Q2 2008 Results
Serica Energy plc
('Serica' or the 'Company')
SECOND QUARTER 2008 REPORT TO SHAREHOLDERS
London, 5th August 2008 - Serica Energy plc (TSX Venture & AIM: SQZ) today announces its financial results for the three months ending 30 June 2008. The results and associated Management Discussion and Analysis are included below and copies are available at www.serica-energy.com and www.sedar.com
Q2 2008 Highlights
Operational
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Significant progress achieved with the Kambuna development, Indonesia
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Heads of agreement for gas contracts formally signed in May
- Kambuna 2, 3 & 4 production wells completed and flow tested, exceeding the initial sales gas target of 50 million standard cubic feet per day ('mmscfd') by a significant margin
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Total maximum stabilised gas rate for the 3 wells was 114 mmscfd and estimated 8,000 bpd of condensate
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First production on track for the end of 2008
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Acquired new 3D seismic survey for the Columbus field in the UK North Sea
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Site survey of Chablis now completed in preparation for drilling
Financial & Corporate
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Agreement reached with Spring Energy Norway AS ('Spring') in June for the sale of Serica's Norwegian subsidiary, Serica Energy Norge
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After the period end, agreement reached for the sale of a 15% interest in the Kambuna TAC and a 23.4% interest the Kutai PSC to Salamander Energy for a total consideration of US$52.75 million
Forward Programmes
South East Asia
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Continued progress on Kambuna development
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Kambuna field reservoir model being updated to investigate a potential increase in planned sales volumes
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Onshore and offshore facilities and a 14-inch offshore pipeline to be installed later this year
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Acquisition of 3D and 2D seismic data on the Kutai PSC later this year
Europe
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Columbus Field Development Plan to be submitted to the UK authorities in Q3 2008
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Site survey will be completed in the Slyne basin, Offshore Ireland in August, ahead of the 2009 drilling programme
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Appraisal well planned to be drilled on the Chablis gas field
Serica's Chief Executive, Paul Ellis commented:
'Over the next 18 months Serica is planning a major exploration, appraisal and development programme, focusing resources on existing projects where we see high potential to improve shareholder value. With US$52.75 million available on completion of the Indonesian transaction in addition to the cash of US$42.2 million as at 30 June 2008, Serica is well placed to achieve this programme and to identify new opportunities to enhance and accelerate shareholder value.'
Enquiries:
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Serica Energy plc |
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Paul Ellis, Chief Executive Officer |
+44 (0)20 7487 7300 |
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Chris Hearne, Finance Director |
+44 (0)20 7487 7300 |
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JPMorgan Cazenove |
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Steve Baldwin |
steve.baldwin@jpmorgancazenove.com |
+44 (0)20 7588 2828 |
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Tristone Capital Limited |
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Majid Shafiq |
mshafiq@tristonecapital.com |
+44 (0)20 7355 5872 |
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Pelham Public Relations -UK |
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James Henderson |
+44 (0)20 7743 6673 |
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Alisdair Haythornthwaite |
+44 (0)20 7743 6676 |
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CHF - Canada |
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Sasha Abrams |
sasha@chfir.com |
001 416 868 1079 |
The TSX Venture Exchange has not reviewed and does not accept responsibility for the adequacy or accuracy of this release.
To receive Company news releases via email, please contact sasha@chfir.com and specify 'Serica press releases' in the subject line
SERICA ENERGY PLC
SECOND QUARTER 2008 REPORT TO SHAREHOLDERS
MANAGEMENT OVERVIEW
Summary
During the first half of 2008, Serica Energy plc ('Serica' or the 'Company') has focused its efforts on field development and on accelerating asset return.
By the end of the second quarter, the development wells for the Kambuna field in Indonesia were drilled and tested with a very successful outcome, achieving a combined stabilized flow-rate of 114 million standard cubic feet per day ('mmscfd') of gas and 8,000 barrels per day ('bpd') of condensate. This is well in excess of the planned sales volume of 50 mmscfd and fully demonstrates the producing capability of the field. Initial production from the field is expected at year end.
In the North Sea, discussions have been held with UK government Energy Development Unit with a view to commencing development of the Columbus gas condensate field in which the Company has a 50% interest and is Operator. Serica plans to submit a Field Development Plan in the second half of 2008 with the aim of commencing production from Columbus in 2010. With the prevailing high demand for gas in the UK and strong gas prices, early production of the Columbus field would add material additional revenue and production to the Company on top of those expected from the Kambuna field.
In line with the Company's policy of accelerating return from its assets, Serica has recently announced the sale of a 15% interest in the Kambuna field in a package which will increase the Company's cash resources by US$52.75 million and which values Serica's retained 50% interest in the field at nearly US$170 million (as at 30th June 2008). These figures, plus net current assets at the half year which stood at US$14.6 million, amount to around US$238 million, or US$1.35 per share (68p/share). This does not include Serica's interests in North Sea fields under development (Columbus) or appraisal (Chablis) or the Company's portfolio of exploration prospects in the UK, Ireland, Indonesia and Vietnam, many of which, if successful, have the potential to add considerable value to the Company.
The transaction strengthens the Company's balance sheet with additional cash resources without materially reducing revenues expected from future production. Given its considerably enhanced financial position, which also includes a US$100 million Senior Debt facility for development expenditure, of which only US$35 million has been drawn to date, the Company has the resources to fully exploit its portfolio of exploration prospects.
Asset Sales
Indonesian asset sale
In July the Company announced that it had reached agreement with Salamander Energy plc for the sale of a 15% interest in the Glagah-Kambuna Technical Assistance Contract ('the Kambuna TAC') and a 23.4% interest in the Kutai Production Sharing Contract ('the Kutai PSC'). The total consideration due to Serica, based on an effective date of 1 July 2008, is US$52.75 million. Completion is subject to certain approvals and consents including that of the Indonesian government.
The Kambuna TAC, located 40 kilometres offshore northern Sumatra, Indonesia, contains the Kambuna gas condensate field in which Serica and Salamander currently hold interests of 65% and 35% respectively (50% each after completion of the transaction). First gas from the Kambuna field is expected to be produced by the end of 2008 with production from the field expected to reach the planned field plateau production rate of 50 mmscfd of gas plus 4,000 to 5,000 bpd of condensate after fully commissioning the onshore facilities early in 2009.
The Kutai PSC, located onshore and offshore East Kalimantan, Indonesia, is an early stage exploration block operated by Serica with a present interest of 78% (54.6% after completion of the transaction with Salamander Energy). Both 2D and 3D seismic surveys are planned this year in preparation for the commencement of exploratory drilling in 2009.
The Indonesian asset sale demonstrates the viability of our strategy of creating and then realising a portion of the shareholder value added through the drillbit. In addition, from next year we will begin to enjoy significant cash flow from our retained 50% interest in the Kambuna field.
Norwegian disposal
In June, the Company reached agreement with Spring Energy Norway AS ('Spring') for the sale of Serica's Norwegian subsidiary, Serica Energy Norge AS, which holds all of Serica's interests in Norway, comprising a 20% working interest in Norwegian offshore licences PL406 and PL407. Completion is subject to the receipt of the required Norwegian government approvals to the transaction and to other approvals and consents. The consideration provides for payment in respect of past costs relating to the blocks and includes a contingent payment to reflect the value of the Bream Field at the time that the field is brought onto production. Under the terms of the transaction Serica retains a significant part of the upside value of the Bream field without being exposed to further appraisal and development costs or to the commitment of additional resources.
Field Appraisal and Development
Kambuna Field, Offshore North Sumatra, Indonesia
Development drilling and testing
Significant progress has been made during the first half on development activities in the Kambuna field. The Kambuna Field production platform has been installed and three development wells have been drilled and tested with very positive results.
In Q2 2008, the Kambuna No. 3 and No. 4 deviated development wells were drilled from the Kambuna production platform, installed in Q1 2008 at the location of the Kambuna No. 2 well, the first of the three development wells drilled in 1H 2008. Kambuna No. 3 was drilled to a total depth of 7,483 ft true vertical depth below mean sea level ('TVDSS'). The well entered the target Belumai reservoir at a depth of 7,166 ft TVDSS and encountered gas-bearing sands over an interval of 107 ft with a net pay of 77 ft (67 vertical ft). Kambuna No. 4 was drilled to a total depth of 7,408 ft TVDSS. The well entered the Belumai reservoir at 7,140 ft TVDSS and encountered gas-bearing sands over an interval of 115 ft with a net pay of 107 ft (66 vertical ft). There was no indication of a gas-water contact in any of these wells.
By the end of the first half, all three Kambuna production wells had been successfully completed and tested. The Kambuna-2 well was tested at a stabilised rate of 33 mmscfd, the Kambuna-3 well was tested at a stabilised rate of 40 mmscfd and the Kambuna-4 well was tested at a stabilised rate of approximately 41 mmscfd.
The total maximum stabilised gas rate from the three wells was 114 mmscfd, together with an estimated 8,000 bpd of condensate. This rate was considerably higher than previously expected and exceeds the initial sales gas target of 50 mmscfd by a significant margin.
Sales contracts
In Q1 2008 Serica announced the agreement of commercial terms for the sale of 28 mmscfd to the state electricity generator, PT Perusahaan Listrik Negara ('PLN') and 12 mmscfd to PT Pertiwi Nusantara Resources ('Pertiwi'). In May, the heads of agreement of these two contracts were formally signed at the opening ceremony of the Indonesia Petroleum Congress in Jakarta, Indonesia. The contract with PLN will realise an initial price of approximately US$5.40 per thousand standard cubic feet ('mcf') escalating at 3% per annum. The contract with Pertiwi will realise an initial price of approximately US$7 per mcf, escalating at 3% per annum. In addition to these contracts, the Company expects to enter into a third contract to bring total contracted gas sales to 50 mmscfd. Serica anticipates that, when the third sales contract has been completed, the average realisation will be approximately US$6 per mcf. In addition to the gas, Serica initially expects to be marketing 4,000-5,000 bpd of condensate at a price close to that of light crude oil.
Forward plans
Serica is currently updating its Kambuna field reservoir model to investigate whether a further increase in planned sales volumes can be justified, particularly given the strong gas prices now being realised for domestic gas sales. Onshore and offshore facilities and a 14-inch offshore pipeline are to be installed later this year, with the pipeline targeted to be commissioned for production in December 2008.
Columbus Field, UK Central North Sea
Serica is the operator of the Columbus field in UK Block 23/16f and holds a 50% interest. UK gas prices have continued to rise this quarter which adds further impetus to our plans to develop the Columbus gas-condensate field, in which the Company drilled the discovery well in 2006 and two appraisal wells in 2007. A pipeline route survey is planned this summer and Serica expects shortly to submit the Columbus Field Development Plan to the UK authorities. The field lies in close proximity to existing production infrastructure, and negotiations to secure access are in progress, with the expectation that production could commence in 2010. The development will include the drilling of horizontal production wells with sub-sea tie-back to the chosen host production platform.
Chablis Field, UK Southern North Sea
Serica operates Block 48/16b, which contains the Chablis gas discovery, and holds a 100% interest in the block. A site survey over Chablis has now been completed in preparation for drilling. Serica has secured a jack-up drilling unit with the objective of drilling the first appraisal well in the fourth quarter of 2008. The field is in close proximity to existing production infrastructure and, if successful, would be produced via a sub-sea tie-back to a host platform to achieve the earliest production from the field.
Exploration
Indonesia
In the Kutai PSC in East Kalimantan, Serica is the operator of the Kutai Block and currently holds a 78% interest (reducing to 54.6% after completion of the transaction with Salamander Energy). The Company has contracts in place to acquire 3D and 2D seismic data this year. The 2D seismic survey crew has mobilised to East Kalimantan and acquisition of the 280 km onshore survey is due to commence shortly. The offshore 3D survey contract has been awarded and the vessel is expected to commence acquisition early in August. Discussions with rig contractors are underway to secure drilling capability for a multi well exploration programme in 2009.
Vietnam
Serica holds a 33.33% interest in the Block 06/94 PSC, which is operated by Pearl Energy and lies in the Nam Con Son Basin about 350 kilometres offshore South Vietnam. The Ocean General semi-submersible drilling rig has been contracted and is now expected to commence drilling the first exploration well in 1Q09. A second 1,000 square kilometre 3D seismic survey on the Block was successfully completed in June 2008 and processing has begun to evaluate further the prospectivity of the acreage.
Ireland
Serica is the operator and holds a 100% interest in Blocks 27/4, 27/5 (west) and 27/9 (collectively Licence PEL 01/06), which cover an area of 611 square kilometres in the Slyne Basin off the west coast of Ireland and lie 42 kilometres south of the Corrib gas field, currently being developed by Shell. Four significant prospects have been identified on the blocks and an offshore drill site survey will be carried out in August. Serica has begun detailed well planning in preparation for exploration drilling in the summer of 2009 and a rig contract is currently being negotiated.
Spain
Serica holds a 75% interest and operatorship in its four exploration Permits onshore northern Spain. The 315 kilometre 2D seismic survey, which commenced in 2007, was completed in the first quarter and the gas prospects identified on the Permits are being evaluated.
UKCS 25th Round
Serica submitted several applications in the UK's 25th Offshore Licensing Round which closed in May 2008. The focus was to make applications in areas where the Company has an enhanced technical understanding. Awards are not expected to be announced much before the end of this year.
Forward Programme
For the remainder of 2008 Serica's priority is the completion of the Kambuna field development programme, which includes laying an offshore and onshore pipeline and completing the construction of the required onshore gas and condensate reception facilities. In addition, a field development plan will be submitted for the Columbus field in the UK North Sea and an appraisal well is planned to be drilled in the Chablis field in the UK. In 2009 the Company expects to drill wells in Ireland, the UK, Indonesia and Vietnam. This programme is intended to bring forward development activity and build revenue as rapidly as possible.
Over the next 18 months Serica is planning a major exploration, appraisal and development programme focusing resources on existing projects where we see high potential to improve shareholder value. With US$52.75 million available on completion of the Indonesian transaction in addition to the cash of US$42.2 million as at 30 June 2008, Serica is well placed to achieve this programme and to identify new opportunities to enhance and accelerate shareholder value. At a time when many junior companies are finding it increasingly difficult to find sources of funds, Serica's strong finances put it in an excellent position to expand its business by taking advantage of new opportunities as they arise in the sector.
MANAGEMENT'S DISCUSSION AND ANALYSIS
The following management's discussion and analysis ('MD&A') of the financial and operational results of Serica Energy plc and its subsidiaries (the 'Group') contains information up to and including 1 August 2008 and should be read in conjunction with the attached unaudited interim consolidated financial statements for the period ended 30 June 2008. The interim financial statements for the three and six months ended 30 June 2008 have been prepared by and are the responsibility of the Company's management. The interim financial statements for the six months ended 30 June 2008 and 2007 have been reviewed by the Company's independent auditors.
References to the 'Company' include Serica and its subsidiaries where relevant. All figures are reported in US dollars ('US$') unless otherwise stated.
Overview
Serica's activities are centred on the UK and Indonesia, with other interests in Vietnam, Ireland, Spain, and Norway. In 2008 to date, work has continued on furthering the Kambuna development and achieving other strategic goals through corporate transactions. Further details are noted in the Management Overview.
The results of Serica's operations detailed below in this MD&A, and in the financial statements, are presented in accordance with International Financial Reporting Standards ('IFRS').
Results of Operations
Serica incurred a loss of US$4.3 million for the three months ended 30 June 2008 ('Q2 2008') compared to a loss of US$1.6 million for the three months ended 30 June 2007 ('Q2 2007').
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2008 |
2008 |
2007 |
2007 |
2007 |
2007 |
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Q2 |
Q1 |
Q4 |
Q3 |
Q2 |
Q1 |
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US$000 |
US$000 |
US$000 |
US$000 |
US$000 |
US$000 |
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Sales revenue |
- |
- |
- |
- |
- |
- |
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Expenses: |
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Administrative expenses |
(2,447) |
(1,973) |
(2,665) |
(1,658) |
(1,728) |
(1,846) |
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Foreign exchange gain/(loss) |
88 |
(55) |
384 |
31 |
(36) |
15 |
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Pre-licence costs |
(813) |
(188) |
(74) |
(76) |
(124) |
(101) |
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Asset write offs |
- |
(375) |
(9,282) |
- |
- |
- |
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Share-based payments |
(581) |
(375) |
(514) |
(485) |
(464) |
(499) |
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Depletion and depreciation |
(35) |
(58) |
(63) |
(34) |
(26) |
(26) |
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Operating loss before finance revenue and taxation |
(3,788) |
(3,024) |
(12,214) |
(2,222) |
(2,378) |
(2,457) |
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Finance revenue |
298 |
576 |
498 |
663 |
791 |
862 |
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Finance costs |
(785) |
(878) |
(321) |
- |
- |
- |
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Loss before taxation |
(4,275) |
(3,326) |
(12,037) |
(1,559) |
(1,587) |
(1,595) |
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Taxation credit/(charge) |
- |
- |
353 |
2,796 |
- |
- |
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(Loss)/profit for the period |
(4,275) |
(3,326) |
(11,684) |
1,237 |
(1,587) |
(1,595) |
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Basic and diluted loss per share |
(0.02) |
(0.02) |
(0.08) |
N/A |
(0.01) |
(0.01) |
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Basic and diluted earnings per share |
N/A |
N/A |
N/A |
0.01 |
N/A |
N/A |
Administrative expenses of US$2.4 million for Q2 2008 increased from US$2.0 million in Q1 2008, and US$1.7 million for the same period last year. The increase of US$0.4 million from the previous quarter can be largely attributed to various corporate costs (including advisor fees) incurred on the recently announced asset disposals. The Company's activities and employee numbers have also increased over the past twelve months, albeit less significantly than from 2006 to 2007.
No significant foreign exchange movements impacted Q2 2008 or Q2 2007 results.
Pre-licence costs include direct cost and allocated general administrative cost incurred on oil and gas interests prior to the award of licences, concessions or exploration rights. The expense of US$0.8 million for Q2 2008 increased from US$0.1 million for the same period last year and is mainly attributable to significant work undertaken during the recent quarter on the 25th Licencing Round in the UK North Sea.
Share-based payment charges of US$0.6 million reflect share option grants made and compare with US$0.4 million for Q1 2008 and US$0.5 million for Q2 2007. Whilst there has been a decline in the charge of the options granted in 2005, 2006 and 2007, the incremental charge generated from further share options granted in March 2008 has generated an overall increase.
Negligible depletion and depreciation charges in all periods represent office equipment and fixtures and fittings. Those costs of petroleum and natural gas properties classified as exploration and evaluation assets are not currently subject to such charges pending further evaluation. The Kambuna asset costs classified as 'development' costs and held within plant, property and equipment will be depleted once production commences.
Finance revenue comprising interest income of US$0.3 million for Q2 2008 compares with US$0.8 million for Q2 2007 and US$0.6 million for Q1 2008. Finance revenue fell from Q1 2008 as cash deposit balances raised from the early January 2008 financing were utilised on Indonesian drilling expenditure.
The first drawdown on the senior secured debt facility occurred soon after the facility was arranged in Q4 2007. Finance costs consist of interest payable, issue costs spread over the term of the bank loan facility, and other fees. A second drawdown occurred in June 2008.
The net taxation credit/(charge) was US$nil in Q2 2008 and Q2 2007.
The net loss per share of US$0.02 for Q2 2008 compares to a net loss per share of US$0.01 for Q2 2007.
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Summary of Quarterly Results |
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2008 |
2008 |
2007 |
2007 |
2007 |
2007 |
2006 |
2006 |
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Quarter ended: |
30 Jun |
31 Mar |
31 Dec |
30 Sep |
30 Jun |
31 Mar |
31 Dec |
30 Sep |
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US$000 |
US$000 |
US$000 |
US$000 |
US$000 |
US$000 |
US$000 |
US$000 |
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Sales revenue |
- |
- |
- |
- |
- |
- |
- |
- |
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(Loss)/profit for the quarter |
(4,275) |
(3,326) |
(11,684) |
1,237 |
(1,587) |
(1,595) |
(13,456) |
(3,795) |
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Basic and diluted loss per share US$ |
(0.02) |
(0.02) |
(0.08) |
- |
(0.01) |
(0.01) |
(0.09) |
(0.03) |
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Basic and diluted earnings per share |
- |
- |
- |
0.01 |
- |
- |
- |
- |
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The fourth quarter 2007 loss includes asset write offs of US$9.0 million in regard to the Biliton PSC.
The fourth quarter 2006 loss includes asset write offs of US$12.7 million in regard to the Asahan Offshore PSC.
Working Capital, Liquidity and Capital Resources
Current Assets and Liabilities
An extract of the balance sheet detailing current assets and liabilities is provided below:
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30 June 2008 |
31 March 2008 |
31 Dec 2007 |
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US$000 |
US$000 |
US$000 |
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Current assets: |
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Inventories |
4,313 |
6,051 |
6,991 |
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Trade and other receivables |
10,885 |
22,076 |
21,906 |
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Taxation receivable |
3,620 |
3,387 |
3,387 |
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Financial assets |
4,680 |
- |
- |
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Cash and cash equivalents |
42,151 |
50,931 |
22,638 |
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Total Current assets |
65,649 |
82,445 |
54,922 |
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Less Current liabilities: |
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Trade and other payables |
(16,349) |
(28,979) |
(23,604) |
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Financial liabilities |
(34,662) |
- |
- |
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Net Current assets |
14,638 |
53,466 |
31,318 |
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Assets held for sale |
7,331 |
- |
- |
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Liabilities associated with assets held for sale |
(4,707) |
- |
- |
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|
At 30 June 2008, the Company had net current assets of US$14.6 million which comprised current assets of US$65.6 million less current liabilities of US$51.0 million, giving an overall decrease in working capital of US$38.8 million in the three month period.
Inventories decreased from US$6.1 million to US$4.3 million over the period as materials were utilised in the Kambuna drilling programme.
Trade and other receivables at 30 June 2008 totalled US$10.9 million, which included US$3.4 million upfront deposit payments in respect of the Kambuna drilling programme and significant recoverable amounts from partners in Joint Venture operations in the UK and Indonesia. Other smaller items included prepayments and sundry UK and Indonesian working capital balances. The tax receivable represents expected recovery of exploration expenditure from the Norwegian fiscal regime.
Financial assets represent US$4.7 million of restricted cash deposits, reclassified as a current asset during Q2 2008.
Cash and cash equivalents decreased from US$50.9 million to US$42.2 million in the quarter. The Company received US$25.0 million from the drawdown on the Kambuna loan, offset by cash outgoings in Q2 2008 covering significant capital expenditure on the Kambuna development, operational expenses and other exploration work. In addition cash receipts of US$0.3 million of interest income were also received in the quarter.
Trade and other payables of US$16.3 million at 30 June 2008 chiefly include significant trade creditors and accruals from the Kambuna drilling programme, and other creditors and accruals from UK and Indonesia. Other smaller items include sundry creditors and accruals for administrative expenses and other corporate costs. Amounts payable have fallen by US$12.6 million from Q1 2008, as significant liabilities in respect of the Kambuna drilling have been settled, together with final payments on the Biliton programme.
Financial liabilities are represented by the first drawdown under the senior secured debt facility, which occurred in Q4 2007, and second drawdown of US$25.0 million in June 2008. The total includes accrued interest payable and is disclosed net of the unamortised portion of allocated issue costs.
Assets held for sale and associated liabilities
The assets and liabilities recorded as at 30 June 2008 in respect of the Norwegian Licence interests being sold, are now classified as part of a disposal group held for sale. Assets held for sale of US$7.3 million chiefly comprise Norwegian expenditure previously capitalised as exploration and evaluation assets, and liabilities of US$4.7 million chiefly represent deferred tax liabilities associated with those assets recognised. These assets and associated liabilities are disclosed separately on the Balance Sheet.
Long-Term Assets and Liabilities
An extract of the balance sheet detailing long-term assets and liabilities is provided below:
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|
30 June 2008 |
31 March 2008 |
31 December 2007 |
|
|
US$000 |
US$000 |
US$000 |
|
|
|
|
|
|
Exploration and evaluation assets |
78,285 |
75,393 |
71,874 |
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Property, plant and equipment |
58,732 |
39,274 |
19,543 |
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Goodwill |
768 |
768 |
768 |
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Financial assets |
- |
4,680 |
4,680 |
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Long-term other receivables |
3,508 |
2,382 |
1,224 |
|
Financial liabilities |
- |
(9,829) |
(9,582) |
|
Deferred income tax liabilities |
(523) |
(4,589) |
(3,910) |
During Q2 2008, total investments in petroleum and natural gas properties, represented by exploration and evaluation assets, increased by US$2.9 million to US$78.3 million. The US$2.9 million increase comprised investment of US$9.0 million partially offset by a reclassification of Norwegian exploration and evaluation assets of US$6.1 million as 'assets held for sale' , effective at the period end date. Of the total Q2 2008 investment of US$9.0 million, in Southeast Asia, US$4.1 million of cost was incurred in Vietnam, (principally on the 3D Seismic survey completed in June 2008) and US$2.5 million was incurred on seismic, exploration work and G&A on the Kutai concession in Indonesia. In the UK & NW Europe, US$1.6 million of expenditure was incurred in the UK and Ireland on exploration work and G&A, including site survey cost on the Chablis discovery. US$0.8 million related to Norway with negligible spend in Spain.
The US$19.4 million increase in property, plant and equipment from US$39.3 million to US$58.7 million is caused by expenditure of US$19.4 million during the quarter on the Kambuna development. The property, plant and equipment also includes immaterial balances of US$0.3 million for office fixtures and fittings and computer equipment.
Goodwill, representing the difference between the price paid on acquisitions and the fair value applied to individual assets, remained unchanged at US$0.8 million.
Financial assets represented by US$4.7 million of restricted cash deposits at 31 December 2007 and 31 March 2008 are now classified in current assets.
Long-term other receivables of US$3.5 million represented value added tax ('VAT') on Indonesian capital spend, which would be recovered from future production.
Financial liabilities represented by drawdowns under the senior secured debt facility are now classified in current liabilities.
The retained deferred income tax liability of US$0.5 million arises in respect of certain capitalised assets retained in the group. Liabilities previously recognised as arising from capitalised Norwegian exploration and evaluation assets have been reclassified as part of the disposal group held for sale noted above.
Shareholders' Equity
An extract of the balance sheet detailing shareholders' equity is provided below:
|
|
30 June 2008 |
31 March 2008 |
31 December 2007 |
|
|
US$000 |
US$000 |
US$000 |
|
|
|
|
|
|
Total share capital |
207,633 |
207,452 |
158,871 |
|
Other reserves |
14,685 |
14,104 |
13,729 |
|
Accumulated deficit |
(64,286) |
(60,011) |
(56,685) |
Total share capital includes the total net proceeds (both nominal value and any premium on the issue of equity capital). Issued share capital during Q1 2008 was increased by the issue of 19,826,954 ordinary shares at £1.02 and 4,943,400 at Cdn$2.10, and during Q2 2008 increased by the issue of 100,000 ordinary shares at C$1.80 following the exercise of options.
Other reserves mainly include amounts credited in respect of cumulative share-based payment charges. The increase in other reserves from US$14.1 million to US$14.7 million reflects the amortisation of share-based payment charges in Q2 2008.
Capital Resources
At 30 June 2008, Serica had US$14.6 million of net working capital, no long-term debt and no capital lease obligations. At that date, the Company had commitments to future minimum payments under operating leases in respect of rental office premises, office equipment and motor vehicles for each of the following periods/years as follows:
|
|
US$000 |
|
31 December 2008 |
191 |
|
31 December 2009 |
389 |
|
31 December 2010 |
83 |
At 30 June 2008, Serica also has amounts contracted but not provided in the financial statements of US$19.5 million of gross capital expenditure on the Kambuna development. Serica's net share of these costs is expected to be approximately 46.4%.
The Company also has obligations to carry out defined work programmes on its oil and gas properties, under the terms of the award of rights to these properties, over the next twelve months as follows:
Twelve months ending 30 June 2009 US$12,572,000
These obligations reflect the Company's share of interests in the defined work programmes and were not formally contracted at 30 June 2008. The Company is not obliged to meet other joint venture partner shares of these programmes.
In the absence of revenues generated from oil and gas production Serica intends to utilise its existing cash balances, US$52.8 of proceeds arising from the Indonesian asset sales together with the remainder of the US$100 million senior secured debt facility, to fund the immediate needs of its investment programme and ongoing operations.
Off-balance Sheet Arrangements
The Company has not entered into any off-balance sheet transactions or arrangements.
Critical Accounting Estimates
The Company's principal accounting policies are detailed in note 2 to the attached financial statements. International Financial Reporting Standards have been adopted. The cost of exploring for and developing petroleum and natural gas reserves are capitalised. Unproved properties are subject to periodic impairment tests whilst the costs of proved properties are depleted over the life of such producing fields. In each case, calculations are based upon management assumptions about future outcomes, product prices and performance.
Financial Instruments
The Group's financial instruments comprise cash and cash equivalents, short term restricted cash deposits, bank loans and borrowings, accounts payable and accounts receivable. It is the management's opinion that the Group is not exposed to significant currency, interest or credit risks arising from its financial instruments other than as discussed below:
Serica has exposure to interest rate fluctuations; given the level of expenditure plans over 2008/9 this is managed in the short-term through selecting treasury deposit periods of one to six months. Cash and treasury credit risks are mitigated through spreading the placement of funds over a range of institutions each carrying acceptable published credit ratings to minimise counterparty risk.
Where Serica operates joint ventures on behalf of partners it seeks to recover the appropriate share of costs from these third parties. The majority of partners in these ventures are well established oil and gas companies. In the event of non payment, operating agreements typically provide recourse through increased venture shares.
It is the management's opinion that the fair value of its financial instruments approximate to their carrying values, unless otherwise noted.
Share Options
As at 30 June 2008, the following director and employee share options were outstanding: -
|
|
Expiry Date |
Amount |
Exercise cost |
|
|
|
|
Cdn$ |
|
Share options |
Feb 2009 |
247,500 |
495,000 |
|
|
May 2009 |
100,000 |
200,000 |
|
|
Dec 2009 |
275,000 |
275,000 |
|
|
Jan 2010 |
600,000 |
600,000 |
|
|
Jun 2010 |
1,100,000 |
1,980,000 |
|
|
|
|
Exercise cost |
|
|
|
|
£ |
|
|
Nov 2010 |
561,000 |
544,170 |
|
|
Jan 2011 |
1,275,000 |
1,319,625 |
|
|
May 2011 |
180,000 |
172,800 |
|
|
June 2011 |
270,000 |
259,200 |
|
|
Nov 2011 |
120,000 |
134,400 |
|
|
Jan 2012 |
1,056,000 |
1,077,120 |
|
|
May 2012 |
405,000 |
421,200 |
|
|
August 2012 |
1,200,000 |
1,182,000 |
|
|
March 2013 |
1,812,000 |
1,359,000 |
|
|
March 2013 |
850,000 |
697,000 |
Business Risk and Uncertainties
Serica, like all exploration companies in the oil and gas industry, operates in an environment subject to inherent risks. Many of these risks are beyond the ability of a company to control, particularly those associated with the exploring for and developing of economic quantities of hydrocarbons: volatile commodity prices; governmental regulations; and environmental matters.
Nature and Continuance of Operations
The principal activity of the Company is to identify, acquire and subsequently exploit oil and gas reserves primarily in Asia and Europe.
The Company's financial statements have been prepared with the assumption that the Company will be able to realise its assets and discharge its liabilities in the normal course of business rather than through a process of forced liquidation. The Company currently has no operating revenues, and during the three month period ended 30 June 2008 the Company generated a loss of US$4.3 million from continuing operations. At 30 June 2008, the Company held cash and cash equivalents of US$42.2 million and a financial asset of restricted cash of US$4.7 million.
Outstanding Share Capital
As at 1 August 2008, the Company had 176,518,311 ordinary shares issued and outstanding.
Additional Information
Additional information relating to Serica can be found on the Company's website at www.serica-energy.com and on SEDAR at www.sedar.com
Approved on Behalf of the Board
|
Paul Ellis |
Christopher Hearne |
|
Chief Executive Officer |
Finance Director |
4 August 2008
Forward Looking Statements
This disclosure contains certain forward looking statements that involve substantial known and unknown risks and uncertainties, some of which are beyond Serica Energy plc's control, including: the impact of general economic conditions where Serica Energy plc operates, industry conditions, changes in laws and regulations including the adoption of new environmental laws and regulations and changes in how they are interpreted and enforced, increased competition, the lack of availability of qualified personnel or management, fluctuations in foreign exchange or interest rates, stock market volatility and market valuations of companies with respect to announced transactions and the final valuations thereof, and obtaining required approvals of regulatory authorities. Serica Energy plc's actual results, performance or achievement could differ materially from those expressed in, or implied by, these forward looking statements and, accordingly, no assurances can be given that any of the events anticipated by the forward looking statements will transpire or occur, or if any of them do so, what benefits, including the amount of proceeds, that Serica Energy plc will derive therefrom. Serica undertakes no obligation to publicly update or revise any forward looking statements, whether as a result of new information, future developments or otherwise, except as required by applicable laws.
The TSX Venture Exchange has not reviewed and does not accept responsibility for the adequacy or accuracy of this release.
To receive Company news releases via email, please contact sasha@chfir.com and specify 'Serica press releases' in the subject line.
Serica Energy plc
Consolidated Group Income Statement
|
Unaudited |
|
Three |
Three |
Six |
Six |
||
|
|
|
months |
months |
months |
months |
||
|
|
|
ended |
ended |
ended |
ended |
||
|
|
|
30 June |
30 June |
30 June |
30 June |
||
|
|
|
2008 |
2007 |
2008 |
2007 |
||
|
Notes |
US$000 |
US$000 |
US$000 |
US$000 |
|||
|
|
|
|
|
|
|||
|
Sales revenue |
|
- |
- |
- |
- |
||
|
|
|
|
|
|
|
||
|
Cost of sales |
|
- |
- |
- |
- |
||
|
|
|
|
|
|
|
||
|
Gross profit |
|
- |
- |
- |
- |
||
|
|
|
|
|
|
|
||
|
Administrative expenses |
|
(2,447) |
(1,728) |
(4,420) |
(3,574) |
||
|
Foreign exchange gain/(loss) |
|
88 |
(36) |
33 |
(21) |
||
|
Pre-licence costs |
|
(813) |
(124) |
(1,001) |
(225) |
||
|
Asset write offs |
|
- |
- |
(375) |
- |
||
|
Share-based payments |
|
(581) |
(464) |
(956) |
(963) |
||
|
Depreciation and depletion |
|
(35) |
(26) |
(93) |
(52) |
||
|
|
|
|
|
|
|
||
|
Operating loss before finance |
|
|
|
|
|||
|
revenue and tax |
|
(3,788) |
(2,378) |
(6,812) |
(4,835) |
||
|
|
|
|
|
|
|
||
|
Finance revenue |
|
298 |
791 |
874 |
1,653 |
||
|
Finance costs |
|
(785) |
- |
(1,663) |
- |
||
|
|
|
|
|
|
|
||
|
Loss before taxation |
|
(4,275) |
(1,587) |
(7,601) |
(3,182) |
||
|
|
|
|
|
|
|
||
|
Taxation credit for the period |
|
- |
- |
- |
- |
||
|
|
|
|
|
|
|
||
|
Loss for the period |
|
(4,275) |
(1,587) |
(7,601) |
(3,182) |
||
|
|
|
|
|
|
|
||
|
Earnings per ordinary share (US$): |
|
|
|
|
|
||
|
Basic and diluted loss per share |
|
(0.02) |
(0.01) |
(0.04) |
(0.02) |
||
Serica Energy plc
Consolidated Balance Sheet
|
|
|
30 June |
31 March |
31 Dec |
30 June |
|
|
|
2008 |
2008 |
2007 |
2007 |
|
Notes |
US$000 |
US$000 |
US$000 |
US$000 |
|
|
|
|
(Unaudited) |
(Unaudited) |
(Audited) |
(Unaudited) |
|
Non-current assets |
|
|
|
|
|
|
Exploration and evaluation assets |
|
78,285 |
75,393 |
71,874 |
58,470 |
|
Property, plant and equipment |
|
58,732 |
39,274 |
19,543 |
327 |
|
Goodwill |
|
768 |
768 |
768 |
1,200 |
|
Financial assets |
|
- |
4,680 |
4,680 |
- |
|
Other receivables |
|
3,508 |
2,382 |
1,224 |
527 |
|
|
|
141,293 |
122,497 |
98,089 |
60,524 |
|
Current assets |
|
|
|
|
|
|
Inventories |
|
4,313 |
6,051 |
6,991 |
6,438 |
|
Trade and other receivables |
|
10,885 |
22,076 |
21,906 |
7,147 |
|
Taxation receivable |
|
3,620 |
3,387 |
3,387 |
- |
|
Financial assets |
|
4,680 |
- |
- |
- |
|
Cash and cash equivalents |
|
42,151 |
50,931 |
22,638 |
56,622 |
|
|
|
65,649 |
82,445 |
54,922 |
70,207 |
|
|
|
|
|
|
|
|
Assets held for sale |
4 |
7,331 |
- |
- |
- |
|
|
|
|
|
|
|
|
TOTAL ASSETS |
|
214,273 |
204,942 |
153,011 |
130,731 |
|
|
|
|
|
|
|
|
Current liabilities |
|
|
|
|
|
|
Trade and other payables |
|
(16,349) |
(28,979) |
(23,604) |
(4,413) |
|
Financial liabilities |
|
(34,662) |
- |
- |
- |
|
Non-current liabilities |
|
|
|
|
|
|
Financial liabilities |
|
- |
(9,829) |
(9,582) |
- |
|
Deferred income tax liabilities |
|
(523) |
(4,589) |
(3,910) |
(955) |
|
|
|
|
|
|
|
|
Liabilities associated with assets |
|
|
|
|
|
|
held for sale |
4 |
(4,707) |
- |
- |
- |
|
|
|
|
|
|
|
|
TOTAL LIABILITIES |
|
(56,241) |
(43,397) |
(37,096) |
(5,368) |
|
|
|
|
|
|
|
|
NET ASSETS |
|
158,032 |
161,545 |
115,915 |
125,363 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share capital |
5 |
207,633 |
207,452 |
158,871 |
158,871 |
|
Other reserves |
|
14,685 |
14,104 |
13,729 |
12,730 |
|
Accumulated deficit |
|
(64,286) |
(60,011) |
(56,685) |
(46,238) |
|
|
|
|
|
|
|
|
TOTAL EQUITY |
|
158,032 |
161,545 |
115,915 |
125,363 |
|
|
|
|
|
|
|
Serica Energy plc
Statement of Changes in Equity
For the period ended 30 June 2008
|
Group |
|
Share capital |
Other reserves |
Deficit |
Total |
|
|
|
US$000 |
US$000 |
US$000 |
US$000 |
|
|
|
|
|
|
|
|
At 1 January 2008 (audited) |
|
158,871 |
13,729 |
(56,685) |
115,915 |
|
|
|
|
|
|
|
|
New shares issued (net) |
|
48,581 |
- |
- |
48,581 |
|
Share-based payments |
|
- |
375 |
- |
375 |
|
Loss for the period |
|
- |
- |
(3,326) |
(3,326) |
|
|
|
|
|
|
|
|
At 31 March 2008 (unaudited) |
|
207,452 |
14,104 |
(60,011) |
161,545 |
|
|
|
|
|
|
|
|
Conversion of options |
|
181 |
- |
- |
181 |
|
Share-based payments |
|
- |
581 |
- |
581 |
|
Loss for the period |
|
- |
- |
(4,275) |
(4,275) |
|
|
|
|
|
|
|
|
At 30 June 2008 (unaudited) |
|
207,633 |
14,685 |
(64,286) |
158,032 |
|
|
|
|
|
|
|
|
Group |
|
Share capital |
Other reserves |
Deficit |
Total |
|
|
|
US$000 |
US$000 |
US$000 |
US$000 |
|
|
|
|
|
|
|
|
At 1 January 2007 (audited) |
|
157,283 |
11,767 |
(43,056) |
125,994 |
|
|
|
|
|
|
|
|
Conversion of options |
|
534 |
- |
- |
534 |
|
Share-based payments |
|
- |
499 |
- |
499 |
|
Loss for the period |
|
- |
- |
(1,595) |
(1,595) |
|
|
|
|
|
|
|
|
At 31 March 2007 (unaudited) |
|
157,817 |
12,266 |
(44,651) |
125,432 |
|
|
|
|
|
|
|
|
Conversion of options |
|
1,054 |
- |
- |
1,054 |
|
Share-based payments |
|
- |
464 |
- |
464 |
|
Loss for the period |
|
- |
- |
(1,587) |
(1,587) |
|
|
|
|
|
|
|
|
At 30 June 2007 (unaudited) |
|
158,871 |
12,730 |
(46,238) |
125,363 |
|
|
|
|
|
|
|
Serica Energy plc
Consolidated Cash Flow Statement
|
|
|
|
|
|
|
Unaudited |
Three |
Three |
Six |
Six |
|
|
months |
months |
months |
months |
|
|
ended |
ended |
ended |
ended |
|
|
30 June |
30 June |
30 June |
30 June |
|
|
2008 |
2007 |
2008 |
2007 |
|
|
US$000 |
US$000 |
US$000 |
US$000 |
|
Cash flows from operating activities: |
|
|
|
|
|
Operating loss |
(3,596) |
(2,378) |
(6,812) |
(4,835) |
|
|
|
|
|
|
|
Adjustments for: |
|
|
|
|
|
Depreciation and depletion |
35 |
26 |
93 |
52 |
|
Asset write-offs |
- |
- |
375 |
- |
|
Share-based payments |
581 |
470 |
956 |
963 |
|
Changes in working capital |
(2,277) |
(58) |
2,465 |
(5,030) |
|
Cash generated from operations |
(5,257) |
(1,940) |
(2,923) |
(8,850) |
|
|
|
|
|
|
|
Taxes received |
- |
- |
- |
- |
|
|
|
|
|
|
|
Net cash flow from operations |
(5,257) |
(1,940) |
(2,923) |
(8,850) |
|
|
|
|
|
|
|
Cash flows from investing activities: |
|
|
|
|
|
Interest received |
298 |
811 |
874 |
1,673 |
|
Interest paid |
(800) |
- |
(800) |
- |
|
Proceeds from disposals |
- |
- |
- |
5,000 |
|
Purchases of property, plant & equipment |
(18,294) |
(37) |
(37,973) |
(37) |
|
Purchases of exploration and evaluation |
(9,908) |
(14,387) |
(13,427) |
(19,004) |
|
assets |
|
|
|
|
|
Net cash used in investing |
(28,704) |
(13,613) |
(51,326) |
(12,368) |
|
|
|
|
|
|
|
Cash proceeds from financing activities: |
|
|
|
|
|
Loan drawdowns |
25,000 |
- |
25,000 |
- |
|
Issue of shares (net) |
- |
- |
48,581 |
- |
|
Proceeds on exercise of warrants/options |
181 |
- |
181 |
534 |
|
|
|
|
|
|
|
Net cash from financing activities |
25,181 |
- |
73,762 |
534 |
|
|
|
|
|
|
|
Cash and cash equivalents |
|
|
|
|
|
Net (decrease)/increase in period |
(8,780) |
(15,553) |
19,513 |
(20,684) |
|
Amount at start of period |
50,931 |
72,175 |
22,638 |
77,306 |
|
|
|
|
|
|
|
Amount at end of period |
42,151 |
56,622 |
42,151 |
56,622 |
Serica Energy plc
Notes to the Unaudited Consolidated Financial Statements
-
Corporate information
The interim condensed consolidated financial statements of the Group for the six months ended 30 June 2008 were authorised for issue in accordance with a resolution of the directors on 4 August 2008.
Serica Energy plc is a public limited company incorporated and domiciled in England & Wales. The Company's ordinary shares are traded on AIM and the TSX Venture Exchange. The principal activity of the Company is to identify, acquire and exploit oil and gas reserves.
2. Basis of preparation and accounting policies
Basis of Preparation
The interim condensed consolidated financial statements for the six months ended 30 June 2008 have been prepared in accordance with IAS 34 Interim Financial Reporting.
These unaudited interim consolidated financial statements of the Group have been prepared in accordance with International Financial Reporting Standards following the same accounting policies and methods of computation as the consolidated financial statements for the year ended 31 December 2007. These unaudited interim consolidated financial statements do not include all the information and footnotes required by generally accepted accounting principles for annual financial statements and therefore should be read in conjunction with the consolidated financial statements and the notes thereto in the Serica Energy plc annual report for the year ended 31 December 2007.
Significant accounting policies
The accounting policies adopted in the preparation of the interim condensed consolidated financial statements are consistent with those followed in the preparation of the Group's annual financial statements for the year ended 31 December 2007, except for the adoption of the following new standards and interpretations, noted below,
IFRIC 11 'IFRS2 - Group and Treasury Share Transactions' - Effective for periods starting after 1 March 2007
IFRIC 12 'Service Concession Arrangements' - Effective date 1 January 2008
IFRIC 14 'IAS 19 - The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction' - Effective date 1 January 2008
The adoption of these did not affect the Group's results of operations or financial position.
The Group financial statements are presented in US dollars and all values are rounded to the nearest thousand dollars (US$000) except when otherwise indicated.
Basis of Consolidation
The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries Serica Energy Corporation, Serica Energy Holdings B.V., Asia Petroleum Development Limited, Petroleum Development Associates (Asia) Limited, Serica Energia Iberica S.L., Serica Holdings UK Limited, Serica Energy (UK) Limited, PDA Lematang Limited, APD (Asahan) Limited, APD (Biliton) Limited, APD (Glagah Kambuna) Limited, Serica Energy Pte Limited, Serica Kutei B.V., Serica Nam Con Son B.V. and Serica Norge AS. Together, these comprise the 'Group'.
All inter-company balances and transactions have been eliminated upon consolidation.
3. Segmental Information
The primary segment reporting format is determined to be geographical segments and they are based on the location of the Group's assets. The Group has only one business segment, that of oil & gas exploration.
The following tables present revenue and profit information regarding the Group's geographical segments for the six months ended 30 June 2008 and 2007.
|
Six months ended 30 June 2008 |
Indonesia & Vietnam US$000 |
UK & NW Europe US$000 |
Spain US$000 |
Total US$000 |
|
Revenue |
- |
- |
- |
- |
|
Segment and operating loss |
(922) |
(5,851) |
(39) |
(6,812) |
|
|
|
|
|
|
|
Six months ended 30 June 2007 |
Indonesia & Vietnam US$000 |
UK & NW Europe US$000 |
Spain US$000 |
Total US$000 |
|
Revenue |
- |
- |
- |
- |
|
Segment and operating loss |
(674) |
(4,054) |
(107) |
(4,835) |
4. Discontinued Operation
In June, the Company reached agreement with Spring Energy Norway AS ('Spring') for the sale of Serica's Norwegian subsidiary, Serica Energy Norge AS, which holds all of Serica's interests in Norway, comprising a 20% working interest in Norwegian offshore licences PL406 and PL407. Completion is subject to the receipt of the required Norwegian government approvals to the transaction and to other approvals and consents.
The base consideration provides for payment in respect of past costs relating to the blocks. Although the transaction has not yet completed, assets and liabilities held as at 30 June 2008 in respect of the Norwegian interests being sold, are now classified as part of a disposal group held for sale. Assets held for sale of US$7.3 million chiefly comprise Norwegian expenditure previously capitalised as exploration and evaluation assets, and liabilities of US$4.7 million chiefly represent deferred tax liabilities associated with the assets recognised. These assets and liabilities are disclosed separately on the Balance Sheet, and there is no significant net Income Statement impact arising from recognition at fair value less costs to sell.
There is no significant impact of this disposal group on the Income Statement for the six months ended 30 June 2008 or 30 June 2007. Cash outflows of the disposal group for the six months ended 30 June 2008 totalled US$1.7 million (six months ended 30 June 2007: US$2.7 million) being expenditure incurred on Norwegian exploration and evaluation assets.
The agreement also includes a contingent payment to reflect the value of the Bream Field at the time that the field is brought onto production. Under the terms of the transaction Serica retains a significant part of the upside value of the Bream field without being exposed to further appraisal and development costs or to the commitment of additional resources.
5. Equity Share Capital
|
|
30 June |
30 June |
31 December |
31 December |
|
|
2008 |
2008 |
2007 |
2007 |
|
|
Number |
US$000 |
Number |
US$000 |
|
Authorised: |
|
|
|
|
|
Ordinary shares of US$0.10 |
250,000,000 |
25,000 |
200,000,000 |
20,000 |
|
Ordinary 'A' share of £50,000 |
1 |
90 |
1 |
90 |
|
|
250,000,001 |
25,090 |
200,000,001 |
20,090 |
|
|
|
|
|
|
On incorporation, the authorised share capital of the Company was £50,000 and US$20,000,000 divided into one 'A' share of £50,000 and 200,000,000 ordinary shares of US$0.10 each, two of which were issued credited as fully paid to the subscribers to the Company's memorandum of association. In January 2008 the authorised ordinary share capital was increased from 200,000,000 ordinary shares to 250,000,000 ordinary shares of US$0.10.
The balance classified as total share capital includes the total net proceeds (both nominal value and share premium) on issue of the Group and Company's equity share capital, comprising US$0.10 ordinary shares.
|
Allotted, issued and fully paid: |
|
Share |
Share |
Total |
|
|
|
capital |
premium |
Share capital |
|
Group |
Number |
US$000 |
US$000 |
US$000 |
|
|
|
|
|
|
|
As at 1 January 2008 |
151,647,957 |
15,255 |
143,616 |
158,871 |
|
|
|
|
|
|
|
Shares issued (1) |
24,770,354 |
2,477 |
46,104 |
48,581 |
|
|
|
|
|
|
|
As at 31 March 2008 |
176,418,311 |
17,732 |
189,720 |
207,452 |
|
|
|
|
|
|
|
Options exercised (2) |
100,000 |
10 |
171 |
181 |
|
|
|
|
|
|
|
As at 30 June 2008 |
176,518,311 |
17,742 |
189,891 |
207,633 |
|
|
|
|
|
|
(1) From 1 January 2008 until 31 March 2008, 19,826,954 ordinary shares were issued at £1.02 and 4,943,400 at Cdn$2.10. The proceeds net of expenses are credited to share capital and share premium.
(2) From 1 April 2008 until 30 June 2008, 100,000 share options were converted to ordinary shares at a price of Cdn$1.80.
6. Share-Based Payments
Share Option Plans
Following a reorganisation (the 'Reorganisation') in 2005, the Company established an option plan (the 'Serica 2005 Option Plan') to replace the Serica Energy Corporation Share Option Plan (the 'Serica BVI Option Plan').
Serica Energy Corporation ('Serica BVI') was previously the holding company of the Group but, following the Reorganisation, is now a wholly owned subsidiary of the Company. Prior to the Reorganisation, Serica BVI issued options under the Serica BVI Option Plan and, following the Reorganisation, the Company has agreed to issue ordinary shares to holders of Serica BVI Options already awarded upon exercise of such options in place of the shares in Serica BVI to which they would be entitled. There are currently options outstanding under the Serica BVI Option Plan entitling holders to acquire up to an aggregate of 2,322,500 ordinary shares of the Company. No further options will be granted under the Serica BVI Option Plan.
The Company has granted 7,984,000 options under the Serica 2005 Option Plan, 7,729,000 of which are currently outstanding. The Serica 2005 Option Plan will govern all future grants of options by the Company to Directors, officers, key employees and certain consultants of the Group.
The Serica 2005 Option Plan is comprised of two parts, the basic share option plan and a part which constitutes an Enterprise Management Incentive Plan ('EMI Plan') under rules set out by the H.M. Revenue & Customs in the United Kingdom. Options granted under the Serica 2005 Option Plan can be granted, at the discretion of the Board, under one or other of the two parts but, apart from certain tax benefits which can accrue to the Company and its UK employees if options are granted under the part relating to the EMI Plan meeting the conditions of that part of the Serica 2005 Option Plan, all other terms under which options can be awarded under either part are substantially identical.
The Directors intend that the maximum number of ordinary shares which may be utilised pursuant to the Serica 2005 Option Plan will not exceed 10 per cent. of the issued ordinary shares of the Company from time to time, in line with the recommendations of the Association of British Insurers.
In December 2005, 330,000 options were awarded to executive directors exercisable only if certain performance targets are met. 110,000 of these were cancelled during Q2 2007. In August 2007, 1,200,000 options were awarded to non-executive directors exercisable only if certain performance targets are met. In March 2008, 850,000 options were awarded to executive directors exercisable only if certain performance targets are met. The Company calculates the value of share-based compensation using a Black-Scholes option pricing model (or other appropriate model for those Directors' options subject to certain performance targets) to estimate the fair value of share options at the date of grant. The estimated fair value of options is amortised to expense over the options' vesting period. US$581,000 has been charged to the income statement in the quarter ended 30 June 2008 and a similar amount credited to other reserves.
The assumptions made for the options granted during 2005, 2006, 2007 and 2008 include a weighted average risk-free interest rate of 6%, no dividend yield and a weighted average expected life of options of three years. The volatility factor of expected market price of 50% used for options granted during 2005 and 2006 was reduced to 40% for options granted in 2007 and 2008.
The following table illustrates the number and weighted average exercise prices (WAEP) of, and movements in, share options during the period:
|
Serica BVI Option Plan |
|
|
Number |
WAEP Cdn$ |
|
|
|
|
|
|
|
Outstanding at 31 December 2007 and 31 March 2008 |
2,722,500 |
1.57 |
||
|
|
|
|
|
|
|
Exercised during the period |
|
|
(100,000) |
1.80 |
|
Cancelled during the period |
|
|
(300,000) |
1.80 |
|
|
|
|
|
|
|
Outstanding at 30 June 2008 |
|
|
2,322,500 |
1.53 |
|
|
|
|
|
|
|
Serica 2005 Option Plan |
|
|
|
£ |
|
|
|
|
|
|
|
Outstanding at 31 December 2007 |
|
|
5,067,000 |
1.00 |
|
|
|
|
|
|
|
Granted during the period |
|
|
2,662,000 |
0.77 |
|
|
|
|
|
|
|
Outstanding at 31 March 2008 and 30 June 2008 |
7,729,000 |
0.92 |
||
|
|
|
|
|
|
|
|
|
|
|
|
7. Taxation
The major components of income tax in the consolidated income statement are:
|
|
|
For six months ended 30 June |
||
|
|
|
|
2008 |
2007 |
|
|
|
|
US$000 |
US$000 |
|
|
|
|
|
|
|
Current income tax credit |
|
|
1,320 |
- |
|
Deferred income tax charge |
|
|
(1,320) |
- |
|
|
|
|
|
|
|
Total tax charge/(credit) |
- |
- |
||
|
|
|
|
|
|
|
|
|
|
|
|
In 2008, expected tax recoveries from Norwegian expenditure were recorded as a current income tax credit, which was offset by a deferred income tax charge from the timing differences arising from capitalised exploration expenditure.
8. Subsequent Events
In July 2008 the Company announced that it had reached agreement with Salamander Energy plc for the sale of a 15% interest in the Glagah-Kambuna Technical Assistance Contract ('the Kambuna TAC') and a 23.4% interest in the Kutai Production Sharing Contract ('the Kutai PSC') to a subsidiary of Salamander. The total consideration due to Serica, based on an effective date of 1 July 2008, is US$52.75 million. Completion is subject to the required government and partner consents.
9. Publication of Non-Statutory Accounts
The financial information contained in this interim statement does not constitute statutory accounts as defined in section 240 of the Companies Act 1985. The financial information for the full preceding year is based on the statutory accounts for the financial year ended 31 December 2007. Those accounts, upon which the auditors issued an unqualified opinion, have been delivered to the Registrar of Companies.
This interim statement will be made available at the Company's registered office at 87-89 Baker Street, London W1U 6RJ and on its website at www.serica-energy.com and on SEDAR at www.sedar.com
INDEPENDENT REVIEW REPORT TO SERICA ENERGY PLC
Introduction
We have been engaged by the company to review the condensed interim consolidated financial statements in the report to the shareholders for the six months ended 30 June 2008 which comprises the consolidated Income Statement, the consolidated Balance Sheet, consolidated Statement of Changes in Equity, consolidated Cash Flow Statement, and related notes 1 to 9. We have read the other information contained in the report to shareholders and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed interim consolidated financial statements.
This report is made solely to the company in accordance with guidance contained in ISRE 2410 (UK and Ireland) 'Review of Interim Financial Information Performed by the Independent Auditor of the Entity' 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 report to shareholders is the responsibility of, and has been approved by, the directors.
As disclosed in note 2, the annual financial statements of the group are prepared in accordance with IFRSs as adopted by the European Union. The condensed interim consolidated financial statements included in this report to shareholders have been prepared in accordance with International Accounting Standard 34, 'Interim Financial Reporting', as adopted by the European Union.
Our Responsibility
Our responsibility is to express to the company a conclusion on the condensed interim consolidated financial statements in the report based on our review.
Scope of Review
We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, 'Review of Interim Financial Information Performed by the Independent Auditor of the Entity' issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that causes us to believe that the condensed interim consolidated financial statements in the report for the six months ended 30 June 2008 are not prepared, in all material respects, in accordance with International Accounting Standard 34 as adopted by the European Union.
Ernst & Young LLP
London
4 August 2008
This information is provided by RNS
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