7th Apr 2010 07:00
Interim Report
EUROPA OIL & GAS (HOLDINGS) plc
For the six months ended 31 January 2010
Chairman's Statement
The six month period from 31 July 2009 saw a combination of exploration successand portfolio consolidation. The Company now holds production, appraisal andexploration assets in three core EU countries: UK, Romania and France.Exploration successes came in the UK and Romania, where oil was encountered inthe Hykeham-1 exploration well and gas tested from the Voitinel-1 well.Portfolio consolidation came primarily with the relinquishment of the EgyptianWest Darag concession and the development of a more focused strategy for theCompany's European core assets in the near to medium term.Production revenues from the UK fields led to a profit before explorationwrite-offs and tax of £0.2 million. In September 2009 the Company issued12,500,000 shares at 14p and raised £1.7 million. The shares were placed withnew and existing investors and represented 16.6% of the Company's enlargedshare capital. Europa participated in the drilling of the Voitinel-1exploration well during the later part of 2009. This Romanian well encounteredgas-bearing Miocene sands in a large structural closure. In February 2010, theoperator, Aurelian, announced the potential for up to 400 billion cubic feet(bcf) of gas in place in the Voitinel trend, this being 115 bcf net to Europa.
At the other geographical extremity of the EU, Europa drilled the Hykeham-1 exploration well in November 2009. Situated near the city of Lincoln in the UK, the well encountered a 4m oil-bearing sand and the well was cased ready for perforating and an extended well test. To date only small volumes have been produced, incompatible with the geological data and so the well is being shut-in until a decision has been made on the type of remedial action required.
The Company relinquished its interest in the West Darag concession, onshore Egypt. The decision, driven by the lack of identified drill-ready prospects needed to commit to phase 2 of the concession, resulted in a write-off of the £ 0.7 million investment in Egypt. The Directors recognised this was an opportunity to concentrate on maturing the Company's core European assets.
As a consequence, the Company has a very active programme of work on itsEuropean licences in 2010. Production enhancement work at West Firsby and workover of the Crosby Warren-2 well will be undertaken in April with a view to significantly increasing well productivity. Immediately following on from this work will be the re-test and frac of Voitinel, which has been delayed by the persistent winter conditions on-site.
Further out into 2010, a re-mapping of the Berenx gas discovery, using a 3D seismic volume recently made available, will commence. In-house estimates of potential gas-in-place at Berenx, which is 20km along trend from the 8.7 trillion cubic feet (tcf) Lacq gasfield, are up to 1.7 tcf.
The coming six months will see significant progress on the UK productionprojects with a target production stream of 500 bopd from the East Midlands bylate 2010. In Romania and France, as described below, the Company holds largegas resource potential which it is hoped can be booked into the pre-developmentcontingent category during the year. The booking of a substantial ContingentResource asset and creating stronger production revenues are the two keyvalue-enhancing drivers for the shareholders in 2010.Michael OliverChairman, 6 April 2010Operations ReportEuropa's business strategy is based on developing a Eurocentric portfolio ofonshore exploration and production assets. These assets are designed to form abalanced Company, with revenue-generating production, value-generatingdevelopment and exploration projects with the potential to transform theCompany's reserve base.
Production (reserves)
Europa's revenue is generated from three oilfields in the UK East Midlands.These fields - West Firsby, Whisby and Crosby Warren, provided productionvolumes in the period net to Europa of 172 bopd. This was down from the 228bopd achieved in the first half of 2009 as a result of the June 09 fire at WestFirsby. In recent weeks, with much of the facility back on stream, productionhas averaged 215 bopd. All of the Company's East Midlands oil is trucked byroad to the ConocoPhillips Immingham refinery and sold at a modest discount toBrent.
Several near-term production enhancements are planned across the East Midlands portfolio:
1. At West Firsby, facilities upgrade work is expected to be completed by May
2010.
2. At Crosby Warren, a workover on the Crosby Warren-2 well, shut-in since
2008.
3. At West Firsby, a further production well location is being planned.
The Company's target production rate for the end of 2010 is net 500 bopd.
Appraisal/Development (contingent resources)
Europa has a varied appraisal development asset base in Romania, France and theUK. At Voitinel, in northern Romania, (28.75%) a well drilled in late 2009encountered gas-bearing Miocene sands which flowed at a rate of 3mmscfpd(million standard cubic feet per day) on test. The sands are encased ingas-prone shales and a second, untested, interpreted gas-bearing zone exists inthe well. The forward plan is to both fracture stimulate the tested zone andflow-test the untested zone. This will provide further information ondevelopment well design and gas-in-place estimates, currently estimated at upto 400bcf by the Operator.In the Aquitaine region of France, Europa's B©arn des Gaves (100%) licencecontains the 1969 Berenx gas discovery, with two wells that both encounteredsignificant gas-bearing intervals at similar stratigraphic levels to the nearbyLacq Gasfield. The Lacq Gasfield has produced 8.7tcf to date and has created alarge gas gathering and processing infrastructure very local to Berenx. Currentestimates of potential gas-in-place at Berenx are 1.7tcf and the Company plansto utilise a recently re-processed 3D seismic volume from Total to moreaccurately quantify the gas resources.
A second Aquitaine licence, Tarbes val d'Adour (100%), contains three productive oil accumulations, all abandoned in 1985 in a period of very low oil prices. Osmets is the first candidate, there being excellent potential for re-development of the field with horizontal wells.
The Hykeham prospect (Europa interest 75%) is situated less than 2km from Europa's existing Whisby production in the UK. Independent log analysis indicated with high confidence that there is a 4m interval of pay in a sandstone section similar in character and quality to the productive Basal Sandstone in the Whisby Oilfield and the well was completed as a future producer. Shows while drilling and cuttings descriptions bear a strong resemblance to the Whisby oil reservoir drilling records. Live oil was indicated in the mud returns. In summary, all the geological information points to the existence of a producible Whisby-type reservoir with live oil.
The results from the flow test are clear that such a reservoir has not beenreached by the perforations. This could be a result of several factors underinvestigation, but the most likely appears to be permeability damage fromdrilling, cementing or perforating operations. Any remedial action would taketime to plan and execute and the well will be shut-in until the analysis iscomplete and a decision is made on the forward programme.
Exploration (prospective resources)
The Company holds interests in a number of pure exploration interests in the UK, Romania, France and Western Sahara along with exploration potential associated with its appraisal stage project areas.
In the UK, Europa holds significant exploration interests primarily in the East Midlands and also in the Weald Basin, both well-established oil and gas provinces. In these licences, there are four mature prospective areas:
1. Wressle Prospect (50%) - close to Crosby Warren and the undeveloped
Broughton oil discovery, this is a well-defined structural prospect and is
likely to be drilled in 2011.
2. Caistor Horst (50%) - this striking structural feature in the Humber Basin
is equidistant between Crosby Warren and the Saltfleetby Gasfield (90bcf)
and newly reprocessed 3D seismic will be utilised for defining a 2011
drilling location.
3. Holmwood Prospect (40%) - this well-defined prospect is in the latter
stages of the planning system and it is hoped permission can be obtained
for drilling in late 2010/early 2011.
4. West Whisby (75%) - this prospect rolls into the Whisby Field bounding
fault and is underlain by a large, potentially gas-prone secondary target.
The UK onshore exploration portfolio contains identified prospects with a potential for 13mmbo of reserves net to Europa and represents a relatively low-risk opportunity to build the Company's producing reserves base.
In Romania, Europa holds equity in four exploration licences:
1. Brodina (28.75%) - exploration will focus on the Voitinel-Solca trend (see
above) for the foreseeable future, though strong oil potential remains in
the thrustbelt play to the west.
2. Cuejdiu (17.5%) - exploration will concentrate on the western thrustbelt
oil play with seismic acquisition later in 2010 or early 2011.
3. Bacau (19%) - Europa elected to opt out of the Lilieci well. The decision
proved well founded as the results were a disappointment. Work will now
concentrate on the western part of the licence, close to the Moinesti
oilfield fairway.
4. Brates (20%) - a shallow well is planned to be drilled in 2010 to test the
Barchiz Prospect, a thrust structure on trend from the 50mmbo Geamana
Oilfield. Longer term the Tazlaul Mare Prospect will be investigated.
Whilst as described above, much of the effort in the French licences (100%) ison developing Berenx and Osmets, there is significant undrilled explorationpotential in both licences, which will be assessed in due course. There hasbeen almost no exploration activity in this part of the Aquitaine Basin since1985, despite the quality of the petroleum system which has generateddiscovered reserves of over 2 billion barrels of oil equivalent to date (BRGM/IFP Aquitaine Basin Study, 2006).Outside the European core area, Europa holds two concessions in Western Saharaissued by the Saharawi Arab Democratic Republic covering two highly prospectiveareas (Tindouf and Aaiun Basins). Until and unless there is a politicalsolution to the dispute with Morocco over the sovereignty of Western Sahara,these licences will remain in force majeure. However, the Directors have notedthat the putative Moroccan authorities have provocatively licensed this area inparallel to San Leon Energy, whose Competent Persons Report booked considerableprospective resources in the licences.
Reserves and resources
Current reserves and resource estimates are a combination of numbers verified by Energy Resource Consultants Limited in September 2008, adjusted for subsequent production and in-house estimates.
Reserves 1P 2P 3P Projects Oil mmbo 0.6 0.7 1.2 W. Firsby, C. Warren, Whisby Gas bcf - - - - Total mmboe 0.6 0.7 1.2 Contingent 1C 2C 3C Projects resources Oil mmbo 1.1 2.1 3.0 Osmets, Hykeham Gas bcf 7 11 131 Voitinel Base, Boistea Total mmboe 2 4 25 Prospective Low Medium High Projects resources Oil mmbo 10 16 28 Barchiz, Wressle, Holmwood Gas bcf - - - - Total mmboe 10 16 28
As of the date of this report, the Company has not booked the significant Contingent Resources that are likely to exist in the portfolio: Berenx and upside at Voitinel. It is clear that Europa holds significant Contingent Resource potential and the work described above is anticipated to boost the current numbers by up to 1,800 bcf (300 mmboe) net to Europa.
The key Contingent Resource projects of Berenx and Voitinel will be independently verified once the 2010 technical work is completed.
Licence Interests Table
Country Project Equity Operator Status UK Crosby Warren 100% Europa Production Oilfield UK West Firsby 100% Europa Production Oilfield UK Whisby Oilfield 65% BPEL Production (W4 well only) UK PEDL143 40% Europa Exploration, Holmwood-1 well planned (Weald) 2010 UK PEDL150 75% Europa Appraisal,, Hykeham-1 well testing (SW Lincoln) 2010 & Exploration West Whisby UK PEDL180 50% Europa Exploration, Wressle prospect (NE Lincs) UK PEDL181 50% Europa Exploration, Caistor Horst prospect (NE Lincs) UK PEDL222 50% Valhalla Exploration (Torksey Area) Romania EIII-1 Brodina 28.75% Aurelian Exploration, Voitinel-1 well testing Block 2010 Romania EPI-3 Brates 20% MND Exploration, Barchiz-1 well and Block Tazaul Mare prospect
Romania EIII-3 Cuejdiu 17.5% Aurelian Boistea-1 commercial feasibility
Block study Romania EIII-4 Bacau 19% Aurelian Exploration, 4 year extension secured Block
Poland Blocks 434, 435, 2.5% * RWE-Dea Watching brief on Ropa/Pola
454 and 455 development
France B©arn des Gaves 100% Europa Exploration, possible field
development France Tarbes val 100% Europa Field development, exploration d'Adour
Western Bir Lehlou Block 100% Europa Inactive - force majeure
Sahara Western Hagounia Block 100% Europa Inactive - force majeure Sahara
* Overriding royalty interest
Unaudited consolidated statement of comprehensive income
6 months 6 months Year to 31 Jan to 31 Jan to 31 Jul 2010 2009 2009 (audited) £000 £000 £000Revenue 1,405 1,700 2,936Other cost of sales (841) (828) (1,694)Exploration write off (738) (297) (297)Total cost of sales (1,579) (1,125) (1,991) -------- -------- --------Gross (loss) / profit (174) 575 945Administrative expenses (229) (334) (545)Finance income 7 436 224Finance costs (176) (113) (248) -------- -------- --------(Loss) / profit before tax (572) 564 376 Taxation (205) (248) (356) -------- -------- --------
(Loss) / profit for the period (777) 316 20
Other comprehensive income Exchange gains arising ontranslation of foreignoperations 72 58 373 -------- -------- --------Total comprehensive (loss) / income for the period attributable to the equity shareholders of the parent (705) 374 393 ======== ======== ======== Pence Pence Pence per share per share per share (Loss) / earnings per share (eps) Basic eps (1.07)p 0.51p 0.03p Diluted eps (1.07)p 0.51p 0.03p ======== ======== ========
Unaudited consolidated statement of financial position
31 Jan 31 Jan 31 Jul 2010 2009 2009 (audited) £000 £000 £000Assets Non-current assetsIntangible assets 8,966 6,908 7,473 Property, plant and equipment 5,409 5,807 5,554 -------- -------- --------Total non-current assets 14,375 12,715 13,027 -------- -------- --------Current assets Inventories 34 19 15 Trade and other receivables 727 758 469 Cash and cash equivalents 3 1 4 -------- -------- --------Total current assets 764 778 488 -------- -------- --------Total assets 15,139 13,493 13,515 ======== ======== ======== Liabilities Current liabilitiesTrade and other payables (1,924) (1,413) (900) Current tax liabilities (398) (671) (588)
Fair value through profit or loss (44) - (40)
Short-term borrowings (292) (767) (767) -------- -------- -------- Total current liabilities (2,658) (2,851) (2,295) -------- -------- -------- Non-current liabilities Long-term borrowings (762) (293) (772) Deferred tax liabilities (2,855) (2,658) (2,651) Long-term provisions (1,180) (1,098) (1,137) -------- -------- -------- Total non-current liabilities (4,797) (4,049) (4,560) -------- -------- --------Total liabilities (7,455) (6,900) (6,855) -------- -------- --------Net assets 7,684 6,593 6,660 ======== ======== ======== Capital and reserves attributable to equityholders of the parent Share capital 751 626 626 Share premium 6,260 4,692 4,692 Merger reserve 2,868 2,868 2,868 Forex reserve 424 37 352 Retained earnings (2,619) (1,630) (1,878) -------- -------- --------Total equity 7,684 6,593 6,660 ======== ======== ========
Unaudited consolidated statement of changes in equity
Share Share Merger Forex Retained Total capital premium reserve reserve earnings equity £000 £000 £000 £000 £000 £000 UnauditedBalance at 1 August 2008 626 4,692 2,868 (21) (1,994) 6,171 Total comprehensive income for the period - - - 58 316 374 Share based payments - - - - 48 48 ------- ------- ------- ------- ------- -------Balance at 31 January 2009 626 4,692 2,868 37 (1,630) 6,593 ======= ======= ======= ======= ======= ======= Audited Balance at 1 August 2008 626 4,692 2,868 (21) (1,994) 6,171 Total comprehensive income for the year - - - 373 20 393 Share based payments - - - - 96 96 ------- ------- ------- ------- ------- -------Balance at 31 July 2009 626 4,692 2,868 352 (1,878) 6,660 ======= ======= ======= ======= ======= ======= Unaudited Balance at 1 August 2009 626 4,692 2,868 352 (1,878) 6,660 Total comprehensive income / (loss) for the period - - - 72 (777) (705) Share based payments - - - - 36 36 Issue of share capital (net of issue costs) 125 1,568 - - - 1,693 ------- ------- ------- ------- ------- -------Balance at 31 January 2010 751 6,260 2,868 424 (2,619) 7,684 ======= ======= ======= ======= ======= =======
Unaudited consolidated statement of cash flows
6 months 6 months Year to 31 Jan to 31 Jan to 31 Jul 2010 2009 2009 (audited) £000 £000 £000
Cash flows from operating activities
(Loss)/ profit after tax (777) 316 20 Adjustments for: Share based payments 36 48 96 Depreciation 233 291 576 Exploration write-off 738 297 297 Finance income (7) (436) (224) Finance expense 176 113 248 Taxation expense 205 248 356 (Increase) /decrease in trade and other receivables (233) (43) 187 (Increase) /decrease in inventories (19) (3) 1 Increase in trade and other payables 55 166 34 -------- -------- --------
Cash generated from operations 407 997 1,591 Income taxes paid (190) - (180) -------- -------- --------Net cash from operating activities 217 997 1,411 ======== ======== ========
Cash flows from investing activities
Purchase of property, plant & equipment (67) (178) (191) Purchase of intangible assets (1,307) (235) (930) -------- -------- -------- Net cash used in investing activities (1,374) (413) (1,121) ======== ======== ========
Cash flows from financing activities
Proceeds from issue of share capital (net of issue costs) 1,693 - - Proceeds from long term borrowings - - 1,000 Repayment of borrowings (260) (520) (585) Interest paid (62) (98) (138) -------- -------- -------- Net cash from / (used in)financing activities 1,371 (618) 277 ======== ======== ======== Net increase / (decrease)in cash and cash equivalents 214 (34) 567 Exchange gain on cash and cash equivalents 9 303 160 Cash and cash equivalents at beginning of period (292) (1,019) (1,019) -------- -------- -------- Cash and cash equivalents at endof period (69) (750) (292) ======== ======== ========
Notes to the consolidated interim statement
1 Nature of operations and general information
Europa Oil & Gas (Holdings) plc ("Europa Oil & Gas") and subsidiaries' ("theGroup") principal activities consist of investment in oil and gas exploration,development and production.Europa Oil & Gas is the Group's ultimate parent Company. It is incorporated anddomiciled in England and Wales. The address of Europa Oil & Gas's registeredoffice head office is 11 The Chambers, Vineyard, Abingdon, Oxfordshire OX143PX. Europa Oil & Gas's shares are listed on the Alternative Investment Marketof 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 6 April 2010.
The condensed interim financial information for the period 1 August 2009 to 31January 2010 is unaudited. In the opinion of the Directors the condensedinterim financial information for the period presents fairly the financialposition, and results from operations and cash flows for the period inconformity with the generally accepted accounting principles consistentlyapplied. The condensed interim financial information incorporates unauditedcomparative figures for the interim period 1 August 2008 to 31 January 2009 andthe audited financial year to 31 July 2009.The financial information contained in this interim report does not constitutestatutory accounts as defined by section 435 of the Companies Act 2006. Thereport should be read in conjunction with the consolidated financial statementsof the Group for the year ended 31 July 2009.
The comparatives for the full year ended 31 July 2009 are not the Company's full statutory accounts for that year. A copy of the statutory accounts for that year has been delivered to the Registrar of Companies. The auditors' report on those accounts was unqualified, did not include references to any matters to which the auditors drew attention by way of emphasis without qualifying their report and did not contain a statement under section 498 (2) - (3) of the Companies Act 2006.
The information has been prepared on the going concern basis.
2 Summary of significant accounting policies
The condensed interim financial information has been prepared using policiesbased on International Financial Reporting Standards (IFRS and IFRICinterpretations) issued by the International Accounting Standards Board("IASB") as adopted for use in the EU. The condensed interim financialinformation has been prepared using the accounting policies which will beapplied in the Group's statutory financial information for the year ended 31July 2010. This results in the adoption of the revision to IAS 1, whichincludes the requirement to present a Statement of Changes in Equity as aprimary statement and introduces the possibility of either a single Statementof Comprehensive Income (combining the Income Statement and a Statement ofComprehensive Income) or to retain the Income Statement with a supplementaryStatement of Comprehensive Income. The first option has been adopted by EuropaOil and Gas. As this standard is concerned with presentation only it does nothave any impact on the results or net assets of the Group. In addition IFRS 8"Segmental reporting" will affect the disclosure notes of the financialstatements for the full year.
3 Share capital
At each reporting period end, the Company's authorised share capital amounted to £1,500,000 represented by 150,000,000 ordinary shares of 1p each.
At 31 January 2009 and 31 July 2009 the Company's issued share capital was £625,637 being 62,563,730 ordinary shares of 1p. No new shares were issued inthe 6 months to 31 January 2009 or in the 12 months to 31 July 2009. On 10September 2009 the Company issued 12,500,000 shares at 14p, raising (net ofbroker commission) £1,693,000.
At 31 January 2010, allotted, called up and fully paid share capital was £ 750,637 being 75,063,730 ordinary shares of 1p each. All the authorised and allotted shares are of the same class and rank pari passu.
4 Earnings per share (eps)
Basic earnings per share has been calculated on the (loss) / profit aftertaxation divided by the weighted average number of shares in issue during theperiod. Diluted earnings per share uses an average number of shares adjusted toallow for the issue of shares, on the assumed conversion of all in the moneyoptions and warrants.As the inclusion of the potential ordinary shares would result in a decrease inthe loss per share in the current period they are considered not to be dilutiveand, as such, the diluted loss per share calculation is the same as the basicloss per share in the period to 31 January 2010. The Company's average shareprice for the six months to 31 January 2009, and for the twelve months to 31July 2009 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 nodifference between the basic and diluted earnings per share.The calculation of the basic and diluted (loss)/earnings per share is based onthe following: 6 months 6 months Year to 31 Jan to 31 Jan to 31 Jul 2010 2009 2009 (audited) £000 £000 £000(Losses) / earnings
(Loss) / profit after taxation (777) 316
20 Number of shares
Weighted average number of ordinary shares for the purposes of basic eps 72,346,339 62,563,730 62,563,730
Weighted average number of ordinary shares for the purposes of diluted eps 72,346,339 62,563,730 62,563,730
5 Discontinued Operations
The anticipated sale of the remaining Ukraine asset has not completed. As it isnot material to the Group, the cost of maintaining the asset has been includedin Administrative Expenses and the comparative periods have been re-presentedfor consistency.
For further information, please contact:
Paul Barrett, Europa +44 7971 528 754Jonathan Wright, Seymour Pierce +44 20 7107 8050
EUROPA OIL & GAS (HOLDINGS) PLCRelated Shares:
Europa Oil & Gas