30th Sep 2005 07:01
Gulf Keystone Petroleum Ld30 September 2005 FOR IMMEDIATE RELEASE 30 SEPTEMBER 2005 GULF KEYSTONE PETROLEUM LIMITED INTERIM RESULTS FOR THE SIX MONTHS ENDED 30 JUNE 2005 Gulf Keystone Petroleum Limited ("Gulf Keystone" or the "Company"), theindependent oil & gas exploration company operating in the Republic of Algeria,today announced its interim results for the period ending 30 June 2005. Highlights • Award of 8 new exploration and appraisal blocks in Algeria • Presidential Decrees approving contracts on 6 of the new blocks • Much improved test results on GKS-2 after a successful workover • Successful completion of contractual commitments on Block 126a • Cash balance of $79m as at 30 June 2005 • Loss per share down to 1.15c from 2.5c • First time adoption of IFRS in line with best practice Todd Kozel, CEO of Gulf Keystone said: "Gulf Keystone has made significant operational progress. We were successful inbeing awarded new acreage in Algeria and have already had the majority of thenew contracts ratified. Our excellent test results on block 126a are a majorstep towards moving the GKS structure into commercial production." Enquiries Gulf Keystone Petroleum: 020 7514 1400Todd Kozel, CEOCaroline Brown, CFO Evolution Securities: 020 7071 4300Rob Collins Citigate Dewe Rogerson: 020 7638 9571Media: Martin Jackson / Rachel LankesterAnalysts: Nina Soon or visit: www.gulfkeystone.comGulf Keystone Petroleum LimitedChairman's Statement The first half of 2005 has seen further significant growth and development ofthe Company. We have successfully acquired eight new exploration and appraisalblocks in Algeria and the contracts on six of these blocks have already beenapproved by Presidential Decree. We have completed our contractual commitmentson block 126a and successful new test results from this block have moved the GKSstructure closer to commercial production. Following its flotation on AIM in September 2004, Gulf Keystone has nowestablished a UK service company based in London. The Company has also chosento adopt International Financial Reporting Standards early in line with alllisted companies in the EU and with best practice. New Blocks 129, 108/128 and HBH In April 2005, Gulf Keystone expanded its acreage position in Algeria byacquiring the exploration and appraisal rights to eight additional blocks inAlgeria upon signing three new contracts with the Algerian Ministry of Energyand Mines. The new contracts cover the Bottena (Block 129), Ben Guecha (Block108 and 128b) and Hassi Ba Hamou Perimeters (Blocks 317b1, 322b3, 347b, 348 and349b, collectively HBH). Gulf Keystone will have the benefit of the existingdiscoveries on these blocks and will actively pursue the perceived explorationupside of all the new blocks. Significantly, these contracts are for blocksthat third party estimates indicate may have the potential of an additional 2.5billion barrels of oil equivalent in place. Two of the new contracts, for six new blocks comprising the Hassi Ba HammouPerimeter and the Bottena Perimeter, have now been approved by PresidentialDecrees. Gulf Keystone is currently developing and preparing to implement a newwork programme to appraise and explore its new blocks. Progress on existing Block 126a During the first half of 2005, Gulf Keystone successfully completed itscontractual commitments on block 126a with the acquisition of 600km of seismicdata and the drilling of one additional exploration well, RTBW-1. RTBW-1 wasunsuccessful in terms of discovering commercial quantities of hydrocarbons andhas been abandoned. During the period, the Company also successfullysidetracked its GKS-3 well and submitted an application for a production licencefor GKN and a provisional exploitation authority to produce from GKS. This month, a Halliburton snubbing unit completed a successful test on the GKS-2well which was discovered by SONATRACH in 1994. Initial testing for productionat GKS-2 by SONATRACH at that time showed maximum flow rates of 2,737 bopd and2,241 mcfd. A workover of the well by Gulf Keystone was necessary tore-complete the well because it was temporarily abandoned. Gulf Keystoneconducted flow tests over a three day period from perforations over the Turonianand Cenomanian reservoirs, at intervals between 3,685 meters and 3,794 meters.Production testing of the well resulted in a measured flow rate of 4,586 barrelsof oil per day and 4.61 million cubic feet of gas per day at a flowing wellheadpressure of 1,774 pounds per square inch through a 40/64 inch choke. TheHalliburton snubbing unit has now moved from GKS-2 to the Company's GKS-3discovery well, a distance of 1 kilometre, for acid stimulation, testing, andcompletion of the pay zone. Finally, Gulf Keystone has now successfully spudded the GRJ-2 appraisal andexploration well. Drilling is currently at almost 2,000m and the well isexpected to complete at 3,300m. Results for the six months ended 30 June 2005 The results for the period have been prepared under International FinancialReporting Standards ("IFRS") for the first time and all numbers presented forcomparative periods are also under IFRS. The largest impact of the adoption ofIFRS on the financial results is the inclusion of an expense calculated on thebasis of the fair value of employee share options, amounting to a charge of$108,000 against the 2004 year end income statement. The full financialeffects of these changes on the previously reported results are contained in thedetailed financial section of this Interim Statement. In the six months ended 30 June 2005, general and administration costs were$4.1m compared with $2.2m for the same period last year. This was due to thehigher level of drilling and operating activity, set up and maintenance costsfor the UK subsidiary and its London office, and the expense of share optiongrants made since flotation. After interest receivable of $1.2m (-), the lossfor the half year was $2.9m ($2.2m). The loss per share was reduced to 1.15c(2.5c) reflecting the increased number of shares outstanding for the period. Intangible assets have increased to $44.3m ($30.2m) due to the Company'sprogramme of drilling, testing and evaluation on the existing block 126a. Netassets have increased significantly to $125.0m from ($29.7m as at 30 June 2004),principally due to the proceeds of £60m raised at the time of flotation toprovide working capital. Net cash has declined over the period by $10.6m($4.0m) and as at 30 June 2005 cash balances totalled $79.3m ($2.9m as at 30June 2004). Outlook I believe that Gulf Keystone is well positioned to exploit its strategy as anindependent exploration and production company operating in Algeria bycontinuing to grow its proven and probable reserves by a programme of drilling,testing and evaluation. Concurrent with our planned exploration and appraisal activities, we will beendeavouring to pursue partnership opportunities with new and existing operatorsin Algeria and elsewhere in North Africa and the Middle East. Roger Parsons Non-executive Chairman 29 September 2005 Consolidated Income Statement 6 months ended 6 months ended 12 months ended 30 June 2005 30 June 2004 31 December 2004 Restated Restated $000 $000 $000 NoteRevenue - - -Operating expensesGeneral and administration costs (4,071) (2,246) (5,669)Operating Loss (4,071) (2,246) (5,669) Interest receivable 1,161 - 1,928Loss before taxation (2,910) (2,246) (3,741)Taxation 3 - - -Loss for the period (2,910) (2,246) (3,741) Loss per share (cents) 4 Basic (1.15) (2.5) (2.71) Diluted (1.15) (2.5) (2.71) Note: The operating loss for the period arises from the Group's continuingoperations. Consolidated Balance Sheet 6 months ended 6 months ended 12 months ended 30 June 2005 30 June 2004 31 December 2004 Restated Restated $000 $000 $000 Non-current assetsIntangible assets 44,321 30,180 38,973Property, plant and equipment 761 43 80Total non-current assets 45,082 30,223 39,053 Current assetsInventory 3,208 448 2,485Trade and other receivables 1,076 64 425Cash and cash equivalents 79,322 2,931 89,882Total current assets 83,606 3,443 92,792Total assets 128,688 33,666 131,845 Current liabilitiesTrade and other payables (3,648) (3,925) (4,068) Total liabilities (3,648) (3,925) (4,068)Net assets 125,040 29,741 127,777 EquityShare capital 1,638 37,564 1,626Share premium 135,349 - 135,349Other reserve 297 - 120Exchange translation reserve (16) -Retained deficiency (12,228) (7,823) (9,318)Total equity 125,040 29,741 127,777 Consolidated Cash Flow Statement 6 months ended 6 months ended 12 months ended 30 June 2005 30 June 2004 31 December 2004 Restated Restated $000 $000 $000Cashflows from operating activitiesLoss for the period (4,071) (2,246) (5,669)Depreciation 54 6 12(Increase)/decrease in inventories (723) - (1,616)(Increase)/decrease in trade and other (651) 421 (361)receivables(Decrease)/increase in trade and other payables (420) (7,509) 311(Decrease)/increase currency revaluation (16) - -(Decrease)/increase share option charge 189 - 108Interest receivable 1,161 - 1,928Net cash outflow from operating activities (4,477) (9,328) (5,287) Cashflows from Investing activitiesPurchase of property, plant and equipment (708) - (43)Purchase of intangible assets (5,375) (7,787) (24,257)Net cash outflow from investing activities (6,083) (7,787) (24,300) Cashflows from financing activitiesProceeds from the issue of share capital - 13,071 112,494Net cash generated from financing activities - 13,071 112,494 Net (decrease)/increase in cash and cash (10,560) (4,044) 82,907equivalentsCash and cash equivalents at start of period 89,882 6,975 6,975 Cash and cash equivalents at end of period 79,322 2,931 89,882 Consolidated Statement of Changes in Shareholders' Equity Share Share Other Cumulative Retained Total capital premium reserve translation deficit equity adjustment $'000 $'000 $'000 $'000 $'000 $'000 Balance at 1 January 2004 24,493 - - - (5,577) 18,916 Loss for the period - - - - (2,246) (2,246)Preferential shares 13,072 - - - - 13,072Balance at 30 June 2004 37,565 - - - (7,823) 29,742 Loss for the period - - - - (1,495) (1,495)Share conversion and issue (35,939) 135,349 - - - 99,410Warrants issued - - 12 - - 12Employee share options scheme - - 108 - - 108 Balance at 31 December 2004 1,626 135,349 120 - (9,318) 127,777 Loss for the period - - - - (2,910) (2,910)Employee share option scheme - - 189 - - 189Exercise of warrants 12 - (12) - - -Currency translation adjustments - - - (16) - (16)Balance at 30 June 2005 1,638 135,349 297 (16) (12,228) 125,040 Notes to the interim accounts 1. General Information Gulf Keystone Petroleum Limited (the "Company") was incorporated and registeredin Bermuda on 29 october 2001 as an exempted company limited by shares with thename Gulf Keystone Petroleum Algeria, Ltd. It changed its name to Gulf KeystonePetroleum Limited on 20 May 2004. The common shares of the Company were listedon AIM, a market operated by the London Stock Exchange, on 8 September 2004.The Company maintains its registered office in Bermuda. These consolidated interim financial statements of Gulf Keystone PetroleumLimited for the six months ended 30 June 2005, comprise the Company and itssubsidiary (together the "Group"). The interim report was authorised for issueby the directors on 29 September 2005. The financial statements are unauditedbut have been reviewed by Baker Tilly and their report is set out below. 2. Principal Accounting Policies of the Group This interim financial information has been prepared on the basis of therecognition and measurement requirements of IFRS's in issue that either areendorsed by the EU and effective (or available for early adoption) at 30 June2005 or are expected to be endorsed and effective (or available for earlyadoption) at 31 December 2005, the Group's first annual reporting under IFRS.Based on these adopted and unadopted IFRS, the directors have made assumptionsabout the accounting policies expected to be applied, which are as set outbelow, when the first annual IFRS financial statements are prepared for the yearending 31 December 2005. The adopted IFRS that will be effective (or available for early adoption) in theannual financial statements for the year ending 31 December 2005 are stillsubject to change and to additional interpretations and therefore cannot bedetermined with certainty. Accordingly, the accounting policies for the annualperiod will be determined finally only when the annual financial statements areprepared for the year ending 31 December 2005. BASIS OF PREPARATION From January 1 2005, the Group has adopted International Financial ReportingStandards ("IFRS") and the IFIRC interpretations in the preparation of itsconsolidated financial statements. The financial statements have been preparedunder the historical cost basis. Information on the impact on accountingpolicies and financial results resulting from the conversion from UK GenerallyAccepted Accounting Practice ("UK GAAP") to IFRS is provided later in thisreport. The comparative figures for the financial year ended 31 December 2004 are basedon the audited financial statements for that year, adjusted for the effects ofIFRS. Those accounts, which were prepared under UK GAAP, have been reported onby the Company's auditors. The report of the auditors was unqualified. The financial information is presented in US dollars being the functionalcurrency of the Group because it is the currency of the primary economicenvironment in which the Group operates. Operations denominated in othercurrencies are included in this financial information in accordance with thepolicies set out below. BASIS OF CONSOLIDATION The consolidated financial information incorporates the financial information ofthe Company and the entities controlled by the Company (its subsidiaries).Control is achieved where the Company has the power to govern the financial andoperating policies of an investee entity so as to obtain benefits from itsactivities, and generally assumes a shareholding of more than one half of thevoting rights. Subsidiaries are fully consolidated from the date at whichcontrol is transferred to the Group and are de-consolidated from the date onwhich control ceases. The Group uses the purchase method of accounting toaccount for the acquisition of subsidiaries. FOREIGN CURRENCIES Assets and liabilities in foreign currencies are translated into US dollars atthe rates of exchange ruling at the balance sheet date. Transactions in foreigncurrencies are translated into US dollars at the rate of exchange ruling at thedate of the transaction. Exchange differences arising are taken to theconsolidated income statement for the period. The assets and liabilities of foreign operations are translated to US dollars atforeign exchange rates at the balance sheet date. The revenues and expenses offoreign operations are translated to US dollars at rates approximating theforeign exchange rates ruling at the date of the transactions. Foreign exchangedifferences arise on retranslation and are recognised directly in thetranslation reserve. SHARE BASED PAYMENTS The Group has applied the requirements of IFRS 2 to share option schemesallowing certain employees within the Group to acquire shares of the company.For all grants of share options, the fair value as at the date of grant iscalculated using an appropriate option pricing model and the correspondingexpense is recognised over the expected life of the option. Intangible and Tangible NON-CURRENT ASSETS - Oil and Gas Interests It should be noted that guidance on certain aspects of full cost accounting hasnot yet been provided by the IASB or IFRIC and the timing and outcome of suchguidance is uncertain. Consequently, the Group has continued to apply UK GAAPfull cost accounting policies that were in effect immediately prior to theGroup's transition to IFRS, subject to changes in accounting policy specificallyrequired under IFRS 6. Accordingly, amendments may be required to theaccounting policies set out in future periods. Under full cost accounting all costs relating to the exploration for anddevelopment of oil and gas interests, whether productive or not, are accumulatedand capitalised as non-current assets. These costs, which are initiallyclassified as intangible non-current assets, are only carried forward to theextent that they are expected to be recouped through the successful developmentof an area or where activities in an area have not yet reached a stage whichpermits reasonable assessment of the existence of economically recoverablereserves. Costs dealt with in this way include seismic data, licence acquisition costs,technical work, exploration and appraisal drilling, general technical supportand a proportion of directly attributable administrative and overhead costs. Costs are transferred to depreciable pools within tangible non-current assets ineach regional cost pool upon declaration of commerciality or upon cessation ofexploration on each license and amortised over the life of the area according tothe rate of depletion of the economically recoverable costs. Any proceedsarising from the sale or farm-out of assets are deducted from the relevant costpool. Depreciation and depletion of costs in depreciable pools is provided under theunit of production method which uses the estimated commercial reserves in thecost pool and the sum of the total costs in the pool and any further anticipatedcosts to develop such reserves. At the end of each year, an assessment is made as to whether the economic valueof interests is in excess of costs capitalised as intangible assets. Anyimpairment is transferred to depreciable regional cost pools within tangiblenon-current assets and depreciated. Where a project is terminated, which isascertained on a country basis, the related exploration costs are written offimmediately. PROPERTY, PLANT AND EQUIPMENT OTHER THAN OIL AND GAS ASSETS Other property, plant and equipment is stated at historical cost. Depreciation is provided on all other property, plant and equipment at ratescalculated to write each asset down to its estimated residual value evenly overits expected useful life as follows:- Furniture and equipment - 20% straight line INTANGIBLE ASSETS OTHER THAN OIL AND GAS ASSETS Intangible assets, other than oil and gas assets, have finite useful lives andare measured at cost and amortised over their expected useful economic lives asfollows:- Computer software - 33% straight line LEASES Rental payable under operating leases is charged to the income statement on astraight line basis over the lease term. INVENTORY Stock relates to materials acquired for the use in exploration activities.These are valued at the lower of cost and net realisable value. TAXATION Bermuda and Algeria currently impose no taxes on corporate income or capitalgains. FINANCIAL INSTRUMENTS The company's financial instruments comprise cash together with various itemssuch as other debtors and trade creditors etc, that arise directly from itsoperations, are not interest bearing and are stated at their nominal value. Themain purpose of these financial instruments is to provide working capital. 3. Taxation Under current laws in Bermuda and Algeria, the Group is not required to paytaxes on either income or capital gains. 4. Loss per share Loss per share have been calculated in accordance with IAS 33 Earnings pershare, by dividing the loss attributable to shareholders by the weighted averagenumber of shares in issue during the financial period. The calculation of basicand diluted loss per share is based on the following losses and number ofshares: 6 months to 6 months to 12 months to 31 30 June 2005 30 June 2004 December 2004 Loss for the financial period ($'000) 2,910 2,246 3,741Weighted average number of shares 253,388,732 90,000,000 138,101,277Basic and diluted loss per share (cents) 1.15 2.50 2.71 5. Explanation of transition to IFRS As required by IFRS 1, the impact of the transition from UK GAAP to IFRS isexplained below. The accounting policies set out above have been applied consistently to allperiods presented in this interim financial information and in preparing anopening IFRS balance sheet at 1 January 2004 for the purposes of the transitionto IFRS. IAS 1 - Presentation of Financial Statements. The form and presentation of theUK GAAP financial statements has been changed to be in compliance with IAS 1. IFRS 2 - Share Based Payments. Under IFRS 2, share awards will be measured atfair value at grant date and recognised as an expense to the income statementover the expected term. The fair value of the incentives granted is measuredusing a stochastic model. The impact of this standard on the financialstatements of the Group is a $108,000 charge to the year ended 31 December 2004income statement and an equivalent increase in shareholder's funds. There is noimpact to the period ended 30 June 2004. IAS 7 - Cash Flow Statements. The IFRS Cash Flow Statement, prepared under IAS7, presents cash flows in three categories; cash flows from operatingactivities, cash flows from investing activities and cash flows from financingactivities. Other than the reclassification of cash flow into the newdisclosure categories, there are no significant differences between the Group'sCash Flow Statement under UK GAAP and IFRS. Consequently, no cash flowreconciliations are provided. Purchases of tangible fixed assets under UK GAAPhave been reclassified to purchases of intangible assets and purchases ofproperty, plant and equipment under IFRS. Details of the adjustments to the Group's financial performance is set out inthe following table: Reconciliation of Loss for the year ended 31 December 2004 Loss for the Period: 30 June 2004 31 December 2004 Note $'000 $'000 Loss for the period as Reported (2,246) (3,633)under UK GAAPShare based payments 5 IFRS 2 - (108)Total Loss Reported under IFRS (2,246) (3,741) There is no change to the total equity other than the transfer between profitand loss account and other reserve as a result of the above charge. 6. Further information Copies of the Interim Statement have been sent to shareholders. Further copiesare available c/o Gulf Keystone Petroleum (UK) Limited, 16 Berkeley Street,London 1WJ 8DZ. In addition, an electronic version of the Interim Statement canbe viewed on the Group's website: www.gulfkeystone.com. Independent Review Report to Gulf Keystone Petroleum Limited Introduction We have been engaged by the Company to review the financial information set outon pages 4 to 11 and we have read the other information contained in the interimreport and considered whether it contains any apparent misstatements or materialinconsistencies with the financial information. This report is made solely to the Company in accordance with the terms of ourengagement to assist the Company in meeting the requirements of the AIM Rules.Our review has been undertaken so that we might state to the Company thosematters we are required to state to it in this report and for no other purpose.To the fullest extent permitted by law, we do not accept or assumeresponsibility to anyone other than the Company for our review work, for thisreport, or for the conclusions we have reached. Directors' responsibilities The interim report, including the financial information contained therein, isthe responsibility of, and has been approved by, the directors. The directorsare responsible for preparing the interim report in accordance with the AIMRules which require that the accounting policies and presentation applied to theinterim figures should be consistent with those that will be adopted in theGroup's annual financial statements. As disclosed in note 2 to the financial information, the next annual financialstatements of the group will be prepared in accordance with IFRSs adopted foruse in the European Union. The accounting policies that have been adopted inpreparing the financial information are consistent with those that the directorscurrently intend to use in the next annual financial statements. There is,however, a possibility that the directors may determine that some changes tothese policies are necessary when preparing the full annual financial statementsfor the first time in accordance with those IFRSs adopted for use by theEuropean Union. This is because, as disclosed in note 2, the directors haveanticipated that certain standards, which have yet to be formally adopted foruse in the EU, will be so adopted in time to be applicable to the next annualfinancial statements. Review work performed We conducted our review in accordance with guidance contained in Bulletin 1999/4: Review of interim financial information issued by the Auditing PracticesBoard for use in the United Kingdom. A review consists principally of makingenquiries of Group management and applying analytical procedures to thefinancial information and underlying financial data and based thereon, assessingwhether the accounting policies and presentation have been consistently appliedunless otherwise disclosed. A review is substantially less in scope than anaudit performed in accordance with Auditing Standards and therefore provides alower level of assurance than an audit. Accordingly we do not express an auditopinion on the financial information. Review conclusion On the basis of our review we are not aware of any material modifications thatshould be made to the financial information as presented for the six monthsended 30 June 2005. Baker Tilly Chartered Accountants 2 Bloomsbury Street, London WC1B 3ST 29 September 2005 This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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