1st Nov 2005 07:00
Europa Oil & Gas (Holdings) PLC01 November 2005 EUROPA OIL & GAS (HOLDINGS) PLC PRELIMINARY RESULTS FOR THE YEAR ENDED 31 JULY 2005 Europa Oil & Gas (Holdings) plc ("Europa" or the "Company"), the independent oil& gas exploration and production group with assets in the UK and continentalEurope, today announces its preliminary results for the year ended 31 July 2005. Financial Highlights • Turnover of £2.399m (18 months to 31 July 2004 £1.952m) • Operating profit of £0.842m (18 months to 31 July 2004 £0.694m) • Profit after tax of £0.354m (18 months to 31 July 2004 £0.298m) • Cash of £1.977m at 31 July 2005 • Net assets of £8.614m • Earnings per share of 0.64p Operational Highlights • Production from the UK and Ukraine during the period averaged 288 barrels of oil equivalent per day (boe/d) • Successful drilling of Bilca-2 in Romania to prove up additional reserves to the west of Bilca-1. Bilca-2 was retained for use as a future gas producer • Drilling of Fratauti-1 discovery well in Romania which tested an aggregate 12.7 million standard cubic feet per day (mmscf/d) (over 2,000 boe/d) from several zones • Approval by the Romanian government for the Bilca Area Gas Development • Costisa-1 well in Romania spudded in early February 2005, currently drilling at 4,034 metres as at 31 October • Drilling of West Firsby-8 well, production currently suspended • Quad 41 preliminary engineering and drilling studies undertaken • Geochemical survey on UK onshore licence PEDL150 near the Whisby Field Corporate • During November 2004 Europa successfully floated on AIM and completed a placing of 20,000,000 shares at 25p each that raised £4.3m after expenses. At the time of the placing, one warrant for every two shares placed was also issued • Exercise of 1,065,000 warrants raising an additional £319,500 and increasing the total ordinary shares in issue to 61,065,000 Recent Events • Award of the Bilca Development construction contract and construction start-up • Farm-out of Whisby Exploration Area to Valhalla Oil & Gas Limited. The agreement with Valhalla covers the seismic and the drilling of the first exploration well at a cost of under 20p in the pound to Europa • Approval by UK government as a UK Offshore Operator and two year extension of Quad 41 North Sea licence Chairman's Statement I am very pleased to report Europa's first annual results as a quoted companyand to be able to demonstrate significant progress on a number of key projects. Over the past year, the management has pursued an active exploration anddevelopment programme, participating in the drilling of four new wells: twoexploration, one development and one appraisal. These included the discoverywell, Fratauti-1 and the successful appraisal well, Bilca-2, both of which arein Romania. This drilling success further enhances Europa's strong drillingtrack record. Currently, the Company continues to benefit from its UK onshore oil productionoperations with steady production and high oil prices. This distinguishes theCompany from many of its peers who are focused on exploration and lackdevelopment and production activities. The successful wells, Fratauti-1 and Bilca-2, now form part of the Bilca AreaGas Development. This production is due onstream in 2006 and will addsignificantly to Europa's daily production. At a time of high commodity pricesthis production, combined with the UK onshore production, will generatesignificant cashflows in the coming year to enable us to fulfil our currentexploration and development programme from existing cash reserves. A third Romanian well, the Costisa-1 well, spudded in February 2005 is currentlydrilling. The prospect remains well-defined at the main Badenian target withother secondary potential. Europa has an excellent acreage position in the Romanian Carpathians, an areawhich has produced 5 billion barrels of oil and 3 trillion cubic feet (tcf) ofgas to date and is still relatively underexplored. The Company is planning toacquire seismic data in 2006 to assess the southern extension of the provenBilca play. Further drilling in the second half of 2006 is anticipated. The Company drilled the West Firsby Field WF8 development well in the UK inMarch 2005, targeting an unproven area of the field. Due to operationaldifficulties, the results were inconclusive and hence disappointing. The WestFirsby Field offers undeveloped reserves potential and management is working toresolve this situation. Elsewhere, work in the UK onshore is progressing apace. The Directors believethat Holmwood is one of the strongest undrilled onshore prospects in the UK.Work is ongoing on planning the drilling operation which we hope can go ahead in2006. The recent farm-out of a proportion of the Company's interest in theWhisby Area Exploration Acreage allows the work programme to be undertaken at asignificantly reduced cost to Europa. The excellent terms obtained on thefarm-out demonstrate the quality of the Whisby Area Exploration Acreage and workhas already begun to identify a drilling location. The Company, now recognised as an offshore operator by the DTI, will be drillingan appraisal well on the Quad 41 licence during the next two years. The Quad 41discoveries produced at rates up to 35 mmscf/d (approximately 5,800 boe/d) anddevelopment of these fields would put Europa firmly in a new peer group. In Ukraine the Company continues to produce and sell gas and awaits thetransition to a full production licence. Further low risk but high rewardopportunities are being pursued in the region. The Directors are committed to adding further assets to Europa's portfolio, withboth discovered and undiscovered resources. Currently, applications have beenlodged in two EU countries for new exploration acreage and a number of other newventure and acquisition opportunities are actively being pursued in the region. The Directors are very pleased with the results of the last year. The activityhas increased reserves with production set to increase significantly in 2006.The Directors are confident that the coming year will be as successful and thatshareholder value will continue to grow. Sir Michael OliverChairman1 November 2005 For further information, contact: Europa Oil & Gas (00 33 563 33 18 97)Paul Barrett Westhouse Securities LLP (0161 838 9140)Tim Feather Also see www.europaoil.com Operational Update Romania The Costisa-1 well, the culmination of over five years of exploration effort onthe EPI-3 Block, was spudded in February. Difficult drilling conditions haveled to much slower progress than originally envisaged and, as at 31 October, thewell was at a depth of 4,034 metres. The target is estimated to lie at around4,250 metres. Nothing seen in the drilling data to date downgrades the primarytarget prospectivity. The Bilca Project, situated in the EIII-1 Brodina Block is on track to achievecommercial gas production in the first half of calendar year 2006. In thisreporting period, Europa has participated in two wells, a successful appraisalof the western part of the Bilca feature and the nearby Fratauti-1 discoverywell, the latter flowing at an aggregate rate of 12.7 mmscf/d from three zones.As a consequence, there are three gas wells, including the Bilca-1 well drilledin 2004, ready to supply the planned Bilca facilities. In August 2005, the Romanian Government approved the construction of the Bilcafacilities and, following a tender process, the construction contract wasawarded in October 2005 to Condmag and Inspet. Construction of the facilitiesbegan immediately following the contract award. In parallel, gas salesarrangements are being finalised and will be announced shortly. The BrodinaBlock consortium, in which Europa has a 28.75% interest, is committed to thecommencement of production in the first half of 2006 and maximising salesvolumes. To this end the consortium has obtained permission to drill a fourthBilca area well on a strong Bilca-style prospect. On the Brodina Block 200km of seismic is planned in 2006 in order to evaluate alarge area devoid of seismic and well data between the Bilca area and theproducing Todiresti gasfield to the south. A seismic acquisition programme is also planned in 2006 over the Bacau andCuejdui Blocks, to the south of the Brodina Block. These blocks are relativelyunexplored, though the limited data available indicates that the Bilca playalong with deeper plays are present. It is hoped the 2006 seismic programmewill define at least one drilling location for 2007. UK North Sea Europa holds 100% equity in licence P1131, containing the 41/24 and 41/25discoveries, near shore gas condensate accumulations which flowed on test atrates of up to 35mmscf/d (approximately 5,800 boe/d). The Company has recentlyagreed terms with the DTI to move into the next phase of the licence. It isanticipated that a high angle appraisal well will be drilled during the currentlicence phase and if successful, it will be retained as a future producer in thefield development. Onshore UK In the East Midlands Oil Province, the W4 well on the Whisby field produced over60,000 barrels (bbls) in the year with a continued low water cut, demonstratingthe long term durability of the production stream. On the surrounding Whisbyexploration licence (PEDL150), a geochemical survey undertaken in early 2005highlighted areas of prospectivity for further work. This work will take theform of 40 km of new 2D seismic in the second quarter of 2006 followed by anexploration well. The Company has successfully farmed out a 50% interest toValhalla Oil & Gas Limited in return for funding the acquisition of the seismicand 75% of the well cost. Pre-planning work, including ecological, archaeological and engineering surveys,has been undertaken on the Holmwood licence (PEDL143) in the Weald Basin.Planning permission to drill a well on the Holmwood Prospect, a robust four-waydip closure at Portland Sandstone level, is expected to be submitted in thefourth quarter of 2005 and it is hoped that the well will be drilled in 2006. During the financial year, Europa drilled the West Firsby field WF8 well, asidetrack of a watered-out producer. This sidetrack encountered significantreservoir sands, but produced water when put onto production. Remedial work wasundertaken to shut off the water zone, but operational difficulties preventedthe work from being completed. Further remedial options are being evaluated. Ukraine The Europa-operated pilot production scheme on the Horodok gas field produced 80million cubic feet (mmcf) over the period. The Company has applied to convertthe pilot production on the Horodok gas field to a full production licencegiving the right to operate the field for the next 15 years. The field iscurrently producing 35 boe/d, net to Europa, and further drilling is planned torealise the full potential of the field following granting of the long termlicence. Forward Programme The Company is looking forward to another active year, primarily in Romania andthe UK. We expect to be participating in at least two wells, and potentially asmany as four, in 2006, along with seismic surveys and other explorationactivity. A key milestone will be first gas from the Bilca Project, which isexpected to take the Company towards the 1,000 boe/d mark by the end of 2006. The Company continues to pursue new venture opportunities. Currentlyapplications for new acreage have been lodged in several jurisdictions with morepending. The Company is focused on the Europe/North Africa region for these newventure opportunities. Presented below are the Financial Review and Results. Paul BarrettManaging Director1 November 2005 Financial Review Results for the year Turnover for the year was £2.399m (2004: £1.952m) mainly from UK onshore oilproduction. UK sales barrels during 2005 were 92,510 bbls (253 bbls/d) achievingan average price of $46.58/bbl (£25.10/bbl). Prices achieved have risen sharplyand during the month of September oil sales have averaged $62.08/bbl. In Ukraine, Europa sold the equivalent of 12,787 boe (35 boe/d) during the yearachieving sales of £0.077m (£6.00/boe). The results for the year to 31 July 2005 show a profit after tax of £0.354million compared to £0.298 million for the 18 months to 31 July 2004. Totalproduction and sales volumes during the year were similar to the prior 18 monthperiod and consequently the increase in gross profit reflects improved commodityprices particularly for oil. This improvement in the underlying performance ofthe business has been offset by an increase in administrative expensesreflecting the cost of becoming a quoted company. In addition increasedinterest charges have been incurred under the terms of a loan from Gemini Oil &Gas Limited in connection with the West Firsby licence. During the fourthquarter of 2005 a trigger point will be achieved which will result in asubstantially reduced future interest charge on the loan. Placing & AIM Admission In November 2004 Europa successfully floated on AIM raising £4.29m net ofexpenses through a placing of 20,000,000 shares at 25p each. At that time onewarrant for every two shares placed was also issued. The 10,000,000 warrantsare exercisable at 30 pence per share. During March 2005 1,065,000 of thesewarrants were exercised raising an additional £319,500. Total shares currentlyin issue are 61,065,000. Certain members of the board, management and employeesof the company have rights in respect of options totalling 1,065,000 sharesexercisable at 25p each. Cash flow Net cash inflow from oil and gas production operations after administrativeexpenses was £953,631 (2004: £1,005,076). The outflow from capital expenditure of £2,492,947 (2004: £3,379,586) relatesmainly to exploration and development activities in the UK and Romania. Servicing of finance resulted in cash outflow of £454,074 (2004: £375,101) beingprincipally the net position of interest payments on a loan and interest earnedon cash deposits. Taking into account the money received from the placing and subsequent exerciseof warrants, the net cash inflow during the year was £2,230,608 (2004: outflowof £267,476). The cash balance at the end of the year was £1,977,117 (2004: £48,789). Financial Risk Europa's activities are subject to a range of financial risks the main onesbeing commodity prices, liquidity within the business and of counterparties,exchange rates and loss of operational equipment or wells. These risks aremanaged through ongoing review taking into account the operational, business andeconomic circumstances at that time. Commodity Price With the rise in commodity prices, Europa has not considered it necessary to usefinancial instruments to hedge sales generated by its oil or gas productionactivities. Liquidity Cash forecasts are prepared frequently and reviewed by management and the board.The board is keen to ensure that adequate financial headroom exists at least ayear ahead. In order to ensure that funds remain liquid and available for operationalrequirements or business opportunities, cash balances are put on short termdeposit. Currency Risk Sales revenue is generated primarily in US dollars and these funds have beenmatched against capital expenditure and payments on the loan. Sterlingexpenditure is provided from existing cash balances in this currency. Operational Risk Appropriate insurance cover is obtained annually for all of Europa'sexploration, development and production activities. Accounting Policies The accounting policies for the year remain unchanged from those used in 2004. Europa in consultation with its advisors will prepare to report consolidatedfinancial statements in conformity with International Financial ReportingStandards (IFRS) for the year ending 31 July 2008 at the latest. Summary The financial results for the year to 31 July 2005 are in line with theCompany's expectations. Europa is well placed to continue the growth of its projects in the UK andcontinental Europe. Ewen AinsworthFinance Director CONSOLIDATED PROFIT AND LOSS ACCOUNTFor the year ended 31 July 2005 18 Months Ended 31 July 2005 2004 £ £ Turnover 2,399,014 1,952,051 Cost of sales- Operating costs (504,908) (476,745)- Depletion and amortisation (754,441) (665,722) 1,259,349 1,142,467 Gross profit 1,139,665 809,584 Administrative expenses (297,337) (115,900) Operating profit 842,328 693,684 Interest receivable 179,809 493Interest payable and similar charges (666,011) (375,594) Profit on ordinary activities before taxation 356,126 318,583 Tax on profit on ordinary activities (2,226) (20,539) Retained profit for the financial year 353,900 298,044 Basic Earnings per share 0.64p 0.75p Diluted Earnings per share 0.64p 0.75p CONSOLIDATED STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSESFor the year ended 31 July 2005 18 Months Ended 31 July 2005 2004 £ £ Profit on ordinary activities after taxation 353,900 298,044 Currency translation difference on foreign currency net investment 18,233 (2,462) Total recognised gains and losses relating to the period 372,133 295,582 CONSOLIDATED BALANCE SHEET as at 31 July 2005 18 Months Ended 31 July 2005 2004 £ £ Fixed assetsIntangible assets 4,478,852 2,958,861Tangible assets 3,256,512 3,019,071 7,735,364 5,977,932 Current assetsDebtors 580,218 284,433Cash at bank and in hand 1,977,117 48,789 2,557,335 333,222 Creditors: amounts falling due within one year (525,037) (3,792,621) Net current assets/(liabilities) 2,032,298 (3,459,399) Total assets less current liabilities 9,767,662 2,518,533 Creditors: amounts falling due after more than one year (883,906) (1,191,158) Provision for liabilities and charges (269,430) (300,000) Net assets 8,614,326 1,027,375 Capital and reservesCalled up share capital 610,650 1,000Share premium 4,406,560 669,425Merger reserve 2,868,033 -Profit and loss account 729,083 356,950 Shareholders' funds 8,614,326 1,027,375 CONSOLIDATED CASH FLOW STATEMENTFor the year ended 31 July 2005 18 Months Ended 31 July 2005 2004 £ £ Net cash inflow from operating activities 953,631 1,005,076 Returns on investments and servicing of finance Interest received & similar income 88,003 493Interest paid & similar charges (542,077) (375,594) Net cash outflow from returns on investments and servicing of (454,074) (375,101)finance Taxation Tax paid (3,180) (29,343) Net cash outflow from taxation (3,180) (29,343) Capital expenditure Purchase of fixed assets (2,492,947) (3,379,586) Net cash outflow from capital expenditure (2,492,947) (3,379,586) Net cash outflow before financing (1,996,570) (2,778,954) Financing Loans (redeemed)/received (275,966) 2,511,478Issue of share capital net of issue costs 4,503,144 - Net cash inflow from financing 4,227,178 2,511,478 Increase/(decrease) in cash in the year 2,230,608 (267,476) CONSOLIDATED CASH FLOW STATEMENTFor the year ended 31 July 2005 Reconciliation of operating profit to net cash outflow from operating activities 18 Months Ended 31 July 2005 2004 £ £ Operating profit 842,328 693,684Depreciation 754,441 665,722(Increase)/decrease in debtors (260,446) 93,391Decrease in creditors (339,833) (747,721)Increase/(decrease) in Provision (42,859) 300,000 Net cash inflow from operating activities 953,631 1,005,076 Reconciliation of net cash flow to movement in net (debt) /funds £ £ Increase/(decrease) in cash in the period 2,229,975 (267,476) Net cash inflow/(outflow) from changes in debt 265,788 (2,577,362) Change in net funds resulting from cash flows 2,495,763 (2,844,838) Currency translation adjustment 10,810 251,548Non cash movement 2,584,974 -Net debt at 1 August 2004/1 February 2003 (4,237,032) (1,643,742) Net funds/(debt) at 31 July 2005/31 July 2004 854,515 (4,237,032) Analysis of changes in net debt Exchange At 31 July Cash Non Cash Gain/ At 31 July 2004 Flow Movement (Loss) 2005 £ £ £ £ £ Cash at bank and in hand 48,789 1,927,695 - 633 1,977,117Overdrafts (302,280) 302,280 - - - (253,491) 2,229,975 - 633 1,977,117 Loans due within one year (2,792,383) (32,144) 2,584,974 857 (238,696)Loans due after one year (1,191,158) 297,932 - 9,320 (883,906) (3,983,541) 265,788 2,584,974 10,177 (1,122,602) Net debt (4,237,032) 2,495,763 2,584,974 10,810 854,515 NOTES TO THE ACCOUNTSFor the year ended 31 July 2005 1. The results for the period are all derived from continuing operations. 2. The results have been prepared on the basis of the accounting policiesadopted in the annual accounts for the 18 month period ended 31 July 2004. 3. The preliminary report for the year to 31 July 2005 was approved by theDirectors on 1 November 2005. 4. The calculation of basic earnings per share is based on the weightedaverage shares in issue throughout the 12 month period. The diluted earningsper share include employee share options. 5. The summarised financial information has been extracted from theunaudited accounts of the Group for the year ended 31 July 2005. The aboveinformation does not amount to statutory accounts within the meaning of theCompanies Act 1985. The statutory accounts for the period ended 31 July 2004have been delivered to the Registrar of Companies. The auditors reported onthose accounts; their report was unqualified and did not contain a statementunder either section 237 (2) or section 237 (3) of the Companies Act 1985. Theauditors have not reported on the accounts for the year ended 31 July 2005, norhave any such accounts been delivered to the Registrar of Companies as at thedate of this announcement. 6. At the time of the placing and admission to AIM, the shareholders ofEuropa Oil & Gas Limited exchanged their entire shareholding for 39,999,998ordinary shares in Europa Oil & Gas (Holdings) plc. Merger accounting has beenadopted in respect of this transaction. Accordingly, the accounts have beenprepared as if Europa Oil & Gas (Holdings) plc had been in existence throughoutthe period. The comparative figures for the prior 18 month period are based on thoseconsolidated figures published for Europa Oil & Gas Limited. The profit andloss account for the current 12 month period reflects the result of Europa Oil &Gas (Holdings) plc from the date of its incorporation on 31 August 2004 andthose of its subsidiaries for the 12 month period to 31 July 2005. 7. The consolidated cash flow statement for the year to 31 July 2005includes in the reconciliation of net cash flow to movement in net (debt)/fundsand analysis of changes in net debt a non cash movement of £2,584,974. Thisrepresents loans and other funds due to directors which were converted to sharesat the time Europa Oil & Gas Limited exchanged their entire shareholding forordinary shares in Europa Oil & Gas (Holdings) plc. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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