29th Apr 2008 07:00
EUROPA OIL & GAS (HOLDINGS) PLC
INTERIM REPORTFOR THE SIX MONTHS ENDED31 JANUARY 2008Chairman's Statement
I am pleased to report significant progress during the 6 months to 31 January 2008. There has been increasing production from existing facilities, the identification of exciting drillable prospects in several areas, and the award of a key new licence in the Aquitaine Basin, onshore France.
Production volumes and an increasing oil price combined to generate revenues of ‚£1.8m in the six month period (2007 ‚£1.3m). Costs were tightly controlled and operating profit was ‚£1.0m (2007 ‚£0.4m).
In December 2007, the company relocated its headquarters to anoffice in Abingdon, Oxfordshire. Phil Greenhalgh, formerly with Whatman plc, aFTSE 250 company, joined Europa as Finance Director on 7 January 2008. Philhas excellent qualifications and substantial financial experience and wasrecruited to strengthen the financial proficiency of the Company. RoderickCorrie, possessing a financial markets background, also joined the Board as anon-executive director during the period. Phil and Roderick were bothappointed to the Board on 22 January 2008.
The Directors expect that several wells will be drilled in the coming 12 months:
- the Gravel Pits-1 well, UK onshore, where Europa's costs are
partially carried.
- the Liliechi-1 well, Romania onshore, where Europa's costs are
fully carried
- the Voitinel-1 well, Romania onshore and
- the Holmwood-1 well, UK onshore.
UK
The UK East Midlands properties continue to provide the Companywith solid oil production. The natural decline of the fields has been offsetby increasing the production from the Crosby Warren (Scunthorpe) and WestFirsby (Lincoln) Oilfields. During the period, Europa's UK assets produced adaily average of 234 barrels of oil, marginally up on the preceding 12 monthperiod. Minor amounts of gas continue to be sold in the UK.During the period, the Crosby Warren 2Y well was completed as anoil producer from a 3 metre interval. The well was put on 24 hour pump in midJanuary and thus only a small contribution from this well has been recordedduring this reporting period. Water cut has been acceptable and it is plannedto open up a further 8 metres of oil pay above the existing perforations inthe near future. This, along with work on the Crosby Warren 1 well, willfurther increase production volumes from the field over the next 6 months.
The loan over the West Firsby oilfield was discharged at the end of November 2007. The field has performed very well over the period and consequently, further production enhancement work, notably additional perforations, will be completed in 2008.
Production from the Whisby-4 well on the oilfield to the south of Lincoln has been stable and predictable.
The exploration portfolio in the UK has been enhanced with theinterpretation of seismic data acquired in 2007 in the PEDL150 licence,southwest of Lincoln. This has strengthened the case for drilling the GravelPits prospect, confirmed as a robust four-way dip-closed structure up-dip froma well with strong oil shows and situated 2km southeast of the Whisbyoilfield. A planning application to drill the Gravel Pits-1 well has beenlodged with Lincolnshire County Council.
An environmental assessment report on the planned Holmwood-1 exploration well in Surrey has been recently updated and is nearing completion. A planning application is scheduled to be submitted to in the coming months.
Romania
During the period, Europa participated in the drilling of theBoistea-1 well, situated in the EIII-3 Cuejdui licence. The well encountered agas-bearing Sarmatian sandstone unit which was subsequently tested and flowedgas on test at a final sustained rate of 10mcm/d (350 mcfpd) after an 8 hourflowing period before being shut-in for an extended period for build-upanalysis. Operational problems both before and during this test have led touncertainties in the interpretation of the test. From wireline loginformation, the formation was expected to flow at higher rates. Thediscrepancy is due primarily to wellbore damage resulting from the well havingto be killed following perforating. The other factor is low permeability, butthe presence of kill fluids in and around the wellbore are likely to have hada significant negative effect on flow rates.Consequently, Europa has expressed its support for an acid wash andhydraulic frac treatment (`frac') to obtain access to virgin formation for asubsequent flow test. The Operator will advise partners of when this frac cantake place and we will report the results in due course.It is anticipated that the Voitinel-1 well, located on the VoitinelProspect in the EIII-1 Brodina licence, will spud in the later part of 2008.New seismic data acquired in 2007 has been integrated into the interpretationwhich has confirmed the integrity of this large four-way dip-closed prospect,having multiple targets in the Tertiary molasse and platform sequences.
Europa completed the drilling of the Costisa-2 well in the EPI-3 Brates licence in September 2007. The well was tested and flowed gas at unsustainable rates. Europa is currently discussing the option to fracture stimulate or plug and abandon the well.
Europa participated in a 200km 2D seismic acquisition survey overthe western and central parts of the EPI-3 licence. This seismic programme wasdesigned to evaluate the extension of the Moinesti Oilfields (typical fieldsizes of between 30 and 50 million barrels of recoverable oil) into thelicence area and identify a drilling location for 2009. A six month extensionof the current phase of the licence has been obtained to allow for thisdrilling decision to be made by November 2008.
France
The period saw a second onshore French permit awarded to Europa,covering an area of 470km2 north of the city of Tarbes in the Aquitaine Basin.The Tarbes Val d'Adour permit, issued in January 2008, is for a four yearinitial term. Several oilfields have been exploited in the surrounding areaand the permit area contains two known fields: Osmets and Jacque. These oilproducing fields were shut-in in 1986 when oil prices were exceptionally low.An initial review of the data indicates that the Osmets-2 well contains up to9 metres of proven undeveloped oil pay above existing perforations. Workcontinues on the evaluation of the two oilfields, with a view to possiblefield re-development.
This evaluation highlighted the deep gas discovery in the Bĩarn des Gaves Permit, also in the Aquitaine Basin. This discovery, made near the Berenx wells in 1975, was not tested at the time due to the very high pressures encountered. Work will focus on attracting a partner with the necessary expertise to test this discovery.
Other Areas
In Egypt, Europa has commenced operations from a new Cairo office and anticipates a significant exploration push later in 2008.
Europa is marketing its Ukraine business for a possible sale.
Exploration interests in Western Sahara continue to await a political resolution.
Finance
The group completed its preparations to adopt International Financial Reporting Standards (IFRS) in the period and provided reconciliations for the year to 31 July 2007 in an announcement dated 22 April 2008.
On 19 November 2007 Europa issued ‚£100,000 of new share capital to the Headstart Group of funds under the 1 June 2006 share finance facility.
A deferred tax asset held in Europa Oil & Gas (Holdings) of ‚£205,000 was considered as not recoverable in the near term and has been derecognised in the period.
For the calculation of the depletion charge within cost of sales, the group adopted the findings of the reserves report issued by Energy Resource Consultants Limited dated 31 July 2007.
Outlook
We look forward to building on the work of the past six months, notably in drilling up to 4 exploration wells in the coming 12 months and undertaking field rehabilitation work designed to further increase the Company's revenue stream into 2009.
Sir Michael OliverChairmanEuropa Oil & Gas (Holdings) plc28 April 2008 Table of LicencesCountry Project Equity Operator StatusUK Crosby Warren Oilfield 100% Europa Production, well work plannedUK West Firsby Oilfield 100% Europa Production, well work plannedUK PEDL143 (Holmwood) 40% Europa Exploration, Holmwood-1 well planned 2009UK PEDL150 (SW Lincoln area) 50%* Europa Exploration, Gravel Pits-1 well planned 2008UK UKCS 109/5 & 112/30 50% Europa Exploration, 1.6tcf prospectUK Whisby Oilfield 65% BPEL Production from W4 well (W4 only)Romania Brates Block East 80% MND Costisa-2 AppraisalRomania Brodina Block 28.75% Aurelian Exploration, Voitinel-1 well planned 2008Romania Brates Block West 20% MND Exploration, drill/drop decision pendingRomania Cuejdiu Block 17.5%* Aurelian Boistea-1 reservoir stimulation plannedRomania Bacau Block 19%* Aurelian Liliechi-1 well planned 2008, fully carriedUkraine Horodok Gasfield 70% Europa Pilot
production phase France Bĩarn des Gaves + Tarbes val d'Adour 100% Europa Exploration, new awards,possible field redevelopment Egypt West Darag Onshore
60%* Europa
Exploration
W. Sahara Bir Lehlou & Hagounia Blocks 100% Europa Exploration Poland Blocks 434, 435
2.5% roy Medusa/RWE Further drilling planned
* subject to various contractual arrangements
Nexia Smith & Williamson
Independent Review Report To Europa Oil & Gas (Holdings) Plc
Introduction
We have been engaged by the Company to review the condensed set of financial statements in the half-yearly report for the six months ended 31 January 2008 which comprises a consolidated income statement, consolidated balance sheet, consolidated statement of changes in equity, consolidated interim cashflow statement and related notes 1 to 7.
We have read the other information contained in the half-yearly report and considered whether it contains any apparent misstatements or material inconsistencies with the financial information in the condensed set of financial statements.
This report is made solely to the Company in accordance with theterms of our engagement to assist the Company in meeting the requirements ofthe AIM Rule 18. Our review has been undertaken so that we might state to theCompany those matters we are required to state to it in this report and for noother purpose. To the fullest extent permitted by law, we do not accept orassume responsibility to anyone other than the Company for our review work,for this report or for the conclusions we have reached.
Directors' responsibilities
The half-yearly report is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the half-yearly report in accordance with AIM Rule 18.
As disclosed in the notes to the financial statements, the annual financial statements of the group are prepared in accordance with IFRS as adopted by the European Union. It is the responsibility of the directors to ensure that the condensed set of financial statements included in this half-yearly report have been prepared on a basis consistent with that which will be adopted in the Group's annual financial statements.
Our responsibility
Our responsibility is to express to the Company a conclusion on the condensed set of financial statements in the half-yearly report based on our review.
Scope of reviewWe conducted our review in accordance with International Standardon Review Engagements (UK and Ireland) 2410 "Review of Interim FinancialInformation Performed by the Independent Auditor of the Entity" issued by theAuditing Practices Board for use in the United Kingdom. A review of interimfinancial information consists of making enquiries, primarily of personsresponsible for financial and accounting matters, and applying analytical andother review procedures.
A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to
obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly we do not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly report for the six months ended 31 January 2008 is not prepared, in all material respects, in accordance with the requirements of the AIM rules.
Nexia Smith & Williamson 25 Moorgate
Chartered Accountants London
Registered Auditors EC2R 6AY
Date: 28 April 2008
The maintenance and integrity of the Europa Oil & Gas (Holdings) Plc web siteis the responsibility of the directors; the work carried out by the auditorsdoes not involve consideration of these matters and, accordingly, the auditorsaccept no responsibility for any changes that may have occurred to theaccounts since they were initially presented on the web site.Legislation in the United Kingdom governing the preparation anddissemination of financial information may differ from legislation in otherjurisdictions.Consolidated income statement Unaudited Unaudited Year to 6 months 6 months 31 July to 31 January 2008 to 31 January 2007 2007 ‚£000 ‚£000 ‚£000Continuing operations Revenue 1,793 1,256 2,504Cost of sales (673) (722) (3,032) ----- ----- -----Gross profit/(loss) 1,120 534 (528)Administrative expenses (170) (158) (418)Other operating expenses - (18) (79) ----- ----- -----Operating profit/(loss) 950 358 (1,025) Finance income 10 85 148Finance expense (80) (122) (388) ----- ----- -----Profit /(loss) before tax 880 321 (1,265)Income tax expense (762) (234) (408) ----- ----- -----Profit/(loss) for the period fromcontinuing operations 118 87 (1,673) Discontinued operations Profit/(loss) for the period fromdiscontinued operations - 34 (558) ----- ----- -----Profit/(loss) for the period 118 121 (2,231) === === ===
Earnings/(loss) per share (pence):
From continuing operationsBasic and diluted earnings/(loss) pershare 0.19 0.14 (2.71) === === ===From discontinued operationsBasic and diluted earnings/(loss) pershare - 0.06
(0.91)
=== ===
===
From continuing and discontinuedoperationsBasic and diluted earnings/(loss) pershare 0.19 0.20 (3.62) === === === Consolidated balance sheet Unaudited Unaudited 31 January 31 January 31 July 2008 2007 2007 ‚£000 ‚£000 ‚£000ASSETSNon-current assetsIntangible assets 6,470 5,153 4,514Property, plant and equipment 5,457 5,758 4,693 ----- ----- ----- 11,927 10,911 9,207 ----- ----- -----Current assetsInventories 20 39 36Trade and other receivables 727 753 2,003Current tax asset - - 73Cash and cash equivalents 45 354 630 ----- ----- ----- 792 1,146 2,742 ----- ----- -----Total assets 12,719 12,057 11,949 ----- ----- -----LIABILITIESCurrent liabilitiesTrade and other payables (2,222) (397) (2,865)Current tax payable (167) (538) -Short-term borrowings (1,353) (257) (533) ----- ----- ----- (3,742) (1,192) (3,398) ----- ----- -----Non-current liabilitiesLong-term borrowings (310) (630) (316)Deferred tax liabilities (2,081) (1,301) (1,847)Long-term provisions (448) (649) (438) ----- ----- -----Total non-current liabilities (2,839) (2,580) (2,601) ----- ----- -----Total liabilities (6,581) (3,772) (5,999) ----- ----- -----Net assets 6,138 8,285 5,950 === === ===EQUITYShare capital 626 620 620Share premium 4,691 4,597 4,597Merger reserve 2,868 2,868 2,868Retained earnings (2,047) 200 (2,135) ----- ----- -----Total equity 6,138 8,285 5,950 === === ===
Consolidated statement of changes in equity (unaudited)
Share Share Merger Retained Total capital premium reserve earnings equity ‚£000 ‚£000 ‚£000 ‚£000 ‚£000 Balance at 1 August 2006 611 4,406 2,868 50 7,935Changes in equity for first halfof 2006/7Exchange difference on translation offoreign operations - - - 16 16 ----- ----- ----- ----- -----Net income recognised directly in equity - - - 16 16 Profit for the period - - - 121 121 ----- ----- ----- ----- -----Total recognised income and expensefor the period - - - 137 137 Share based payments - - - 13 13Issue of share capital 9 191 - - 200 ----- ----- ----- ----- -----Balance at 31 January 2007 620 4,597 2,868 200 8,285 === === === === ===Balance at 1 August 2006 611 4,406 2,868 50 7,935Changes in equity for yearExchange difference ontranslation of foreign operations - - - 5 5 ----- ----- ----- ----- -----Net income recognised directly in equity - - - 5 5 Loss for the year - - - (2,231) (2,231) ----- ----- ----- ----- -----Total recognised income and expensefor the year - - - (2,226) (2,226) Share based payments - - - 41 41Issue of share capital 9 191 - - 200 ----- ----- ----- ----- -----Balance at 31 July 2007 620 4,597 2,868 (2,135) 5,950
Consolidated statement of changes in equity (unaudited) - continued
Share Share Merger Retained Total capital premium reserve earnings equity ‚£000 ‚£000 ‚£000 ‚£000 ‚£000 Balance at 1 August 2007 620 4,597 2,868 (2,135) 5,950Changes in equity for firsthalfof 2007/8Exchange difference on translation offoreign operations - - - - - ----- ----- ----- ----- -----Net income recognised directly in equity - - - - Profit for the period - - - 118 118 ----- ----- ----- ----- -----Total recognised income and expense for the period - - - 118 136 Share based payments - - - (30) (30)Issue of share capital 6 94 - - 100 ----- ----- ----- ----- -----Balance at 31 January 2008 626 4,691 2,868 (2,047) 6,138 === === === === ===
Consolidated interim cash flow statement
Unaudited Unaudited 6 months 6 months to 31 to 31 Year to January January 31 July 2008 2007 2007 ‚£000 ‚£000 ‚£000
Cash flows from operating activities
Profit/(loss) after taxation 118 121 (2,231)Adjustments for:Share based payments (30) 13 41Depreciation including exploration andappraisal write off 266 595
2,587
(Profit)/loss on sale of fixed assets 10 -
594Finance income (9) (87) (150)Finance expense 67 127 395Taxation expense recognised in income statement 762 234
408
Decrease / (increase) in inventories 16 (22)
(20)
Decrease / (increase) in trade andother receivables 276 (94)
(598)
(Decrease) / increase in trade and other payables (202) 25
851
----- -----
-----
Cash generated from operations 1,274 912
1,877Interest paid (50) (55) (252)Income taxes paid (300) - (90) ----- ----- -----
Net cash from operating activities 924 857
1,535
----- -----
-----
Cash flows from investing activities
Purchase of property, plant and equipment (3,423) (922)
(2,700)
Proceeds from sale of property, plant and equipment 1,009 - 1,000Interest received 10 4 14 ----- ----- -----
Net cash used in investing activities (2,404) (918)
(1,686)
----- -----
-----
Cash flows from financing activities
Proceeds from issue of share capital 100 200
200
Underwriting and due diligence fee (5) -
(10)
Proceeds from long-term borrowings - 460
790Repayment of borrowings (47) (393) (828) ----- ----- -----
Net cash from financing activities 48 267
152
----- -----
-----
Net (decrease)/increase in cash and cashequivalents (1,432) 206
1
Exchange loss on movement of cashand cash equivalents (11) -
-
Cash and cash equivalents at beginningof period 149 148 148 ----- ----- -----Cash and cash equivalents at end ofperiod (1,294) 354 149 === === ===
Notes to the consolidated interim statement
1 Nature of operations and general information
Europa Oil & Gas (Holdings) plc ("Europa Oil & Gas") and subsidiaries' ("the Group") principal activities consist of investment in oil and gas exploration, development and production.
Europa Oil & Gas is the Group's ultimate parent company. It isincorporated and domiciled in Great Britain. The address of Europa Oil & Gas'sregistered office head office is 11 The Chambers, Vineyard, Abingdon,Oxfordshire OX14 3PX. Europa Oil & Gas's shares are listed on the AlternativeInvestment Market of the London Stock Exchange.
The Group's consolidated interim financial information is presented in Pounds Sterling (‚£), which is also the functional currency of the parent company.
The consolidated interim financial information has been approved for issue by the Board of Directors on 28 April 2008.
The financial information set out in this interim report does notconstitute statutory accounts as defined in Section 240 of the Companies Act1985. The Group's statutory financial statements for the year ended 31 July2007, prepared under UK GAAP, have been filed with the Registrar of Companies.The auditor's report on those financial statements was unqualified and did notcontain a statement under Section 237(2) of the Companies Act 1985.
2 Summary of significant accounting policies
This interim financial information has been prepared by applying the IFRS-compliant accounting policies published on the group's website, www.europaoil.com.
3 Basis of preparation
The interim consolidated financial information is for the sixmonths ended 31 January 2008 and has been prepared following the recognitionand measurement principles of IFRS because they are part of the period coveredby the Group's first IFRS financial statements for the year ending 31 July2008. The standard IAS34 Interim Financial Reporting has not been applied asthis is only mandatory for fully listed entities.The interim financial information does not include all of theinformation required for full annual financial statements, and should be readin conjunction with the consolidated financial statements of the Group for theyear ended 31 July 2007. The information has been prepared on the goingconcern basis and under the historical cost convention.
The consolidated interim financial information has been prepared in accordance with the accounting policies referred to above which are based on the recognition and measurement principles of IFRS in issue as adopted by the European Union (EU) and are effective or are expected to be adopted and effective at 31 July 2008, our first annual reporting date at which we are required to use IFRS accounting standards as adopted by the EU.
Europa Oil & Gas's audited consolidated financial statements wereprepared in accordance with United Kingdom Accounting Standards (UnitedKingdom Generally Accepted Accounting Practice) until 31 July 2007. The dateof transition to IFRS was 1 August 2006. The comparative figures in respect of2007 have been restated to reflect changes in accounting policies as a resultof adoption of IFRS. The disclosures required by IFRS 1 concerning thetransition from UK GAAP to IFRS are given in the reconciliation schedulespublished on the group's website.
The accounting policies have been applied consistently throughout the Group for the purposes of preparation of the consolidated interim financial information.
4 Share capital
At each reported period end, the company's authorised sharecapital amounted to ‚£1,500,000 represented by 150,000,000 ordinary shares of1p each. At 31 January 2008, allotted, called up and fully paid share capitalwas ‚£625,637, being 62,563,730 ordinary shares of 1p each.
All the authorised and allotted shares are of the same class and rank pari passu.
5 Earnings per share
The calculation of the basic earnings per share is based on the earnings attributable to ordinary shareholders divided by the weighted average number of shares in issue during the period.
The calculation of diluted earnings per share is based on the basicearnings per share, adjusted to allow for the issue of shares and the post taxeffect of dividends and/or interest, on the assumed conversion of all dilutiveoptions and warrants and other dilutive potential ordinary shares.
During each reported period the company's average share price was lower than the exercise price of the share options in issue. Therefore the share options in issue have no dilutive effect and there is no difference between the basic and diluted earnings per share.
The calculation of the basic and diluted earnings/(loss) per share is based onthe following:Earnings/(losses) 6 months to 6 months to Year to 31 January 31 January 31 July 2008 2007 2007 ‚£000 ‚£000 ‚£000Earnings/(losses) for the purposesof basic earnings/(loss) per share 118 121 (2,231) === === ===Number of shares 6 months to 6 months to Year to 31 31 31 July January 2008 January 2007 2007Weighted average number of ordinaryshares for the purposes of basicand dilutedearnings/(loss) per share 62,239,253 61,396,334 61,709,613 ==== ==== ====Discontinued operationsThe discontinued operations basic and diluted loss per share has beencalculated using: 6 months to 6 months to Year to 31 January 31 January 31 July 2008 2007 2007 ‚£000 ‚£000 ‚£000Earnings/(losses) for the purposesof basicearnings/(losses) per share - 34 (558) === === ===Continuing operationsThe continuing operations basic and diluted earnings / (loss) per share hasbeen calculated using: 6 months to 6 months to Year to 31 January 31 January 31 July 2008 2007 2007 ‚£000 ‚£000 ‚£000Profits / (losses) for the purposesof basicearnings / (losses) per share 118 87 (1,673) === === ===
6 Dividends
No dividends have been paid to equity shareholders during the periods covered by the interim financial information.
7 Post Balance Sheet Events
On 7 March 2008 the company received a loan of Euro 650,000 fromThe Sherborne Trust, a discretionary trust of which Mr CW Ahlefeldt-Laurvig isa beneficiary. Mr Ahlefeldt-Laurvig is a director of the company. The loan isexpected to be repaid in the third quarter of 2008.
On 2 April 2008 the Sherborne Trust loan was assigned to Mr CW Ahlefeldt-Laurvig and Mrs M Ahlefeldt-Laurvig.
EUROPA OIL & GAS (HOLDINGS) PLCRelated Shares:
Europa Oil & Gas