18th Apr 2005 07:00
Star Energy Group PLC18 April 2005 Star Energy Group plc Preliminary Audited Results for the year ended 31 December 2004 Highlights • We achieved AIM admission in May 2004 and completed a successful fund-raising, providing a strong financial base to accelerate our strategy • Our first gas storage project, at Humbly Grove in Hampshire, is under construction, on budget and on schedule for commercial service in October 2005 • Significant progress has been made in accelerating other gas storage projects in the Weald Basin • Oil production averaged 3,021 bopd net for 2004 (2003: 3,248 bopd net) • Gas production averaged 481 boepd net for 2004 (2003: 505 boepd net), and was used to generate 97,310 MWHrs of electricity (2003: 102,016 MWHrs) • Turnover of £17.1 million (2003: £20.9 million) • EBITDA of £2.8 million (2003: £8.0 million) after one-off administrative expenses of £2.0 million (2003: nil) • Loss before tax of £2.1 million (2003: profit £0.5 million) after total one-off costs of £2.2 million (2003: nil) (Note 4) • Loss for the year of £2.9 million (2003: £1.2 million loss) after total one-off costs of £2.2 million (2003: nil) (Note 4) • Earnings per share is a loss of 6.85 pence per ordinary share (2003: loss of 7.86 pence) • Capital expenditure of £15.6 million (2003: £6.7 million) with £12.9 million (2003: £3.2 million) in respect of the Humbly Grove gas storage facility • Proven and probable reserves estimated by management at 14.7 million boe as at 31 December 2004 (2003: 15.9 million boe) 18 April 2005 ENQUIRIES: Star EnergyRoland Wessel 020 7730 6663Colin Judd 020 7730 6663 College HillJim Joseph 020 7457 2020 Strategy Star Energy's primary focus is to build a significant multi-site gas storagebusiness. We aim to consolidate our existing oil and gas production business toprovide the depleted reservoirs that form the basis of future gas stores. Wewill exploit our expertise in operating onshore oil and gas fields safely andresponsibly in environmentally sensitive areas. Star Energy will take advantageof opportunities to expand its asset base in the UK and potentially continentalEurope. Chairman's Statement The past year has seen substantial progress on our objective to become asignificant player in the gas storage market in the UK - a sector that webelieve will be of major importance to the domestic energy market. We achievedAIM admission in May 2004 together with a successful fund-raising, whichprovides a strong financial base that we believe will accelerate our strategy.Our first storage project, at Humbly Grove in Hampshire, is under constructionand we are meeting schedules and budgets. Star Energy's portfolio of UK onshoreoil and gas fields provides both a resource of potential storage assets as wellas a solid source of cash flow. Star Energy deploys a unique mix of resources and expertise to develop oil andgas fields, power generation and gas storage. We also place great emphasis onenvironmental soundness and sensitivity to local concerns. Our objective is toimpact minimally on the surroundings in which we operate. Our ability to combinethese skills and imperatives is a strong source of competitive advantage. The Board On admission to AIM in May, we committed to strengthening the Board with two newnon-executive directors. We fulfilled that commitment by recruiting two people -David Wertheim and Stephen East - who possess excellent track records. We nowhave a strong and experienced Board to lead the Group forward, and haveestablished Board and committee structures based on sound corporate governanceprinciples. Outlook Gas price volatility this winter has provided more evidence that imbalancesexist in the UK gas market. We believe that the demand for gas storage willcontinue to strengthen as dependence on imported gas becomes more acute and theGroup is being positioned to play a key role in this market, as well as to buildits portfolio of exploration and production assets as opportunities arise. Ourfirst year as a listed company has been a busy one. As Humbly Grove iscommissioned later this year, we look forward to an eventful period ahead withconfidence. I welcome both institutional and individual shareholders, and would be happy todiscuss any issues and gain an understanding of any concerns you may have inrelation to Star Energy's governance and strategy. Stephen GutteridgeChairman Chief Executive's Review Execution of the Group's strategy has already passed a number of key milestones- the most significant being the start of construction of the Group's first gasstorage project at Humbly Grove in Hampshire. The project is on schedule andbudget. The Humbly Grove gas store has been contracted to a blue chip customerfor the medium-term and this has secured the financial stability of the Group'sfirst gas storage project via a consistent level of cash flow. Results Production of oil in the year averaged 3,021 bopd net. This was somewhat lowerthan projected levels, primarily due to a number of individual well problems.However, a production enhancement programme has been initiated, which it ishoped will restore production levels to over 3,200 bopd net. Our financial results at this stage in the Group's development relate primarilyto our oil and gas production activities, rather than our gas storage business,and also reflect one-off costs related to the flotation and fundraising of some£1.9 million, and £0.3 million relating to the write down of development costspreviously capitalised for the Welton wind turbine project. Strengthening oilprices did not have a significant impact on the Group in 2004, due toconservative hedging arrangements, but continued strong oil prices will furtherunderpin the Group's development of storage projects. The future Our existing portfolio provides us with significant optionality as we lookbeyond Humbly Grove. Progress through the planning stages for our Welton projectin the East Midlands is ongoing but we have accelerated the evaluation ofadditional gas storage projects in the Weald Basin. In particular the companyhas identified a potential high performance gas storage project. Both within ourcurrent portfolio and outside it, we see a strong flow of good businessopportunities that we are uniquely equipped to exploit. I would like to thank both the Board and our dedicated staff for theircommitment to Star Energy. Roland WesselChief Executive Officer Consolidated profit and loss accountfor the year ended 31 December 2004 note 2004 2003 £000 £000 Turnover 17,144 20,949Cost of sales (9,342) (10,283)Depletion and depreciation (4,166) (5,963) Gross profit 3,636 4,703Corporate AIM admission and restructuring costs 4 (1,452) -Other administrative expenses (3,547) (2,666) Administrative expenses (4,999) (2,666)Other income 15 22 Operating (loss)/profit 6 (1,348) 2,059 Other interest receivable and similar income 700 12Interest payable and similar charges 4 (1,460) (1,618) (Loss)/profit on ordinary activities before taxation (2,108) 453 Tax charge on (loss)/profit on ordinary activities (742) (1,696) Loss for the year (2,850) (1,243) Finance costs on non-equity shares (658) (1,335) Retained loss for the financial year (3,508) (2,578) Basic and diluted loss per share (pence)Ordinary shares 3 (6.85) (7.86) Consolidated balance sheetat 31 December 2004 note 2004 2003 £000 £000 £000 £000Fixed assetsTangible assets 53,298 43,195 53,298 43,195Current assetsStocks 297 418Debtors 6,390 4,650Cash at bank and in hand 7 12,357 295 19,044 5,363Creditors: amounts falling due within one year (9,344) (11,581) Net current assets/(liabilities) 9,700 (6,218) Total assets less current liabilities 62,998 36,977 Creditors: amounts falling due aftermore than one year (413) (11,830)#Provisions for liabilities and charges (5,812) (6,020) Net assets 56,773 19,127 Capital and reservesCalled up share capital 6,025 4,650Share premium account 94,604 55,000Merger reserve (45,093) (44,610)Profit and loss account 1,237 4,087Shareholders' funds - equity 56,773 3,666 - non equity - 15,461 56,773 19,127 Consolidated cash flow statementfor the year ended 31 December 2004 2004 2003 £000 £000 £000 £000 Cash flow from operating activities 2,013 7,433 Returns on investments and servicing of financeInterest received 392 12Interest paid (710) (1,144)Interest element of finance lease rental payments (129) (186) _______ _______ (447) (1,318) Taxation (163) (718) Capital expenditure and financial investmentPurchase of tangible fixed assets (10,716) (5,786) Acquisitions and disposals - - _______ _______Cash outflow before management ofliquid resources and financing (9,313) (389) FinancingIssue of ordinary share capital 78,250 2,052Issue costs of equity shares (4,806) -Redemption of shares (32,948) -Debt due within one year - 4,000Repayment of debt due after more than one year (17,638) (5,306)Debt arrangement fee (863) -Capital element of finance lease rental payments (921) (851) _______ _______ 21,074 (105) Increase/(decrease) in cash in the year 11,761 (494) Reconciliations of movements in shareholders' fundsfor the year ended 31 December 2004 2004 2003 £000 £000 Retained loss for the financial period (3,508) (2,578)Add back undeclared dividends on non-equity shares 494 1,335Add back premium paid on redemption of redeemable preference 10p shares 164 -Issue of shares 78,250 2,110Share issue costs (4,806) -Redemption of 'B' ordinary shares (16,781) -Redemption of preference shares (16,167) -Cancellation of purchases of 96,037 own shares by Employee Benefit Trust - 96Acquisition of 72,028 own shares by Employee Benefit Trust - (319)Proceeds on disposal of 72,028 own shares by Employee Benefit Trust - 159 Net addition to shareholders' funds 37,646 803Opening shareholders' funds 19,127 18,324 Closing shareholders' funds 56,773 19,127 Notes: 1. The financial information set out above does not constitute theCompany's statutory accounts for the period ended 31 December 2004 or 2003. Thestatutory accounts for 2004 will be delivered to the Registrar of companies,following the company's annual general meeting. The auditors have reported onthose accounts; their report was unqualified and did not contain statementsunder section 237(2) or (3) of the Companies Act 1985. The Company wasincorporated on 4 May 2004 and therefore did not present statutory accounts forthe year ended 31 December 2003. Effective 12 May 2004 it acquired 100 percentof the issued share capital of Star Energy Limited by means of a share-for-shareexchange. The directors adopted merger accounting principles in drawing up theaccounts, and 2003 comparative information is prepared on this basis. Theauditors have reported on the 2003 statutory accounts of Star Energy Limited(which formed the basis for the comparative information) and their report wasunqualified and did not contain a statement under section 237 (2) or (3) of theCompanies Act 1985. Those accounts have been delivered to the Registrar ofCompanies. 2. No dividend is proposed. 3. The Company's Articles of Association confer on the holders of 'A'ordinary shares and 'B' preferred ordinary shares, the same rights in respect ofdividends, as if they were a single class of ordinary shares (prior toconversion to 10p Ordinary shares or redemption). Accordingly, for the purposesof earnings per share calculations, all ordinary shares were treated asconstituting one class of shares. Earnings per share is calculated using a weighted average number of ordinaryshares of 51,219,990 (2003: 32,806,864), and a loss for the year attributable toordinary shareholders of £3,508,000 (2003: £2,578,000). There is no differenceon dilution. There is no difference between basic earnings per share and diluted earnings pershare as the exercise of share options would not be dilutive. 4. Included in corporate AIM admission and restructuring costs are£906,000 of advisory costs for restructuring the senior debt facilityarrangement, £546,000 of costs in respect to the AIM admission. Included inother administrative expenses are £272,000 relating to the write down ofdevelopment costs for the wind turbine project, and £250,000 of other one-offprofessional advisory costs. Included in interest payable and similar chargesis £219,000 relating to write-off of arrangement fees in respect of theassociated loan restructuring. 5. The Group secured a loan facility of £57.5 million on 5 May 2004. Thiscredit facility incurs a commitment fee for undrawn balances 0.6% and intereston outstanding debt at LIBOR plus 2 %. The outstanding debt is repayable invariable amounts (determined semi-annually) until the Humbly Grove gas storagefacility has achieved technical completion as defined by the credit facilityagreement. Thereafter the interest rate is LIBOR plus 1.75% until finalmaturity of 31 December 2012 or earlier if the debt has been repaid. The creditfacility is hedged for 75% of the interest exposure to Sterling LIBOR at a rateof 7.535%, based on the expected borrowings for the life of the facility until31 December 2008. As at 31 December 2004 the facility had not been drawn upon. 6. Reconciliation of operating profit to operating cash flows 2004 2003 £000 £000 Operating (loss)/profit (1,348) 2,059Depreciation, amortisation and impairment charges 4,331 6,121Decrease/(increase) in stocks 120 (3)Non cash write offs 118 -Increase in debtors (1,260) (144)Increase/(decrease) in creditors 52 (600) Net cash inflow from operating activities 2,013 7,433 The cash inflow from operating activities in 2004 is stated after deducting anoutflow of £1.7 million to the Corporate AIM admission and restructuring costsand to other one-off professional advisory costs. 7. Analysis of debt At At beginning Other non cash Exchange end of of year Cash flow changes movement year £000 £000 £000 £000 £000 Cash in hand and at bank 295 11,745 - 317 12,357Overdrafts (16) 16 - - - 279 11,761 - 317 12,357Debt due within one year (7,086) 7,158 (72) - -Debt due after one year (10,480) 10,480 - - -Obligations under finance leases andHP contracts (2,257) 921 (48) - (1,384) Total (19,544) 30,320 (120) 317 10,973 8. Copies of the annual report and accounts will be posted to allshareholders. Further copies will be available from the Company's head officesat 6th Floor, 5 Lower Belgrave Street, London, SW1W 0NR from the date ofposting. Telephone +44 (0) 20 7730 6663. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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