22nd Dec 2009 07:09
Enegi Oil Plc
('Enegi' or 'the Company')
Results for the year ended 30 June 2009
Enegi, the western Newfoundland focused oil and gas company, today announces its results for the year ended 30 June 2009.
Key points:
Re-entered well on Garden Hill South (PAP#1) - both oil and gas were encountered
6,146 barrels of high quality oil were produced and associated gas in January 2009
Preliminary flow test suggested that the well was sub-economic - well temporarily shut-in on extended well test. In November the well was reopened and initially flowed at 580 to 600 bopd plus associated gas
Well proved presence of hydrocarbons - other leads in the Company's acreage are on the same geological trend
New exploration rights gained for an offshore parcel, adjacent to existing acreage increasing risked contingent resources by 3.8mmboe and risked prospective resources by 0.6mmboe.
Post Balance events:
PDIP have concluded an agreement with a farm-in partner for the PAP#1 well
Raised £1.5 million via a share placing in September to meet working capital needs and complete farm-in agreement
Raised £1.3 million via a share placing in December to acquire in full the remaining interest of CIVC Creditor Corporation in the Western Newfoundland assets
On EL1070, PDIP acquired 100% interest in the St. George's Group play in exchange for its interest in the less conventional, shallower shale play
Outlook:
Further evaluation shows PAP#1 well capable of generating cyclical production - Company recommenced operations in November 2009
Recommencing operations has provided revenue and further invaluable data on the geology of Garden Hill South
Potential to increase production from the Garden Hill South well further through physically stimulating the well - farm-in partner to cover this work
Continuing to appraise new opportunities, new licences, farm-ins and asset / company acquisitions
Alan Minty, Chief Executive, commented:
"Enegi can now look forward to the year ahead. With the actions that have been undertaken during the year and the activities post the year end; the Company now has the potential to generate revenues from Garden Hill South.
We look forward to working with our farm-in partner in the coming year on a work programme which we believe will significantly enhance the productivity of the PAP#1 well. We are optimistic about the year ahead as we look forward to taking advantage of the opportunities which are available to us and developing the Company further."
22 December 2009
Enquiries:
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Enegi Oil |
Tel: + 44 161 817 7460 |
|
Alan Minty, CEO |
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|
Cenkos Securities |
Tel: + 44 207 397 8900 |
|
Joe Nally |
|
|
Stephen Keys |
|
|
College Hill |
Tel: + 44 207 457 2020 |
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Nick Elwes |
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CHAIRMAN'S STATEMENT
The last 12 months, and in particular the last 9 months, have proven to be a difficult time for the Company. The funds secured when it listed on the Alternative Investment Market were primarily to be used to drill a horizontal sidetrack at its Garden Hill South asset to increase production from that well, and unfortunately the result of that operation was not as had been hoped by the Group. There wasn't a significant increase in production and this has meant the Group has had to spend the last 9 months reviewing the financial and operational options available to it.
The activities of the Group for the first half of the year concentrated on the drilling of the horizontal sidetrack to the PAP#1 well at Garden Hill South. PDI Production Inc. ('PDIP') took delivery of Nabors Rig 45 during the summer and commenced the re-entry of the PAP#1 well in August 2008. In doing so, PDIP satisfied the only lease extension obligation that was due in the period.
During the drilling, which lasted into December, both oil and gas were encountered and PDIP commenced a flow test on the PAP#1-ST#3 well at Garden Hill South on 21 January 2009. During the drilling of the well and the subsequent flow test, 6,146 barrels of high quality crude oil (and 3100 boe of associated gas) were produced. The Board however concluded, from the preliminary results of the flow test, that the well was sub-economic at that time and it was shut in on extended well test. In November the well was reopened and initially flowed at 580 to 600 bopd plus associated gas.
The Group has further examined the flow and shut in test data to determine various options for improving the flow rate at the well. The data gained indicates that the well will produce now on an interval basis; whereby the well may be flowed then shut-in, allowing it to recharge the in-contact reservoir pressure before repeating the process. The period between each interval and the expected production is currently not known. The Group also reviewed the potential for re-entering the sidetrack to physically stimulate the well; an option which is thought to provide a solution. As such PDIP has signed a farm-in agreement for the PAP#1 well. Under the terms of the agreement, the farm-in partner will gain a 30% interest in the well for a maximum expenditure of C$2.5 million (Canadian Dollars); an amount which the Directors consider to be adequate to carry out the planned work programme. The expenditure is expected to be used to initially log the well and then conduct a foam/acid fraccing operation which is anticipated to improve the production profile of the well.
It should be noted that despite the disappointing results the well has proved the presence of producible oil at the southern end of an identified trend. This trend contains a number of potentially drillable untested leads, including Garden Hill Central and Garden Hill North, within the lease acreage to the North East.
The results from the drilling programme have had a significant impact upon the Group's operations. In addition to the effect on Enegi Oil, in February 2009, PDIP informed the parent company that it had been materially adversely affected (PDIP had liabilities in excess of its assets) by the results of the operations which had been expected to generate revenue for the Group going forward.
Consequently, the Board worked to reduce the Group's overheads with a number of staff, including three of the Company's Board members departing. In addition, PDIP has successfully worked to agree payment schedules with its creditors; with terms agreed with the majority of them.
The conclusion of these activities has enabled the Group to assess its opportunities and financial needs, leading to the completion of a share placement, raising approximately £1.5 million in September 2009 which will allow the Group to meet its working capital needs.
In order to continue to secure the future of the Group, a placing was also completed in December 2009 which raised a further £1.3million. The funds secured at that time were primarily used to purchase all the interests of CIVC Creditor Corp in the Group's oil and gas assets, including a 4% overriding royalty and the obligation to make future payments of over C$1.0million. As a result of this transaction any past or present breaches of the mortgages that covered the assets in favour of CIVC Creditor Corp will have no on-going effect on the Group.
The Board still believe in the opportunities available in Western Newfoundland and as such have further consolidated the Company's position in the region with the acquisition of EL1116; an offshore exploration licence that runs adjacent to PL2002-01 in which the Garden Hill South discovery is based. TRACS International, who produced the Company's CPR at the time of its IPO, produced a report dated April 2007 outlining that the acquisition of the licence represents an increase of risked contingent resources of 3.8 mmboe or 89% and an increase in risked prospective resources of 0.6 mmboe or 8% to the Company.
Outlook
The next year will provide the Group with the opportunity to generate revenue from Garden Hill South. While not currently able to provide a continuous revenue stream for the Group, the belief of the Board is that cyclical production can be generated. The Board is also confident that the planned farm-in operation and subsequent work programme will significantly enhance the productivity of the well.
The Group continues to look at new opportunities in the form of participation in licensing rounds, through farm-ins and asset or even private company acquisitions. We will update shareholders in the event that we successfully pursue an opportunity that meets the Group's investment criteria.
The past year has been one of disappointment and adversity, but I believe that the Group has shown significant courage in addressing these difficulties. We are optimistic that next year we will reap the rewards of this year's hard work.
I would like to take this opportunity to thank all the staff for their contributions during this difficult period.
Alan Minty
Chairman
OPERATIONAL AND FINANCIAL REVIEW
Enegi's principal business activities include the development and operation of hydrocarbon assets in Atlantic Canada. The Company holds the hydrocarbon rights to an onshore petroleum lease, PL 2002-01 (the "lease"), and two offshore exploration licences, EL1070 and EL1116 (the "licences"), in Western Newfoundland. The Company was established to exploit prospects identified within the lease and licences.
The lease was issued in April 2002 and has been extended until August 2012 upon the satisfaction of certain conditions, those which have fallen due to date having all been met. The lease covers an area of approximately 160km2 and contains the discovered field, Garden Hill South, as well as two other leads, Garden Hill Central and Garden Hill North.
The licence EL1070 was issued in January 2002 for a total period of nine years and covers an area of approximately 1,000km2. The licence contains the Shoal Point prospect and an unmapped lead, Lourdes.
The licence EL1116 was issued in January 2009 for a total period of nine years and covers an area of approximately 2,120km2.
Garden Hill South
PDI Production Inc. ('PDIP'), the Company's wholly owned Canadian operating subsidiary, took delivery of Nabors Rig 45 during the summer after it had drilled a well at Shoal Point and commenced the re-entry of the PAP#1 well in August 2008, the main objective being the completion of a horizontal sidetrack. In so doing, PDIP met the only condition of the lease extension set by the Department of Natural Resources that became due in the period.
During the drilling, which lasted into December 2008, both oil and gas were encountered. PDIP commenced a flow test on the PAP#1-ST#3 well at Garden Hill South on 21 January 2009 and during the drilling of the well and the subsequent flow test, 6,146 barrels of high quality crude oil (and 3100 boe of associated gas) were produced. The Board however concluded, from the preliminary results of the flow test, that the well was sub-economic at that time and it was shut in on an extended well test. In November the well was reopened and initially flowed at 580 to 600 bopd plus associated gas.
The Company has further examined the flow and shut in test data to determine various options for improving the flow rate at the well. The data gained indicates that the well will produce now on an interval basis; whereby the well may be flowed then shut-in, allowing it to recharge the in-contact reservoir pressure, before repeating the process. The period between each interval and the expected production is currently not known. The Company also reviewed the potential for re-entering the sidetrack to physically stimulate the well; an option which is thought to provide a solution. As such PDIP has signed a farm-in agreement for the PAP#1 well. Under the terms of the agreement, the farm-in partner will gain a 30% interest in the well for a maximum expenditure of C$2.5 million (Canadian Dollars); an amount which the Directors consider to be adequate to carry out the planned work programme. The expenditure is expected to be used to initially log the well and then conduct a foam/acid fraccing operation which is anticipated to improve the production profile of the well.
The well has however proved the presence of producible oil at the southern end of an identified trend. This trend contains a number of potentially drillable untested leads, including Garden Hill Central and Garden Hill North, within the lease acreage to the north east.
Garden Hill Central and North
Garden Hill Central and North are 100% owned and operated by PDIP. TRACS International has estimated that Garden Hill Central and North have net mean unrisked resources of 24.6 mmboe and 8.3 mmboe respectively.
In August 2007, the Company commenced preparations for a 2D seismic programme covering the Garden Hill Central and Garden Hill North structures. This survey will provide additional information to better understand the two structures and determine initial drilling targets. Due to its size, Garden Hill Central is likely to be the first of these two structures to be drilled.
Although this survey was originally scheduled to take place in the fourth quarter of 2008, weather and technical delays have pushed the programme back. As part of the larger review which the Company is currently undertaking, the timing of this seismic work is now being reconsidered.
New exploration licence award
In December 2008, PDIP was informed that it had been awarded further hydrocarbon exploration rights in the 2008 Call for Bids offered by the Canada - Newfoundland Offshore Petroleum Board (C-NLOPB). The successful bid was for an offshore parcel comprising 211,985 hectares which is adjacent to PL 2002-01 which PDIP currently holds.
The successful bid was based upon the Company committing to expenditure of CAD$600,000 in exploring the parcel during the initial five-year period of a nine-year Exploration Licence. PDIP has lodged a deposit equal to 25% of this work commitment with the C-NLOPB which will be offset against future expenditure. If significant quantities of petroleum resources are discovered as a result of exploration work, PDIP may then seek a Significant Discovery Licence from the C-NLOPB. Any Significant Discovery Licences issued in respect of lands resulting from the Exploration Licence will be subject to rentals which will escalate over time.
As stated in Enegi's Competent Persons Report at the time of the IPO, TRACS International believes that two of the structures that it has identified under Petroleum Lease 2002-01, Garden Hill South and Garden Hill Central, extend offshore.
As described in the prospectus issued at the Company's flotation, the award of the licence triggered a payment of C$500,000 to CIVC Creditor Corp. PDIP renegotiated this payment into minimum monthly payments of C$10,000 which it has continued to meet. The Company is required to have repaid the full C$500,000 by 31st July 2010. The non-payment of these amounts is governed by a mortgage on EL1116 in favour of CIVC Creditor Corp. On conclusion of the purchase of CIVC Creditor Corp's remaining interests in the Group's assets this obligation has been extinguished.
Shoal Point
In November 2009, the Group's operating subsidiary, PDIP, entered into an agreement with Canadian Imperial Venture Corporation and Shoal Point Energy on EL1070. Under the agreement, PDIP acquired a 100% interest in the more conventional St. George's Group play in exchange for its interest in the less conventional, shallower shale play.
PDIP
In February, we announced that the financial position of PDIP had deteriorated significantly. Weather delays, technical issues and logistical problems led to significant delays in the drilling programme on Garden Hill South. As a result, PDIP now has current liabilities in excess of its current assets. PDIP has entered into largely successful discussions with its creditors to reschedule its liabilities.
Financial Highlights
After the drilling program at Garden Hill South and prior to the well being shut-in on extended well test, Enegi Oil generated production revenues during the year ended 30 June 2009 of £140k (2008: £nil).
Losses before tax for the year were £17,238k (2008: £3,447k). The increase in losses in 2008 is due to two main factors. As a result of the poor outcome from drilling activities, the Group took an impairment charge of £13,350k on its fixed assets, and after a significant detrimental change in financial market conditions the Company took a charge of £1,487k against assets held for sale.
Group net assets at 30 June 2009 were £2,099k (2008: £17,654k). The main reason for this movement is the asset impairment charges described above.
CONSOLIDATED INCOME STATEMENT
For the year ended 30 June 2009
|
2009 £'000 |
2008 £'000 |
|
|
Continuing operations |
||
|
Revenue |
140 |
- |
|
Administrative expenses |
(17,416) |
(3,390) |
|
Loss from operations |
(17,276) |
(3,390) |
|
Finance income |
74 |
35 |
|
Finance expense |
(36) |
(92) |
|
Loss before tax |
(17,238) |
(3,447) |
|
Taxation |
- |
- |
|
Profit for the year attributable to equity shareholders |
(17,238) |
(3,447) |
|
Loss per share (expressed in pence per share) |
||
|
Basic |
(55.1p) |
(15.1p) |
|
Diluted |
(55.1p) |
(15.1p) |
CONSOLIDATED STATEMENT OF RECOGNISED INCOME AND EXPENSE
For the year ended 30 June 2009
|
2009 £'000 |
2008 £'000 |
|
|
Loss for the year |
(17,238) |
(3,447) |
|
Foreign exchange gain / (loss) |
1,479 |
(9) |
|
Total recognised expense for the year attributable to equity shareholders |
(15,759) |
(3,456) |
CONSOLIDATED BALANCE SHEET
As at 30 June 2009
|
2009 £'000 |
2008 £'000 |
|
|
Non-current assets |
||
|
Tangible fixed assets |
4,639 |
7,284 |
|
Intangible assets |
649 |
1,135 |
|
Other long term assets |
736 |
1,408 |
|
6,024 |
9,827 |
|
|
Current assets |
||
|
Cash and cash equivalents |
42 |
6,001 |
|
Trade and other receivables |
250 |
3,030 |
|
Assets held for sale |
871 |
- |
|
1,163 |
9,031 |
|
|
Total assets |
7,187 |
18,858 |
|
Current liabilities |
||
|
Trade and other payables |
(4,694) |
(1,015) |
|
Due to related parties |
(194) |
(7) |
|
(4,888) |
(1,022) |
|
|
Non-current liabilities |
||
|
Provisions |
(200) |
(182) |
|
Total liabilities |
(5,088) |
(1,204) |
|
Net assets |
2,099 |
17,654 |
|
Shareholders' equity |
||
|
Ordinary share capital |
313 |
313 |
|
Share premium |
13,862 |
13,695 |
|
Reverse acquisition reserve |
9,364 |
9,364 |
|
Other reserve |
(1,557) |
(1,557) |
|
Warrant reserve |
646 |
646 |
|
Retained earnings |
(20,529) |
(4,807) |
|
Total shareholders' equity |
2,099 |
17,654 |
CONSOLIDATED CASH FLOW STATEMENT
For the year ended 30 June 2009
|
2009 £'000 |
2008 £'000 |
|||
|
Cash flows from operating activities |
||||
|
Cash used in operations |
(1,083) |
(3,716) |
||
|
Interest paid |
(36) |
(92) |
||
|
Net cash used in operating activities |
(1,119) |
(3,808) |
||
|
Cash flows from investing activities |
||||
|
Licence deposits reclaimed / (paid) |
734 |
(1,266) |
||
|
Expenditure on tangible fixed assets |
(5,375) |
(4,444) |
||
|
Expenditure on intangible fixed assets |
(562) |
(931) |
||
|
Interest received |
74 |
35 |
||
|
Net cash used in investing activities |
(5,129) |
(6,606) |
||
|
Cash flows from financing activities |
||||
|
Share capital issued for cash, net of expenses |
- |
14,913 |
||
|
Net cash flows from financing activities |
- |
14,913 |
||
|
Net (decrease) / increase in cash and cash equivalents |
(6,248) |
4,499 |
||
|
Cash and cash equivalents at the start of the year |
6,001 |
1,513 |
||
|
Exchange gains / (losses) |
289 |
(11) |
||
|
Cash and cash equivalents at the end of year |
42 |
6,001 |
||
Basis of presentation
The consolidated financial statements of the Group have been prepared in accordance with International Financial Reporting Standards as adopted by the European Union ("IFRSs as adopted by the EU"), IFRIC interpretations and the Companies Act 2006 applicable to Companies reporting under IFRS. The consolidated financial statements have been prepared under the historical cost convention.
Basis of consolidation
On 18 March 2008, Enegi acquired PDIP via a share for share exchange. Under IFRS 3 'Business Combinations', this acquisition has been accounted for as a reverse acquisition, whereby PDIP is treated as the acquirer of Enegi. Arising from this treatment was the reverse acquisition reserve within consolidated shareholders' equity and the merger relief reserve within the legal parent Company's shareholders' equity. The consolidated financial statements, therefore, represent the consolidated financial statements of PDIP combined with Enegi.
The merger reserve created in 2008 has been written down during 2009 through the impairment charge relating to the Group's principal trading subsidiary, PDIP.
The financial statements of the subsidiaries are prepared for the same reporting year as the parent company, using consistent accounting policies. All intra-group balances, transactions, revenues, expenses and gains and losses resulting from intra-group transactions that are recognised in assets, have been eliminated on consolidation.
Subsidiaries are entities controlled by the Group. Control exists when the Group has the power, directly or indirectly, to govern the financial and operating policies of an entity so as to obtain benefits from its activities. In assessing control, potential voting rights that are currently exercisable or convertible are taken into account. The financial statements of subsidiaries are included in the consolidated financial statements from the date that control commences until the date that control ceases.
Related Shares:
NUOG.L