30th Jun 2008 07:00
PRESS RELEASE
Dublin: 30th June 2008
PETROCELTIC INTERNATIONAL PLC
RESULTS AND OPERATIONS UPDATE
FOR THE TWELVE MONTHS ENDED 31 DECEMBER 2007
Petroceltic International plc ("Petroceltic" or "the Company") the independent oil & gas exploration company operating in Algeria, Italy, Ireland and Tunisia today announced its results for the 12 month period ended 31 December 2007. The key highlights are:
·; Algerian 3D seismic programme to optimise drilling locations
·; Seven wells planned for Algeria
·; Major expansion of Italian exploration portfolio
·; Corporate focus on developing industry relationships
·; Board appointments add commercial and technical expertise
·; Cash and cash equivalents conserved at US$23.5m at year end
·; Operating loss reduced to US$2.5m
·; Petroceltic has also made a significant announcement today on a strategic alliance and investment in the Company by Iberdrola, the Spanish energy company
Brian O'Cathain, Executive Chairman of Petroceltic commented:
"Petroceltic has made clear progress in laying the groundwork for what is set to be an exciting year ahead. We have put in place a portfolio lying on the doorstep of Europe, with growing demand for energy supply, which has the potential to generate significant value for shareholders.
The inherent upside in our portfolio has been underlined by the strategic alliance and investment agreement with Iberdrola, announced separately today, which ensures that we are fully funded for the upcoming multi-well drilling programme in Algeria and elsewhere."
Press Enquiries to:
John Craven / Brian O'Cathain, Petroceltic International Tel: +353 (1) 421 8300
James Henderson / Alisdair Haythornthwaite, Pelham PR Tel: +44 20 7743 6676
Joe Murray / Joe Heron Murray Consultants Tel: +353 (1) 4980300
HIGHLIGHTS
In 2007, Petroceltic's focus was on building its exploration and production portfolio in North Africa and Italy, two prolific petroleum provinces. Extensive seismic and analysis work has identified optimal drilling locations on a number of discovery and exploration prospects in both areas. In the same period the Italian licence areas, both onshore and offshore, were expanded considerably.
The company is now poised for a period of significant investment and activity to prove up reserves, and move discoveries towards the development stage. The acquisition and interpretation of seismic data continues apace, ahead of the anticipated drilling of seven wells over the next year on the selected locations.
In Algeria, Petroceltic has now completed the acquisition of over 75% of its largest ever 3D seismic survey which will cover over 850 sq kms of the 70 kms long Ain Tsila Ridge the largest prospect in the Isarene permit. This programme will be finished in August and data will be processed by year end. This and other seismic data will enable the company to identify optimal drilling locations in terms of structural position and reservoir quality. It is planned to drill the gas-prone Ain Tsila Ridge in addition to other oil and gas prospects in the Isarene permit in 2009.
In Italy, the company has substantially increased its acreage portfolio and is firming up drilling locations and rig slots. In addition to acquiring an attractive inventory of gas prospects in the Po Valley from BG Italia, Petroceltic has been awarded seven new exclusive offshore permits in the Adriatic. These adjoin four existing oil and gas fields. A number of wells are planned for late 2009/2010, including two onshore wells in the Po Valley area and one offshore well in the Elsa discovery block BR 268 RG in the Adriatic.
Petroceltic's management has also invested significant time and energy in developing industry relationships over the past year. High commodity prices and the recent worldwide decline in liquidity have meant that funds for investment in exploration and production are at present more readily available from the industry than from capital markets. These efforts, and the above planned activity, have laid the foundations for a period of significant growth in shareholder value.
The focus on preparing for a more intensive investment and exploration phase is reflected in the results for the year to December 31st, 2007. Cash and cash equivalent resources were conserved at US$23.5m while the Operating Loss was reduced to US$2.5m. Accounts for the year and a comprehensive review of activity are attached.
A presentation on the Petroceltic Iberdrola Strategic Alliance will be available on the Company's website from 10.00am, and a conference call will take place at 10.00am today.
Conference call-in details are as follows:
Ireland: +353-1436-7641 / 1800-943-557
UK: +44-20-8515-2301 / 0800 279 2280
The annual report and notice of AGM, which will include resolutions in relation to the investment by Iberdrola, will be posted to shareholders today, Monday June 30th, 2008 and will also be available on the Company's website from 10.00am.
The Annual General Meeting will be held on Thursday August 14th, 2008, at 11am at the Herbert Park Hotel, Ballsbridge, Dublin 4.
Notes to Editors:
The relevant information has been reviewed and verified by Mr. John Craven, Director and Chief Executive Officer of Petroceltic, for the purposes of the Guidance Note for Mining, Oil and Gas Companies issued by the London Stock Exchange in March 2006. Mr. Craven holds a B.Sc in Geology and a Masters Degree in Petroleum Geology from Imperial College of Science and Technology in London, and is a member of the Petroleum Exploration Society of Great Britain.
Glossary of Terms
|
bblsd bcf boe bopd mmbo mmscf tcf tcfe PSC |
Barrel (1 barrel = 159 litres) per day Billion cubic feet (1 cubic foot = 0.028 m3) Barrels of oil equivalents Barrels of oil per day Million barrels of oil Million standard cubic feet per day Trillion cubic feet Trillion cubic feet equivalents Production sharing contract |
Chairman's Statement
Since my last statement to shareholders, the Company has made significant progress in its objective of building a significant exploration and production business in both major areas of focus, North Africa and Italy.
These two prolific petroleum provinces both have the potential to add significant discoveries and reserves. These areas are both on the doorstep of Europe where increasing focus on security of supply and heightened demand for ownership of equity gas amongst utilities has increased the competition for and attractiveness of good hydrocarbon portfolios. This provides real opportunity for Petroceltic.
Our business model is focused on the acquisition of good quality acreage in areas of proven oil and gas, the development of drillable prospects through the application of our exploration skills, and the addition of step-change value through the drill bit in exploration and appraisal. We seek to mitigate risk by taking partners from the industry or through strategic alliances where appropriate.
The current climate for small market capitalisation exploration and production companies is challenging. Hydrocarbon prices are at record highs, but drilling and seismic costs have increased to record levels also, and there is a very competitive and scarce market for equipment and people.
The exploration and production industry is prone to cyclical activity. The advent of the current period of high commodity prices, combined with the worldwide decline in liquidity following the "sub-prime" crisis of 2007 has led to a period when the capital required for investment in oil and gas exploration and production is more readily available from the industry than from the traditional sources of investment. The Company has invested serious time and energy in developing its industry profile and relationships over the past year.
It is the primary strategic objective of the Board to seek to create the most value for all of our shareholders over the long term. The benefits of fostering industry relationships which this strategy requires may not always be obvious in the short term; this has been reflected in our recent share price performance. However, we are confident that our current efforts are laying solid foundations for a period of significant growth in shareholder value in the near future.
We are now poised for a period of investment in drilling and proving up reserves, where we believe that the value in our portfolio will be demonstrated.
It is also the Company's intention to complement our organic growth programme by pursuing both corporate and asset acquisition opportunities. High oil prices have led to a seller's market in the international oil industry, but for experienced technical and financial teams such as Petroceltic's with detailed technical knowledge, good regional contracts and advisors and strong commercial partners, the opportunity to create value through acquisition still exists. The Board will look carefully at all opportunities which arise in our area of focus, seeking always to maximise shareholder value and the potential upside.
The results of Petroceltic International plc have been prepared this year for the first time in accordance with International Financial Reporting Standards ("IFRS"). As a result last year's comparative figures have been restated. The accounting policies adopted and the impact of the move to IFRS for the comparative financial statements, including quantification of the main accounting differences, are set out in the attached financial statements. These changes provide considerably more detail than required before, and result in a longer annual report, which I hope that you will find more useful.
On behalf of the Board of Directors, I would like to thank the Company's shareholders for their continued support over the past year. I have personally spoken to many of you over the year, and I understand that you have been patient while we put our industry partnerships in place. I look forward to rewarding your patience with a year of more operational progress over the coming twelve months.
In summary, we have an exciting year of technical work and operational activity ahead of us. The stage is set for an active and exciting drilling campaign, and I confidently expect to see our Company making even greater strides during the coming year.
On behalf of the Board of Directors,
Brian O'CathainChairman
27 June 2008
Chief Executive's Review
2007 was a very active year for Petroceltic in which we have prepared the groundwork in terms of new seismic acquisition and new licenses necessary to form the basis of an active drilling programme which in Algeria is planned to commence in late 2008 or early 2009.
ALGERIA
Illizi Basin Isarene PSC (Blocks 228/229A) Petroceltic 75% Interest
Highlights
4 appraisal areas and 1 exploration area identified for further drilling
Commenced 3 D seismic acquisition and processing over the Ain Tsila Ridge
Nearby discoveries on adjacent permits - extending in to Isarene
Successful entry in to second exploration period
Tenders issued for drilling rigs and related services for 7 wells.
In Algeria, we initiated the acquisition of the Company's largest ever 3D seismic survey, which covers 850 sq. km. over the Ain Tsila Ridge Ordovician prospect, and re-processed 1,500 km of 2D seismic on our acreage. The 3D acquisition programme is now over 75% complete at the time of writing, and I am very pleased to report that to date the field operations have been carried out safely and professionally, with no significant injuries or lost time incidents. The initial results from the early field seismic processing look very encouraging, and we look forward to firming up our inventory of drilling targets on this very prospective Isarene licence.
Petroceltic has identified five highly prospective areas namely the Ain Tsila Ridge, Issaouane South (ISAS), Issaouane NW (INW), Hassi Tab Tab (HTT) and SW Isarene following an extensive review of all reprocessed seismic, well and geological information, including well test and core data. These project areas will be the focus of drilling and other necessary work to progress towards commercialisation of potential hydrocarbon resources. Four of these project areas already have existing discoveries made by Petroceltic and previous operators and hence are considered appraisal areas. The other remaining prospect is SW Isarene which is an oil exploration target.
The Ain Tsila Ridge
This is the largest prospect in the Isarene permit area. It is a north plunging structural high extending some 70 kms from south to north. Petroceltic is the first foreign company to have a permit over the whole of the ridge area, and consequently the opportunity to explore this feature as a single entity.
Previous operators have drilled 5 wells on or just outside structural closure on this prospect. In these wells, drilled some 40 years ago, the target Ordovician sandstone reservoir was gas saturated but only flowed gas at moderate rates due in part to the location of the wells mainly outside optimal structural closure but also the quality of the Ordovician reservoir.
In the Illizi Basin Ordovician sandstones are the most important reservoirs in terms of hydrocarbon volumes. The key to success is to identify areas of high quality reservoir and increasingly operators are using state of the art wide azimuth 3D seismic to mitigate reservoir risk.
Petroceltic's strategy going forward is to employ the latest seismic technologies and a key objective of the wide azimuth 3D seismic survey is to identify high permeability sweet spots in the target Ordovician reservoirs in order to optimise drilling and well testing procedures. This technique has been successfully deployed by BP in the appraisal and development of the adjacent Tiguentourine Field in the Illizi Basin (to the east of the Isarene Permit) - where average development well flow rates of 80 mmscf/d from the Ordovician reservoir, have been reported.
Petroceltic has contracted Global Geophysics to acquire a 3D WAZ seismic survey over the northern part of the ridge and as of May 2008 some 650 square kilometers of data has been acquired. Acquisition of the data is expected to be completed in August 2008 and processing by year end 2008. The data will be used to optimise new drilling locations in terms of structural position and reservoir quality.
Petroceltic estimates prospective hydrocarbon resources for the ridge to be in excess of 2 trillion cubic feet of gas.
ISAS and INW
New mapping utilizing all the wells and newly reprocessed seismic data over the ISAS structure demonstrates that at the Devonian F2 level it is a gas cap with an oil rim. Three wells ISAS 1, INE 1 and TMZ 1 all flowed gas whereas the down dip GTT 1 well flowed oil also from the F2 sands. In addition GTTN 1 drilled in adjacent block 226 flowed gas from this horizon on the same structure.
In 2007 Medex, operator of the adjacent block 226 and Petroceltic undertook a joint technical study of the ISAS-INW area using a common data base. The main conclusions from this study were that at the F2 level the ISAS and INW structures extend in to both blocks. In 2007 Medex drilled a successful well NIS 1 which tested gas at 7mmscf/d on the INW structure.
Petroceltic plans to drill further wells on the ISAS and INW structures in 2009.
HTT
Following the successful drilling of Petroceltic's HTT 2 discovery well the HTT structure is being remapped using newly reprocessed seismic data. On completion of this work further appraisal drilling is planned.
SW Isarene
In 2007 we completed seismic reprocessing over this prospect area. Subsequent mapping of this data has identified 2 prospects, SW Isarene and El Biod south.
It is planned to conduct further 2D seismic acquisition followed by drilling in 2009. Both prospects are considered oil targets with main reservoir objectives in the Devonian and Ordovician.
Successful Entry in to the Second Exploration Period
Petroceltic received approval to enter the second exploration period in the Isarene PSC. The second period officially commenced on 26 April 2008 and is in force for two years until 25 April 2010. After this time discoveries can be retained for appraisal, development and production.
Petroceltic has retained 70 per cent of the original Isarene Permit area (7,520 sq. km) into the second exploration period, in line with the provisions of the Production Sharing Contract. The retained area contains all of the prospects and discoveries previously identified by Petroceltic in the permit area.
Future Plans
Petroceltic has issued tender documents for a minimum of seven exploration and appraisal wells. Drilling of these wells is planned for the Ain Tsila Ridge and the other discovery areas mentioned above. Our programme is aimed at commercialisation of all prospective discovery areas before the end of the second exploration period in April 2010.
ITALY
Italy is a good place to do business. The fiscal terms are very favourable with a simple tax and royalty regime. Entry costs are low, there is a well developed infrastructure and producers enjoy high oil and gas prices. Against this background I am pleased to report that in 2007 Petroceltic made significant progress in Italy by acquiring new licences, including a package of onshore permits in the Po Valley from the BG Group and by generating prospects in existing permits for future drilling.
In Italy, we have substantially increased our acreage portfolio, by acquisition in the Po Valley area, and through successful licence application in the Central Adriatic. We are excited about possible oil prospects in both of these areas. We are now working with our partners in firming up drilling locations and rig slots for the Italian portfolio.
BR 268 RG (Elsa) Petroceltic 40% Interest
This block contains the Elsa oil discovery. Seismic data over the discovery has been obtained from ENI the previous operator. This data has been reprocessed and is currently being mapped.
It is planned to drill a well in this block in late 2009 or early 2010. Potential recoverable reserves for Elsa have been independently estimated to be 182 million barrels.
There is farm-in interest in this block from a number of major oil and gas companies.
Civitaquana Exploration Permit Petroceltic 35% Interest
In 2007 Petroceltic received final ministerial approval for the Civitaquana exploration permit onshore Italy.
The permit is located in the Marche-Abruzzi Basin of central Italy, west of the onshore Miglianico oil and gas discovery and close to Petroceltic's BR 268 RG Offshore Permit, in the Adriatic Sea.
The block contains several potential oil and gas targets, including a shallow Pliocene gas play and possible extensions of the intra-Cretaceous Maiolica formation that yielded light oil and gas in the nearby Miglianico discovery well, drilled by ENI in 2001.
Po Valley Permits
In October 2007 Petroceltic acquired a portfolio of acreage comprising 4 exploration permits from BG Italia. The interests in these permits vary from 50 per cent to 95 per cent. In addition, the deal included interests in two exclusive permit applications, one in the Po Valley and one offshore in the Sicily Channel in Southern Italy.
These permits, Carisio, Torrente Nure, Casalnoceto and Vercelli contain an inventory of prospects with estimated unrisked recoverable resources in excess of 1 TCFe (trillion cubic feet gas equivalent). Some of these are ready to drill and are well defined by an extensive 3 D seismic data base. Also Triassic oil leads have been recently identified on trend to the nearby ENI operated Villafortuna oil fields.
Petroceltic's activity in the Po Valley will focus on the Carissio and Torrente Nure Licences. In Carissio (Petroceltic Operated, 95% interest) there are two gas prospects well-defined by 3D seismic, Rosso and Arborio. These low-risk prospects are adjacent to existing gas infrastructure. The Company intends to mature these to fully-permitted, ready-to-drill prospects during the year, with drilling planned for 2009, subject to rig availability. There is also a significant Triassic oil lead which will require further seismic before drilling. In Torrente Nure (ENI operated, Petroceltic 55% interest) the operator intends to shoot additional 2D seismic, and plans to drill an exploration well in 2009.
Included in the BG Italia acquisition are two exclusive permit applications Case Sparse in the Po Valley and Licata in the Sicily Channel. A prospect in the Licata application area is similar to and on trend with the Pande Gas Field which is now being developed by ENI.
Adriatic Permit Applications Petroceltic 100% Interest
The Gazette of the Ministry of Economic Development, published in April 2007, confirmed that seven new permit applications in the Central Adriatic offshore were awarded on an exclusive basis to Petroceltic Elsa Srl ('Petroceltic') a wholly owned subsidiary of Petroceltic International plc.
These exploration permit areas were primarily selected to access the extension of the proven Elsa-Miglianico oil fairway, into the Central Adriatic, to the east and southeast of the existing Petroceltic blocks. They are adjacent to four oil and gas fields, the Miglianico, Rospo Mare and Ombrino Mare oil fields and the Santo Stefano Mare Gas field.
Petroceltic will operate the seven exclusive exploration permits with a 100% working interest. These permit areas, which cover approximately 2,040 sq kms, lie in water depths ranging from 30 to 150 meters.
The seven exclusive exploration permits are part of an application for nine permits, in the central Adriatic area, submitted by Petroceltic in October 2006. A decision from the Ministry regarding the other two applications is expected from the Ministerial Commission in the coming months.
Since year end Petroceltic has applied for 2 further permits in the Adriatic.
Future Plans
We plan to mature existing oil and gas prospects in the Po Valley for planned drilling in 2009/10. In addition, we intend to farm-out the Adriatic blocks for a carried seismic and drilling programme commencing in 2010.
TUNISIA
Tunisia Ksar Hadada Petroceltic 57% Interest/Operator
New interpretation of seismic and well data on the Ksar Hadada permit has yielded positive results with the validation of a number of Ordovician and Silurian prospects in the southern part of the block. These prospects have been enhanced recently by positive drilling results on adjacent permits where an oil discovery in the Ordovician in the TT2 well, approximately 20 kilometres to the south, has been announced by the co-venturers in this well.
It was intended to farm-out Tunisia for drilling in late 2008. However this process has been suspended pending the final results of testing of the TT2 well in the adjacent block.
Since year end Petroceltic as operator of the Ksar Hadada permit has been informed by the Tunisian government that the application to enter the first renewal period has been approved. The first renewal period of the permit begins on 20 April 2008 and lasts for three years. In line with the Production Sharing Contract, Petroceltic and its' co-venturer Independent Resources have retained 80% of the original Ksar Hadada permit (5,600 sq. km) into the first renewal period.
IRELAND
Kinsale Gas Royalty
The Marathon operated Kinsale Head, SW Kinsale and Ballycotton Gas fields continued production in 2007 yielding a net royalty to Petroceltic of $549,000.
Outlook
In 2007 we focused on extending the existing portfolio with additional quality assets in Italy and maturing our exciting prospects in Algeria, Italy and Tunisia towards the drilling phase.
We are now poised for the most exciting drilling campaign in the history of the Company, when we will begin to unlock the value which we believe exists in our portfolio. I would like to thank the Staff of Petroceltic, and our partners and stakeholders, for all of their hard work and loyal support in bringing us to this very exciting period. I am confident that significant value uplift will be realised for shareholders in the near future.
John CravenChief Executive
27 June 2008
Consolidated Income Statement
for the year ended 31 December 2007
2007 2006* US$'000 US$'000
Continuing Operations
Revenue 549 1,266
Administrative expenses (2,817) (2,577)
Amortisation of intangible assets (53) (51)
Exploration costs written off (210) (5,756)
Cost of share based payments (1,757) (1,832)
Results from operating activities (4,288) (8,950)
Finance income 1,827 4,257
Loss before tax (2,461) (4,693)
Income tax expense - (102)
Loss for the year - all attributable to equity holders in the Company (2,461) (4,795)
Basic loss per share (cent) (0.33) (0.70)
Diluted loss per share (cent) (0.33) (0.70)
* As restated for IFRS
Consolidated Statement of Recognised Income and Expense for the year ended 31 December 2007
2007 2006* US$'000 US$'000
Loss for the year (2,461) (4,795)
Income recognised directly in equity
- net change in fair value of available-for-sale assets 50 299
- related deferred tax (10) (59)
Total recognised income and expense for the year, all attributable to equity holders of the Company (2,421) (4,555)
* As restated for IFRS
Consolidated Balance Sheet
as at 31 December 2007
2007 2006* US$'000 US$'000
Assets
Non-current assets
Intangible assets 47,490 41,767
Investments 758 708
Total non-current assets 48,248 42,475
Trade and other receivables 632 985
Cash and cash equivalents 23,463 33,410
Total current assets 24,095 34,395
Total assets 72,343 76,870
Equity
Share capital 26,191 26,191
Capital conversion reserve fund 51 51
Share premium 113,079 113,079
Share based payment reserve 9,220 7,463
Fair value reserve 562 522
Retained earnings (78,290) (75,829)
Total equity 70,813 71,477
Liabilities - current
Trade and other payables 1,390 5,263
Liabilities - non current
Deferred tax 140 130
Total liabilities 1,530 5,393
Total equity and liabilities 72,343 76,870
* As restated for IFRS
Consolidated Cash Flow Statement
for the year ended 31 December 2007
2007 2006* US$'000 US$'000
Cash flows from operating activities
Loss for the year (2,461) (4,795)
Adjustments for:
Finance income (1,827) (4,257)
Income tax expense - 102
Amortisation of intangible assets 53 51
Exploration costs written off 210 5,756
Cost of share based payments 1,757 1,832
Cash from operations before changes in working capital (2,268) (1,311)
Decrease/(increase) in trade and other receivables 353 (190)
(Decrease)/increase in trade and other payables (626) 4,681
Net cash from operating activities (2,541) 3,180
Cash flows from investing activities
Expenditure on intangible assets (9,233) (34,427)
Interest received 1,515 1,870
Sale of investments - 1
Net cash from investing activities (7,718) (32,556)
Cash flows from financing activities
Proceeds from the issue of new shares - 40,994
Net cash from financing activities - 40,994
Net (decrease)/increase in cash and cash equivalents (10,259) 11,618
Effect of foreign exchange fluctuations on cash and cash equivalents 312 2,387
Cash and cash equivalents at start of year 33,410 19,405
Cash and cash equivalents at end of year 23,463 33,410
* As restated for IFRS
Related Shares:
PCI.L