22nd Sep 2008 07:00
Embargoed for release: 0700 on 22 September 2008
Northern Petroleum Plc ("Northern", "the Group" or "the Company") Interim Results for the Six Months Ended 30 June 2008 Financial highlights: Six months ended Six months ended 30 June 2008 30 June 2007 ‚£'000 ‚£'000 (Unaudited) (Unaudited) Revenue 2,214 1,182 Profit before taxation 807 8,514 Profit for the period 1,001 7,414 Basic earnings per share on profit for the 1.41p 10.54pperiod Diluted earnings per share on profit for the 1.31p 9.65pperiod Cash and cash equivalents 24,877
24,678
Deferred consideration (Dyas Strategic 6,353 8,862Alliance) Net assets 43,399 31,708 Total Group distributable reserves 17,354 8,793 Production* 65,000 86,000 Average revenue, in currency of receipt, per attributable boe: Gas ¢â€š¬40.66 ¢â€š¬33.90 Oil $103.94 $57.03 Net Commercial Oil & Gas Reserve Quantities 76.48
50.03
- Proven and Probable reserves (million boe)
* includes attributable H1 2007 production from P12 gas field for comparison purposes
Operational highlights:
* Rig secured for three well programmestarting Q1 2009to drill two
exploration wells-Nieuwendijk (56 to 83 million barrel oil prospect,
Northern 22.5%)and Tiendeveen (67 to 98 bcf gas prospect, Northern 22.5%)-
plus drill a production development well in the Papekop oil field ( containing probable recoverable reserves of 39.4 bcf of gas and 12.2 million barrels of oil, Northern 45%); * Four Dutch gas discoveries now to be developed as gas fields, not e-gen developments;
* Critical long lead items for all six oil and gas field developments have
been ordered and tenders are being reviewed for non critical long lead
items, with production to commence in 2009;
* Independent resource evaluationof six of the Company's drilling prospects
in the Adriatic Sea, with the combined potential of the prospects assessed
at2.29 billion barrels of oil in place at a P50 probability, rising to a
potential of 6.03 billion barrels at a P10 probability(Northern 50%);
* Northern's first operated well in Italy expected to be drilled in Q1 2009
on the Savio licence (mean estimate of 220 bcf of gas in place, Northern
50%), on trend to the recent Abbadesse gas discovery; negotiations are
ongoing with potential new partners in both onshore and offshore licences;
* Markwells Wood-1 (mean estimate of 27.5 million barrels of oil in place,
Northern 50%) expected to be drilled in early 2009; long term production
from Avington expected to commence before the end of 2008; and
* The Company is working on plans to drill 10 wells across the portfolio in
the next 18 months. Second half outlook:
* Expected completion of the sale of interests in underground gas storage
projects to Star Energy Group Plc realising ‚£7 million in cash with up to ‚£
3m of contingent consideration; and * Sales price received for existing Dutch gas production to increase significantly.
Richard Latham, Chairman, summarised:
"We feel sufficiently well placed to have confidence that we will achieve ourobjectives of building up between 2009 and 2013 to 6,000 bopd production in TheNetherlands from our existing discoveries, and have an exciting explorationfuture funded predominantly by that production."
For further information please contact:
Northern Petroleum Plc Tel: +44 (0) 20 7469 2900
Richard Latham, Chairman
Derek Musgrove, Managing Director
Chris Foss, Finance Director
Graham Heard, Exploration & Technical Director
Bishopsgate Communications Limited (Press) Tel: +44 (0) 20 7562 3350
Nick Rome / Maxine Barnes
Buchanan Communications Limited (Analysts) Tel: +44 (0) 20 7466 5000
Tim Thompson / Ben RomneyNotes to Editors:
Northern has recoverable Proven and Probable reserves of 76.5 million barrels of oil equivalence.
It is the Netherland's second largest onshore oil company in terms of oil andgas reserves, 45.5 million boe recoverable. It is currently producing gas atWaalwijk and the offshore P12 fields. The planned development of six onshoreoil and gas fields is being progressed through the Netherlands authorisationand planning processes. Partners in these projects include Dyas B.V. and EBN.NPN is progressing an enhanced condensate recovery project at Waalwijk, whereit is felt that ultimate recovery of petroleum liquids can be economicallyincreased.The Company holds and manages the largest licensed exploration area in Italy,over 13,000 km‚², predominantly offshore but includes seven licences in the PoValley oil and gas province in the north of the country where the drilling ofthe Savio 220 bcf gas prospect is being progressed. Through its holdings inlicences in the southern Adriatic covering the Rovesti and Giove oildiscoveries it has net Probable oil reserves independently assessed at 26.6million barrels recoverable.Northern has an excellent record of trading assets to enhance shareholdervalue. In 2007 two separate transactions with Dyas B.V. yielded a reportedprofit of ‚£19.7 million and in July 2008 the Company reached agreement to sellits interests in an underground gas storage project application for ‚£7 millionwith further contingent payments totalling ‚£3 million.Northern has a strong balance sheet and net cash and receivables position andis currently debt free. Drawdowns under a project finance facility approved bythe credit committee of Standard Bank Plc to finance 65% of NPN's oil and gasfield developments in The Netherlands are expected to commence in early 2009.
Further information on Northern is available at www.northpet.com.
CHAIRMAN'S STATEMENT
I am pleased to report a half year profit of ‚£1 million. This does not includethe sale announced during July of our position in an underground storageapplication for a consideration of up to ‚£10 million to a subsidiary of thePetronas Group. As Dutch gas prices are closely linked to movements in oilprices, but with a six month lag, we will achieve a better price for ourproduct in the second half. Profit and healthy cash flow has been realised fromproduction at the onshore Waalwijk gas field, over which we took control ofoperations in August 2007 and the offshore P12 gas field. Operationalimprovements at Waalwijk have maintained gas production at rates higher thanforecast and with improvements in gas prices field life has consequently beenextended. Prudent management of our cash position has also contributed to ourprofitability.I am pleased that we have demonstrated our operational abilities in improvingperformance at Waalwijk during this period of making progress through thelengthy planning consent processes in The Netherlands following the transferand issuing of production licenses. Putting into production our 45.5 millionboe recoverable reserves, the second largest of any company operating onshorein The Netherlands, from six oil and gas fields is key to the Company's future.Progress continues towards first production from our developments in 2009. Inaddition two exploration wells, Nieuwendijk and Tiendeveen, are planned for thefirst quarter of 2009, targeting 56 million barrels oil in place and 67 bcf gasin place respectively and for which a rig has been secured.Our activities will now take place against a much deteriorated and lessfavourable climate in the financial sector. I would therefore direct yourattention away from the increasingly more volatile and therefore less usefulIFRS dictated income statement and highlight our strong balance sheet. Ourhealthy net cash and receivables position will, together with a facility fromStandard Bank of up to ¢â€š¬40 million, suffice to build the facilities forestablishing production and cash flow in the Netherlands. This will sustain amuch higher future activity level for the Group including an ongoingexploration programme which in Italy in particular is likely to be assistedthrough farmouts to new partners.Northern has the largest licensed exploration holding by area in Italy and theportfolio of undeveloped discoveries and exploration prospects is of hugepotential. The licence position gives exploration potential for gas in the PoValley where the Savio well is awaiting final environmental approvals beforethe drilling of this 220 Bcf gas in place prospect. Northern continues to worktowards drilling wells on prospects within the Cerasa and Longastrino licenceswhich are interpreted as appraising existing gas discoveries. In the southernAdriatic the interpreted exploration potential of the acreage continues toimprove as the evaluation advances towards augmenting the 2P reserves of 53.23million barrels (26.61 million net to Northern) established at the Rovesti andGiove fields. The very significant exploration potential of the offshore Sicilyacreage will be further advanced with additional 2D seismic acquisition plannedfor this winter.In the UK plans for a well at Markwells Wood to appraise an interpretedextension of the Horndean field are well advanced with drilling expected earlyin 2009. At Avington consent from central government has been given fordevelopment of the field and production is expected to commence before the yearend. Production from Horndean has continued with a negligible decline andrevenues have significantly increased meaning minimal change in the lastreported 2P reserves position of 4.49 million barrels.Your company has prudently built and preserved a strong balance sheet and cashposition. Whilst concerned as most with the crisis in the financial worldaround us, we feel sufficiently well placed to have confidence that we willachieve our objectives of building up between 2009 and 2013 to 6,000 bopdproduction in The Netherlands from our existing discoveries, and have anexciting exploration future funded predominantly by that production. We have astrong management, technical and operational team with which to fulfil our welllaid plans and to overcome both the unprecedented turbulence within thefinancial markets and the extreme volatility in the prices of our products.Shareholders should feel assured by the fact that most of our existing assetbase was in place by 2005 based on the prevailing economics, a time when oiland gas prices were much lower than they are today.R H R LathamChairman
Consolidated Income Statement For the six months ended 30 June 2008
6 months 6 months Year ended ended ended 30 June 30 June 31 December 2008 2007 2007 (Unaudited) (Unaudited, (Audited) restated) Notes ‚£'000 ‚£'000 ‚£'000 Revenue 2,214 1,182 4,086 Production costs (647) (273) (1,381) Depreciation, depletion and (942) (672) (2,299)amortisation Cost of sales (1,589) (945) (3,680) Gross profit 625 237 406
Administrative expenses - other (1,495) (972)
(2,777)
Administrative expenses - share (685) (786)
(648)incentives
Administrative expenses - total (2,180) (1,758)
(3,425) Other operating income 44 78 534 Profit on disposal of assets 2 - 9,536 19,730
Deemed profit on disposal of associate - 19
102
(Loss) / profit from operations (1,511) 8,112
17,347 Finance income 3 2,380 464 2,173
Share of operating loss in associates (62) (62)
(111) Profit before taxation 807 8,514 19,409 Income tax credit / (expense) 194 (1,100) (4,467)
Net profit for the financial period 1,001 7,414
14,942
Basic earnings per share on profit for 4 1.41p 10.54p
21.21pthe period
Diluted earnings per share on profit for 4 1.31p 9.65p
19.73p
the period
All amounts relate to continuing activities and are attributable to equity shareholders of the parent.
Consolidated Balance Sheet at 30 June 2008
At 30 June At 30 June At 31 December 2008 2007 2007 (Unaudited) (Unaudited, (Audited) restated) Notes ‚£'000 ‚£'000 ‚£'000 Assets Non-current assets Intangible assets 8,399 7,131 7,460 Property, plant and 5 7,866 7,241 7,855equipment Investments in associates 59 87 121 Loans and other 2,788 5,793 5,499receivables 19,112 20,252 20,935 Current assets Inventories 38 27 73 Trade and other 12,422 7,627 10,604receivables Cash and cash equivalents 24,877 24,678 22,179
Non-current assets classified 6 25 -
-as held for sale 37,362 32,332 32,856 Total assets 56,474 52,584 53,791 Liabilities Non-current liabilities Trade and other payables 67 58 38 Provisions 5,032 1,845 4,660 Deferred tax liability 2,704 - 4,155 7,803 1,903 8,853 Current liabilities Trade and other payables 3,091 4,118 3,382 Corporation tax liability 2,181 1,100 590 Payment in advance - 13,755 - 5,272 18,973 3,972 Total liabilities 13,075 20,876 12,825 Net assets 43,399 31,708 40,966 Capital and reserves Share capital 3,545 3,525 3,540 Share premium 18,931 18,684 18,923 Special reserves 7 3,721 3,721 3,721 Share incentive plan 1,114 523 795reserve Foreign currency 2,333 61 1,242translation reserve Retained earnings 13,755 5,194 12,745 Total equity 43,399 31,708 40,966
All amounts are attributable to equity shareholders of the parent.
Consolidated Cash Flow Statementfor the six months ended 30 June 2008
6 months 6 months Year ended ended ended 30 June 30 June 31 December 2008 2007 2007 (Unaudited) (Unaudited, (Audited) restated) ‚£'000 ‚£'000 ‚£'000
Cash flows from operating activities
Profit before taxation 807 8,514 19,409 Depreciation, depletion and amortisation 942 672
2,246
Depreciation - non oil and gas tangible 77 34
79assets Profit on disposal of property, plant - - (10,876)and equipment
Unwinding of fair value discount (361) -
- Foreign exchange gain (1,560) (16) (1,394) Finance income (459) (377) (779) Share based payments 328 249 544
Expenses settled by issue of shares - -
44
Share of operating loss in associate 62 62
111
Deemed profit on disposal of associate - (19)
(102)
Net cash (outflow) / inflow before changes in (164) 9,119 9,282working capital
Decrease / (increase) in inventories 35 -
(46)
Decrease / (increase) in trade and other 3,200 (10,352) (12,068)receivables
(Decrease) / increase in trade and other (565) 14,550
67payables 2,670 4,198 (12,047) Net cash inflow / (outflow) from 2,506 13,317 (2,765)operating activities
Cash flows from investing activities
Interest received 459 377 779 Purchase of property, plant and (489) (4,113) (3,156)equipment Sale of property, plant and equipment - -
11,681
Expenditure on exploration and (626) (561) (687)evaluation assets Loan to associated company - (500) (750) Net cash (outflow) / inflow used in (656) (4,797) 7,867investing activities
Cash flows from financing activities Proceeds from the exercise of warrants 13 169
379
Net cash inflow from financing 13 169
379activities Net increase in cash and cash 1,863 8,689 5,481equivalents Cash and cash equivalents at start of 22,179 15,954 15,954period Exchange movement 835 35 744 Cash and cash equivalents at end of 24,877 24,678 22,179period
There have been no significant non-cash transactions during the period.
Consolidated Statement of Changes in Equity for the six months ended 30 June2008 Share Share p Special Share Foreign Retained remium incentive currency plan translation capital account reserves reserve reserve earnings Total ‚£'000 ‚£'000 ‚£'000 ‚£'000 ‚£'000 ‚£'000 ‚£'000 At 1 January 2007 3,511 18,529 3,721 295 42 (2,241) 23,857(audited) Exchange differences - - - - 19 - 19on translation of foreign operations Net income - - - - 19 - 19recognised directly in equity Profit for the - - - - - 7,414 7,414period Total recognised - - - - 19 7,414 7,433income for the period Issue of shares 14 155 - - - - 169during the period Equity share - - - (21) - 21 -warrants issued Charge for share based - - - 249 - - 249payments At 30 June 2007 3,525 18,684 3,721 523 61 5,194 31,708(unaudited) Exchange differences - - - - 1,181 - 1,181on translation of foreign operations Net income - - - - 1,181 - 1,181recognised directly in equity Profit for the - - - - - 7,528 7,528period Total recognised - - - - 1,181 7,528 8,709income for the period Issue of shares 15 239 - - - - 254during the period Equity share - - - (23) - 23 -warrants issued Charge for share based - - - 295 - - 295payments At 31 December 2007 3,540 18,923 3,721 795 1,242 12,745 40,966(audited) Exchange differences - - - - 1,091 - 1,091on translation of foreign operations Net income - - - - 1,091 - 1,091recognised directly in equity Profit for the - - - - - 1,001 1,001period Total recognised - - - - 1,091 1,001 2,092income for the period Issue of shares 5 8 - - - - 13during the period Equity share - - - (9) - 9 -warrants issued Charge for share based - - - 328 - - 328payments At 30 June 2008 3,545 18,931 3,721 1,114 2,333 13,755 43,399(unaudited)
All amounts are attributable to equity shareholders of the parent.
Notes to the Interim Results for the six months ended 30 June 2008
1. BASIS OF PREPARATION
This unaudited consolidated interim financial information has been preparedusing the recognition and measurement principles of International AccountingStandards, International Financial Reporting Standards and Interpretationsadopted for use in the European Union (collectively EU IFRSs). The principalaccounting policies used in preparing the interim results are unchanged fromthose disclosed in the Group's Annual Report for the year ended 31 December2007. These statutory accounts are available on the Company's website (www.northpet.com) or by application to the Company's registered office.The financial information for the six months ended 30 June 2008 and 30 June2007 is unreviewed and unaudited and does not constitute the groups statutoryfinancial statements for those periods. The comparative financial informationfor the full year ended 31 December 2007 has, however, been derived from thestatutory financial statement for that period. A copy of those statutoryfinancial statements has been delivered to the Registrar of Companies. Theauditors' report on those accounts was unqualified, did not include referencesto any matters to which the auditors drew attention by way of emphasis withoutqualifying their report and did not contain a statement under section 237(2)-(3) of the Companies Act 1985.
Restatement of Comparatives
Certain amounts within the Consolidated Income Statement and Consolidated CashFlow Statement for the six months ended 30 June 2007 have been reclassifiedwhere necessary to ensure that their classifications are consistent with thoseused in the Group's Annual Report for the year ended 31 December 2007.
2. PROFIT ON DISPOSAL OF ASSETS
6 months 6 months Year ended ended ended 30 June 30 June 31 December 2008 2007 2007 (Unaudited) (Unaudited) (Audited) ‚£'000 ‚£'000 ‚£'000 Disposal of property, plant - - 10,876and equipment Disposal of proprietary - 9,536 8,854knowledge Total profit on disposal of - 9,536 19,730assets 3. FINANCE INCOME 6 months 6 months Year ended ended ended 30 June 30 June 31 December 2008 2007 2007 (Unaudited) (Unaudited) (Audited) ‚£'000 ‚£'000 ‚£'000 Interest receivable 459 377 779 Foreign exchange gains 1,560 87 1,394 Unwinding of fair value 361 - -discount 2,380 464 2,173
The profit on disposal of proprietary knowledge of ‚£8,854,000 reported for theyear ended 31 December 2007 was less than the accounting profit as ¢â€š¬8.5 millionof the consideration was due after 31 December 2008 and therefore in accordancewith IFRS 7, Financial Instruments, a fair value discount of ‚£734,000 wasapplied to the receivable and the reported profit on disposal. Disclosures withrespect to IFRS 7 and its impact on financial statements can be seen in notes1, 15 and 25 of the Group's Annual Report for the year ended 31 December 2007.As at 30 June 2008 only ¢â€š¬4 million of the consideration was due after more thanone year and therefore ‚£361,000 of the fair value discount of ‚£734,000 has beenreleased back to the profit and loss account.
4. EARNINGS PER 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 year.
Diluted earnings per share amounts are calculated by dividing profit for theperiod attributable to ordinary equity holders of the parent by the weightedaverage number of ordinary shares outstanding during the year, plus theweighted average number of shares that would be issued on the conversion ofdilutive potential ordinary shares into ordinary shares. The calculation of thedilutive potential ordinary shares related to employee and director shareoption plans includes only those warrants with exercise prices below theaverage share trading price for each period. 6 months ended 6 months Year ended ended 30 June 30 June 31 December 2008 2007 2007 ‚£'000 ‚£'000 ‚£'000 (Unaudited) (Unaudited) (Audited) Net profit attributable to equity holders 1,001 7,414 14,942used in basic calculation Net profit attributable to equity holders 1,001 7,414 14,942used in dilutive calculation Basic weighted average 70,843,482 70,308,210 70,453,273number of shares Dilutive potential of ordinary shares: Warrants exercisable under 5,415,311 6,509,141 5,270,000Company schemes Diluted weighted average 76,258,793 76,817,351 75,723,273number of shares
The calculation of the diluted EPS assumes all criteria giving rise to the dilution of the EPS are achieved and all outstanding share options that in are in money at period end are exercised.
5. PROPERTY, PLANT AND EQUIPMENT
6 months 6 months Year ended ended ended 30 June 30 June 31 December 2008 2007 2007 (Unaudited) (Unaudited) (Audited) ‚£'000 ‚£'000 ‚£'000 Oil and gas assets 7,412 7,102 7,344 Computer and office equipment 454 139 511 7,866 7,241 7,855
6. NON-CURRENT ASSETS CLASSIFIED AS HELD FOR SALE
6 months 6 months Year ended ended ended 30 June 30 June 31 December 2008 2007 2007 (Unaudited) (Unaudited) (Audited) ‚£'000 ‚£'000 ‚£'000 25 - -On 14 July the Group announced the sale of its entire interests in the Waalwijkunderground gas storage ("UGS") projects to Star Energy Group Plc ("Star"), asubsidiary of Petronas International Corporation Limited, for an initial cashconsideration of ‚£7 million with further contingent consideration totalling ‚£3million. Northern's share of UGS costs as at 30 June 2008 are included above.
The sale of the two subsidiary companies does not constitute a discontinued operation as the revenue and profit generated from the UGS project in each of the above periods was ‚£Nil and ‚£Nil respectively.
As at the date of these interim results legal completion of the disposal of the subsidiaries remained outstanding, but the directors are confident that the sale will be completed in the not too distant future.
7. SPECIAL RESERVES 6 months 6 months Year ended ended ended 30 June 30 June 31 December 2008 2007 2007 ‚£'000 ‚£'000 ‚£'000 (Unaudited) (Unaudited) (Audited) Special reserve - 3,599 3,599 3,599Distributable Special reserve - 122 122 122Undistributable 3,721 3,721 3,7218. APPROVAL BY DIRECTORS
The interim report for the six months to 30 June 2008 was approved by the Directors on 19 September 2008.
9. AVAILABILITY OF INTERIM REPORT
The interim report will be made available in electronic format on the Company'swebsite, www.northpet.com, and will be posted to registered shareholders.Further copies will be available on request by application to the CompanySecretary at the Company's registered office being Martin House, 5 Martin Lane,London, EC4R 0DP.
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