Half Yearly Report

27th Jul 2009 07:00



27 July 2009

For immediate release

EMERALD ENERGY PLC ("EMERALD" OR THE "COMPANY") ANNOUNCES RESULTS FOR THE HALF-YEAR PERIOD ENDED 30 JUNE 2009

HIGHLIGHTS

Gigante No.2 drilled to total depth of 15,630 feet, Caballos formation flow tested with ESP and produced oil at 745 bopd; Tetuan formations to be flow tested shortly;

INTERIM MANAGEMENT REPORT

OUTLOOK

  

SUMMARY FINANCIAL RESULTS

		1H 2009		1H 2008
		mbbl		mbbl
Working interest production		1,466		324
Entitlement production		1,037		295
		$ '000		$ '000
Revenue from oil sales	(a)	42,027		29,592
Other operating income/(expense)	(b)	2,721		(33)
Production costs	(c)	(7,078)		(4,872)
Expensed exploration costs		(54)		(122)
Administrative costs, excluding IFRS2 and depreciation charges	(d)	(5,362)		(4,499)
Adjusted EBITDA*		32,254		20,066
Profit before tax	(e)	16,802		18,962
		$		$
Earnings per ordinary share on diluted basis		0.13		0.20

(*) EBITDA is earnings before interest (and other finance income and costs), tax, depreciation, depletion, amortisation and write-offs (including impairment) of oil & gas assets. Adjusted EBITDA is calculated before share based payments charged to the income statement under IFRS 2.

a. Revenue from Oil Sales

Emerald recognises revenue from oil sales on the entitlement basis, as the entitlement production is delivered to the point of sale and invoiced. The tables below provide the breakdown of invoiced production and revenue by quarter.

		Total Entitlement	Change in Inventories	Total Invoiced	Invoiced in 2Q 2009	Invoiced in 1Q 2009	Invoiced in 1H 2008
PRODUCTION:		mbbl	mbbl	mbbl	mbbl	mbbl	mbbl
Colombia		494	51	443	268	175	306
Syria		543	-	543	278	265	-
Total		1,037	51	986	546	440	306
				Total	2Q 2009	1Q 2009	1H 2008
REVENUE:				$ '000	$ '000	$ '000	$ '000
Colombia				18,180	13,020	5,160	29,592
Syria				23,847	14,788	9,059	-
Total				42,027	27,808	14,219	29,592

In Colombia, the majority of oil sales are priced referenced to Vasconia blend, which usually trades at a discount to major benchmarks, such as West Texas Intermediate and Brent. In addition to the price of Vasconia blend, pricing formulae incorporate crude quality adjustments and deductions reflecting the cost of transporting crude through the pipeline system.

In Syria, produced oil is sold at the prevailing market price of Syrian Heavy blend, which usually trades at a discount to Brent oil price. Pipeline charges are reflected in production costs, rather than in the realised oil prices. In the reported period, the sale proceeds of crude oil, produced by the Khurbet East field, were at 80% of the official price of Syrian Heavy, reflecting the market arrangements with the Syrian Petroleum Company and the Oil Marketing Bureau of the Syrian Government. As the settlement of any unpaid amounts is expected by September 2009, revenue is recognised and realised oil prices are expressed on a grossed-up basis, showing 100% of the revenue and prices that the Group will have achieved once the final settlement takes place in the second half of 2009.

Effective discounts of invoiced production in Colombia and Syria to WTI and Brent, respectively, as experienced in the first and second quarters of 2009 are provided in the table below:

				1H 2009	2Q 2009	1Q 2009	1H 2008
REALISED OIL PRICE				$/bbl	$/bbl	$/bbl	$/bbl
Colombian Operations				41	49	29	97
Production Weighted WTI*				55	62	45	111
Effective Discount				14	13	16	14
Syrian Operations				44	53	34	-
Production Weighted Brent*				52	59	44	-
Effective Discount				8	6	10	-

(*) Production weighted WTI and Brent oil prices are computed using monthly average WTI and Brent oil prices, which are weighted by monthly invoiced production in Colombia (to compute production weighted WTI oil price) and in Syria (to compute production weighted Brent oil price).

b. Other Operating Income

Major contributors to other operating income in 2009 included an income of $0.948 million received from La Cortez relating to the recovery of 60% of the historical exploration costs in the Maranta block pursuant to the Maranta Farmout Agreement, and an income of $1.368 million relating to the administrative overhead recovery from the Company's partners in the jointly controlled producing field in Colombia, operated by Emerald.

c. Production Costs

Production costs are those costs incurred to lift, gather, process and deliver hydrocarbons to the point of sale. The following table provides the segmental analysis of production costs.

	1H 2009				1H 2008
	Colombia	Syria	Total		Colombia	Syria	Total
	$ '000	$ '000	$ '000		$ '000	$ '000	$ '000
Production Costs	5,347	1,731	7,078		4,872	-	4,872
	mbbl	mbbl	mbbl		mbbl	mbbl	mbbl
Entitlement Production	494	543	1,037		295	-	295
Production Unit Costs:	$/bbl	$/bbl	$/bbl		$/bbl	$/bbl	$/bbl
Entitlement Basis	10.8	3.2	6.8		16.5	-	16.5

d. Administrative Costs

Administrative costs relating to Syrian operations in the first six months of 2008 were capitalised. 

  

e. Profit Before Tax

		1H 2009		1H 2008
		$ '000		$ '000
Adjusted EBITDA		32,254		20,066
Depletion and depreciation	(i)	(9,205)		(4,094)
Write-offs of unsuccessful exploration costs	(ii)	(3,290)		-
Impairment reversal	(iii)	-		3,541
Share based payments	(iv)	(547)		(128)
Finance costs	(v)	(2,692)		(1,369)
Finance income		282		946
Profit before tax		16,802		18,962

REVIEW OF OPERATIONS

Syria, Block 26

 

The Khurbet East field production performance has been excellent with the cumulative gross oil production of 3.5 million barrels recently being reached, minimal water production to date, and little reservoir pressure depletion being recorded.

The expansion of the capacity of the field's gathering, processing and loading facilities to 18,000 barrels of fluid per day as an interim expansion prior to the full field development of the Khurbet East field is approaching completion. The additional facilities are being commissioned and two of the recently drilled wells, Khurbet East No.9 and No.10, are being prepared for connection to the expanded facilities. The last of the three wells planned to support the expanded facilities capacity, Khurbet East No. 11 is currently being drilled.

During drilling operations, the Khurbet East No.9 vertical well was flow tested at an average stabilized rate of 3,040 barrels per day with a water cut of between 3% and 4% which may have been the return of drilling fluids. The Khurbet East No.10 and No.11 wells are horizontal wells and are not planned to be flow tested prior to connection to the production facilities.

Two delineation wells, Khurbet East No.7 and Khurbet East No.8 have been drilled in the north and south of the field, respectively, to identify the oil-water contact and with the potential to be used as water disposal wells in the future.

Khurbet East No.7 encountered good hydrocarbon shows across a 7 metre interval while drilling into the reservoir. However, the reservoir porosities recorded were in the range of 5% to 10%, significantly lower than in the central portion of the field, and the oil-water contact was not directly determined by the wireline logs.

Khurbet East No.8 encountered a 23 metre gross oil column (15 metre net) with an average porosity in the net oil bearing interval in excess of 23% and did not identify a definitive oil-water contact. During flow testing of the full reservoir interval, the well produced, under artificial lift and following acid stimulation, 23 degree API oil at an average rate of 617 barrels per day with a water-cut of less than 2%.

An independent evaluation, based on data up to 14 April 2009, estimated proved plus probable working interest reserves in the Khurbet East field at 31 December 2008 to be 29.6 million barrels.

Yousefieh No.2, the first appraisal well in the Yousefieh discovery and located approximately 1.8 km east of the Yousefieh No.1 well, encountered approximately 16 metres of net potential hydrocarbon pay with an average porosity of approximately 16%. An open-hole production test of the reservoir interval recovered quantities of oil and water but did not establish continuous production at surface. Following the success of acid stimulation on the Khurbet East No.8 well, this technique is planned to be applied in the Yousefieh No.2 well and the well is planned to be re-tested in the second half of 2009.

An independent evaluation, based on data up to 31 March 2009, estimated proved plus probable working interest reserves in the Yousefieh field to be 5.7 million barrels.

Following the independent estimate of reserves in the Khurbet East and Yousefieh fields, the Operator estimated the proved plus probable net entitlement reserves attributable to the Company in Block 26 at 31 December 2008 to be 14.3 million barrels.

Acquisition of the 850 square kilometre 3D seismic survey in the area around the Khurbet East and Yousefieh fields has been completed. Delivery of final processed data is expected late in the third quarter of 2009 with interpretation of these data commencing immediately thereafter.

 

Colombia

 

Development drilling activities continued with the completion of the Campo Rico No. 5 well, which commenced production in February 2009. 

Ecopetrol has notified the Company that it has elected to enter joint operations in the Vigia field in the Campo Rico block. Following reimbursement of costs under the sole risk terms of the association contract, expected to occur in the third quarter of 2009, further costs and production will be shared on a 50/50 basis.

The Gigante No.2 well was drilled to a total depth of 15,630 feet, encountering the tops of the Tetuan formation, the producing reservoir in the Gigante No.1A well, and the Caballos formation, the underlying exploration target, approximately 378 feet and 338 feet structurally higher, respectively, than in the Gigante No.1A well which is significantly higher than the pre-drill estimate of 260 feet.

Analysis of the data acquired in the well indicates the Tetuan formation to be a potentially oil bearing sandstone interval of approximately 32 feet (gross and net) with an average porosity of approximately 10% and the Caballos formation to be a 163 feet gross (107 feet net) sandstone interval with an average porosity of approximately 9%. 

During flow testing operation across an 84 feet interval in the Caballos formation, 32 degree API oil flowed to surface, under natural flow, at a rate of approximately 185 barrels per day with a water cut of approximately 3.5% which may have been the return of fluids lost to the formation during drilling operations. Analysis of the pressure data acquired during this test indicates that formation damage occurred during drilling and also that the pressure in the Caballos formation has not been depleted by production from the Tetuan reservoir in the Gigante No.1A well. During a further flow test using an electrical submersible pump, oil flowed to surface at an average stabilised rate of 745 barrels per day over a 48 hour period with a water cut of less than 1%. The Company is evaluating methods to reduce the formation damage and further enhance production rates.

Following flow testing operations in the Caballos formation, the Company plans to conduct flow testing operations in the Tetuan formation prior to preparing the well for production.

Significant progress has been achieved in the appraisal of the Capella heavy oil discovery with the drilling and evaluation of three wells in 2009 and the commencement of production from the field with rates of up to 700 barrels per day being achieved, limited only by marketing constraints.

The Capella No.4 vertical well was drilled approximately 1.6 kilometres to the southwest of the Capella No.1 location and both of the Mirador reservoir intervals were encountered with the upper interval in this well being thinner than in previous wells. However, poor cementing within the well bore resulted in neither of the Mirador intervals being effectively flow tested.

The Capella No.5 well, located some 3.4 kilometres to the northeast of Capella No.1, also encountered both Mirador reservoirs. The lower Mirador reservoir was flow tested at an average rate of 82 bopd with a water cut of 52% and the upper Mirador reservoir was flow tested at an average rate of 26 bopd with a water cut of 4%.

The Capella No.6 well, located 4.2 kilometres to the southwest of Capella No.1 encountered an exceptionally thick upper Mirador interval with net potential hydrocarbon pay of 80 feet of 37% porosity sand, greatly exceeding the previously recorded maximum net thickness of 23 feet encountered in the Capella No.2 well, and a lower Mirador gross conglomerate interval of 175 feet with hydrocarbon shows being recorded to a depth of 3,605 feet, some 130 feet deeper than recorded in previous wells.

Following isolation of the lower part of the well using a cement plug the lower Mirador was flow tested at an oil rate of 90 barrels per day with a water cut of 25%. A total of 3 cased hole flow tests were conducted in the upper Mirador interval and in each test the oil production stabilised at a rate of 100 barrels per day with a water cut in the range of 2% to 5%. Based on initial evaluation of the data obtained during the tests, the Company believes that there is potential to increase the rate from this interval by optimising the design of the well production equipment.

The Company plans to drill the first horizontal well in the field to target the thicker upper Mirador sand in the Capella No.6 area, and has scheduled the drilling of this well for the late third or early fourth quarter of 2009 to allow time to optimise the drilling and completion design based on the results of the Capella No.6 well. In the interim, a slim-hole drilling rig has been contracted to drill two stratigraphic wells in an area around Capella No.6 to test the extent of the thick upper Mirador sand encountered in this well. These stratigraphic wells are designed to recover cores from the entire drilled section and maybe logged using special slim-hole tools, but will not be capable of production.

The Company is drilling two exploration wells in Colombia in 2009. In the Jacaranda block, the Jacinto No.1 exploration well, designed to evaluate the potential of a stratigraphic exploration target in the Tertiary aged Carbonera formation, encountered a water-bearing sand channel and was plugged and abandoned. Subsequently, the Company notified the ANH that it has decided not to enter the third exploration phase in the block, and to relinquish the block.

In the Maranta block, the Mirto No.1 well has been drilled to a depth of 11,578 feet with oil and gas shows recorded across the target horizons. The Company is now commencing a period of evaluation that is expected to take up to two weeks. The Company has entered into a previously announced farmout agreement, subject to the approval of the ANH, under which Emerald retains 80% working interest and operatorship of the block.

The Company has added two blocks to its exploration portfolio, Durillo and VSM32, under the ANH E&P contract terms. The Durillo block is located adjacent to the Company's Ombu block in the Caguan Putumayo basin and may contain an extension of the Capella field. Under the contract, Emerald has 100% working interest and operatorship of the block. The work commitment during the first phase of the ANH exploration and production contract, lasting 12 months, consists of the acquisition of 22 km of new 2D seismic data.

Block VSM32 is located in the Upper Magdalena Valley adjacent to the Company's Matambo block. Under the contract, Emerald has 100% working interest and operatorship of the block. The Company believes the block may contain exploration potential analogous to the nearby Gigante field. The work commitment during the first phase of the ANH exploration and production contract, lasting 36 months, consists of the acquisition of 137 km of new 2D seismic data and the drilling of one exploration well.

 

Peru

 

Emerald has formally signed the exploration and production contract for Block 163 under which Emerald has 100% working interest and operatorship of the block, Emerald's first in Peru. The work commitment during the first phase of the exploration and production contract, lasting twelve months, consists of technical studies.

Production

 

During the first half of 2009, working interest production averaged 8,057 barrels of oil per day and net entitlement averaged 5,696 barrels of oil per day. 

	1H 2009	2Q 2009	1Q 2009	1H 2008
	bopd	bopd	bopd	bopd
Working Interest Production:
Syria	5,059	5,175	4,998	-
Colombia	2,998	2,987	3,042	1,797
	8,057	8,162	8,040	1,797
Entitlement Production:
Syria	2,981	3,050	2,945	-
Colombia	2,715	2,713	2,748	1,621
	5,696	5,762	5,693	1,621

CONVERSION OF SERIES B CONVERTIBLE BONDS

In April, the entire outstanding principal amount of the Series B $15,000,000 4.875 per cent senior unsecured convertible bonds were converted into 2,754,229 of the Company's ordinary shares. The Company agreed to pay to the holder of the bonds, on conversion, an amount of $914,062.50 equal to the interest due on the bonds in the period to 30 June 2010, the interest payment date prior to the earliest date on which the Company may have been entitled, subject to a number of conditions, to redeem the bonds.

The early conversion of the Series B Bonds has eliminated any uncertainty related to the occurrence and timing of conversion of these bonds and reduced the Company's balance sheet liabilities.

POTENTIAL OFFER FOR THE ENTIRE ISSUED SHARE CAPITAL OF EMERALD

On 13 July 2009, following a significant movement in its share price and speculation in the national press, the Company confirmed that it had received an approach from a third party who has expressed an interest in making a possible cash offer for the entire issued share capital of the Company. The announcement emphasised that the discussions were at a preliminary stage. No assurances can yet be given that any formal offer will be forthcoming or that any transaction will occur.

CHANGE IN DIRECTORS' INTEREST

The announcement relating to a potential offer for the entire issued share capital of Emerald, released by the Company on 13 July 2009, commenced an offer period, as defined by the Takeover Code, which, in turn, resulted in a close period, prohibiting the Directors and certain senior employees of the Company to trade, or acquire by way of exercising options, Emerald shares. In accordance with the rules of the employee share option scheme, the Directors have extended the maturity of certain options expiring on 27 August 2009 until the later of their final exercise date and the date falling 10 working days after the end of the offer period that commenced on 13 July 2009. The changes of Directors' interests were as follows:

Director:	Option Class	Shares under  Option	Original Final Exercise Date	New Final  Exercise Date
Alastair Beardsall	A B	500,000 500,000	27 August 2009 27 August 2009	10 working days after the end of the offer period*
Edward Grace	A B	150,000 150,000	27 August 2009 27 August 2009	10 working days after the end of the offer period*
Keith Henry	E F	140,000 140,000	27 August 2009 27 August 2009	10 working days after the end of the offer period*
Merfyn Roberts	A B	75,000 75,000	27 August 2009 27 August 2009	10 working days after the end of the offer period*

(*) Note: Assuming this date is later than 27 August 2009.

PRINCIPAL RISKS AND UNCERTAINTIES

The Company and its subsidiaries (jointly, the "Group"), is subject to various risks and uncertainties that may impact its business in the remaining six months of the financial year as well as in the more distant future. The principal risks and uncertainties, faced by the Group, include: 

Exploration Risk

The business of oil and gas exploration involves a high degree of risk, which even a combination of experience, knowledge and careful evaluation may not be able to fully mitigate. Few properties that are explored are ultimately developed into producing fields. Substantial expenditure is required to establish hydrocarbon reserves through seismic surveys and exploration drilling. There is no assurance that hydrocarbons will be discovered or, even if they are, that economically viable quantities of them can be recovered from the areas by the Group's existing or future E&P licenses.

Reserve Estimates

Petroleum engineers' projections of future production from oil and gas reserves are derived from historic production records and volumetric estimates. The levels of production actually achieved may differ significantly from petroleum engineers' estimates. The current value of such future production is based upon projections of future oil and gas prices and drilling and operating costs. Such projections may turn out to be inaccurate. Adverse movements in any of these variables may result in lower levels of production that had been estimated by petroleum engineers.

Operational Risk

The operations of the Group may be disrupted by a variety of risks and hazards, which are beyond the control of the Group, including environmental hazards, industrial accidents, occupational and health hazards, technical failures, labour disputes, unusual or unexpected geological formations and extended interruptions due to increment of hazardous weather conditions, explosions and other accidents. These risks and hazards could also result in damage to, or the destruction of, production facilities, personal injury, environmental damage, business interruption, monetary losses and possible legal liability. While the Group currently maintains insurance within ranges of coverage consistent with industry practice, no assurance can be given that the Group will be able to obtain such insurance at reasonable rates (or at all), or that any coverage it obtains will be adequate and available to cover any such claims.

Oil and Gas Price Risk

The profitability of the Group's operation is dependent upon the market price of hydrocarbons, which has fluctuated widely in the past. Oil and gas prices are affected by numerous factors beyond Emerald's control, including international economic and political conditions, level of supply and demand, policies of the Organisation of Petroleum Exporting Countries and currency exchange rates. Movements in market prices could render uneconomic any of the extraction or exploration activities undertaken or to be undertaken.

International Operations in Territories Susceptible to Political or Other Instability

The Group's operations may be susceptible to political, social and economic instability and civil disturbances. Risks for the Group in operating in such areas include:

Any of the above factors could result in disruptions to the Group's business, increased costs or reduced future growth opportunities. Potential losses caused by these disruptions may not be covered by insurance.

Competition

The Group competes with numerous other companies (many of which have greater financial resources than the Group) and individuals in the search for and acquisition of hydrocarbons as well as for the recruitment and retention of its senior personnel and qualified employees.

STATEMENT OF DIRECTORS' RESPONSIBILITIES

The Directors confirm to the best of their belief that:

The condensed half year financial statements have been prepared in accordance with IAS34 as adopted by the European Union; and

The interim management report includes a fair review of the information required by the FSA Disclosure and Transparency Rules 4.2.7R and 4.2.8R. 

Financial information is published on the Group's website. The maintenance and integrity of the Group's website is the responsibility of the Directors. The Directors' responsibility also extends to the ongoing integrity of the financial statements contain therein. 

Alastair Beardsall, Chairman of the Board

Angus MacAskill, Chief Executive

Edward Grace, Finance Director

Keith Henry, Senior Non-Executive Director

Merfyn Roberts, Non-Executive Director

27 July 2009

  

CONDENSED FINANCIAL STATEMENTS

UNAUDITED GROUP STATEMENT OF COMPREHENSIVE INCOME

			Half year to 30 June	Half year to 30 June	Year to 31 December
			2009	2008	2008
			$ '000	$ '000	$ '000
Revenue from oil sales			42,027	29,592	86,041
Cost of sales
	Production costs		(7,078)	(4,872)	(12,388)
	Expensed exploration costs		(54)	(122)	(285)
	Depletion and depreciation of oil and gas assets		(9,014)	(4,048)	(12,759)
	Write-offs of unsuccessful exploration costs		(3,290)	-	(3,277)
	Impairment reversal		-	3,541	3,541
Total cost of sales			(19,436)	(5,501)	(25,168)
Gross profit			22,591	24,091	60,873
Other income/(expenses)			2,721	(33)	377
Administrative expenses
	General and administrative expenses before share-based payments		(5,553)	(4,545)	(7,926)
	Share-based payments		(547)	(128)	(242)
Total administrative expenses			(6,100)	(4,673)	(8,168)
Profit from operations before tax and finance income			19,212	19,385	53,082
Finance costs			(2,692)	(1,369)	(2,792)
Finance income			282	946	2,162
Profit before tax			16,802	18,962	52,452
Tax expense
	Current tax charge for the year		(2,159)	(3,808)	(10,358)
	Deferred tax credit/(charge) for the year		(6,100)	(2,710)	(6,449)
Total tax expense			(8,259)	(6,518)	(16,807)
Profit and total comprehensive income for the period			8,543	12,444	35,645
Basic earnings per ordinary share			$0.14	$0.21	$0.60
Diluted earnings per ordinary share			$0.13	$0.20	$0.57

  

UNAUDITED GROUP STATEMENT OF FINANCIAL POSITION

		30 June 2009	30 June 2008	31 December 2008
		$ '000	$ '000	$ '000
Non-current assets
Property, plant and equipment		109,658	80,391	89,905
Intangible assets		7,929	6,251	6,130
Deferred tax		-	-	20
		117,587	86,642	96,055
Current assets
Inventories		13,785	5,115	7,853
Trade and other receivables		27,727	6,014	14,944
Prepayments		1,239	258	408
Restricted cash collateral		255	1,109	255
Cash and cash equivalents		37,767	48,358	74,447
		80,773	60,854	97,907
Total assets		198,360	147,496	193,962
Current liabilities
Trade and other payables		8,838	4,314	17,697
Accruals		7,355	4,974	5,666
Provisions		410	410	410
Corporation tax creditor		2,798	2,482	6,829
		19,401	12,180	30,602
Non-current liabilities
Deferred tax		18,863	8,528	12,762
Debt component of convertible bonds		13,382	24,781	25,313
		32,245	33,309	38,075
Equity attributable to the shareholders
Issued share capital		10,256	9,839	9,843
Share premium		62,285	50,359	50,359
Retained earnings		72,158	36,804	60,078
Equity portion of convertible bonds		2,015	5,005	5,005
		146,714	102,007	125,285
Total liabilities and shareholders' equity		198,360	147,496	193,962

  

UNAUDITED GROUP STATEMENT OF CASH FLOWS

		Half year to 30 June 2009	Half year to 30 June 2008	Year to 31 December 2008
		$ '000	$ '000	$ '000
Cash flow from operating activities
Profit before tax		16,802	18,962	52,452
Adjusted for:
Share based payments		547	128	242
Depletion and depreciation		9,205	4,094	12,911
Write-offs of unsuccessful exploration costs		3,290	-	3,277
Impairment reversal		-	(3,541)	(3,541)
Finance income		(282)	(946)	(2,162)
Finance costs		2,692	1,369	2,792
Exchange gains		-	273	-
Disposals		14	-	143
Operating profit before changes in working capital and provisions		32,268	20,339	66,114
Movement in inventory		(5,932)	1,127	(1,612)
Movement in operating receivables		(14,217)	959	(6,487)
Movement in operating payables		(7,167)	776	9,350
Cash flow from operating activities		4,952	23,201	67,365
Profit tax paid		(6,171)	(977)	(2,705)
Net cash flow from operations		(1,219)	22,224	64,660
Cash flow from investing activities
Investment in property, plant and equipment		(34,062)	(13,637)	(29,764)
Interest received		282	673	1,382
		(33,780)	(12,964)	(28,382)
Cash flow from financing activities
Cash paid on settlement of options		-	(215)	(252)
Interest paid and banking charges		(1,681)	(856)	(1,748)
		(1,681)	(1,071)	(2,000)
Net change in cash and cash equivalents		(36,680)	8,189	34,278
Cash at period start		74,447	40,169	40,169
Period cash flow		(36,680)	8,189	34,278
Cash and cash equivalents at period end		37,767	48,358	74,447

  

UNAUDITED GROUP STATEMENT OF CHANGES IN EQUITY

GROUP:	Share capital(1)	Share premium(2)		Equity portion of convertible bonds(3)	Retained earnings (4)	Total
	$ '000	$ '000		$ '000	$ '000	$ '000
Balance at 31 December 2007	9,825	50,359		5,005	24,461	89,650
Changes in equity:
Total comprehensive income for the period	-	-		-	12,444	12,444
Issue of new share capital	14	-		-	(229)	(215)
Share based payments	-	-		-	128	128
Balance at 30 June 2008	9,839	50,359		5,005	36,804	102,007
Balance at 31 December 2007	9,825	50,359		5,005	24,461	89,650
Changes in equity:
Total comprehensive income for the period	-	-		-	35,645	35,645
Issue of new share capital	18	-		-	(18)	-
Share based payments	-	-		-	(10)	(10)
Balance at 31 December 2008	9,843	50,359		5,005	60,078	125,285
Changed in equity:
Total comprehensive income for the period	-	-		-	8,543	8,543
Issue of new share capital	413	11,926		-	-	12,339
Conversion of convertible bonds				(2,990)	2,990	-
Share based payments	-	-		-	547	547
Balance at 30 June 2009	10,256	62,285		2,015	72,158	146,714

 

The following describes the nature and purpose of each reserve within shareholders' equity:

Share capital (1)	Nominal value of amounts subscribed for share capital
Share premium (2)	Amounts subscribed for share capital in excess of nominal value
Equity portion of convertible bonds (3)	Portion of convertible bonds recognised as equity on issuance of Series A and Series B senior unsecured convertible bonds
Retained earnings (4)	Cumulative net gains and losses recognised in the income statement. Retained earnings include fair value of the share options issued under the Company's discretionary share option plan and recognised on the date of the grant as well as effects of cashless exercise and cash settlement of the exercises of share options under the Emerald Energy Plc Discretionary Share Option Scheme and cumulative effect of historical differences arising from conversion of reserves from source to reporting currency

  

NOTES TO THE FINANCIAL INFORMATION

Basis of Preparation

The Group applies International Financial Reporting Standards, endorsed by the EU, as the basis for preparation of its financial statements. These financial statements are prepared on the historical basis as modified by the requirements of IFRS to present financial assets and liabilities at their fair value, making the required adjustment through the income statement.

The financial information presented above does not constitute statutory accounts within the meaning of Isle of Man Companies Acts 1931 to 2004. This financial information has been prepared on the basis consistent with the accounting policies applied for the year ended 31 December 2008 and in accordance with the requirements of IAS 34, 'Interim Financial Reporting', except for the impact of the adoption of the Standards and Interpretations relating to IAS 1 (revised) and IFRS 8. The adoption of IAS 1 (revised) and IFRS 8 have resulted in changes to the presentation of financial information, but have not affected the recognition or measurement criteria.

Segment Information

The Group is engaged in oil and gas exploration and production activities only. As the operating businesses are organised and managed separately on a country-by-country basis, segment information is reported geographically only.

Currently, the Group and its companies are not involved in transfer pricing.

Half Year to 30 June 2009	Syria	Colombia	London Head Office	Group
	$ '000	$ '000	$ '000	$ '000
Revenue from oil sales	23,847	18,180	-	42,027
Cost of sales:
Production costs	(1,731)	(5,347)	-	(7,078)
Expensed exploration costs	(38)	-	(16)	(54)
Depletion and depreciation of oil & gas assets	(2,795)	(6,219)	-	(9,014)
Write-offs offs of unsuccessful exploration costs	-	(3,290)	-	(3,290)
Total cost of sales	(4,564)	(14,856)	(16)	(19,436)
Gross profit	19,283	3,324	(16)	22,591
Other income/(expenses)	-	2,603	118	2,721
Administrative expenses	(1,521)	(1,892)	(2,687)	(6,100)
Profit from operations before tax and finance	17,762	4,035	(2,585)	19,212
Net finance income/(costs)	24	(375)	(2,059)	(2,410)
Profit before tax	17,786	3,660	(4,644)	16,802
Tax expense	(6,696)	(1,563)	-	(8,259)
Profit/(loss) for the period	11,090	2,097	(4,644)	8,543
Total assets	73,886	95,983	28,491	198,360
Total liabilities	12,567	22,271	16,808	51,646

 

Half Year to 30 June 2008	Syria	Colombia	London Head Office	Group
	$ '000	$ '000	$ '000	$ '000
Revenue from oil sales	-	29,592	-	29,592
Cost of sales:
Production costs	-	(4,872)	-	(4,872)
Expensed exploration costs	-	(45)	(77)	(122)
Depletion and depreciation of oil & gas assets	-	(4,048)	-	(4,048)
Impairment reversal	-	3,541	-	3,541
Cost of sales	-	(5,424)	(77)	(5,501)
Gross profit	-	24,168	(77)	24,091
Other income/(expenses)	-	(33)	-	(33)
Administrative expenses	-	(1,760)	(2,913)	(4,673)
Profit from operations before tax and finance	-	22,375	(2,990)	19,385
Net finance income/(costs)	-	247	(670)	(423)
Profit before tax	-	22,622	(3,660)	18,962
Tax expense	-	(6,518)	-	(6,518)
Profit/(loss) for the period	-	16,104	(3,660)	12,444
Total assets	47,715	54,385	45,396	147,496
Total liabilities	-	17,408	28,081	45,489

 

Year to 31 December 2008	Syria	Colombia	London Head Office	Group
	$ '000	$ '000	$ '000	$ '000
Revenue from oil sales	25,478	60,563	-	86,041
Cost of sales:
Production costs	(1,257)	(11,131)	-	(12,388)
Expensed exploration costs	(33)	(63)	(189)	(285)
Depletion and depreciation of oil & gas assets	(2,364)	(10,395)	-	(12,759)
Write-offs of unsuccessful exploration costs	(992)	(2,285)	-	(3,277)
Impairment reversal	-	3,541	-	3,541
Cost of sales	(4,646)	(20,333)	(189)	(25,168)
Gross profit	20,832	40,230	(189)	60,873
Other income/(expenses)	-	377	-	377
Administrative expenses	(2,046)	(1,432)	(4,690)	(8,168)
Profit from operations before tax and finance	18,786	39,175	(4,879)	53,082
Net finance income/(costs)	(49)	53	(634)	(630)
Profit before tax	18,737	39,228	(5,513)	52,452
Tax expense	(5,353)	(11,020)	(434)	(16,807)
Profit/(loss) for the period	13,384	28,208	(5,947)	35,645
Total assets	56,190	76,250	61,522	193,962
Total liabilities	7,741	32,635	28,301	68,677

Conversion of Series B Convertible Bonds

In April, the entire outstanding principal amount of the Series B $15,000,000 4.875 per cent senior unsecured convertible bonds were converted into 2,754,229 of the Company's ordinary shares. The Company agreed to pay to the holder of the bonds, on conversion, an amount of $0.914 million equal to the interest due on the bonds in the period to 30 June 2010, the interest payment date prior to the earliest date on which the Company may have been entitled, subject to a number of conditions, to redeem the bonds.

Earnings per Ordinary Share

Basic earnings per share amounts are calculated by dividing profit for the period attributable to ordinary equity holders of the parent by the weighted average number of ordinary shares outstanding during the period.

Diluted earnings per share amounts are calculated by dividing the profit for the period attributable to ordinary equity holders of the parent by the weighted average number of ordinary shares outstanding during the year plus the weighted average number of ordinary shares that would be issued on the conversion of all the dilutive potential ordinary shares into ordinary shares.

The following reflects the income and share data used in the basic and diluted earnings per share computations:

	Half year to 30 June 2009	Half year to 30 June 2008	Year to 31 December 2008
	$ '000	$ '000	$ '000
Net profit/(loss) for the period attributable to equity holders	8,543	12,444	35,645

	Half year to 30 June 2009	Half year to 30 June 2008	Year to 31 December 2008
Basic weighted average number of shares	60,828,599	59,599,549	59,641,920
Dilutive potential ordinary shares:
Shares to be issued on conversion of convertible bonds*	940,624	143,526	723,496
Employee share options	2,890,656	2,142,968	2,264,365
Diluted weighted average number of shares	64,659,879	61,886,043	62,629,781

(*) Series A bonds are convertible into 2,564,282 ordinary shares of the Company at 290 pence per share. Series B bonds, convertible into 2,754,229 ordinary shares of the Company at 270 pence per share, were fully converted into the Company's ordinary shares in April 2009.

There have been no other transactions involving ordinary shares or potential ordinary shares between the reporting date and completion of these financial statements.

Dividends

No dividend was declared in the reporting period (2008: Nil).

Auditors' Review

This half-yearly financial report has not been reviewed by the Group's auditors, BDO Stoy Hayward LLP.

Approval of Half-Yearly Financial Report

This unaudited half-yearly financial report was approved by Directors on 26 July 2009.

Subsequent Events

There were no material subsequent events between 30 June 2009 and the date of this document other than disclosed in this document.

  

DEALING DISCLOSURE REQUIREMENTS 

Under the provisions of Rule 8.3 of the City Code on Takeovers and Mergers (the "Code"), if any person is, or becomes, 'interested' (directly or indirectly) in 1% or more of any class of 'relevant securities' of the Company, all 'dealings' in any 'relevant securities' of the Company (including by means of an option in respect of, or a derivative referenced to, any such 'relevant securities') must be publicly disclosed by no later than 3.30pm (London time) on the London business day following the date of the relevant transaction. This requirement will continue until the date on which any offer becomes, or is declared, unconditional as to acceptances, lapses or is otherwise withdrawn or on which the 'offer period' otherwise ends. If two or more persons act together pursuant to an agreement or understanding, whether formal or informal, to acquire an 'interest' in 'relevant securities' of the Company, they will be deemed to be a single person for the purpose of Rule 8.3. 

Under the provisions of Rule 8.1 of the Code, all 'dealings' in 'relevant securities' of the Company by any offeror or the offeree company, or by any of their respective 'associates', must be disclosed by no later than 12.00 noon (London time) on the London business day following the date of the relevant transaction. 

A disclosure table, giving details of the companies in whose 'relevant securities' 'dealings' should be disclosed, and the number of such securities in issue, can be found on the Takeover Panel's (the "Panel") website at www.thetakeoverpanel.org.uk. 

'Interests in securities' arise, in summary, when a person has long economic exposure, whether conditional or absolute, to changes in the price of securities. In particular, a person will be treated as having an 'interest' by virtue of the ownership or control of securities, or by virtue of any option in respect of, or derivative referenced to, securities. 

Terms in quotation marks are defined in the Code, which can also be found on the Panel's website. If you are in any doubt as to whether or not you are required to disclose a 'dealing' under Rule 8 you should consult the Panel. 

ENDIR BGGDRDDDGGCL

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Related Shares:

Emerald Energy