6th Oct 2006 07:00
Cambrian Oil & Gas PLC06 October 2006 6th October 2006 AIM: COIL CAMBRIAN OIL & GAS PLC ("COIL" or "the Company") Results for the year ended 30th June 2006 Cambrian Oil & Gas plc, the oil and gas exploration and development company,announces its audited results for the year ended 30 June 2006. Operational highlights • Commissioning of water injection at the Beshkent-Togap oil field and first incremental oil • Acquisition of the Toktogul exploration licence • Exploration activities at Tash Kumyr involving acquisition of 2D seismic and geochemistry • Acquisition of an interest in Elko Energy Inc., an unlisted Canadian oil and gas exploration company Subsequent to the reporting period the Company announced further progress asfollows: • Acquisition of an approximate 25% interest in ASX listed Methanol Australia Ltd • Continuing advancement of projects in the Kyrgyz Republic: - Ongoing incremental oil from the Beshkent-Togap water injection project and agreement to expand the project in the adjoining Togap area; operating cash flow from first oil sales planned before year end 2006 - Seismic interpretation at Tash Kumyr shows at least two potential drilling targets - Exploration licences at Toktogul and Tash Kumyr have been extended in size to cover possible target extensions into adjoining areas • Acquisition of an interest in Elko Energy Inc. • Funds of £1.5M raised in a placement in August 2006, to partially fund the investment in Methanol Australia Mr John Byrne, Chairman, commented: "The significant opportunities presented by our investment in Methanol Australiatogether with the progression of our Kyrgyz projects offer the potential totransform the size of the Company." For further information, please contact: Neale Taylor Victoria ThomasCambrian Oil & Gas plc Parkgreen CommunicationsTel: +44 (0)20 7409 0890 Tel: +44 (0) 20 7493 3713 Peter Jackson/ Paul DudleyW.H. Ireland LimitedTel: +44 (0) 20 7220 1666 CHAIRMAN'S STATEMENT Dear Shareholders I am pleased to report that your board and management have assembled adiversified portfolio of projects that has the potential to deliver materialshareholder value. Since the end of the financial year your Company has secured a 25% equityinterest in Methanol Australia Limited (MEO), a company listed on the AustralianStock Exchange. MEO has secured Australian Government environmental approvalsto install two large scale methanol plants and one 3 million tonne per annum(Mtpa) Liquefied Natural Gas (LNG) plant in an area of shallow water known asTassie Shoal, located approximately 275km northwest of Darwin Australia. Suchapprovals are very rare. This offshore region contains substantial undeveloped gas resources that wouldideally be suited to conversion into methanol. In addition, MEO has 100% of theNT/P68 petroleum exploration permit immediately adjacent to Tassie Shoal. Thepermit contains a very large structure - Epenarra - that was penetrated by theHeron-1 well in 1972. That well intersected a 50m gas column in the DarwinFormation that was never tested. The Epenarra structure covers 1,200 km2 and has been estimated to containapproximately 6 trillion cubic feet (Tcf) of gas-in-place in a new play type.Moreover, the indications are that this gas is likely to be of high quality -high in associated gas liquids and low in CO2 - which would make it economicallyattractive for conversion into LNG. It is our intention to support MEO to maintain 100% interest in the NT/P68permit and the approved LNG project at least through the drilling of Heron-2 andan exploration well - Blackwood-2 - on an adjacent structure planned in thefourth quarter of 2007. Success in either well would have a material impact onthe value of MEO and therefore on our Company. MEO is in the process of securing a rig for the drilling of both wells. The MEO opportunities are very significant and therefore have the potential tooffer an immediate transformation in the size of your Company. In the interimwe have continued to make progress to mature our first two Kyrgyz projects - theBeshkent-Togap water injection project and the Tash Kumyr exploration project. I can report the following progress since the last reporting period: • The Beshkent-Togap water injection pilot project produced its first incremental oil in February this year and the Company is considering expansion options. Net incremental oil production was achieved in May/June and positive operating cash flow will be recorded with the sale of the Company's currently accumulating oil inventory. • Re-mapping of structures in the Tash-Kumyr exploration licence and integration with the newly acquired 2D seismic and geochemical data has identified two strong candidates from which to select targets for drilling in mid-2007. • The re-mapping identified that these structures extend into vacant acreage to the north and south west. Consequently we applied for and were granted an extension to our existing licence and a new adjoining exploration licence. Additional 2D seismic and geochemistry surveys are underway to further refine the prospects ahead of drilling in the summer of 2007. • The Company took an equity interest in the unlisted company Elko Energy Inc., a Canadian oil and gas exploration company, which is pursuing offshore exploration in Europe, North Africa and the Middle East. Elko is currently the largest licence holder in the offshore Danish North Sea. Net loss for the year was £441,000 as against a loss of £340,000 in the previousreporting period. Loss per share was 0.4p as against 0.7p in the previousreporting period. We have now assembled a variety of projects and investments that can provide theimpetus for growth. The management team, headed by Neale Taylor, has deliveredwhat I believe are valuable opportunities and on behalf of all shareholders Icongratulate them on their efforts. John ByrneChairman OPERATIONAL REVIEW The Company has assembled a diverse portfolio of interests in Central Asia,China, the North Sea and Australia and is seeking to further supplement theseinvestments with projects that meet our rigorous economic screening criteria. Kyrgyz Republic The Kyrgyz interests are held in the Company's wholly owned subsidiary, ZhibekResources Plc., and include: • a production sharing agreement with Kyrgyzneftegaz to instigate a water injection project on the Beshkent-Togap oil field; • 72% interest in JSC KNG Hydrocarbons, which holds several exploration licences in the Tash Kumyr area; and • 100% interest in the Toktogul exploration licence. Progress on each of these projects is outlined below. Beshkent-Togap Water Injection Project Installation of facilities for a pilot water injection project was completed inthe fourth quarter of 2005. Water injection commenced in October 2005. Wateris injected into the injection wells to displace oil in the reservoir towardsthe existing oil production wells. The objective of the water injection is toincrease oil flow rates at existing oil production wells. Two oil production wells were converted to water injection wells. Installedfacilities include a water source well, pumps, pipelines, storage tanks, meters,a site office and operation buildings. Extremely cold weather hit much of Central Asia and Russia in January andFebruary 2006, limiting the level of water injection. Facilities were shut downon several occasions in order to protect personnel and facilities. Injection was further limited by required repairs to injection pumps supplied byKyrgyzneftegaz and periodic sanding up of injection wells. A number ofworkovers were conducted on the injection wells to clean out sand. Notwithstanding these constraints, first gross incremental oil was recorded inFebruary 2006, when the well located closest to the injection wells, producedincremental oil. First net oil was recorded in May, after allowing forcumulative forsaken oil from oil producers converted into injection wells. Ongoing well testing has recorded a number of wells in the pilot area withincremental oil rates. The project has produced cumulative gross incrementaloil production of approximately 140 tonnes or 1,000 barrels to 30 June 2006.The Company receives 70% of this oil after deducting oil forsaken by converting2 low rate wells to the existing water injection wells. The Company has beenstoring its net share of produced oil and will make its first sales of oilbefore the end of 2006. While the incremental oil volumes to date arerelatively minor, they are important in establishing the viability of expandingthe project across the whole field. The Company has taken a number of steps to improve water injection volumes whichin turn should increase the responses at adjoining oil wells: • High-pressure packers were installed in the two injection wells; • Two new centrifugal pumps are being installed to replace older style pumps currently in use; and • The Company is considering converting a number of low rate oil wells to additional water injectors An agreement was recently reached with Kyrgyzneftegaz for the Company to fundthe rehabilitation and upgrading of the water injection facilities thatKyrgyzneftegaz installed in the Togap area of the field in 1989-1990. Upgrade work includes re-instating injection facilities, installation of pumpsand rehabilitation of the large water storage tank and distribution lines stillon site. Water injection is expected to commence shortly after these facilities have beeninstalled. Well testing will commence to measure responses at adjoining oilproduction wells. Full-scale development of water injection across the whole Beshkent-Togap oilfield is currently under consideration pending further test results. A number of new projects in the Kyrgyz Republic are under evaluation. Tash Kumyr (Exploration Licence NG-72-00) JSC KNG Hydrocarbons (KNG HC) acquired approximately 60 km of 2D seismic in thesecond half of 2005 over previously identified prospects and leads in the TashKumyr area. KNG HC worked closely with local company, KyrgyzGeophysica, to upgrade theirequipment and data acquisition processes to improve the quality of acquiredseismic. KNG HC retained the services of ECL (now RPS) to manage its seismic acquisitionactivities and used German company, TEEC, to process and interpret the newlyacquired data in conjunction with reprocessing of existing seismic data. The structural form of the new TEEC map shows reasonable conformance to thesurface geochemical indicators of hydrocarbons determined by the 2005 GoreSurvey. All of these structures conform to previous interpretations byKyrgyzneftegaz. The southern and northern structures appear to extend outsidethe original licence boundary. As a result, the current licence was extended tothe north and a new licence, 618-NP, was granted to the west and southwest. Additional seismic (40km) and geochemical data is being acquired to furtherrefine the prospects. Additional Soviet vintage seismic has been located inRussia and will be reprocessed and incorporated into the mapping of theseprospects. The improved seismic control and alignment of seismic with geochemical surveysshould increase the probability of making a discovery within the Tash Kumyrlicence area, thereby enhancing the value of this project. A farm-out is alsounder consideration. Upon completion of the current exploration program, the Company expects tonominate one or two candidates for drilling, which is likely to commence in2007. Toktogul Exploration Licence Geological and geophysical studies including a review of all previous surfacegeological maps and gravity maps over the licence area were completed in thereporting period. Based on this review, Zhibek Resources was granted anextension of the licence area to allow the planned geochemical survey to extendinto adjoining prospective areas. The Toktogul structure is expressed as a surface anticline. No wells have beendrilled to the likely target horizon in this intra-mountain basin although itsgeological setting is believed to be very similar to those occurring in theFergana Basin and at Tash Kumyr. A key risk is whether the thinner geological section at Toktogul relative tothat at the Fergana Basin is conducive to generating sufficient hydrocarbons tocharge the apparent structural traps. Zhibek Resources is using a Gore Survey to ascertain indications of surfacehydrocarbons that might be trapped at depth. Available gravity data is beingre-interpreted to aid basin depth analysis. Relationship with Kyrgyzneftegaz The Company has built up almost 8 years of operating experience in the KyrgyzRepublic - mostly in association with Kyrgyzneftegaz. In recognition of thissustained effort, the Company is now being offered new opportunities in theKyrgyz Republic. Executive Director, Mr Ian Ennis, spent a significant portion of his time duringthe reporting period in the Kyrgyz Republic, supporting the Company's activitiesand strengthening local relationships. Screening of Other Areas & Projects The Company continues to screen opportunities in the Kyrgyz Republic,Tajikistan, Uzbekistan and Russia. Elko Energy The Company's investment in Elko provides diversification into new focus areaswhere its management has considerable contacts, experience and mostsignificantly, a track record of exploration success including the North Sea,Europe, North Africa and the Middle East. Elko acquired a 5,400 km2 exploration and production license in close proximityto the prolific Central Graben in the Danish North Sea in late 2005. Elko is anapproved offshore operation and has set up a Danish subsidiary to carry out therequired work programme. Following further ongoing technical work, Elko plans tofarm down its interest in the new year in exchange for future seismic anddrilling obligations being paid for by the new partner. Additional explorationand development opportunities are being sought. Elko has acquired and currently owns approximately 40% of Dragon Energy Inc., aprivate Canadian company, with a significant development project in GansuProvince, China. Dragon has signed a Joint Venture Agreement with a provincialsubsidiary of CNPC of China, the 10th largest oil company worldwide, providingfor the re-development of the onshore Maling Oilfield in Gansu Province, China. Investment in Methanol Australia Limited (ASX: MEO) During July and August 2006, the Company acquired 17.55% of the issued sharecapital in ASX listed Methanol Australia Ltd (MEO) through a placing and onmarket purchases. In October 2006, the Company increased its interest toapproximately 25% by underwriting a majority of MEO's 1:4 rights issue. The Company believes MEO has a significant gas discovery in its 100% ownedexploration permit (NT/P68) that could underpin MEO's 100% owned LNG proposalthat has received environmental approvals from the Australian CommonwealthGovernment. In the event that appraisal drilling in late 2007 confirms thispotential, a material re-valuation is likely for commitment to a majordevelopment project. This potential LNG project adds significant upside toMEO's existing proposal to develop major offshore methanol processing plants formanufacture of methanol from existing gas supplies in the same region. . Background on MEO Methanol Australia is focused on developing gas-to-liquids (GTL) projects in theTimor Sea some 275km north west of Darwin, Australia, in an area of shallowwater known as Tassie Shoal. It has secured Commonwealth Governmentenvironmental approvals for two world scale (1.8 Mtpa) methanol plants (50%interest) and a 3 Mtpa LNG plant (100% interest) offshore located in the heartof the gas fields. The environmental approvals are the key approvals requiredfor the projects and are valid until 2052. The proposed Timor Sea LNG Project is the only new Australian LNG project thathas received its Commonwealth Government environmental approvals. Tassie Shoal is an area of shallow water adjacent to the Evans Shoal gas field(containing approximately 26% CO2) and about 25km west of MEO's 100% owned NT/P68 exploration permit. The NT/P68 contains five large structures withpotential un-risked in-place gas resources of at least 14 Tcf; this additionalgas potential at NT/P68 provides major upside to existing gas supplies. The manufacture of methanol from natural gas uniquely utilises and benefits fromsignificant amounts of carbon dioxide (CO2) as is associated with the naturalgas from certain horizons in adjoining fields and prospects. The Methanolprojects could secure third party gas from a number of adjacent high CO2 gasfields subject to negotiating a satisfactory gas sales agreement. In contrast,the planned LNG project is focused on low CO2, high liquids content gas fromdifferent horizons at fields and prospects in the same area. Notwithstanding the potential for third party gas supply for its LNG project,MEO's focus is to confirm high quality, commercial gas resources within its NT/P68 exploration permit for its environmentally approved LNG project. Lesserquality gas discovered could supply the methanol projects. Heron-1, (ARCO, 1972), encountered a 50m gas-bearing fractured carbonateinterval at the Darwin Formation on the Epenarra structure, which is a broad,flat anticline with a mapped closure of approximately 1,200 km2 containingin-place contingent gas resources of 5.6 Tcf (P50). Potential traps occur atboth deeper and shallower levels on the same structure and adjoining structures. A number of large international companies reviewed NT/P68 over the past year.However, farm-in offers all involved the assignment of a significant interest inthe permit. The Cambrian Mining Group approached MEO with a funding strategy that allowed itto retain 100% control of its exploration permit and LNG project, by funding theseismic program and supporting the funding for the drilling of two wells late in2007. In September 2006, MEO finalised an agreement with PGS Australia Pty Ltd toacquire and process approximately 500 km2 of 3D seismic over the crest of the1,200km2 Epenarra structure to locate the Heron-2 appraisal/development well toproduction test the Darwin Formation and target several other horizons. A 2D seismic acquisition contract has been awarded to Compagnie Generale deGeophysique Group (CGG) to acquire approximately 600 line kilometers of infill2D seismic over the nearby Blackwood lead during October 2006 to elevate it todrillable status. Recent studies indicate that the quality of gas in certain target horizons(other than the CO2 containing Plover Formation which is planned to be used forthe methanol projects) is likely to be both low in CO2 and contain attractivelevels of associated condensate (120-300 bbls/mmcf) due to the underlying EchucaShoals Formation being in the active wet-gas generative window. At 150 bbls/mmcf, the Epenarra structure could contain at least 800 million bbls condensatein place. Forward Strategy The Company's Kyrgyz Republic interests and MEO provides a diversifiedgeographic and product portfolio. These investments range from near-term oilproduction assets to exploration prospects with varying risk profiles andsignificant potential upside. The Company's recent investment in MEO also provides an entree to majorgas-to-liquids projects with environmental approvals in place, requiring onlysecure gas supplies. Such projects present the Company with the opportunity tobenefit from very large scale long-term production projects. This portfolio of diversified interests has been assembled in under two years,since floating the Company on AIM as Cambrian Oil and Gas in March 2005. Cambrian Oil & Gas plcGroup Profit and Loss Account (audited)for the year ended 30th June 2006 Period 2nd March Year ended 30th 2004 to 30th June June 2006 2005 Note £'000 £'000 Administrative expenses (505) (394) _______ _______Operating loss 3 (505) (394) _______ _______Interest received on bank deposits 64 54 _______ _______Loss on ordinary activities before taxation (441) (340) _______ _______Tax on loss on ordinary activities 5 - - _______ _______Loss for the period (441) (340) Equity minority interest 11 23 _______ _______Retained loss for the year (430) (317) ====== ====== Loss per share (pence) - basic 6 (0.4)p (0.7)p Continuing operationsAll items relate to continuing operations Total recognised gains and losses There were no recognised gains or losses in the year other than those includedwithin the profit and loss account. The accompanying notes are an integral part of this consolidated profit and lossaccount. Cambrian Oil & Gas plcBalance Sheets (audited)as at 30th June 2006 Group Company Group Company 2006 2006 2005 2005 Note £'000 £'000 £'000 £'000 Fixed assetsIntangible assets 7 2,094 - 1,918 -Tangible assets 8 164 - 114 -Investments 9 243 2,255 - 2,012 _______ _______ _______ _______ 2,501 2,255 2,032 2,012 _______ _______ _______ _______ Current assetsDebtors 10 309 991 93 161Cash at bank and in hand 961 903 2,408 2,260 _______ _______ _______ _______ 1,270 1,894 2,501 2,421 _______ _______ _______ _______Creditors: amounts falling due within one year 11 (155) (73) (431) (86) _______ _______ _______ _______ Net current assets 1,115 1,821 2,070 2,335 _______ _______ _______ _______Net assets 3,616 4,076 4,102 4,347 ====== ====== ====== ======Capital and reservesCalled up share capital 12 1,082 1,082 1,082 1,082Share premium 13 1,759 1,759 1,758 1,758Merger reserve 14 1,602 1,602 1,602 1,602Profit and loss account 15 (747) (367) (317) (95) _______ _______ _______ _______Equity shareholders' funds 16 3,696 4,076 4,125 4,347Equity minority interests (80) - (23) - _______ _______ _______ _______ 3,616 4,076 4,102 4,347 ====== ====== ====== ====== The accompanying notes are an integral part of these balance sheets. Cambrian Oil & Gas plcGroup Cash Flow Statement (audited)for the year ended 30th June 2006 Year Period ended ended 30th June 2006 30th June 2005 Note £'000 £'000 Reconciliation of operating loss to net cash outflow fromoperating activitiesOperating loss (505) (394)Increase in debtors (216) (93)Increase in creditors 44 111Depreciation 19 -Exchange gain (49) - _______ _______Net cash outflow from operating activities (707) (376) _______ _______ Returns on investments and service of financeInterest received 64 54 _______ _______ Capital expenditurePurchase of tangible fixed assets (69) (114)Purchase of intangible fixed assets (173) (202)Purchase of investments (243) - _______ _______Net cash outflow on capital expenditure (485) (316) AcquisitionsNet cash acquired with subsidiary acquisition - 286 _______ _______FinancingIssue of share capital 1 2,440Short term loans (320) 320 _______ _______(Decrease)/increase in cash (1,447) 2,408 ====== ====== Reconciliation of net cash flow to movement in net funds (Decrease)/increase in cash in the year 17 (1,447) 2,408 (Decrease)/increase in short term loans 320 (320) _______ _______Change in net funds (1,127) 2,088 Net funds at 1st July 2005 2,088 - _______ _______Net funds at 30th June 2006 961 2,088 ====== ====== The accompanying notes are an integral part of this consolidated cash flowstatement. Cambrian Oil & Gas plcNotes to the Accountsfor the year ended 30th June 2006 1. ACCOUNTING POLICIES The principal accounting policies are summarised below and have been appliedconsistently throughout the year. (a) Accounting convention The accounts have been prepared under the historical cost convention and inaccordance with applicable U.K. Accounting Standards. (b) Basis of consolidation The Group profit and loss account and balance sheet combine the accounts of theCompany, its wholly-owned subsidiary, Zhibek Resources Plc, and its 72% ownedsubsidiary CJSC KNG Hydrocarbons, together with its 85% owned subsidiary CJSCZhibek Hydrocarbons, using the acquisition method of accounting. In the Company's balance sheet the investment in Zhibek Resources Plc includesthe nominal value of shares issued together with the value of the warrants. Asrequired by sections 131 and 133 of the Companies Act 1985 no premium wasrecognised on the share issue. The difference between nominal and fair value ofthe shares and warrants issued was credited to the merger reserve. (c) Fixed asset investments Investments in subsidiary Companies are classified as fixed assets and includedin the balance sheet of the Company at cost at the date of acquisitionirrespective of the application of merger relief under the Companies Act. (d) Deferred taxation Full provision is made for deferred taxation resulting from timing differencesbetween the recognition of gains and losses in the accounts and theirrecognition for tax purposes. A deferred tax asset is only recognised when it is more likely than not that theasset will be recoverable in the foreseeable future out of suitable taxableprofits. (e) Foreign currencies Transactions in foreign currencies are recorded at the rate ruling at the dateof the transaction. Monetary assets and liabilities denominated in foreigncurrencies are translated at the rate of exchange ruling at the balance sheetdate. All differences are taken to the profit and loss account. On consolidation of a foreign operation, assets and liabilities are translatedat the balance sheet rates, income and expenses are translated at rates rulingat the transaction date. Exchange differences on consolidation are taken to theforeign exchange reserve account where material. (f) Tangible fixed assets Tangible fixed assets are stated at cost less accumulated depreciation.Depreciation of tangible fixed assets is provided where it is necessary toreflect a reduction from book value to estimated residual value over theestimated useful life of the asset to the Company. Depreciation of tangiblefixed assets is calculated by the straight-line method and the annual ratesapplicable to the principal categories are: Motor vehicles - between 10 per cent and 25 per cent Plant & equipment - between 5 per cent and 20 per cent Office equipment - between 20 per cent and 30 per cent (g) Exploration and development expenditure Exploration, evaluation and development expenditure incurred as accumulated inrespect of each identifiable area of interest. These costs are only carriedforward to the extent that they are expected to be recouped through thesuccessful development of the area or where activities in the area have not yetreached a stage which permits reasonable assessment of the existence ofeconomically recoverable reserves. Accumulated costs in relation to an abandoned area are written off in fullagainst the profit in the year in which the decision to abandon the area ismade. A regular review is undertaken of each area of interest to determine theappropriateness of continuing to carry forward costs in relation to that area ofinterest. Restoration, rehabilitation and environmental costs necessitated by explorationand evaluation activities are expensed as incurred and treated as explorationand evaluation expenditure. (h) Revenue recognition The Company recognises revenue from operations in its profit and loss account,on an invoiced basis. (i) Company profit and loss The Company has taken advantage of the exemption in the Companies Act 1985 fromthe requirement to publish its own Profit and Loss Account. The result for theyear ended 30th June 2006 was a loss after taxation of £272,331 (period ended30th June 2005: loss £95,375). 2. GROUP SEGMENTAL ANALYSIS Year ended 30th June 2006 Period ended 30th June 2005 Loss before Net assets/ Loss before Net assets/ taxation (liabilities) taxation (liabilities) By geographical areaUK (266) 2,754 (200) 2,008Kyrgyz Republic (164) 862 (117) 2,094 _______ _______ _______ _______ (430) 3,616 (317) 4,102 ====== ====== ====== ====== 3. OPERATING LOSS 2006 2005 £'000 £'000 This is stated after charging:Depreciation 19 1Exchange Loss 49 -Auditors' remuneration Chapman Davis LLP - for audit 15 15 - other services 3 1 BDO Stoy Hayward - for audit - 5 ====== ====== 4. DIRECTORS AND EMPLOYEES A detailed analysis of Directors' remuneration is provided in the Directors'Report. A summary of the total remuneration of the Directors is comprised asfollows: 2006 2005 £'000 £'000 Directors' fees (including subsidiary company fees) 134 70Ex-gratia payments - 30Emoluments payable for consultancy services 16 73 _______ _______ 150 173 ====== ====== Highest paid director 53 14 ====== ====== The average number of employees, including Directors during the year was 20,allocated as follows: Number Number Management and administration 12 4Operation resources 8 - ====== ====== Of the 20 employees disclosed above, Zhibek Resources Plc retains between 10 to14 persons as employees and contractors to maintain its operation and supportadministration within the Kyrgyz Republic. 5. TAXATION 2006 2005 £'000 £'000Analysis of charge in yearTax on loss on ordinary activities - - ====== ====== Factors affecting tax charge for year The differences between the tax assessed for the period and the standard rate ofcorporation tax are explained as follows: 2006 2005 £'000 £'000 Loss on ordinary activities before tax (430) (317) Loss on ordinary activities multiplied by the standard rateof corporation tax in the UK of 30% (129) (95)Effects of: Future tax benefit not brought to account 129 95 _______ _______Current tax charge for period - - ====== ====== The Group has a potential deferred tax asset of £224,000 due to losses made todate. No deferred tax asset has been recognised because there is insufficient evidenceof the timing of suitable future profits against which the losses can berecovered. 6. LOSS PER SHARE Basic loss per share is calculated on the loss on ordinary activities aftertaxation of £430,000 (2005 loss £317,000) and on 108.2 million ordinary shares(2005: 48 million ordinary shares) being the weighted average number of sharesin issue during the year. No diluted loss per share is presented as none of theoutstanding options or warrants have a dilutory effect. 7. INTANGIBLE FIXED ASSETS - GROUP Licences & Deferred exploration costs £'000 CostAt 1st July 2005 1,918Additions 173Exchange adjustment 3 _______At 30th June 2006 2,094 _______AmortisationAt 30th June 2005 and at 30th June 2006 - _______Net book valueAt 30th June 2006 2,094 ====== At 30th June 2005 1,918 ====== As at 30th June 2006 the Directors undertook an impairment review of thelicences and deferred exploration costs, as a result of which, no provisionswere required. 8. TANGIBLE FIXED ASSETS - GROUP Office Motor Plant equipment vehicles Total £'000 £'000 £'000 £'000CostAt 1st July 2005 113 2 - 115Additions 46 8 15 69 _______ _______ _______ _______At 30th June 2006 159 10 15 184 _______ _______ _______ _______DepreciationAt 1st July 2005 1 - - 1Charge for year 12 2 5 19 _______ _______ _______ _______At 30th June 2006 13 2 5 20 _______ _______ _______ _______Net book valueAt 30th June 2006 146 8 10 164 ====== ====== ====== ====== At 30th June 2005 112 2 - 114 ====== ====== ====== ====== 9. INVESTMENTS - GROUP Unlisted Investments 2006 2005 £'000 £'000CostAt July 2005 - -Additions 243 - At 30th June 2006 243 - The unlisted investment represents the Group's 5% holding in Elko Energy Inc at cost. 9a. INVESTMENTS - COMPANY Subsidiary Unlisted undertakings Investments Total £'000 £'000 £'000 CostAt 1st July 2005 2,012 - 2,012Additions - 243 243 _______ _______ _______At 30th June 2006 2,012 243 2,255 _______ _______ _______Provision for loss in value of investmentAt 1st July 2005 - - -Charge for year - - - _______ _______ _______At 30th June 2006 - - - _______ _______ _______Net book valueAt 30th June 2006 2,012 243 2,255 ====== ====== ====== At 30th June 2005 2,012 - 2,012 ====== ====== ====== The Company holds 20% or more of the share capital of the following Companies: Country of registration Shares heldCompany or incorporation Class Percentage Zhibek Resources Plc England Ordinary 100 2006 2005 £'000 £'000 Carrying value of investment in subsidiary 2,012 2,012 The investment in Zhibek Resources Plc is carried in the Group's annual reportat the lower of cost and net realisable value. Zhibek Resources Plc made a loss after taxation of £165,000 for the year ended30th June 2006 none of which arose during the period to date of acquisition. Zhibek Resources Plc owns 72% of CJSC KNG Hydrocarbons, a joint-stock Companyincorporated in the Kyrgyz Republic whose main activity is oil exploration. Zhibek Resources Plc owns 85% of CJSC Zhibek Hydrocarbons, a joint-stock Companyincorporated in the Kyrgyz Republic whose main activity was oil exploration butwhich is currently dormant. The unlisted investment represents the Company's 5% holding in Elko Energy Inc. 10. DEBTORS Group Company Group Company 2006 2006 2005 2005 £'000 £'000 £'000 £'000 Amounts owed by subsidiary undertakings - 905 - 122Other debtors 301 81 48 28Prepayments 8 5 45 11 _______ _______ _______ _______ 309 991 93 161 ====== ====== ====== ====== Of the amounts owed by subsidiary undertakings £905,000 relates to a debt thathas no formal terms of repayment and is unlikely to be repaid within the nexttwelve months. 11. CREDITORS: amounts falling due within one year Group Company Group Company 2006 2006 2005 2005 £'000 £'000 £'000 £'000 Short-term loan from Cambrian Mining - - 320 -Trade Creditors - - 11 -Accruals and deferred income 155 73 100 86 _______ _______ _______ _______ 155 73 431 86 ====== ====== ====== ====== 12. SHARE CAPITAL 2006 2005 £'000 £'000 Authorised400,000,000 ordinary shares of £0.001 each 4,000 2,000(30 June 2005: 200,000,000 ordinary shares of £0.001 ====== ======each) 2006 2005 £'000 £'000 Allotted, called up and fully paid108,227,159 Ordinary shares @ £0.001 each 1,082 1,082(30 June 2005: 108,196,900 Ordinary shares of £0.001 ====== ======each) On 11 November 2005, the Company increased by ordinary resolution the authorisedshare capital to 400,000,000 Ordinary shares of £0.001 each from 200,000,000Ordinary shares of £0.001 each. On 5 July 2005 8,804 ordinary shares were issued at a price of 7 pence for cash. On 27 July 2005 200 ordinary shares were issued at a price of 7 pence for cash. On 5 September 2005 3,333 ordinary shares were issued at a price of 7 pence forcash. On 5 April 2006 17,922 ordinary shares were issued at a price of 7 pence forcash. In the year ended 30 June 2006, all of the above share issues were the result ofwarrants converted into fully paid ordinary shares, for cash consideration. At 30 June 2006 20,926,174 warrants were outstanding. Share Options The following options have been issued by the Company and have not beenexercised at 30th June 2006: Number of Exercise ordinary shares price Expires 231,150 5p 15th July 2007 6,200,000 7p 1st March 2008 13. SHARE PREMIUM 2006 2005 £'000 £'000 At 1st July 1,758 -Arising on shares issued 1 2,330Expenses of issue - Silvermines Media Plc - (118) - Re-admission - (454) _______ _______At 30th June 1,759 1,758 ====== ====== 14. MERGER RESERVE Group Company Group Company 2006 2006 2005 2005 £'000 £'000 £'000 £'000 At 1st July 1,602 1,602 - -On acquisition of subsidiary - - 1,602 1,602 _______ _______ _______ _______At 30th June 1,602 1,602 1,602 1,602 ====== ====== ====== ====== Upon the acquisition of the Company's wholly-owned subsidiary, a merger reservewas created to deal with the excess of the fair value of shares acquired overthe nominal value of shares allotted, in accordance with the merger reliefprovisions in the Companies Act 1985. 15. PROFIT AND LOSS ACCOUNT Group Company Group Company 2006 2006 2005 2005 £'000 £'000 £'000 £'000 At 1st July (317) (95) - -Retained loss (430) (272) (317) (95) _______ _______ _______ _______At 30th June (747) (367) (317) (95) ====== ====== ====== ====== 16. RECONCILIATION OF MOVEMENT IN SHAREHOLDERS' FUNDS Group Company Group Company 2006 2006 2005 2005 £'000 £'000 £'000 £'000 At 1st July 4,125 4,347 - -Loss for the financial period (430) (272) (317) (95)Shares issued 1 1 2,840 2,840Premium on issue of acquisition shares - - 1,602 1,602 _______ _______ _______ _______At 30th June 3,696 4,076 4,125 4,347 ====== ====== ====== ====== 17. ANALYSIS OF CHANGES IN NET FUNDS At 1st July Cash Non-cash At 30th June 2005 flows changes 2006 £'000 £'000 £'000 £'000 Cash at bank and in hand 2,408 (1,447) - 961Short term loans (320) 320 - - _______ _______ _______ _______Total 2,088 1,127 - 961 ====== ====== ====== ====== 18. CONTINGENT LIABILITIES AND COMMITMENTS (a) Exploration commitments Ongoing exploration expenditure is required to maintain title to the Group'smineral exploration licences and permits. No provision has been made in thefinancial statements for these amounts as the expenditure is expected to befulfilled in the normal course of the operations of the Group. (b) Other commitments The Group has no material commitments under operating leases and has no capitalcommitments contracted but not provided for. 19. FINANCIAL INSTRUMENTS The Group uses financial instruments comprising cash, liquid resources anddebtors/creditors that arise from its operations. The Group's exposure to currency and liquidity risk is not consideredsignificant. The majority of the Group's cash balances are held in Sterling. To date the Group has relied upon equity funding and loans from Cambrian MiningPlc to finance operations. The Directors are confident that adequate cashresources exist to finance operations to commercial exploitation but controlsover expenditure are carefully managed. The net fair value of financial assets and liabilities approximates the carryingvalues disclosed in the financial statements. The currency and interest rate profile of the financial assets is as follows: Cash and short Cash and short term deposits term deposits At 30th June 2006 At 30th June 2005 £'000 £'000 Sterling 913 2,395Kyrgyz Soms 48 13 _______ _______ 961 2,408 ====== ====== The financial assets comprise interest earning bank deposits. 20. EVENTS AFTER THE BALANCE SHEET DATE • On 20 July 2006, the Company acquired 5.5million ordinary shares in Methanol Australia Limited, for Aus$1,100,000 (£450,000). Further subscriptions for 42.5million ordinary shares in August and September 2006, after further fund-raising by Methanol, increased the Company's holding therein to 24.6%. • On 27 July 2006, the Company placed 50million ordinary 1p shares at a price of 3p, raising gross proceeds of £1.5million. • On 11 September 2006, the Company, following an EGM, increased its authorised share capital from £4million to £8million (400,000,000 to 800,000,000 ordinary 1p shares). 21 RELATED PARTIES Cambrian Mining Plc had previously provided short-term loan facilities to theGroup during the prior period. The amount owing at 30th June 2005 was £320,000,and this was subsequently repaid during September 2005. John Byrne is aDirector of both Cambrian Mining Plc and Cambrian Oil & Gas Plc, and shareholderof Cambrian Mining Plc. The following Directors and shareholders of the Company have entered intoconsultancy agreements between the Group and their respective personal servicecompanies for professional services over and above their fees as Directors: Additional Professional Services charged to the Profit and Loss AccountDirector/Shareholder Personal Service Company £'000 Ian Ennis Ian Ennis & Company Pty Ltd 16 This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
Coiled Thera