hedge oil and gas price exposure up to a maximum of 50
per cent of forecast production (excluding production from Norway and Indonesia,
where price risk is already mitigated by relatively high tax rates).

In respect of 2002, the Group entered into the following oil price swaps (based
on Dated Brent): 100,000 bbl per month for January to June at an average price
of $24.11 per bbl, 100,000 bbl per month for July to December at an average
price of $22.50 per bbl, 25,000 bbl per month from August to December at $25.00
per bbl and 25,000 bbl per month from October to December at $27.32 per bbl.
These volumes represent 42 per cent of Group oil production from the Danish and
UK North Sea in the year and resulted in a loss of £1.4 million.

Further swaps have been entered into for the period from 1 January 2003 to 31
December 2004 as detailed below, representing approximately 40 per cent of the
Group's projected lower taxed production over this period.

                                                 Entered into in 2002          Entered into since year end
Period                                                  Average price                        Average price
                                                bbl         $ per bbl               bbl          $ per bbl

2003                                      3,300,000             23.96           450,000              24.85
2004                                      1,800,000             22.54           750,000              23.55

Currency risk

The Group seeks to match the currency of its borrowings with that of the income
generated by the assets to which they relate, in order to minimise exposure to
adverse exchange rate movements. Accordingly, at 31 December 2002, 79 per cent
of bank debt was denominated in US dollars and 21 per cent in sterling.

The Group also sells US dollars and purchases Norwegian and Danish kroner
forward as income is generated by its Scandinavian assets to cover tax
liabilities in those currencies.

Interest rate risk

The Group entered into interest rate swaps to fix the interest rate (excluding
margin and other bank fees) on borrowings of $12.5 million at 2.59 per cent for
the period from December 2001 to December 2002 and on a further $12.5 million at
2.11 per cent from December 2001 to June 2002 and at 2.06 per cent from June
2002 to December 2002. In addition, the interest rate on borrowings of £6
million was fixed from June 2002 to December 2002 at 4.45 per cent. These swaps
increased net interest expense for the year by £0.2 million. There were no
interest rate swaps outstanding at 31 December 2002.

Daniel Stewart-Roberts
Finance Director
19 March 2003

Production and Reserves

Production                                                    2002                        2001
Oil                                                     Mbbl          bopd          Mbbl          bopd

UK                                                       928         2,543           654         1,792
Scandinavia                                            7,012        19,210         3,379         9,257
Indonesia                                              1,889         5,175         2,066         5,660
USA                                                       32            87            58           159
Total                                                  9,861        27,015         6,157        16,868

Gas                                                     Bscf         MMscfd           Bscf         MMscfd

UK                                                      0.65           1.80           0.46           1.26
Scandinavia                                             1.61           4.40           0.30           0.82
Indonesia                                               1.81           4.97           1.68           4.60
USA                                                     0.53           1.45           0.60           1.64
Total                                                   4.60          12.61           3.04           8.32

                                                        Mboe          boepd           Mboe          boepd

Total oil equivalent production                       10,628         29,117          6,664         18,255

Proven and Probable Reserves at 31 December                                               2002          2001
Oil                                                                                      MMbbl         MMbbl

UK                                                                                       10.49          4.04
Scandinavia                                                                              52.21         21.74
Indonesia                                                                                26.70         28.23
USA                                                                                       0.47          0.50
Total oil reserves                                                                       89.87         54.51

Gas                                                                                       Bscf          Bscf

UK                                                                                       51.88         20.61
Scandinavia                                                                              10.81          6.84
Indonesia                                                                                43.26         19.79
USA                                                                                       3.95          4.48

Total gas reserves                                                                      109.90         51.72

                                                                                         MMboe         MMboe

Total reserves oil equivalent                                                           108.19         63.13

Notes to Production and Reserves:

 1. Oil includes NGL.

 2. Quantification of reserves is based on the Company's own estimates supported
    by operators' and third party experts' estimates. The reserves in the table
    above represent the Group's entitlement to commercial proven plus probable
    reserves, as defined in the SORP. On a working interest basis, Indonesian
    reserves at 31 December 2002 would increase by 19.4 MMboe to 53.3 MMboe and
    total Group reserves would increase to 127.6 MMboe.

 3. Quantities of oil equivalent are calculated on an energy equivalent basis for
    the purpose of the above tables and for depreciation and depletion
    calculations. A gas-to-oil conversion factor of 6,000 standard cubic feet of
    natural gas per barrel of oil equivalent is used.

 4. The following movements in proven and probable reserves occurred in 2002,
    with comparative figures provided for 2001:

                                                                        2002                2001
                                                                       MMboe               MMboe

Reserves at 1 January                                                  63.13               38.15
Produced during the year                                             (10.63)              (6.66)
Acquisitions                                                           43.69               26.32
Disposals                                                                  -              (1.03)
Revisions to estimates                                                 12.00                6.35

Reserves at 31 December                                               108.19               63.13

Group Profit and Loss Account
for the year ended 31 December                                                              2002            2001
                                                                        notes               £000   (as restated)
Turnover                                                                                 170,247         104,713

Cost of sales
Production costs                                                                        (65,054)        (35,846)
Depletion and depreciation                                                              (32,068)        (22,664)
Exploration expenditure written off                                                        (982)         (2,487)
                                                                                        (98,104)        (60,997)
Gross profit                                                                              72,143          43,716
Administrative expenses                                                                  (2,431)         (2,462)
Operating profit                                                               4          69,712          41,254
Net interest expense                                                                     (3,738)         (3,498)
Profit on ordinary activities before taxation                                             65,974          37,756
Taxation                                                                                (45,825)        (26,987)
Profit on ordinary activities after taxation                                              20,149          10,769
Dividend                                                                       3         (4,449)               -

Retained profit for the year                                                              15,700          10,769

Earnings per share                                                             2
Basic                                                                                      7.76p           4.88p
Diluted                                                                                    7.65p           4.87p

Dividend per ordinary share                                                    3           1.50p               -

Group Statement of Total Recognised Gains and Losses
for the year ended 31 December                                                             2002          2001
                                                                                           £000 (as restated)
Profit for the year                                                                      20,149        10,769
Foreign exchange differences                                                           (11,022)            68
Total recognised gains for the year                                                       9,127        10,837
Prior year adjustment                                                                  (10,935)
Total recognised losses since last accounts                                             (1,808)

Group Balance Sheet
at 31 December                                                                               2002            2001
                                                                                             £000   (as restated)
Fixed assets
Tangible fixed assets                                                                     233,270         161,154
Investments                                                                                   117             253
                                                                                          233,387         161,407
Current assets
Stock                                                                                       7,543           1,595
Debtors                                                                                    30,251          14,958
Cash at bank and in hand                                                                    1,164               -
                                                                                           38,958          16,553
Creditors: amounts falling due within one year                                           (73,176)        (18,460)
Net current liabilities                                                                  (34,218)         (1,907)
Total assets less current liabilities                                                     199,169         159,500
Creditors: amounts falling due after one year                                            (61,731)        (44,379)
Provisions for liabilities and charges                                                   (31,447)        (14,152)
Net assets                                                                                105,991         100,969
Capital and reserves
Called up share capital                                                                    25,426          25,300
Share premium                                                                              44,356          44,138
Profit and loss account                                                                    36,209          31,531
Equity shareholders' funds                                                                105,991         100,969

The financial statements were approved by the Board of Directors on 18 March
2003 and signed on its behalf by:

J M Gourlay                   D J B Stewart-Roberts
Chairman                      Finance Director

Group Cash Flow Statement
for the year ended 31 December                                       notes                 2002             2001
                                                                                           £000             £000
Cash flow from operating activities                                                      96,275           60,999
Returns on investments and servicing of finance

Interest received                                                                           437               60
Interest paid (including interest of £140,000 on finance leases)                        (4,489)          (3,519)
Net cash outflow from returns on investment and servicing of finance                    (4,052)          (3,459)
Taxation                                                                               (27,481)         (14,486)

Capital expenditure and financial investments
Ongoing capital expenditure (excludes capitalised interest)                            (30,179)         (16,619)
Acquisition of oil and gas fixed assets                                                (62,189)         (70,550)
Amount received in settlement of legal proceedings relating to oil
and gas interests                                                                         6,000                -
Proceeds from sale of oil and gas interests and rights                                        -            1,811
Investment in own shares                                                                  (486)            (453)
Net cash outflow from capital expenditure                                              (86,854)         (85,811)

Equity dividend paid                                                                    (1,264)                -

Net cash outflow before financing                                                      (23,376)         (42,757)


Issue of shares                                                                             344           21,147

Increase in borrowings                                                                  133,458           47,934
Proceeds from lease financing                                                             9,052                -
Decrease in borrowings                                                                (117,830)         (27,429)
Finance lease payments                                                                    (420)                -
Net cash inflow from financing                                                           24,604           41,652
Increase/(decrease) in cash in the year                                                   1,228          (1,105)
Reconciliation of net cash flow to movement in net debt

Increase/(decrease) in cash in the year                                                   1,228          (1,105)

Increase in borrowings                                                                (133,458)         (47,934)
Proceeds from lease financing                                                           (9,052)                -
Decrease in borrowings                                                                  117,830           27,429
Payment of lease financing                                                                  420                -
Change in net debt resulting from cash flows                                           (23,032)         (21,610)
Exchange differences                                                                      5,821            (433)
Movement in net debt in the year                                                       (17,211)         (22,043)
Net debt at the start of the year                                                      (44,408)         (22,365)
Net debt at the end of the year                                                        (61,619)         (44,408)

(forming part of the financial statements)

1          The financial information set out above does not constitute the
Company's statutory accounts for the years ended 31 December 2002 or 2001 but is
derived from those accounts. Statutory accounts for 2001 have been delivered to
the Registrar of Companies, and those for 2002 will be delivered following the
Company's Annual General Meeting.  The auditors have reported on these accounts;
their reports are unqualified and did not contain statements under section 237
(2) or (3) of the Companies Act 1985.

2          Earnings per share

The basic and diluted earnings per share are calculated on a profit after tax of
£20,149,000 (2001: profit of £10,769,000 as restated) and, for the basic
earnings per share, the weighted average number of 259,631,356 ordinary shares
(2001: 220,457,784 shares).

The weighted average number of shares for the purpose of the
calculation of the diluted earnings per share is calculated as follows:

                                                                               2002             2001
                                                                            thousands       thousands
Basic weighted average number of shares                                       259,631         220,458
Dilutive potential ordinary shares:
Employee share options                                                          3,665             760
                                                                              263,296         221,218

The above calculations of basic and diluted earnings per share for both 2002 and
2001  have been retrospectively adjusted to take account of the bonus element of
the January 2003 one for four rights issue at 66 pence per ordinary share.

3          Dividend

An interim dividend of 0.5 pence per share was paid in October 2002 and the
Board recommend the payment of a final dividend of 1.0 pence per share. If
approved by shareholders, the final dividend will be paid on 23 May to those
shareholders on the register on 25 April 2003. The interim dividend paid was
£1,264,000 (2001: nil) and the proposed final dividend is £3,185,000 (2001:

4          Reconciliation of operating profit to operating cash flows

                                                                                    2002             2001
                                                                                    £000             £000
Operating profit                                                                  69,712           41,254
Depreciation and depletion charge                                                 32,068           22,664
Exploration expenditure written off                                                  982            2,487
Increase/(decrease) in provisions                                                    376              (9)
Operating cash flow before movement in working capital                           103,138           66,396
Increase in stocks                                                               (3,827)            (973)
Increase in debtors                                                             (16,940)          (7,872)
Increase in creditors                                                             13,904            3,448
Net cash inflow from operating activities                                         96,275           60,999

5          Post balance sheet events

On 12 December 2002, the Company announced that it had entered into sale and
purchase agreements with BP and Amerada Hess to acquire their interests in
Blocks 22/17, 22/18, 22/22a and 22/23a in the UKCS, including the Montrose,
Arbroath and Arkwright Fields and the Carnoustie and Wood discoveries. On
completion, which is expected to occur towards the end of the second quarter of
2003 following partner and regulatory approvals, Paladin will become operator of
the fields. A deposit of $15 million was paid in January 2003 in respect of
these acquisitions.

On 12 December 2002, the Company also announced its intention to raise
additional share capital by way of a placing and open offer on the basis of one
new share for every four existing shares, in order to partially finance the
acquisition described above. The new shares were admitted to trading on 10
January 2003 and the proceeds of the issue, which amounted to £42.0 million
(£40.4 million net of expenses), have initially been applied to reduce existing
bank debt.

The Group sold its interests in the US Fort Chadbourne Field in January 2003 to
St. Mary Energy Company for a consideration at completion of $5.4 million.

                      This information is provided by RNS
            The company news service from the London Stock Exchange                                                                                                 

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