31st May 2005 07:02
Regal Petroleum PLC31 May 2005 For Immediate Release 31 May 2005 REGAL PETROLEUM PLC PRELIMINARY AUDITED RESULTS FOR THE YEAR ENDED 31 DECEMBER 2004 Regal Petroleum plc ("Regal", "the Company" or "the Group"), the oil and gasexploration and production company, today announces its audited results for theyear ended 31 December 2004. FINANCIAL HIGHLIGHTS • Turnover increased to $42.5 million (2003: $10.2 million). • Production averaged 4,129 boepd (2003: 4,063 boepd). • Loss for the year of $13.7 million (2003: $2.9 million). • Depreciation charge for the year of $7.7 million (2003: $2.2 million). • Hedging charge for the year of $11.0 million (2003: $Nil). • Capital cash expenditure of $71.6 million (2003: $16.8 million). • Placing of 13,333,334 ordinary shares which raised $69.8 million (net of expenses). • Net cash at year end of $25.6 million (2003: $28.5 million). OPERATIONAL HIGHLIGHTS Greece • Completed the drilling of the first Kallirachi exploration well to a depth of 2,556 metres in January 2004 and commenced the drilling of the second Kallirachi well in October 2004. Ukraine • The drilling of production well MEX102 was completed in March 2004 with a high condensate flow rate. • Awarded 100 per cent. interest in two new 20 year production licences in Ukraine. These licences replace the exploration licences which Regal previously operated under. Romania • Government ratification of the 4,103 square kilometre exploration, development and production licence for Suceava Block. • Drilling of the first exploration well on the Suceava Block commenced in December 2004. Egypt • Acquisition of an onshore exploration concession in the East Ras Budran Area, Gulf of Suez, Egypt. • The existing data for the concession area has been evaluated and four prospective structures have been identified. London • Roger Phillips appointed as Finance Director in September 2004. Roger has in excess of 25 years experience in the oil and gas industry including 19 years at Amerada Hess Corporation. 2005 UPDATE • Greece: the new Managing Director in Greece is currently assessing the production operations at Kavala Oil SA and will report to the Board in due course. • Romania: following the successful completion of exploration well SE-1 in the Suceava licence in April 2005, a drilling programme is currently being finalised and it is expected that a series of shallow, low cost appraisal/ development wells will be drilled in 2005 and 2006. • Placing: in April 2005 the Company successfully raised £42.6 million (net of expenses) through a placement of 11,500,000 new ordinary shares at a price of 390p per share. For further information, please contact:Regal Tel: 020 7408 9500Frank Timis, Executive ChairmanRoger Phillips, Finance Director Buchanan Communications Tel: 020 7466 5000Bobby Morse / Ben Willey Definitions bopd: barrels of oil per day boepd: barrels of oil equivalent per day CHAIRMAN'S STATEMENT During 2004 the Company achieved major milestones in all assets with thesuccessful increase in the interest in the Greek operations through theinvestment in preference shares, the awarding of 100% owned 20 year productionlicences in Ukraine, the government ratification of the Suceava licence block inRomania and the acquisition of an onshore exploration concession in Egypt. Investment in Kavala Oil SA In August 2004 the Company negotiated to increase its interest in Kavala Oilthrough the investment in preference shares for €10 million cash, with the fundsbeing used towards the Greek asset development programme. Due to mechanical, technical and operational difficulties with existing offshorefacilities the average daily production for the year was only 2,761 bopd (2003:3,061 bopd), however, the Company remains confident of realising the fullpotential of Kavala Oil's producing assets in the medium term. In January 2004 the Company successfully completed the drilling of the firstexploration well in the Greater Kallirachi Area with positive results. Based onthese well results and existing seismic data a second well location wasidentified and drilling commenced in October 2004. The Company has engaged independent reserve auditors McDaniel & AssociatesConsultants Ltd to estimate the remaining recoverable reserves in Kavala. Thereport has not been finalised, however, a preliminary presentation of findingsby the auditors indicates that a more conservative estimate than that currentlyin place should be used to estimate its remaining recoverable reserves.Accordingly the Company has decided to revert from 80 million barrels ofrecoverable reserves to the previous report issued by Troy Ikoda in 2003 whichstated remaining recoverable reserves of 24 million barrels of oil. Ukraine Operations On 30 June 2004 Regal was awarded a 100% interest in two production licences:Mekhedivsko-Golotovshenske (MEX/GOL) and Svyrydivske (SV). The licences are for20 years and allow full exploitation and production of hydrocarbons. The Ukraine operations were profitable during the year and generated positivecash-flow for the Group. Average daily production for the year in Ukraine was 1,368 boepd (2003: 1,002boepd) from four wells on production: MEX102, MEX3, GOL1 and GOL2. Regal willcontinue to increase production by exploiting western oil technology and byperforming well interventions on the MEX/GOL field. The construction of extra storage plant to cope with the unexpectedly highcondensate flow from well MEX102 commenced in Q3 2004 and was completed in Q42004. Romania Operations Formal government ratification of the 4,103 square kilometre exploration,development and production licence for the Suceava Block was achieved in 2004. Acomprehensive seismic survey was completed in November 2004 which confirmedthree well locations and firmed up other structures for future drilling toconfirm the volume and deliverability of the identified fields. Drilling of thefirst exploration well commenced in December 2004. The 6,285 square kilometre exploration, development and production licence forthe Barlad Block licence was submitted to various government ministries duringthe year in order to obtain formal government ratification of the licence (whichwas achieved in January 2005). Egypt Concession Area In 2004 Regal acquired an exploration concession in the East Ras Budran Area,Gulf of Suez, Egypt. The concession provides Regal with exclusive explorationrights in the East Ras Budran Area for an initial period of 3 years with theright to extend this for a further 4 years. In the event that a commercial oildiscovery is made in the concession area, Regal has the right (subject tocertain conditions) to convert the concession into a 20 year development andproduction lease. Under the terms of the concession Regal is committed tospending a total of US$4 million during the exploration stage. Four prospective structures have been identified following the evaluation ofexisting data. Seismic data is currently being re-processed and interpreted andexploration drilling is expected to commence in late 2005. Placement of Shares On 27 February 2004 the Company raised £37.5 million ($69.8 million), net ofexpenses, through an institutional placing of 13,333,334 new ordinary shares ata price of 300 pence per share. Board Appointment We are currently strengthening the composition of the Board of Directors byadding executives with substantial industry experience. Roger Phillips wasappointed Group Finance Director in September 2004. Roger has in excess of 25years experience in the oil and gas industry including 19 years at Amerada HessCorporation where most recently he was the Vice President and Director in chargeof London finance for Europe, North Africa and Asia. In addition, Dr RexGaisford was appointed as Executive Director responsible for Production in May2005 and we are currently seeking a new Chief Executive Officer. Strategy and Outlook for 2005 The Company has experienced both positive and negative operational resultsduring the first part of 2005. On the one hand, we successfully completed thedrilling of Regal's first exploration well on the Suceava Block resulting in asignificant gas discovery in Romania, whilst on the other hand the secondKallirachi well was completed in Greece with flow rates that were deemednon-commercial. In order to ensure that the Company realises the full potential of its assetsthe Directors have appointed industry recognised independent experts to evaluatedata and reserves in Ukraine and Greece, and will appoint the same for Romaniain due course. These evaluation reports will be pivotal in the Company's futurestrategic planning. On a final note I would like to reiterate that the Board believes that thequality of the Company's assets, all of which are located in proven hydrocarbonregions, will underpin the future growth of the Company. The Company iscommitted to increasing production and cash flow in order to finance anincreasing proportion of its exploration costs from self generated cash. V. Frank Timis Chairman FINANCIAL REVIEW Turnover Turnover for the year was $42,459,000 generated from the sale of gas andcondensate production from wells MEX102, MEX3, GOL2 and GOL1 in Ukraine($7,633,000) and the sale of oil and sulphur production from Kavala in Greece($34,826,000). All gas and condensate production in Ukraine was sold locally at an averageprice of $50 per thousand cubic metres of gas and $28 per barrel of condensate. Kavala sells its oil at a price approximately equal to the prevailing IPE Brentprice less a discount of US$3 per barrel. Sulphur, being a bi-product of the oilproduction, is sold locally at market prices. Loss for the Financial Year The loss after tax and after minority interests of $13,681,000 included a losson crude oil hedging of $11.0 million (2003: $Nil) and a larger than anticipatedcharge for depreciation on the Greek assets of $5.5 million (2003: $2.1million). The crude oil hedging loss resulted from a twelve month contract taken out for2004 to hedge fifty percent of forecast Greek production of 5,000 barrels of oila day at IPE Brent of $30.50. Higher oil prices contributed to a larger hedgeloss in the second half of 2004. For the year ended 31 December 2004 the Directors consider, for financialstatement purposes, that the previous Greek remaining recoverable reservesfigure of 80 million was not appropriate and therefore the Company has decidedto revert to 24 million barrels of remaining recoverable reserves in Greece. TheCompany calculates depreciation on its exploration and development costs on aunit of production basis and accordingly this revision to the Greek reserves hascontributed to a larger than anticipated charge of $5.5 million for depreciationon the Greek assets. Institutional Placing In March 2004, Regal successfully raised $69.8 million net of expenses throughan institutional placing of 13,333,334 shares at 300 pence. Part of these fundswere applied against the drilling of production wells in the Prinos field and anexploration well in the Kallirachi oil prospect. Following the institutional placement, the Company had a total of 116,374,868shares in issue at 31 December 2004 (31 December 2004: 100,541,534 shares). Cashflow Net cash outflow from operating activities was $5,901,000 (2003: outflow$1,060,000). The capital expenditure outflow of $71,586,000 (2003: $16,766,000) mainlyrepresented drilling expenditure on the Company's assets in Greece. As at 31 December 2004, the Group had no long term bank borrowings. As at 31 December 2004, the Group had total cash balances of $25,643,000 (2003:$28,539,000). Financial Risk The main financial risks Regal is exposed to are resource price, exchange rate,counterparty and liquidity risks in its Group operations. Wherever possible theGroup attempts to minimise the impact of such risks. Certain resource risk and counterparty risk is minimised through short-termforward sale contracts. Longer term contracts will be negotiated once productionlevels have increased. To minimise exchange rate risks, Regal attempts to match currency receipts andpayments wherever possible. Regal also seeks to retain sufficient liquidity,either in the form of cash or maturing deposits to manage the Group's ongoingprogrammes. Summary The financial results for the year to 31 December 2004 after accounting forcrude oil hedging and additional depreciation on Greek assets are in line withthe Company's expectations. With an institutional placing completed subsequent to year end in April 2005,Regal is well placed to continue the development and growth of its projects inUkraine, Greece, Romania and Egypt. Roger Phillips Finance Director Regal Petroleum plcConsolidated profit and loss accountfor the year ended 31 December 2004 2004 2003 Total Total $000 $000 Group turnover 42,459 10,194Cost of sales (48,371) (8,973) Gross profit/(loss) (5,912) 1,221 Administrative expenses (15,517) (8,528)Other operating income 3,386 2,966 Group operating loss (18,043) (4,341) Loss on sale of fixed assets - continuing operations (36) -Interest receivable and similar income 1,244 254Interest payable and similar charges (325) (129) Loss on ordinary activities before taxation (17,160) (4,217)Tax on profit on ordinary activities (884) - Loss on ordinary activities after taxation (18,044) (4,217) Minority interests - equity 4,363 1,309 Loss for the financial year (13,681) (2,908) Loss per ordinary share (cents)Basic 12.4c 4.5cDiluted 12.4c 4.5c Regal Petroleum plcConsolidated balance sheetat 31 December 2004 2004 2003 Total Total Restated $000 $000Fixed assetsIntangible assets 6,183 2,350Tangible assets 97,877 36,188 104,060 38,538Current assetsStocks 10,166 3,626Debtors (including $2,791 (2003: $2,206) due aftermore than one year) 14,919 10,169Investments 3,342 3,770Cash at bank and in hand 25,643 28,539 54,070 46,104Creditors: amounts falling due within one year (30,777) (15,441) Net current assets 23,293 30,663 Total assets less current liabilities 127,353 69,201 Creditors: amounts falling due after more than one (682) -yearProvisions for liabilities and charges (1,854) (1,253) Net assets 124,817 67,948 Capital and reservesCalled up share capital 9,678 8,212Share premium account 134,254 62,369Other reserves 5,036 4,273Profit and loss account (24,151) (10,854) Shareholders' funds - equity 124,817 64,000 Minority interests - equity - 3,948 Total equity 124,817 67,948 Regal Petroleum plcConsolidated cash flow statementfor the year ended 31 December 2004 Note 2004 2003 Total Total $000 $000 Net cash flow from operating activities 3 (5,901) (1,060) Returns on investments and servicing of financeInterest received 1,241 280Interest paid (324) (130) 917 150 Taxation (771) - Capital expenditure and financial investmentPurchase of tangible and intangible fixed (71,586) (16,766)assets (71,586) (16,766)Acquisitions and disposalsPurchase of subsidiary undertaking - (1,547) - (1,547) Cash outflow before management of liquid (77,341) (19,223)resources and financing Management of liquid resourcesPurchase of current non-listed investments - (3,168)Increase in monies on deposit (119) - (119) (3,168)FinancingIssue of ordinary share capital 73,350 42,025Debt due within one year:Increase in short-term borrowing 1,080 -Repayment of secured loan - (185) 74,430 41,840 Increase/(decrease) in cash in the period (3,030) 19,449 Regal Petroleum plcConsolidated statement of total recognised gains and lossesfor the year ended 31 December 2004 2004 2003 Total Total $000 $000 Loss for the financial year (13,681) (2,908)Gross exchange differences on the retranslation of netinvestments and related borrowings 1,147 488 Total recognised gains and losses relating to thefinancial year (12,534) (2,420) Reconciliations of movements in shareholders' fundsfor the year ended 31 December 2004 2004 2003 Total Total Restated $000 $000 Loss for the financial year (13,681) (2,908) Other recognised gains and losses relating to the year 1,147 488(net)New share capital subscribed (net of issue costs) 73,351 51,214Purchase of own shares - (149) Net addition to shareholders' funds 60,817 48,645 Opening shareholders' funds - previously reported 64,203 15,409Prior year adjustment * (203) (54) Opening shareholders' funds - restated 64,000 15,355 Closing shareholders' funds 124,817 64,000 * restated for the adoption of UITF38 Accounting for ESOP Trusts Regal Petroleum plc Notes forming part of the financial statementsfor the year ended 31 December 2004 1 Statutory Accounts The financial information set out above does not constitute the Company'sstatutory accounts for the year ended 31 December 2004 or 2003. The statutoryaccounts for 2004 will be delivered to the Registrar of Companies following theCompany's annual general meeting. The auditors have reported on those accountsand their report was unqualified and did not contain statements under section237(2) or (3) of the Companies Act 1985. 2. Analysis of continuing and discontinued operations 2004 2003 Total Continuing Acquisitions Total operations $000 $000 $000 $000 Group turnover 42,459 2,844 7,350 10,194Cost of sales (48,371) (888) (8,085) (8,973) Gross profit/(loss) (5,912) 1,956 (735) 1,221 Administrative (15,517) (4,788) (3,740) (8,528)expensesOther operating 3,386 1,566 1,400 2,966income Group operating (18,043) (1,266) (3,075) (4,341)loss All amounts for 2004 relate to continuing activities. Regal Petroleum plcNotes forming part of the financial statementsfor the year ended 31 December 2004 3. Reconciliation of operating profit to operating cash flows 2004 2003 Total Total $000 $000 Operating loss (18,043) (4,341)Depreciation, amortisation and impairment charges 7,696 2,259Exchange differences (349) (1,007)Movement in provisions 601 86(Increase)/decrease in stocks (6,541) 1,735Decrease in debtors (4,750) (4,888)Increase in creditors 14,256 3,841Shares issued in lieu of cash - 1,255Loss on gift of shares to minority interest 682 -Current asset investment - expiration of oil hedge 547 -put options Net cash outflow from operating activities (5,901) (1,060) 4. Analysis of net funds At Cash Other non cash Exchange At end beginning flow movements movement of of year year $000 $000 $000 $000 Cash in hand, at 28,539 (3,030) - 134 25,643bankOverdrafts - (1,080) - - (1,080)Current asset 3,770 119 (547) - 3,342investmentsDebt due after one - - (682) - (682)year Total 32,309 (3,991) (1,229) 134 27,223 This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
RPT.L