16th Mar 2005 07:01
JKX Oil & Gas PLC16 March 2005 FOR IMMEDIATE RELEASE 16 MARCH 2005 JKX Oil & Gas plc PRELIMINARY RESULTS FOR THE YEAR ENDED 31 DECEMBER 2004 Financial Highlights 2004 2003 % Increase Turnover $46.6m $36.9m 26% Operating profit $23.6m $12.3m 92% Retained profit after minorities $19.7m $10.7m 84% Earnings per share (basic) 14.08 cents 8.08 cents 74% Net Cash $21.5m $12.7m 69% Strategic Highlights - Three new wells drilled in Poltava, Ukraine- New Elizavetovskoye exploration license in Ukraine awarded- First full year of gas export from Ukraine- Civita gas discovery in Italy (estimated at 3 Bcf)- Initiation of production from the third (Novo-Nikolaevskoye) of four Ukrainian production licenses- Five per cent increase in recommended full year dividend Dr Paul Davies, Chief Executive of JKX, said: "The excellent results for theyear reflect the continued development of our operations coupled with a strongoil price. We will continue to build on our success in Ukraine and are alsoexamining opportunities elsewhere. I am confident that we can continue to growvalue for shareholders." ENDS For further information please contact: Dr Paul Davies/ Bruce Burrows JKX Oil & Gas 020 7323 4464Anthony Cardew/Sofia Rehman Cardew Group 020 7930 0777 CHAIRMAN'S STATEMENT I am pleased to report that 2004 was a year of steady progress in bothcommercial and financial performance, with the focus of the Company's effortsbeing concentrated on the development of its wholly owned licenses at Poltava,Ukraine. The Company delivered a 26% increase in turnover to $46.6million ($36.9million),driven primarily by improved oil and gas realisations, with average productionfor the year sustained at 8,004 boepd (8,068 boepd). Operating profit increased92% to $23.6million ($12.3million), with a strong rise in operating cash flow to$29.9million ($19.6million). Profit for the year almost doubled from the 2003result at $19.7million ($10.7million). Capital expenditure was significantlyhigher at $27.8million ($17.4million), with more than 85% expended indevelopment of the Company's Ukrainian assets. Ukraine remains the focus of JKX's operations and production. The continuingimprovement of the commercial and operating environment in the country wasthrown into sharp relief with the disputed presidential elections in December.The Company experienced no production downtime throughout this period. Theresilience of the democratic process and the stated objectives of the newgovernment to accelerate market reforms and promote foreign investment providefurther encouragement to your Board to build on our pre-eminent position in thecountry. The Company initiated its 2004 drilling programme at Poltava, Ukraine in May2004. To date, three new wells have been drilled on the Molchanovskoye Field andare on stream. We are now in continuous drilling mode and are currentlycompleting a re-entry and side-track of Well R12 on the deep RudenkovskoyeField; initial test results from this well are scheduled for the end of thismonth. Remedial work was also successfully completed in the third quarter of2004 on Well N9 in the Novo-Nikolaevskoye Field, and this well has demonstratedthe latent potential of this field for both further development and addition toour reserve base. In addition to drilling operations, we have completed asignificant upgrade of our field facilities at Poltava. JKX is seeking to broaden its oil and gas portfolio in Ukraine and has beenactive in evaluating a number of potential exploration and development projects.In November 2004, we announced the award of the Elizavetovskoye explorationlicense (JKX: 100%), which covers a 70 sq.km area in the Poltava region,approximately 45 km from JKX's existing production facilities. I am hopeful thatwe will be able to add further licenses to our Ukrainian portfolio in the comingmonths. In Georgia, Anadarko Petroleum completed the planned 1,100 sq.km, 3-D seismicsurvey over the southernmost block of the 8,900 sq. km exploration area of theGeorgia Black Sea (JKX: 4% net profit interest). The results of the survey willbe available later this year and will determine the location of the first wellon the block. In March this year, the Company was able to confirm that BPExploration Operating Company ("BP") and Turkish Petroleum Overseas Company("TPOC") had farmed-in to the Georgia Black Sea license, and that the assignmenthad received the approval of the relevant Georgian authorities. BP and TPAO, theparent company of TPOC, are the holders of the adjacent license in the TurkishBlack Sea, and have stated their intention to drill a well in mid-2005 on thatlicense. I believe that the farm-in to the Georgian license supports our view ofthe potential of the area and the imminence of the first exploration well in theGeorgian Black Sea. In Italy, the first exploration well was drilled on the Civita permit (ENI 70%;JKX 30%) in the first quarter of 2004 and made a discovery of an estimated 3billion cubic feet of gas. JKX has now reached agreement to take over ENI's 70%interest in the discovery and become operator. ENI will retain its 70% interestand remain operator in the rest of the exploration permit. We continue to pursuea modest but focused exploration and development programme in Italy. The Company's balance sheet has strengthened in the period with year end cashbalances of $39.1million ($19.7million). The increase in liquidity results fromstrong cash flow, share placements in the period of 6.35 million shares atmarket price which raised £4.5m, and the issue of unsecured one-year ConvertibleLoan Notes at a conversion price of 109.5p per share which raised £9.2million ofadditional working capital. In line with the Board's policy of returning value to shareholders, the Companypaid an interim dividend of 0.25p per share on 29 October, 2004. I am pleased toreport that the Board is recommending a final dividend of 0.3p which will bepaid on 16 May to shareholders who are on the Company's Register of Members atthe close of business on 29 March. This payment will bring the total dividendfor 2004 to 0.55p per share (0.525p per share), a 5% increase over 2003. The Company continues to advance the development of its production licenses atPoltava. New wells are planned this year on the Novo-Nikolaevskoye,Molchanovskoye and Rudenkovskoye Fields. Depending on the level of productionsuccess achieved with our new wells on Rudenkovskoye and Novo-Nikolaevskoye, theCompany will consider mobilising a second rig. Evaluation work will proceed onboth the Zaplavskoye and Elizavetovskoye licenses, with scheduling ofexploration drilling dictated by the priority to raise production levels. Wewill continue to seek to add licenses to our Ukrainian portfolio. Future plans for our remaining investment in the United States in the CenterDeep Project (JKX: 34.4%), rests with the results of the appraisal programmewhich is currently drawing to a close. We do not intend to seek other interestsin the United States. In Italy, however, we will exploit our discovery at Civitaand seek to build prudently on our exploration portfolio onshore. Over the reporting period, we have increased our efforts to locate and securesuitable projects in and around our core area of the states of the former SovietUnion. We have evaluated a number of potential projects in Russia, but have yetto identify a suitable project. However, we believe Russia continues to offer usthe opportunity to significantly increase our reserve base and we are continuingour efforts in the region. We are currently concluding a farm-in opportunity toan exploration project onshore Bulgaria and are evaluating a number of prospectsonshore Turkey where there are interesting opportunities available. I hope to beable to report progress on these two new country entries in the near future. I thank all JKX staff, both in the UK and overseas, for their continuedcontribution to the success of the Company. I would further like to extend myappreciation to all shareholders of the Company for their continued interest andsupport. Chief Executive's Statement During 2004, JKX concentrated its development activities on the drilling andfacilities upgrade programme at Poltava, Ukraine. Continuous drilling at Poltavaand the acquisition of additional licenses are the key objectives for theCompany in 2005. UkraineJKX's wholly owned subsidiary, Poltava Petroleum Company ("PPC"), has retainedits position as the largest non-state producer of oil and gas in Ukraine.Average daily production increased to 8,000 boepd (7,851 boepd) with productioncoming on-stream from the new Wells: M203, M204, M150, and the rehabilitatedWell N9 offsetting natural decline from existing wells. More than 90% of the oilproduced was exported to Poland and Romania at a fixed discount to Brent orUrals, with an average realised price of $31.99 per barrel ($25.21 per barrel).PPC sold approximately 40% of its gas production into the domestic market with20 MMcm per month contracted for export to Slovakia. Average realisations forthe year increased by more than 20% to $1.59 per Mcf ($1.29 per Mcf), whichreflected the improved price for exported gas as well as the increasing price inthe domestic market. The price of gas in the Ukrainian market will continue torise in 2005, primarily as a result of the new contracted price agreed for 2005deliveries of gas imported from Turkmenistan. In November 2003, JKX commenced the delivery of a proportion of its Ukrainiangas production to Slovakia under a three-year gas export sales contract. Theinitiation of gas export was regarded as a milestone for both the Company andthe industry. There were changes to the delivery and trans-shipment arrangementsof gas from Turkmenistan at the end of 2004. As a result of this, JKX is pleasedto report that it has concluded a new 21 month agreement with RusUkrEnergo, the50% owned Russian Gasprom entity, which from January 2005 is delivering andtrans-shipping gas from Turkmenistan. This new contract provides JKX with themechanism to continue the export of part of its Ukrainian gas production.However, the strengthening of the domestic gas price in Ukraine may modify thebalance of the Company's gas sales in 2005. In the reporting period, three new wells were drilled on the MolchanovskoyeField and remedial work was undertaken on Well N9 on the Novo-NikolaevskoyeField. In addition, a significant upgrade of the production facilities atPoltava was completed, including the installation of a 5,000 barrel per daycondensate stabilisation plant, a new one-megawatt gas-fired generator and theprovision of additional storage tanks to bring storage capacity up to 60,000barrels. Significant progress was made in the proposed tie-in of our fieldfacilities to the Soyuz pipeline, one of the main gas trunkline systemsdelivering gas from Russia to western Europe; additional gas export pipelinecapacity from our production facilities is necessary for PPC to deliver asignificantly higher level of gas production to market. We are still awaitingfinal approvals for this tie-in, but remain optimistic that our shareholder,Naftogas of Ukraine, will continue to work closely with us in completing thenecessary formalities. GeorgiaJKX is greatly encouraged by the increased pace of the exploration activity inthe eastern section of the Black Sea and the farm-in by BP and TPOC to ourlicense area. In addition, the dynamically-positioned deepwater drillship, theGlobal Santa Fe Explorer, has been contracted to drill the first well on theadjacent Turkish license in mid 2005. The Company is optimistic that the firstwell on our Georgian license will form part of its on-going drilling programme. USAIn the third quarter of the reporting period, we announced the commencement of atwo-well appraisal programme in the Center Deep project in east Texas (JKX:34.4%). Both wells have now been drilled and completed and a testing programmeis underway following installation of a delivery flowline, and finalisation ofthe gas sales contract. ItalyJKX has agreed to take over ENI's 70% interest in the Civita gas discovery,bringing JKX's interest to 100%. The Company continues to evaluate developmentoptions and intends to apply for a production concession as soon as possible. Weremain optimistic that potential exists in the remainder of the block and willbe seeking to evaluate this jointly with ENI who have elected to remain as ourpartner in the balance of the block. Evaluation has been undertaken of the purchased seismic data over the FiumeArrone permit (JKX: 30%), and three leads have been identified. A 32 km 2Dseismic programme is planned to firm up the most promising leads, with thisprogramme scheduled to be performed in late 2005. The award of a permit is still awaited for the Montalbano block (JKX: 40%),following approval by the Italian authorities of the environmental studysubmitted during 2003. It is not possible to predict an award date at this time. In November 2004, JKX applied for the 176 sq.km Corropoli permit, which islocated in the Abruzzo region of central Italy. JKX will perform anenvironmental survey over the block in 2005. Permit award is not expected before2007. OutlookThe continued development of the Company's existing Ukrainian licenses remainsthe focus for the 2005 work programme. The sidetrack of Well R12 on theRudenkovskoye Field is yielding the first modern logs on this extensive licenseand provides a basis for planning a suitable work programme to develop this deepand technically challenging field. Currently, the sidetrack drilling work isbeing completed through a gross interval of 470m of Devonian sandstones andshales in the upper part of the reservoir. The well will be cased down to adepth of 3,950m and testing operations will commence once the rig has beenmoved. The rig will then move onto the first new well on the Novo-Nikolaevskoyelicense, and its completion will open the possibility of parallel developmentson these production licenses. We have initiated data gathering and evaluation of our recently awardedElizavetovskoye exploration license and will be seeking to develop a firmprogramme before year end. We remain both active and optimistic with regards tothe acquisition of additional licenses in Ukraine. We anticipate maintaining our current level of participation in our Italian andUSA appraisal projects, but recognise the potential for realisation of value.The Company has been negotiating the terms of our participation in an onshoreproject in Azerbaijan, and will seek to draw these to a close by mid-year. JKXintends to broaden its exploration portfolio in 2005 as we identify prospects inand around our core area of interest. The Bulgarian and Turkish projectsdemonstrate that suitable opportunities, which have the potential for earlydevelopment, can be identified. The Company is mindful of the need to increase its reserve base both fromexisting licenses and by acquisition. We retain the view that significantreserve additions will be most readily achievable in the near term by assetacquisition in Ukraine and Russia. New opportunities will continue to be evaluated with regard to increasingshareholder value. I am confident that the Company and its staff will continueto build upon its achievements to date. Financial Review -------------------------------- -------- --------- ------- ------- Total Second half First half TotalProduction summary 2004 2004 2004 2003-------------------------------- -------- --------- ------- -------ProductionOil (Mbbl) 729 401 328 751Gas (Bcf) 13.2 6.4 6.8 13.2-------------------------------- -------- --------- ------- ------Oil equivalent (Mboe) 2,929 1,469 1,460 2,945-------------------------------- -------- --------- ------- ------Daily productionOil (bopd) 1,993 2,216 1,804 2,058Gas (MMcfd) 36 35 37 36-------------------------------- -------- --------- ------- ------Oil equivalent (boepd) 8,004 7,985 8,022 8,068-------------------------------- -------- --------- ------- ------ -------------------------------- -------- --------- ------- ------- Total Second half First half Total 2004 2004 2004 2003Operating results $m $m $m $m-------------------------------- -------- --------- ------- -------TurnoverOil 23.1 15.0 8.1 18.0Gas 20.7 10.4 10.3 18.0Other 2.8 1.4 1.4 0.9-------------------------------- -------- --------- ------- ------- 46.6 26.8 19.8 36.9-------------------------------- -------- --------- ------- -------Cost of salesOperating costs (10.6) (5.3) (5.3) (10.7)Depletion and amortisation (5.0) (2.5) (2.5) (6.2)Production based taxes (3.2) (1.5) (1.7) (1.7)-------------------------------- -------- --------- ------- ------- (18.8) (9.3) (9.5) (18.6)-------------------------------- -------- --------- ------- -------Release of doubtful debtprovision/production royaltyaccrual 0.3 0.2 0.1 1.5Exploration write off - - - (3.2)-------------------------------- -------- --------- ------- -------Gross Profit 28.1 17.7 10.4 16.6-------------------------------- -------- --------- ------- -------Operating expensesGeneral and administrative expenses (4.5) (2.5) (2.0) (4.3)-------------------------------- -------- --------- ------- -------Operating profit 23.6 15.2 8.4 12.3-------------------------------- -------- --------- ------- ------- -------------------------------- -------- --------- ------- ------- Total Second half First half TotalEarnings 2004 2004 2004 2003-------------------------------- -------- --------- ------- -------Net profit ($m) 19.7 12.5 7.2 10.7Basic weighted average number ofshares in issue (m) 140 140 138 132Earnings per share (basic) (cents) 14.08 8.83 5.25 8.08Earnings before interest, tax,depreciation and amortisation ($m)* 29.2 18.0 11.2 18.2-------------------------------- -------- --------- ------- ------- -------------------------------- -------- --------- ------- ------- Total Second half First half TotalRealisations 2004 2004 2004 2003-------------------------------- -------- --------- ------- -------Oil (per boe) $31.99* $33.33* $29.75* $25.34*Gas (per Mcf) $1.59 $1.61 $1.57 $1.39-------------------------------- -------- --------- ------- ------- *Oil prices are net of all transportation, shrinkage and brokerage charges.-------------------------------- -------- --------- ------- ------- Total Second half First half TotalCost of production ($/boe) 2004 2004 2004 2003-------------------------------- -------- --------- ------- -------Production costs $2.56* $2.44* $2.69* $2.93*Depletion and amortisation $1.71 $1.70 $1.74 $2.09Production based taxes $1.09 $1.04 $1.14 $0.58-------------------------------- -------- --------- ------- ------- *Production costs relate to the operating costs attributable to oil and gasturnover. -------------------------------- -------- --------- ------- ------- Total Second half First half TotalCash flow 2004 2004 2004 2003-------------------------------- -------- --------- ------- -------Operating cash flow ($m) 29.9 20.2 9.7 19.6Operating cash flow per share(cents) 21.3 14.3 7.0 14.8-------------------------------- -------- --------- ------- ------- -------------------------------- -------- --------- ------- ------- Total Second half First half TotalBalance sheet 2004 2004 2004 2003-------------------------------- -------- --------- ------- -------Net cash ($m) 21.5 21.5 20.5 12.7Net cash to equity (%) 21.4 21.4 23.2 17.2Return on average capital employed(%) 23.3 27.6 17.9 15.8Capital expenditure ($m) 27.8 19.2 8.6 17.4-------------------------------- -------- --------- ------- ------- Group profit and loss accountFor the year ended 31 December--------------------------------------- ------ -------- -------- Note 2004 2003 $000 $000--------------------------------------- ------ -------- --------Turnover 2 46,594 36,908Cost of sales (18,427) (20,273)--------------------------------------- ------ -------- --------Gross profit 28,167 16,635Operating expensesGeneral and administrative expenses (4,519) (4,316)--------------------------------------- ------ -------- --------Operating profit 23,648 12,319--------------------------------------- ------ -------- --------Loss on disposal - (30)Interest receivable 564 392Provision against investments - (748)Interest payable (546) (7)--------------------------------------- ------ -------- --------Profit on ordinary activities before taxation 23,666 11,926Taxation on profit on ordinary activities 4 (3,894) (1,879)--------------------------------------- ------ -------- --------Profit for the year after taxation 19,772 10,047Minority interest (53) 641--------------------------------------- ------ -------- --------Retained profit for the year attributable to membersof 19,719 10,688the parent company ------ -------- -----------------------------------------------Ordinary dividends on equity shares (1,460) (1,184)--------------------------------------- ------ -------- --------Retained profit for the year 18,259 9,504--------------------------------------- ------ -------- --------Earnings per share - basic earnings per 10p ordinaryshare (in cents) 5 14.08 8.08- diluted earnings per 10p ordinary share (in cents) 5 13.02 7.95--------------------------------------- ------ -------- -------- Group statement of total recognised gains and lossesFor the year ended 31 December There are no recognised gains or losses attributable to the shareholders of theCompany other than the profit of $19,719,000 for the year ended 31 December 2004(2003: $10,688,000). Reconciliation of group shareholders' funds For the year ended 31 December------------------------------------------ -------- -------- 2004 2003 $000 $000------------------------------------------ -------- --------Total recognised gains 19,719 10,688Other movements:Dividends (1,460) (1,184)New shares issued 1,147 1,062Share premium arising on issue of new shares 6,932 2,124Issue expenses - (159)------------------------------------------ -------- --------Total movement during the year 26,338 12,531------------------------------------------ -------- --------Shareholders' funds at 1 January 73,915 61,384------------------------------------------ -------- --------Shareholders' funds at 31 December 100,253 73,915------------------------------------------ -------- -------- Balance sheets As at 31 December Group Parent ------------ ----------- 2004 2003 2004 2003 $000 $000 $000 $000-------------------------------- -------- ------- ------- ------- Fixed assetsIntangible assets 14,428 10,230 - 238Tangible assets 65,467 47,463 - -Investments - - 6,270 6,267-------------------------------- -------- ------- ------- ------- 79,895 57,693 6,270 6,505-------------------------------- -------- ------- ------- ------- Current assetsStocks 194 44 - -Debtors 15,013 11,073 41,873 30,296Cash at bank and in hand 39,134 19,671 21,666 2,028-------------------------------- -------- ------- ------- ------- 54,341 30,788 63,539 32,324-------------------------------- -------- ------- ------- ------- Creditors - amounts falling due within oneyearConvertible loan capital (17,662) - (17,662) -Loan capital - (6,994) - -Other creditors (15,420) (6,928) (4,517) (717)-------------------------------- -------- ------- ------- ------- Net current assets 21,259 16,866 41,360 31,607-------------------------------- -------- ------- ------- ------- Total assets less current liabilities 101,154 74,559 47,630 38,112-------------------------------- -------- ------- ------- ------- Provisions for liabilities and charges (808) (554) - -Minority interests - equity (93) (90) - --------------------------------- -------- ------- ------- ------- Net assets 100,253 73,915 47,630 38,112-------------------------------- -------- ------- ------- ------- Capital and reservesCalled-up share capital 21,582 20,435 21,582 20,435Share premium account 22,127 15,195 22,127 15,195Capital redemption reserve 587 587 587 587Merger reserve 30,680 30,680 - -Profit and loss account 25,277 7,018 3,334 1,895-------------------------------- -------- ------- ------- ------- Total equity shareholders' funds 100,253 73,915 47,630 38,112-------------------------------- -------- ------- ------- ------- These financial statements were approved by the Board of Directors on 10 March2005 and signed on its behalf by: Lord FraserB J BurrowsDirectors16 March 2005 Group cash flow statement-------------------------------------- ------ -------- -------- Note 2004 2003 $000 $000-------------------------------------- ------ -------- --------Net cash inflow from operating activities 6 29,851 19,609-------------------------------------- ------ -------- --------Returns on investments and servicing of financeInterest received 571 392Interest paid (498) (7)-------------------------------------- ------ -------- -------- 73 385-------------------------------------- ------ -------- --------Taxation (3,040) (609)-------------------------------------- ------ -------- --------Capital expenditure and financial investmentCapital expenditure on fixed assets (25,044) (11,905)Disposal proceeds from sale of US assets 233 4,419Disposal proceeds 17 -Payment to secure PPC investment/increase in equity - (4,859)-------------------------------------- ------ -------- -------- (24,794) (12,345)-------------------------------------- ------ -------- --------Equity dividends paid (1,303) (1,058)-------------------------------------- ------ -------- --------Net cash inflow before management of liquid resourcesand financing 787 5,982-------------------------------------- ------ -------- --------Management of liquid resourcesIncrease in short term deposits (30,366) (5,946)-------------------------------------- ------ -------- --------FinancingReceipts from the issue of new shares 8,049 3,186Issue costs - (159)Receipt from exercise of share options (41) -Receipt of short term loans 2,482 6,994Receipt from issue of convertible loan notes 17,662 -Repayment of short term loans (9,476) --------------------------------------- ------ -------- -------- 18,676 10,021-------------------------------------- ------ -------- --------(Decrease)/Increase in cash (10,903) 10,057-------------------------------------- ------ -------- -------- Note 2004 2003 $000 $000Reconciliation of net cash flow to movement in netfunds(Decrease)/increase in cash (10,903) 10,057Repayment of short term loans 9,476 -Receipts from issue of convertible loan notes (17,662) -Receipt of short term loans (2,482) (6,994)Cash inflow from short term deposits 30,366 5,946-------------------------------------- ------ -------- --------Increase in net funds 8,795 9,009Net funds at 1 January 12,677 3,668-------------------------------------- ------ -------- --------Net funds at 31 December 7 21,472 12,677-------------------------------------- ------ -------- -------- Notes to the accounts 1. Accounting policiesUkrainian business environmentUkraine continues to display emerging market characteristics, and itslegislation and business practices regarding banking operations, foreigncurrency transactions and taxation is constantly evolving as the new governmentattempts to manage the economy. Risks inherent in conducting business in anemerging market economy include, but are not limited to, volatility in thefinancial markets and the general economy. Uncertainties over the development ofthe tax and legal environment, as well as difficulties associated with theconsistent application of current laws and regulations, have continued. Oil andgas assets based in Ukraine represent approximately 82% of the Group's oil andgas assets. The Group's operations and financial position may be affected by theseuncertainties. The Group's financial statements as at 31 December 2004 and forthe year then ended do not include any adjustments to reflect the possiblefuture effects on the recoverability and classification of assets or the amountsor classifications of liabilities that may result from these uncertainties. Basis of preparationThe above financial information does not represent statutory accounts within themeaning of section 240 of the Companies Act 1985. The comparative financial information is based upon the statutory accounts forthe year ended 31 December 2003. Those accounts, upon which the auditors issuedan unqualified opinion, have been delivered to the Registrar of Companies. In 2001 the Company changed its reporting currency to US Dollars, the functionalcurrency of the Group. These accounts have been prepared in US Dollars on a going concern basis, under the historical cost convention, and in accordance with the Oil Industry Accounting Committee Statement of Recommended Practice - "Accounting for Oil and Gas Exploration, Development, Production and Decommissioning Activities" and applicable accounting standards including the adoption of the standards mentioned below. 2. TurnoverTurnover represents amounts invoiced net of value added and similar taxes forthe Group's share of oil and gas sales and related management services. 3. Segmental analysis Turnover by source1 Turnover by destination1 Profit/(loss) before taxation2 Net assets 2004 2003 2004 2003 2004 2003 2004 2003 $000 $000 $000 $000 $000 $000 $000 $000--------------- ------- ------ ------ ------ ------ ------ ------- -------UK 2,761 878 80 248 8,197 4,631 10,614 11,167Ukraine 43,788 33,694 9,431 16,356 15,834 11,142 67,685 43,237Georgia - - 213 - 116 (526) 5,535 5,191USA 45 2,336 45 2,336 (355) (1,854) 12,861 12,663Eastern Europe - - 36,825 17,968 - - - -Rest of world - - - - (126) (1,467) 3,558 1,657--------------- ------- ------ ------ ------ ------ ------ ------- -------Total 46,594 36,908 46,594 36,908 23,666 11,926 100,253 73,915--------------- ------- ------ ------ ------ ------ ------ ------- ------- 1. Turnover represents amounts invoiced net of value added and similar taxes forthe Group's share of oil and gas sales and related management services. 2. Profit/(loss) before taxation is stated after interest payable/receivable.4. Taxation on profit on ordinary activitiesAnalysis of tax on profit on ordinary activities. Taxes charged on production of hydrocarbons are included in the cost of sales. Analysis of charge in period------------------------------------------- --------- -------- 2004 2003 $000 $000------------------------------------------- --------- --------Current tax - Overseas 3,771 1,669Deferred tax - Overseas 123 210------------------------------------------- --------- -------- 3,894 1,879------------------------------------------- --------- -------- Factors that affect the current tax chargeThe current tax charge for the year of $3.8m (2003: $1.7m) is lower than thecharge that would be calculated using the standard rate of UK corporation tax of30% (2003: 30%) The differences are explained below:------------------------------------------- --------- -------- 2004 2003Current tax reconciliation $000 $000------------------------------------------- --------- --------Profit on ordinary activities before tax 23,666 11,926------------------------------------------- --------- --------Current tax calculated at 30% (2003: 30%) 7,100 3,578Accelerated capital allowances 744 2,631Utilisation of overseas tax losses (2,464) (2,743)Losses to carry forward into future periods 88 31Short term timing differences (1,014) (3,592)Permanent foreign exchange differences 16 2Expenses not deductible for tax purposes (699) 1,762------------------------------------------- --------- --------Total current tax charge 3,771 1,669------------------------------------------- --------- -------- Factors that may affect future tax charges A significant proportion of the group's income will be generated overseas.Profits made overseas will not be able to be offset by costs elsewhere In thegroup. This could lead to a higher than expected tax rate for the group 5. Earnings per shareThe calculation of profit per ordinary share for 2004 is based on the profitafter tax and minority interests of $19.7 million (2003: $10.7 million) on140,054,580 ordinary shares (2003: 132,348,271) being the weighted averagenumber of shares in issue during the year. The diluted earnings per share for 2004 is based on the profit after tax andminority interest and adjusted for interest expense on convertible loan notesafter taxation of $20.1 million (2003: $10.7 million) on 154,091,847 (2003:134,404,828) ordinary shares, calculated as follows: 2004 2003------------------------------------------- --------- --------Basic weighted average number of shares 140,054,580 132,348,271Dilutive potential ordinary sharesConvertible loan notes 8,401,826 -Share options 5,635,441 2,056,557------------------------------------------ --------- ---------Weighted average number of shares for dilutedearnings per share 154,091,847 134,404,828------------------------------------------ --------- --------- There were 8,131,531 (2003: 6,997,276) outstanding share options at 31 December2004 only 5,635,441 (2003: 2,056,557) have a dilutive effect. 6. Reconciliation of operating profit to net cash inflow from operatingactivities------------------------------------------- --------- -------- 2004 2003 $000 $000------------------------------------------- --------- --------Operating profit 23,648 12,319Depreciation 5,582 6,686Exploration write off - 3,245Gain on disposal of fixed assets (57) -Exchange differences 3 35(Increase) in operating debtors (4,165) (3,269)Increase in operating creditors 4,989 588(Increase)/decrease in stocks (149) 5------------------------------------------- --------- --------Net cash inflow from operating activities 29,851 19,609------------------------------------------- --------- -------- 7. Reconciliation of net cash flow to movement in net funds--------------------------------- ----------- --------- -------- At At 1 Jan 31 Dec 2004 Cash flow 2004 $000 $000 $000--------------------------------- ----------- --------- --------Cash 12,181 (10,903) 1,278Short-term deposits 7,490 30,366 37,856--------------------------------- ----------- --------- --------Cash at bank and in hand 19,671 19,463 39,134Loans (6,994) (10,668) (17,662)--------------------------------- ----------- --------- -------- 12,677 8,795 21,472--------------------------------- ----------- --------- -------- 8. External AuditThe Group's external auditors, Ernst & Young LLP have confirmed that they havereviewed this preliminary announcement and they anticipate signing anunqualified opinion on the audited accounts for the Group ended 31 December2004.Glossary Mcf Thousand cubic feetMcfd Thousand cubic feet per dayBcf Billion cubic feetcfpd Cubic feet per dayMMcf Million cubic feetMMcfd Million cubic feet per dayMbbl Thousand barrelsMMbbl Million barrelsbopd Barrel of oil per dayboe Barrel of oil equivalentMboe Thousand barrels of oil equivalentMMboe Million barrels of oil equivalentboepd Barrel of oil equivalent per daysq.km Square Kilometre$ United States DollarsLIBOR London InterBank Offered RateUS United StatesHryvna The lawful currency of Ukraine Conversion factors6,000 standard cubic feet of gas = 1 boe We welcome visits to our websitewww.jkx.co.uk This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
JKX.L