1st May 2007 07:01
Lansdowne Oil & Gas plc01 May 2007 To be embargoed until 7.00am On 1 May 2007 Lansdowne Oil & Gas plc ("Lansdowne" or "the Company") Preliminary Results for the year ended 31 December 2006 Lansdowne Oil & Gas is pleased to announce its maiden preliminary results, for the year ended 31 December 2006. Lansdowne is an upstream oil and gas company, focused on exploration and appraisal opportunities offshore Ireland. The Group has targeted the Irish offshore shelf areas for exploration as these provide shallow water (generally less than 100 metres),relatively low cost opportunities and these factors, combined with the current good fiscal terms, have the potential to deliver high value reserves. Operational Highlights - Acquisitions of Celtic Sea licensing options from Ramco - Acquisition of 19.25% of Frontier Licence 1/05 offshore Donegal from Ramco - The Inishbeg wildcat (Lansdowne 19.25% fully carried interest) was drilled offshore Donegal and plugged and abandoned as a dry hole. - Lansdowne is continuing with post-well evaluation work - Work programme commitments completed on all Celtic Sea Licensing Options: - Applications submitted for follow-on authorisations Financial Highlights - £750,000 private placing with international institutions to fund operational programme in February 2006 - IPO on the AIM Market raising £1.6 million Steve Boldy, CEO of Lansdowne commented, "The work which we carried out during the year has encouraged us to apply forsuccessor licences on our Celtic Sea interests and to seek an extension of ourDonegal Frontier licence. RPS Scott Pickford have reviewed our Celtic Seainterests in the light of cost escalations and we remain confident that theprojects remain robust under conservative price assumptions. We are activelyseeking farm-in partners to take the projects forward." Contacts Lansdowne Oil & Gas plcSteve Boldy Chief Executive Officer 01224 748480Chris Moar Finance Director John East & Partners LimitedDavid Worlidge Director 020 7628 2200Johnny Townsend Director Lansdowne Oil & Gas plc Preliminary Results for the year ended 31 December 2006 Chairman's Statement Strategy Lansdowne Oil & Gas plc is an upstream oil and gas company, focused onexploration and appraisal opportunities offshore Ireland. The Group has targetedthe Irish offshore shelf areas for exploration, as these provide shallow water(generally less than 100 metres), relatively low cost opportunities and thesefactors, combined with the current good fiscal terms, have the potential todeliver high value reserves. Summary of key events In January 2006, the Company acquired the entire issued share capital of RamcoDonegal Limited from Ramco Eastern Europe Limited, a fellow subsidiary of RamcoEnergy plc, the Company's parent. The purchase consideration was satisfied bythe issue of 5,713,043 ordinary shares in the share capital of the Company.Ramco Donegal Limited subsequently changed its name to Donegal ExplorationLimited. In February 2006, the Company raised £750,000 from institutional investors tofinance completion of the work programmes on its existing assets and to buildLansdowne's prospect inventory. The Company also acquired interests in the EastKinsale, Midleton, Rosscarbery and Seven Heads Oil Licensing options (the CelticSea Licensing options) from Ramco Oil and Gas Limited, a fellow subsidiary ofRamco Energy plc. The purchase consideration was satisfied by the issue of12,286,957 ordinary shares. The interests which the Company acquired were 100 per cent of the Midleton andEast Kinsale licensing options, 77 per cent of the Rosscarbery Licensing optionand 74 per cent of the Seven Heads Oil licensing Option. Under a farm-inagreement Island Oil and Gas plc ("Island"), act as technical manager in respectof the Seven Heads Oil Licensing Option and fund the Company's share of the workprogramme. In return, Island has the option to farm-in to 60 per cent of theCompany's interest in any successor authorisations covering all or part of thesame area. In order to exercise this option, Island is required to fully fundthe Company's share of drilling and testing an appraisal well on the Seven HeadsOil prospect. If the Island option is exercised, the Company's interest in SevenHeads Oil would reduce from 74 per cent to 29.6 per cent. On 21 April 2006, the issued share capital of the Company was admitted totrading on the AIM Market in conjunction with a placing of 1,882,353 shares atan issue price of 85p per share, which raised £1.6 million before expenses. The Company participated in the Inishbeg exploration well which was drilled inAugust 2006. This frontier exploration well, operated by Lundin Exploration B.V.(a subsidiary of Lundin Petroleum), was located offshore Ireland in Block 13/12off the northwest coast of County Donegal. It was designed to target a large butshallow Triassic gas prospect. Under the terms of a farm-out agreement, theCompany was carried through all the costs associated with the drilling andtesting of the well by two of its partners in the licence. The well was pluggedand abandoned in August 2006. Although the Company considered that the negativeresults of the 13/12-1 well did not give sufficient confidence in theprospectivity remaining to allow a commitment to be given to drilling a secondwell, they did indicate the possibility that there could be a viable hydrocarbonplay on the acreage. The Company has therefore requested an extension of the first phase of thefrontier exploration licence for a further 18 months to allow additionaltechnical work to be carried out, in advance of a decision on whether to drill afurther well. A response to that request is awaited. During the financial year, the Company successfully completed the workprogrammes associated with the Celtic Sea licensing options by reprocessingexisting 2D seismic data, acquiring and integrating further 2D seismic data,conducting geophysical processing studies, reservoir development studies,reservoir engineering studies and conceptual development studies. Comprehensivereports detailing the findings were presented to the Department ofCommunications, Marine and Natural Resources of the Irish Government. In December 2006, the Company filed applications for Standard ExplorationLicences over parts of the areas held under the Midleton, Rosscarbery and EastKinsale Licensing Options. In addition, an application has been filed to convertthe Seven Heads Oil Licensing Option to a Lease Undertaking, to allow theCompany and its partners to continue to evaluate development options. However, during the financial year, the Irish Government announced a review ofLicensing and Fiscal terms applicable to the exploration and production ofhydrocarbons. It is possible that the existing terms will change as a result ofthis review and the Company has been informed that any new licences granted arelikely to fall under the new regime. Accordingly, the applications submitted areall conditional on the new fiscal terms being acceptable to the applicants. Outlook In August 2006, Island announced that its 49/23-1 Celtic Sea exploration well onthe Old Head prospect had successfully discovered gas. Following furthertechnical review of results, Island announced in March 2007 a P50 reserveestimate of 55bcf. Island further announced this month that an appraisal well isexpected to commence in May 2007, the results of which will have a bearing onour contiguous interest in the East Kinsale area. Following completion of the additional technical work in 2006, we asked RPSScott Pickford to review all of our Celtic Sea projects in the light of thesubstantial increase in costs related to exploration and development of oil andgas projects. I am pleased to say that their conclusion was that all theprojects outlined in our AIM Admission document remained robust based on thesame price assumptions, which were $35 per bbl for oil and a 30p per therm gasprice, and the current fiscal terms. Judging from the number of discussions we have had with potential farm-inpartners, it is clear that there is much industry interest in the Celtic Sea. Anumber of companies continue to consider their involvement in our acreage and aresponse to our Licence applications, which we expect to receive in the nearfuture, will allow us to progress this issue. With regard to the review offiscal terms, we expect that any amendments will be announced in the next coupleof months. Clarification of these issues would enable us to plan the next stage in theCompany's development. John GreenallChairman Lansdowne Oil & Gas plcConsolidated Profit and Loss AccountFor the year ended 31 December 2006 Year to 31 December 2006 Note £'000 Cost of sales (10) --------Gross loss (10) -------- Administrative expenses (409)Loss on exchange (25) --------Operating loss (444) -------- Interest receivable 43 --------Loss on ordinary activities before taxation (401) -------- Tax charge on loss on ordinary activities - --------Loss for the financial year 7 (401) -------- Loss per ordinary share - basic and fully dilutedOn loss for the financial year 3 (2.2p) -------- All activities relate to continuing operations. There is no material differencebetween the loss on ordinary activities before taxation and the loss for theyear stated above, and their historical cost equivalents. There are no recognised gains or losses other than the Group loss for the periodand, therefore, no Statement of Total Recognised Gains and Losses has beenpresented. This is the first period in which the Group has presented its financialstatements. Consequently, there are no corresponding amounts for earlierperiods. Lansdowne Oil & Gas plcConsolidated Balance SheetAs at 31 December 2006 31 December 2006 Note £'000 Fixed assetsIntangible assets 4 1,645 -------- Current AssetsDebtors: amounts falling due within one year 102Cash at bank and in hand 968 -------- 1,070Creditors: amounts falling due within one year (215) --------Net current assets 855 -------- --------Net assets 2,500 -------- Capital and reservesCalled up share capital 6 1,041Share premium account 7 1,712Profit and loss account 7 (253) --------Equity shareholders' funds 8 2,500 -------- Lansdowne Oil & Gas plcConsolidated Statement of Cash FlowsFor the year ended 31 December 2006 Year to 31 December 2006 £'000 Operating activitiesLoss for the period (401)Adjustments for:Net finance income (43)Equity settled share-based payment transactions 12Change in debtors (23)Change in prepayments (17)Change in creditors 81 --------- (391)Interest paid -Income tax paid - ---------Net cash outflow from operating activities (391) --------- Returns on investments and servicing of financeInterest received 18 ---------Cash inflow from returns on investments and servicing of finance 18 --------- Capital expenditure and financial investmentsOil and gas expenditure - intangible assets (398) ---------Cash outflow for capital expenditure and financial investments (398) --------- Acquisitions and disposalsAcquisition of subsidiary - ---------Cash flow from acquisition - --------- FinancingProceeds from issue of share capital 2,350Payment of transaction costs (611) ---------Net cash inflow from financing activities 1,739 --------- Net increase in cash 968Cash at 1 January 2006 - ---------Cash at 31 December 2006 968 --------- Lansdowne Oil & Gas plcNotes to the Financial StatementsFor the year ended 31 December 2006 1. Basis of presentation The financial statements have been prepared on the going concern basis whichassumes that the Company and its subsidiaries will continue in operationalexistence for the foreseeable future. Particular attention is drawn to two areasof uncertainty as to whether or not the Group can be considered a going concern. The first area of uncertainty is whether the Irish Government will renew theGroup exploration licences, which expired in December 2006. In addition, as theIrish fiscal policy in respect of licences is currently being reviewed there isuncertainty regarding whether the terms of any such renewal will be agreeable tomanagement. If the terms are unfavourable the Group will not renew the licencesand therefore they have no potential source of future funding or revenue. The second area of uncertainty surrounds the future funding of the Group'sactivities, should the licences be granted. The Directors have prepared cashflow forecasts for the Group for the period ending 12 months from the date ofapproval of these financial statements. These indicate that the Group will haveadequate cash resources to meet its obligations as they fall due but do notinclude any expenditure in relation to the exploration licences. Therefore, onthe assumption that the Group is awarded the licences, all work programmeobligations would have to be financed either by a farm-out arrangement or froman issue of new shares or both. No sources of funding have yet been agreed dueto the above issues surrounding the granting of the licences and as a resultthis represents a further uncertainty. The Directors consider that it is appropriate to adopt a going concernassumption in preparing these financial statements as; they believe that there is no reason to suggest that the licences will not begranted or that the new licensing and fiscal terms will be unfavourable, and a number of potential partners have expressed an interest in entering into afarm-in arrangement to fund future exploration activities. If for any reason the uncertainties described above cannot be successfullyresolved, the going concern basis may no longer be applicable and adjustments tothe Group profit and loss account and Group balance sheet would be required torecord additional liabilities and write down assets to their recoverableamounts. The financial information set out in these financial statements does not constitute the Company's statutory accounts for the year ended 31 December 2006. The 2006 statutory accounts have not yet been delivered to the Registrar, nor have the auditors yet reported on them. 2. Segmental Reporting The Group has only one reportable business segment, which is the exploration foroil and gas reserves in Ireland. All operations are classified as continuing. 3. Loss per ordinary share The basic loss per share of 2.2p was calculated on the loss for the financialyear of £401,000 and 18,400,167 ordinary shares, being the weighted averagenumber of ordinary shares in issue during the year. The loss for the year waswholly from continuing operations. For diluted earnings per share, the weighted average number of ordinary sharesin issue is adjusted to assume conversion of all dilutive potential ordinaryshares. The Group has two classes of dilutive potential ordinary shares; shareoptions and share warrants. In July 2006 share options over 200,000 ordinaryshares were granted at an exercise price of 85p. These share options are notexercisable until July 2009 and are, therefore, not potential ordinary sharesfor the current period. In April 2006 warrants over 312,239 ordinary shares wereissued to the Group's brokers at an exercise price of 85p. Warrants are onlyconsidered dilutive if their exercise price is below the average market price ofthe shares for the period. On that basis the warrants are not considereddilutive for the current period. 4. Intangible Fixed Assets Exploration costs 2006 £'000 At 1 January 2006Acquisition (note 6) 474Additions 386Transfers from Ramco Group at fair value (note 7) 785 ----------------At 31 December 2006 1,645 ---------------- Oil and gas project expenditures, including geological, geophysical and seismiccosts, are accumulated as intangible fixed assets prior to the determination ofcommercial reserves. At 31 December 2006, intangible fixed assets totalled £1.6million, all of which relate to Ireland. 5. Acquisitions Acquisition accounting was used for the acquisitions made in the period, inwhich there was no purchased goodwill. (a) Donegal Exploration Limited On 5 January 2006 the Group acquired the entire issued share capital of RamcoDonegal Limited for an all-share consideration of £365,000, which was satisfiedby the issue of 5,713,043 ordinary shares. On 18 January 2006, Ramco DonegalLimited changed its name to Donegal Exploration Limited. The assets and liabilities acquired are set out below: Book Fair value Fair value adjustment value £'000 £'000 £'000 Intangible fixed assets 64 410 474Debtors 18 - 18Creditors (127) - (127) -------- --------- ------- (45) 410 365 -------- --------- ------- Satisfied by : Ordinary shares of Lansdowne Oil & Gas plc 365 -------- --------- ------- The fair value adjustment is based on past costs incurred on the Donegal Basinlicence (blocks 13/7, part of 13/11 (NE) and 13/12 (N)). The original licencewas first acquired by Ramco Oil and Gas Limited ("ROGL") on 1 March 2000. Thislicence was allowed to lapse on 28 February 2002 and costs incurred to date werewritten off. Ramco Donegal Limited ("RDL") successfully applied for a newlicence on the same acreage in January 2005. Costs incurred during 2005 werecapitalised into ROGL and then transferred into RDL when the new licence wasapproved. The book value on acquisition plus the fair value uplift representsthe full past costs incurred on the licence at the date of acquisition. (b) Lansdowne Celtic Sea Limited On 5 January 2006 the Group acquired the entire issued share capital ofLansdowne Celtic Sea Limited from a subsidiary of Ramco Energy plc for £100. Thenet assets acquired were £1. (c) Celtic Sea assets On 13 February 2006 the Company issued 12,286,957 ordinary shares to satisfy the£785,000 consideration for the acquisition by Lansdowne Celtic Sea Limited ofcertain assets and Ramco's interests in the East Kinsale, Midleton, Rosscarberyand Seven Heads Oil Licensing Options. The contribution to the Group loss of £401,000 for the period was £45,000 byDonegal Exploration Limited and £40,000 by Lansdowne Celtic Sea Limited. 6. Share Capital 2006 £'000Authorised:50,000,000 ordinary shares of 5p each 2,500 ----------Allotted, called up and fully paid:20,815,953 ordinary shares of 5p each 1,041 ---------- The share capital comprises the following; £'000Acquisition of Donegal Exploration Limited 286Acquisition of assets from Ramco Oil and Gas Limited 614Initial Public Offering 141 ----------Total share capital 1,041 ---------- At 31 December 2005 the Company had allotted and issued two shares of 5p each;one each to its joint owners Ramco Oil and Gas Limited (ROGL) and Ramco EasternEurope Limited (REEL). On 5 January 2006 the Company allotted and issued 5,713,043 ordinary shares of5p each to REEL to satisfy the £365,000 consideration for the entire issuedshare capital of RDL. On 18 January 2006, Ramco Donegal Limited changed its nameto Donegal Exploration Limited. On 13 February 2006 the Company allotted and issued 12,286,957 ordinary sharesof 5p each to ROGL to satisfy the £785,000 consideration for the acquisition byLansdowne Celtic Sea Limited, a wholly owned subsidiary of the Company, ofcertain assets and ROGL's interests in the East Kinsale, Midleton, Rosscarberyand Seven Heads Oil Licensing Options. The consideration reflected the fairvalue of the assets transferred, based on past costs incurred. On 1 February 2006, the Company converted 6,000,000 authorised ordinary sharesof 5p each into 1,200,000 preference shares of 25p each. On 16 February 2006,the Company obtained approximately £750,000 of funding from the issue of 900,267preference shares to institutional investors. As part of the Initial PublicOffering ("IPO") on 21 April 2006 these preference shares were converted to933,598 ordinary shares of 5p each. A further 1,882,353 ordinary shares of 5peach were allotted and issued during the IPO, raising £1,600,000 before cashexpenses of £611,000 and the share warrant expense of £136,000. On 15 March 2007 ROGL and REEL transferred their shareholdings in the Company toRamco Hibernia Limited (RHL) at a fair value consideration of 59.5p per share.RHL is a wholly owned subsidiary of Ramco Energy plc and is now the holder of17,953,308 ordinary shares of 5p each, representing 86.25 percent of the issuedshare capital of the Company. The ultimate ownership of these shares remainedunchanged by this transaction. The principal trading market for the shares in the UK is the London StockExchange's AIM Market on which the shares have been traded since 21 April 2006.The following table sets forth, for the calendar quarters indicated, thereported highest and lowest price for the shares on AIM, as reported by theLondon Stock Exchange. 2006 Pence per share High Low ----------- ---------Second quarter 106.0 70.0Third quarter 82.5 59.5Fourth quarter 63.5 60.0 ----------- ---------- 7. Reserves Share Premium Profit & loss account account £'000 £'000 At 1 January 2006Loss for the financial year - (401)Share based payments charge - 148Issues of new shares - grossconsideration 2,459 -Costs of issue (747) - ------------ ----------At 31 December 2006 1,712 (253) ------------ ---------- It is Group policy to provide for amounts owed to the Company by subsidiaries ifthe subsidiary has net liabilities. At 31 December 2006 the amounts owed to theCompany from its subsidiaries were £108,000 from Donegal Exploration Limited and£1,186,000 from Lansdowne Celtic Sea Limited. Both subsidiaries have netliabilities. Consequently, the loss for the financial year for the Companyincluded a provision expense in this regard for £1,294,000. 8. Movement in Shareholders' Funds 2006 £'000 Loss for the financial year (401)Issue of ordinary share capital 2,753Share based payments charge 148 ------------Net change in shareholders' funds 2,500Shareholders' funds at 1 January 2006 - ------------Shareholders' funds at 31 December 2006 2,500 ------------ 9. Post Balance Sheet Events On 15 March 2007 Ramco Oil and Gas Limited (ROGL) and Ramco Eastern EuropeLimited (REEL) transferred their shareholdings in the Company to Ramco HiberniaLimited (RHL) at a fair value consideration of 59.5p per share. RHL is a whollyowned subsidiary of Ramco Energy plc and is now the holder of 17,953,308ordinary shares of 5p each, representing 86.25 percent of the issued sharecapital of the Company. The ultimate ownership of these shares remainedunchanged by this transaction. 10. Accounts Copies of the annual accounts for the year ended 31 December 2006 will be sentto shareholders shortly and will be available from the Company's office atBritannia House, Endeavour Drive, Arnhall Business Park, Westhill,Aberdeenshire. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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