2nd Nov 2007 07:00
Island Oil and Gas PLC02 November 2007 ISLAND OIL & GAS PLC PRELIMINARY RESULTS FOR THE YEAR ENDED 31 JULY 2007 Island Oil & Gas plc ("Island" or the "Company") (LSE:IOG), today announces itspreliminary results for the year ended 31 July 2007. The year under review hasseen the Company operate two further successful Celtic Sea gas wells and acquirestrategic International Assets. FINANCIAL HIGHLIGHTS: • Increased turnover of 53% to Stg£1.762 million (year ended 31 July2006: Stg£1.151 million). • Gross profit increase of 96% to Stg£860,000 (year ended 31 July2006: Stg£439,000). • Loss before tax of Stg£5.183 million, as expected, including awrite-off of Stg£4.537 million for non-commercial projects, in particular thenon-Island operated Inishbeg well (year ended 31 July 2006: loss before taxStg£481,000). • Loss per share Stg£0.0636 (year ended 31 July 2006: loss per shareStg£0.0086). OPERATIONAL HIGHLIGHTS: Year Under Review: • July 2007 - Share Purchase and Option Agreement for PorcupineLicence 1/04 with the Bluewater Group. Gas flowed at 18 million standard cubic feet per day ("mmscf/day") fromthe Old Head of Kinsale field, the Company's second successful well on theLicence. • May 2007 - Stg£13.7 million raised in an equity placing and afurther Stg£591,000 through the subsequent exercise of warrants. • April 2007 - Equity in the Old Head of Kinsale and Schull Licensesfarmed out to Valhalla Oil & Gas Limited and EnCore Oil plc ("EnCore"). Atlantic Margin asset swap agreed with OMV whereby 50% equity in Rockall LicenceFrontier Exploration Licence 3/05 is exchanged for 50% equity and operatorshipin the Durresi Block, offshore Albania, which includes an existing gas/condensate discovery. Farmout agreement concluded with EnCore for 10% equity in the Amstel oil fielddevelopment, offshore Netherlands. • December 2006 - Award of 20% carried interest in the Zag BasinReconnaissance Licence, onshore Morocco. This is one of the few remainingunder-explored basins in North Africa and has geology analogous to some of theprolific oil and gas basins in Algeria and Libya. Stg£7.5 million loan facility secured with RMB Resources. • November 2006 - Awarded 100% equity and operatorship of the Amsteloil field development, offshore Netherlands. • August 2006 - Significant gas discovery announced at the Old Head ofKinsale following well 49/23-1. Award of the Inishowen and Inishmore Frontier Exploration Licences in theAtlantic Margin in partnership with Lundin Petroleum AB and Endeavour Energy UKLimited. Post Year-End: • October 2007 - Additional loan facility of Stg£4.5million securedwith RMB Resources. • September 2007 - Contract awarded to Pegasus International UKLimited for the Old Head of Kinsale and Schull joint development studiestargeting first gas in 2009. • August 2007 - Board reorganisation and appointment of KarlPrenderville as Commercial Director. Schull appraisal well flows gas at 21 mmscf/day in the Celtic Sea. Island's Annual Report will be posted during December 2007. It will be sent toall shareholders whose names appear on the register at the date of posting. Commenting upon the results, Paul Griffiths, Island's Chief Executive, said: "The year under review has seen Island make excellent progress in bringingforward the value of our projects, and in proving our ability to partner withmajor industry players, demonstrating the attractiveness of our projects. Wehave also delivered upon our stated aim to build a strategic internationalportfolio. We have a busy year ahead and will continue with our Atlantic MarginFarmout programme whilst progressing the near-term development projects with theaim of generating cashflow from the Netherlands and Celtic Sea by the end of2009, subject to market conditions." Enquiries: Karl PrendervilleCommercial DirectorIsland Oil & Gas plcTel: +353 1 631 3755 Paul GriffithsChief ExecutiveIsland Oil & Gas plcTel: +353 1 631 3755 ISLAND OIL & GAS PLC PRELIMINARY RESULTS FOR THE YEAR ENDED 31 JULY 2007 CHAIRMAN'S STATEMENT The last 12 months has been an extremely active and operationally successfultime at Island Oil & Gas plc ("Island" or the "Company"). Island has madeexcellent progress in our stated aim of bringing forward the value of our nearterm development assets and are continuing with our farmout strategy in theAtlantic Margin, in order to accelerate drilling activity in this highlyprospective area. Island has also ventured into the International arena for thefirst time acquiring both proven oil reserves and high potential explorationacreage. Island is pleased with the results from our Celtic Sea drilling programme thissummer when once again Island operated and tested two successful gas wells.Island believes the results from the Schull and Old Head of Kinsale gas fieldswill lead to a Declaration of Commerciality in 2008 with the aim of jointlydeveloping both fields via the Kinsale infrastructure in 2009. The successfuldrilling campaign enhances Island's reputation as a capable operator. In line with our strategy of developing strategic industry alliances, wesuccessfully brought OMV and the Bluewater Group ("Bluewater") into our highlyprospective Atlantic Margin acreage. Island was also awarded two newexploration licences in the Slyne and Donegal basins in partnership with LundinPetroleum AB and Endeavour Energy UK Limited. These joint ventures togetherwith the successful Celtic Sea farmout to Valhalla Oil & Gas Limited and EnCoreOil plc ("EnCore") during the year further enhance Island's reputation and itsability to create value from industry peers for its exploration andnear-development assets. Island has been approved as an operator in the Netherlands and was initiallyawarded 100% equity and operatorship of the Amstel oil field development in late2006. The Dutch State will participate in the development for its full equityallowance of 40% and a farmout to EnCore for a further 10% is in the process ofbeing finalised. Island continues to pursue further opportunities in thisprolific oil and gas province and is well-positioned, with approved fielddevelopment operator status, to form strategic partnerships to acquire strandedassets around under-utilised pipeline infrastructure and platform facilities.During the year Island also acquired interests as operator offshore Albania,including a gas/condensate discovery, and onshore Morocco. Island intends toseek industry partners in respect of these interests over the medium term toenhance the future growth potential of the Company. BOARD In October 2006 Island appointed Carl Kindinger as a Non-executive Director.Carl has considerable international experience and has successfully raisedproject finance and initiated a number of IPO's. Post year-end KarlPrenderville, our existing Financial and Commercial Manager, was appointedExecutive Commercial Director. Karl has worked for over 25 years in the oilindustry and was formerly Finance Director of Enterprise Energy Ireland Limited.Island welcomes them both to the Board. In August 2007 Island's New Ventures Director, Philip Beck, left the Board topursue other interests. Island thanks Phil for his contribution to theCompany's growth in the formative days and wishes him every success in thefuture. Island is actively seeking suitable candidates for Executive andNon-executive roles with the specialist experience required to support theCompany's increasing level of corporate and financial activity. Those appointedshall oversee and prioritise the restructuring of Island's portfolio ofexploration and near-development assets to ensure alignment with accessiblefunding. FINANCIAL REVIEW The Group recorded a loss on ordinary activities before tax of Stg£5,183,000compared to Stg£481,000 in the year ended 31 July 2006. The loss relates mainlyto the write off of the non-operated well on the Inishbeg prospect in FrontierExploration Licence 1/05, which has been deemed non-commercial. The actual costof non-commercial projects written off is Stg£4,537,000 compared to Stg£227,000in the previous year. Frontier Exploration Licence 1/05 has been relinquished. Gross Revenue from Island's interest in the Seven Heads gas field improved forthe second year in succession with a turnover of Stg£1,762,000 compared toStg£1,151,000 in the previous year representing a 53% increase year on year.Cost of sales at Stg£902,000 compared to Stg£712,000 represents a 27% increaseyear on year. Gross profit at Stg£860,000 has improved from Stg£439,000representing a 96% increase from last year. The field is continuing to produce at rates in excess of 10 mmscf per day andturnover next year is expected to exceed this year's figure should the recentincrease in gas prices be maintained and should the Field perform to currentexpectations as projected by the Operator, Marathon Seven Heads Limited. Administration costs at Stg£707,000 compares to Stg£1,040,000 for the previousyear. Island moved to larger premises and has increased staffing to support theincreased activity levels during the period under review. A significantcontribution to Island's overheads is made by the Company's joint venturepartners in our various licences where Island operates. In accordance with FRS20"Share-based payment" share options awarded during the period to key personnelhave been independently valued. The fair value of share options granted duringthe year is Stg£315,000 compared to Stg£70,000 in the previous year andStg£270,000 relating to the year ended 31 July 2005. In December 2006 Island raised Stg£7.5 million through a short term debtfacility with RMB Resources. This has recently been increased to Stg£12million. The facility is primarily being used to fund the 2007 appraisal wellprogramme in order to bring forward a potential development and relatedrealisation of value. In May 2007 Island raised Stg£13.7 million in an equityplacing mainly with institutional shareholders. In July 2007 warrants wereexercised raising a further Stg£591,000. This, together with the Stg£5.5million received from Platinum Petroleum Limited in August 2006, followingconversion of their convertible loan, resulted in a total of Stg£19.1 million(net of expenses) raised in equity finance during the year. Island continues toraise capital through the sale of assets to EnCore and Bluewater. The completionof these transactions will result in Island receiving Stg£3.75 million.Completion is pending finalisation of legal documentation at year end. Afurther Stg£2.25 million will be due from Bluewater in the first quarter of2008, should they exercise the option to purchase an additional 10% in PorcupineLicence FEL 1/04. OUTLOOK Island considers that the oil price is likely to remain at a high level for sometime and the uncertainty surrounding the future supply of gas to Europe willhelp to underpin gas prices. Although this will ultimately increase the valueof our near term developments, it also means the current high cost and generalshortages of goods and services within the industry will continue. Next year the Company will further progress the Old Head, Schull and Amstelfield developments with the aim of achieving production and ultimately cash flowby the end of 2009, subject to market conditions. Island believes that thediversity of these projects provides a well balanced risk/reward profile, whichwill prove attractive to potential lenders. Island's substantial portfolio ofexploration and near-development assets, combined with its relatively highequity levels in its Licences and ability to operate, gives Island the abilityto rationalise its assets through transactions with industry peers as a means ofseeking sources of additional funding where prudent to do so. A 3D seismicacquisition programme is planned in Island's Atlantic Margin acreage over thepotentially very large Killala and Slyne structures (gas and oil targetsrespectively). On behalf of the Board of Directors I would like to thank shareholders for theircontinued support during the year. We believe our well balanced portfolio,strong operational capabilities and dedicated team of people will achieve ourmain aim of delivering shareholder value over the next few years and into thefuture. I look forward to reporting on your Company's progress and strategicgrowth in twelve month's time. CONSOLIDATED PROFIT AND LOSS ACCOUNT for the year ended 31 July 2007 Year ended Year ended 31-Jul 31-Jul 2007 2006 Stg£'000 Stg£'000 (Restated*) Turnover 1,762 1,151Cost of sales (902) (712) Gross profit 860 439Administration expenses (707) (1,040)Costs associated with uncommercial projects (4,537) (227)Charge for share awards (315) (70)Other operating income 401 - Operating loss - continuing operations (4,298) (898)Interest receivable and similar income 181 446Interest payable and similar charges (1,037) -Unwinding of discount on decommissioning provision (29) (29)Loss on ordinary activities before taxation (5,183) (481)Taxation on loss on ordinary activities - (8) Loss for the financial year (5,183) (489) Loss per share (Stg £) (0.0636) (0.0086) * As restated for FRS20 'Share-based payment' CONSOLIDATED STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES for the year ended 31 July 2007 Year ended Year ended 31-Jul 31-Jul 2007 2006 Stg£'000 Stg£'000 Loss for the financial year (5,183) (489) Prior year adjustment (340) -Total recognised gains and losses since last annual report (5,523) (489) CONSOLIDATED BALANCE SHEET at 31 July 2007 2007 2006 Stg£'000 Stg£'000 (Restated*)Fixed assetsTangible assets 1,761 2,147Intangible assets 54,911 30,950 56,672 33,097 Current assetsCash at bank and in hand 11,602 6,071Debtors 2,612 9,893 14,214 15,964 Creditors: amounts falling due within one year (25,885) (13,311) Net current (liabilities)/assets (11,671) 2,653 Total assets less current liabilities 45,001 35,750Provision for liabilities (675) (646)Net assets 44,326 35,104 Capital and reservesCalled up share capital 762 478Share premium 48,571 29,712Shares to be issued - 5,500Share warrants reserve 447 -Share option reserve 655 340Unrealised reserve 47 47Profit and loss account (6,156) (973)Shareholders' funds 44,326 35,104 * As restated for FRS20 'Share-based payment' CONSOLIDATED CASHFLOW STATEMENT for the year ended 31 July 2007 Year ended Year ended 31-Jul 31-Jul 2007 2006 Stg£'000 Stg£'000 (Restated)* Net cash inflow/(outflow) from operating activities 1,013 (2,342)Returns on investments and servicing of finance (409) 446Corporation tax - 7Capital expenditure and financial investment (21,716) (16,713)Net cash (outflow) before financing (21,112) (18,602)Financing 19,143 16,307(Decrease) in cash for the year (1,969) (2,295) * As restated for FRS20 'Share-based payment' RECONCILIATION OF NET CASHFLOW TO MOVEMENT IN NET DEBT for the year ended 31 July 2007 Year ended Year ended 31-Jul 31-Jul 2007 2006 Stg£'000 Stg£'000 (Decrease) in cash for the year (1,969) (2,295)Net funds at beginning of year 6,071 8,366Net funds at end of year 4,102 6,071 Net funds is analysed as follows:Cash at bank and in hand 11,602 6,071Bank loan (7,500) - 4,102 6,071 2 November 2007 This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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