27th Sep 2007 07:01
Regal Petroleum PLC27 September 2007 For Immediate Release 27 September 2007 REGAL PETROLEUM PLC INTERIM RESULTS FOR THE SIX MONTHS ENDED 30 JUNE 2007 Regal Petroleum plc ("Regal", "the Company" or "the Group"), the oil and gasexploration and production company, today announces its un-audited results forthe six months ended 30 June 2007 and an update on the Company's progress. In accordance with the requirements of AIM, these results are reported underInternational Financial Reporting Standards ("IFRS") as opposed to UK GenerallyAccepted Accounting Practices ("UK GAAP") which were adopted in previousfinancial periods. The un-audited results include comparative IFRS financialstatements for the six months ended 30 June 2006 and the year ended 31 December2006 audited results. Highlights include: Ukraine • The Company announced on 14 September 2007 that it has entered into an exclusive Memorandum of Understanding with the private oil and gas company, MND Exploration and Production Limited ("MND"). Under the terms of the proposed transaction, which is for a 50% interest in the assets, KKCG Oil and Gas BV, MND's holding company in The Netherlands, will invest a total of $330,000,000 in the development of the MEX-GOL and SV fields. The proposed transaction is subject to due diligence and the negotiation of transaction documentation. • Average production for the six month period was 4.44 mmcf of gas per day and 303 barrels of condensate per day (total equivalent of 1,093 boepd). Production is currently averaging 5.59 mmcf of gas per day and 308 barrels per day of condensate (total equivalent of 1,304 boepd). • In May 2007, the Company connected the SV-10 well to the existing Regal-owned MEX-GOL facility. This increased the Company's wells in production to five: MEX-102, MEX-3, GOL-1, GOL-2 and SV-10. • Operations remained cash flow positive and profitable during the six month period to June 2007. • Gas prices increased from an average for the last five months of 2006 of $3.05 per mscf to $4.02 per mscf for the first six months of 2007, an increase of approximately 32%. • Average condensate sales price achieved by the Company for the six months to end June 2007 was $55 per barrel (excl VAT) compared to $41 per barrel in the same period of 2006. • The Company signed a contract with Chernihivnaftagasgeologia ("CNGG") for the drilling of the MEX-103 well in late July 2007 and expects drilling to commence in the fourth quarter of 2007. • A 3D seismic survey covering approximately 100 square kilometres of the MEX-GOL licence area commenced in January 2007 and was completed in late May 2007. • Following shareholder approval at an Extraordinary General Meeting on 25 May 2007, in mid-June 2007 the Company completed the acquisition of Alberry Limited's shares in Regal Petroleum Corporation Limited under the Subscription and Services Agreement. As consideration for such acquisition 13,910,623 ordinary shares of 5 pence each in the capital of the Company were allotted and issued to Alberry Limited. Romania • Suceava Block: The Company's farm-in partner, Aurelian Oil and Gas Plc ("Aurelian"), acquired 160 kilometres of 2D seismic data in the block and is planning to spud an exploration well (Dornesti-1-Sud) in late October or early November 2007 to test a shallow gas target. This well will complete the earn-in work programme under the farm-in agreement with Aurelian. • Barlad Block: Regal plans to spud the first of two planned exploration wells in October 2007. These wells are targeted at the same shallow gas reservoirs as the Dornesti-1-Sud well and are expected to be completed in the fourth quarter of 2007. Egypt East Ras Budran: In early 2007 Apache, as concession operator, acquired a 3Dseismic survey over the central portion of the concession. The resulting 3Dseismic data has been processed and interpreted. The first of two explorationwells ("ERB-A-1X") was spudded in June 2007 and this well has now reached itstarget depth (11,921 feet TVD) and has been flow tested. The well was opened fora 12 hour period and produced at an average rate of 1,901 bopd from the targetDarat Limestone. This well will be suspended as a future production well and anappraisal well, ("ERB-A-2X"), is under consideration. The drilling of the secondexploration well ("ERB-B-1X") will be commenced shortly. Corporate activity • Mirabaud were appointed as joint broker in mid February 2007. Board & Senior Management • Mr Gordon Stein was appointed as Chief Financial Officer on 15 January 2007 following the resignation of Mr Roger Phillips as Finance Director. Financial highlights • Gross profits increased from $0.8 million to $3.8 million when comparing the six month periods ending June 2006 and June 2007 respectively. • Turnover increased to $6.5 million (30-Jun-06: $4.9 million). This increase is primarily attributable to an uninterrupted six months of continued production in the first half of 2007 in Ukraine, together with new production following the hook-up of the SV-10 well in May 2007, whereas the same period in 2006 was marred by intermittent disruption to production due to court enforced shut-ins. • Loss for the period of $10.4 million (30-Jun-06: loss of $3.7 million), with loss per share of 8.1 cents (30-Jun-06: loss per share of 2.9 cents). The increased loss was primarily due to significant administration costs being incurred following the successful outcome of the legal cases in Ukraine at the end of 2006, in addition to share based charges accounted for in accordance with the requirements of IFRS 2 "Share Based Payments". • Capital cash expenditure of $3.4 million (30-Jun-06: $7.3 million). • Net cash of $9.4 million (30-Jun-06: $25.6 million) at period end and net assets of $62.8 million (30-Jun-06: $123.4 million). At the date of this announcement the Company had cash in hand of approximately $7.5 million. • In September 2007 the Company secured a $15 million Revolving Credit Facility with Bank of Scotland. OPERATIONAL STATEMENT Ukraine Mekhediviska/Golotvschinska ("MEX-GOL") and Svyrydivske ("SV") fields (workinginterest 100%) The Ukraine production operations continue to be profitable and generatepositive cashflow for the Group. During the six-month period to 30 June 2007 theCompany achieved a Gross Profit percentage of 58%. Partial Divestment In February 2007, the Company appointed Tristone Capital Limited to carry out astrategic review of options for the Company's MEX-GOL and SV fields (the"Fields") in Ukraine. Since April 2007, Tristone Capital Limited has beenadvising the Company on a partial divestment of the Fields with the objective ofidentifying a strategic partner to assist the Company in accelerating theirdevelopment. The Company announced on 14 September 2007 that it has entered into an exclusiveMemorandum of Understanding ("MOU") with the private oil and gas company, MNDExploration and Production Limited ("MND"). Under the terms of the proposedtransaction, which is for a 50% interest in the assets, KKCG Oil and Gas BV,MND's holding company in The Netherlands, will invest a total of $330,000,000 inthe development of the MEX-GOL and SV fields. The terms of the MOU allow theCompany and MND to conduct due diligence and negotiate transaction documentationon an exclusive basis, but it must be stressed however that, save in respect ofcertain matters, the MOU is non-binding and conditional upon due diligence andthe execution of transaction documentation and there is no certainty that anytransaction or the proposed transaction will reach completion. Production Average production for the six month period to June 2007 was 4.44 mmcf of gasper day and 303 barrels of condensate per day (total equivalent of 1,093 boepd).In May 2007, the Company completed the 4.3 kms pipeline which connected theSV-10 well to the existing Regal-owned MEX-GOL facility. The SV-10 well wasoriginally drilled in 1998 and was subsequently worked-over by Regal in late2006 using coiled tubing and nitrogen lift. The well was flow tested from midNovember 2006 to February 2007 during which time average flow rates ofapproximately 46,000 m3/d of gas (1.62 mmcf/d) and 8.5 m3/d (50 bopd) ofcondensate were achieved. With SV 10 coming into production in May 2007, thisincreased the Company's wells in production to 5: MEX-102, MEX-3, GOL-1, GOL-2and SV-10. Production is currently averaging 5.59 mmcf of gas per day and 308 barrels perday of condensate (total equivalent of 1,304 boepd). Seismic A 3D seismic survey covering approximately 100 square kilometres of the MEX-GOLproduction licence area, was acquired during the period. This data has beenprocessed and interpreted by Ukrgeofizika in Ukraine and is expected to assistin the full field development. Drilling The Company continued to prepare for additional drilling on the MEX-GOL field inaccordance with the requirements of its Field Development Plan. Regal has beenin discussions since early 2007 with Chernihivnaftagasgeologia ("CNGG") torestart the drilling of MEX-103, the next planned production well. A drillingcontract for that well was signed in late July 2007 and the Company expectsdrilling to commence in the fourth quarter of 2007. Several other production wells are in the process of being permitted andpreliminary discussions have been initiated with a number of potential drillingcompanies able to provide equipment and services. The drilling of further wellsis expected to get underway in early 2008. Additionally, Regal is consideringmethods to prolong production from its five existing production wells and hasrecently completed a logging programme. Alberry Limited On 18 June 2007, the Company announced that it had completed the acquisitionfrom Alberry Limited of its 15% interest in Regal Petroleum Corporation Limited("RPC") and that RPC was subsequently a wholly owned subsidiary of Regal. Inconsideration for the acquisition of this shareholding interest, 13,910,623ordinary shares of 5 pence each in the capital of the Company were allotted andissued to Alberry Limited. These shares rank pari passu with the Company'sexisting ordinary shares of 5 pence each and such shares were admitted totrading on AIM on 21 June 2007. Romania Suceava Block (working interest 50%) Pursuant to the agreed work programme with Regal's farm-in partner Aurelian Oiland Gas Plc ("Aurelian"), it is planned to spud the Donesti-1-Sud explorationwell in late October or early November 2007. This well is part of Aurelian'searn-in work programme and accordingly the well costs are to be fully carried byAurelian. A second contingent exploration well may be drilled in late 2007/early2008, depending on the success of the first well. If such a well is approved bythe partners, Regal will be required to fund its own share of the well costs. Barlad Block (working interest 100%) Regal has contracted a rig to drill two exploration wells in the fourth quarterof 2007, with the first well planned to spud in October 2007. All necessarypreparations are in place and long lead items have been received for these twowells, which will test shallow Sarmatian gas prospects similar to those beingpursued in the Suceava block to the north. The wells are each expected to takeless than 30 days to drill and, if successful, will lead to testing beingconducted at a later date. The close proximity of existing gas infrastructureallows relatively small gas accumulations to be commercially exploited. Egypt East Ras Budran Concession (working interest 25%) Apache Khalda Corporation LDC ("Apache"), the Company's joint venture partner inthe Eas Ras Budran concession in Egypt, acquired a 3D seismic survey in early2007. In addition two exploration wells ("ERB-A-1X" and "ERB-B-1X") arecommitted to be drilled on the concession and the first exploration well,ERB-A-1X, was spudded in June 2007. This well has recently reached its targetdepth (11,921 feet TVD) in the Darat Limestone and has been flow tested. Thewell was opened for a 12 hour period and produced at an average rate of 1,901bopd. Wellsite estimates of average flow rate of 1,910 bopd and oil gravity ofapproximately 17 degree API have subsequently been confirmed by the operator as1,901 bopd and 16-16.2 degree API. The ERB-A-1X well has confirmed the presence of commercial production from theDarat Limestone which has previously been tested in a nearby location by TullowOil Plc in 1999. The well is less than 1 km from the existing Ras Budran onshoreoil processing and export facilities which have available ullage. The well wasdesigned to intersect the reservoir at the optimal angle (near horizontal) tomaximise production potential. Apache has indicated that it will submit a Noticeof Commercial Discovery with the Egyptian authorities shortly. The ERB-A-1X wellwill be suspended as a future production well and an appraisal well,("ERB-A-2X"), is under consideration. The second exploration well, ERB-B-1X, will be drilled shortly using the samerig, and will explore potential reservoirs in a different part of theconcession. Greece Kavala Oil S.A. (working interest 95%) The operational management of Kavala Oil S.A. has continued to be undertaken byGreek local management, with the assistance of the unionised workforce. TheCompany has received no operational or financial information relating to thefirst half of the year from Kavala Oil S.A. which continues to function withoutany financial assistance or investment from the Company.The Company has recently entered into a conditional agreement for the sale ofits entire holding in Eurotech S.A. to a Greek buyer. Subject to satisfaction ofcertain conditions, completion of such sale is expected to occur in the fourthquarter of 2007, following which further information will be provided. Liberia Blocks 8 & 9 (working interest 25%) The two production sharing agreements in respect of Blocks 8 and 9 still awaitratification by the Liberian Government. The Government has sought clarificationon various terms of these agreements and discussions with the Government andNOCAL, the State oil company, are continuing. FINANCIAL STATEMENT Review of Results The financial results for the six months ended 30 June 2007 indicate animprovement in the profitability of the Ukraine operations following thesatisfactory conclusion of the legal dispute over the validity of the productionlicences in December 2006. A full six months of continued production in thefirst half of 2007, together with new production following the hook-up of theSV-10 well in May 2007, compares very favourably to the same period in 2006which was marred by intermittent disruption to production due to the courtenforced shut-ins. Together with increased commodity prices (see below), grossprofits subsequently increased from $0.8 million to $3.8 million when comparingthe six month periods ending 30 June 2006 and 2007 respectively. Turnover for the six months was $6.5 million (30-Jun-06: $4.9 million) which isattributable to gas and condensate sales in Ukraine. The average gas priceachieved for the first six months of 2007 was $141.95 per 1,000 m3 (excl. VAT)or $4.02 per mscf. This compares very favourably to average prices in the firstsix months of 2006 of $94.99 per 1,000 m3 and $2.69 per mscf. The Companybelieves the trend of increasing gas prices appears set to continue in thecoming years as Russia progressively seeks to eliminate the discount paid byUkraine for imported gas. This will further underpin value in the Ukrainianfield development operations. The Company continues to achieve good condensate prices, although the priceenvironment is subject to relatively high price fluctuations due to seasonaldemand cycles in Ukraine (eg. the harvesting season). The average condensatesales price achieved by the Company for the six months to 30 June 2007 was $55per barrel (excl. VAT) compared to $41 per barrel in the same period of 2006,although the above-mentioned price fluctuations meant that the Company hasachieved as high as $69 per barrel in 2007 for certain condensate shipments andas low as $47 per barrel. The loss for the period of $10.4 million (30-Jun-06: loss of $3.7 million)partially reflects an increase in activity and administration costs followingthe successful outcome of the legal cases in Ukraine at the end of 2006,together with share based charges accounted for in accordance with therequirements of IFRS 2 "Share Based Payments". Other administrative costs have increased from $5.2 million in the first sixmonths of 2006 to $7.4 million in 2007, with the main increase in costs being anadditional $1.1 million in consultancy and professional fees as the Companyseeks to accelerate the development of its Ukrainian fields and find a strategicpartner through a partial divestment. Other administrative charges also includea charge of $0.6 million as recognition of a future National Insurance liabilityon share options (30-Jun-06: no comparable charge) and a movement in foreignexchange translation losses of $1.0 million between the comparable periods in2006 and 2007. In accordance with IFRS 2, the Company is required to recognise the fair valueof long-term equity based awards which have been granted in the current andprior periods, which are available to be exercised in the current and futureperiods. A charge of $7.4 million has been made for the six month period to June2007, representing equity awards to new directors, senior managers and externalservice providers who have been appointed since mid 2006. Due to the volatilityof the share price in the past two years, the requirements of IFRS have resultedin a large Income Statement charge for the period in which the awards were made.This charge has been verified by an independent firm specialising in thevaluation of awards that fall within the scope of IFRS 2. The majority of theseequity awards are expected to vest in the coming years as the directors andmanagement continue to deliver results in line with shareholder expectations. At the end of June 2007 the Company had cash in hand of $9.4 million and theGroup had no external borrowings at that time. At the date of this announcement the Company had cash in hand of approximately$7.5 million and has access to a further $12.0 million from a $15.0 millionone-year revolving credit facility which has recently been entered into withBank of Scotland. The capital cash expenditure of $3.4 million (30-Jun-06: $7.3 million)represented the continued investment toward development and exploration inRomania, Egypt and Ukraine. Activity will increase significantly in the secondhalf of 2007 as drilling commences in all three countries and this will bereflected by an increase in capital expenditure during this period when comparedto the first six months. CORPORATE ACTIVITY Board and Senior Management Appointments Mr Gordon Stein was appointed as Chief Financial Officer on 15 January 2007following the resignation of Mr Roger Phillips as Finance Director. It is anticipated that additional Directors may be appointed in the fourthquarter of 2007 and a search for new Directors has been underway since mid year. Advisors Mirabaud Securities Limited was appointed as joint broker in mid February 2007. Responsibility The Directors accept responsibility, collectively and individually, for theinformation contained in this document. To the best of the knowledge and beliefof the Directors (who have taken all reasonable care to ensure that such is thecase), the information contained in this document is in accordance with thefacts and does not omit anything likely to affect the import of suchinformation. In accordance with the guidelines of the AIM market of the London StockExchange, Neil Ritson BSc (Hons) Geophysics, FGS, Chief Executive Officer ofRegal Petroleum plc, is the qualified person that has reviewed the technical information contained in this press release. Definitions: $ United States dollarbopd barrels of oil per dayboepd barrels of oil equivalent per daykms kilometresmmcf million cubic feetmscf thousand standard cubic feetm3 /d cubic metres per daymmcf/d million cubic feet per dayTVD true vertical depth For further information, please contact: Regal Tel: 020 7408 9500 Neil Ritson, Chief Executive OfficerFrancesco Scolaro, Chairman Evolution Securities Tel: 020 7071 4300Robert Collins Mirabaud Securities Tel: 020 7321 2508Pav Sanghera Buchanan Communications Tel: 020 7466 5000Bobby MorseBen Willey Attached Consolidated Income Statement Consolidated Balance Sheet Consolidated Cash Flow Statement Consolidated Statement of Recognised Income and Expenditure Consolidated Statement of Changes in Equity Notes to the Accounts Independent review report by the Auditors Regal Petroleum plc Consolidated Income Statement for the period ended 30 June 2007 30-Jun-07 30-June-06 31-Dec-06 (unaudited) (unaudited) (audited) $'000 $'000 $'000 Notes Revenue 2 6,473 4,861 10,811Cost of sales (2,704) (4,086) (8,285)----------------------- ------ --------- --------- --------Gross profit 3,769 775 2,526 Ukraine settlement costs - - (54,801)Share based (charge)/credit 3 (7,337) 91 (387)Other administrative expenses (7,440) (5,182) (20,467)----------------------- ------ --------- --------- --------Total administrative expenses (14,777) (5,091) (75,655)Other operating income 697 - 858----------------------- ------ --------- --------- --------Operating loss (10,311) (4,316) (72,271) Impairment of financial asset - - (43,700)Finance revenue 267 679 1,182Finance costs - (1) (2)----------------------- ------ --------- --------- --------Loss on ordinary activitiesbefore taxation (10,044) (3,638) (114,791) Tax on loss on ordinary (394) (32) (489)activities ----------------------- ------ --------- --------- --------Loss for the financial period (10,438) (3,670) (115,280)----------------------- ------ --------- --------- -------- Loss per ordinary share (cents)Basic and diluted 4 (8.1) (2.9) (89.8)----------------------- ------ --------- --------- -------- All amounts for the six months ended 30 June 2007 and 2006 relate to continuingactivities. The notes on pages 15 to 17 form part of these interim accounts. Regal Petroleum plc Consolidated Balance Sheet as at 30 June 2007 30-Jun-07 30-June-06 31-Dec-06 (unaudited) (unaudited) (audited) $'000 $'000 $'000 Non-current assetsIntangible assets 23,711 20,487 20,672Property, plant and equipment 32,168 33,321 29,620Financial asset - 43,700 ------------------ --------- --------- -------- 55,879 97,508 50,292 Current assetsInventories 63 40 37Trade and other receivables 1,759 3,515 3,368Investments - 117 -Cash and cash equivalents 9,440 25,478 13,048----------------- --------- --------- -------- 11,262 29,150 16,453 Current liabilitiesTrade and other payables (2,601) (3,086) (2,171)----------------- --------- --------- -------- Net current assets 8,661 26,064 14,282----------------- --------- --------- -------- Non-current liabilitiesCreditors (33) - -Provisions (1,736) (207) (950)----------------- --------- --------- -------- (1,769) (207) (950)----------------- --------- --------- --------Net assets 62,771 123,365 63,624----------------- --------- --------- -------- EquityCalled up share capital 12,379 10,934 10,934Share premium account 265,899 217,640 217,640Other reserves 18,199 8,294 10,598Equity reserves - - 49,049Profit and loss account (233,706) (113,503) (224,597)----------------- --------- --------- --------Total equity 62,771 123,365 63,624----------------- --------- --------- -------- The notes on pages 15 to 17 form part of these interim accounts. Regal Petroleum plc Consolidated Cash Flow Statement for the period to 30 June 2007 30-Jun-07 30-June-06 31-Dec-06 (unaudited) (unaudited) (audited) $'000 $'000 $'000 NotesOperating activitiesCash generated from operations 5 (844) (2,874) (18,024)Interest received 263 678 1,183Interest paid - (1) (2)Taxation paid (274) (34) (491)---------------------- ------- --------- --------- --------Net cash used in operatingactivities (855) (2,231) (17,334)---------------------- ------- --------- --------- -------- Investing activitiesProceeds from sale of intangiblefixed assets - - 4,245Purchase of intangible assets (2,112) (4,124) (7,966)Purchase of property, plant andequipment (1,256) (3,168) (1,926)---------------------- ------- --------- --------- --------Net cash used in investingactivities (3,368) (7,292) (5,647)---------------------- ------- --------- --------- -------- Financing activitiesFunds received in connection withshare options 655 - 80---------------------- ------- --------- --------- --------Net cash from financing 655 - 80activities ---------------------- ------- --------- --------- -------- Net decrease in cash and cashequivalents (3,568) (9,523) (22,901)Cash and cash equivalents atbeginning of period 13,048 34,916 34,916Effect of foreign exchange ratechanges (40) 202 1,149Other non-cash movements - - (116)---------------------- ------- --------- --------- --------Cash and cash equivalents at endof period 9,440 25,595 13,048---------------------- ------- --------- --------- -------- Regal Petroleum plc Consolidated Statement of Recognised Income and Expenditurefor the six months ended 30 June 2007 30-Jun-07 30-June-06 31-Dec-06 (unaudited) (unaudited) (audited) $'000 $'000 $'000 Loss for the financial period (10,438) (3,670) (115,280) Exchange differences on translation ofsubsidiaries and associates 1,593 2,312 4,285--------------------- --------- --------- --------Total recognised losses relating tothe financial period (8,845) (1,358) (110,995)--------------------- --------- --------- -------- Regal Petroleum plc Consolidated Statement of Changes in Equityfor the six months ended 30 June 2007 Share Share Equity Shares Merger Capital Foreign Profit Total capital premium share to be reserve contribution exchange and loss account option issued reserve account reserve $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 Balance at 31 December 2005 10,934 217,640 1,791 - (3,204) 7,477 9 (109,831) 124,816 Loss for the period - - - - - - - (3,670) (3,670) Share based credit - - (91) - - - - - (91) Exchange differences - - - - - - 2,312 - 2,312 Other - - - - - - - (2) (2) --------------------------- --------- -------- ------- ------- -------- -------- ------ --------- --------Balance at 30 June 2006 10,934 217,640 1,700 - (3,204) 7,477 2,321 (113,503) 123,365 --------------------------- --------- -------- ------- ------- -------- -------- ------ --------- -------- Balance at 31 December 2005 10,934 217,640 1,791 - (3,204) 7,477 9 (109,831) 124,816 Loss for the period - - - - - - - (115,280) (115,280)Share based charge - - 387 49,049 - - - - 49,436 Cost of shares vesting - - - - - - - 80 80 Exchange differences - - - - - - 4,285 - 4,285 Transfer for options exercised or expired - - (147) - - - - 147 - Other - - - - - - - 287 287 --------------------------- --------- -------- ------- ------- -------- -------- ------ --------- --------Balance at 31 December 2006 10,934 217,640 2,031 49,049 (3,204) 7,477 4,294 (224,597) 63,624 --------------------------- --------- -------- ------- ------- -------- -------- ------ --------- --------Loss for the period - - - - - - - (10,438) (10,438) Issued shares 1,445 48,259 - (49,049) - - - - 655 Share based charge - - 7,337 - - - - - 7,337 Exchange differences - - - - - - 1,593 - 1,593 Transfer for options exercised - - (1,329) - - - - 1,329 - --------------------------- --------- -------- ------- ------- -------- -------- ------ --------- --------Balance at 30 June 2007 12,379 265,899 8,039 - (3,204) 7,477 5,887 (233,706) 62,771 --------------------------- --------- -------- ------- ------- -------- -------- ------ --------- -------- Regal Petroleum plc Notes forming part of the financial statements for the six months ended 30 June2007 1 Basis of preparation The interim financial report has been prepared using accounting policies inaccordance with International Financial Reporting Standards (IFRS) for the firsttime. The same accounting policies and methods of computation are followed in theinterim financial report as published by the Company on 19 September 2007 in itsIFRS transition document which is available on the Company's website atwww.regalpetroleum.co.uk. That document sets out Regal's preliminary comparative2006 financial information for the year ended 31 December 2006 and the sixmonths ended 30 June 2006, restated under IFRS in US dollars, includingreconciliations of the consolidated income statements, consolidated balancesheets and consolidated cash flow statements between UK GAAP and IFRS. Thedocument additionally sets out the Group's balance sheet under IFRS at thetransition date of 1 January 2006, including a reconciliation to the UK GAAPbalance sheet at that date. The interim financial information for the six months ended 30 June 2007 and 30June 2006 is unaudited and does not constitute statutory accounts as defined insection 240 of the Companies Act 1985. The auditors have carried out a review ofthe interim financial information for these periods and their report is shown inpage 18. The information for the year ended 31 December 2006 does not constitutestatutory accounts as defined in section 240 of the Companies Act 1985. A copyof the statutory accounts for that year has been delivered to the Registrar ofCompanies. The auditors' report on those accounts was qualified arising from alimitation in scope in respect of their comparatives. 2 Revenue Turnover represents amounts invoiced in respect of sales of oil and gasexclusive of indirect taxes and excise duties and is recognised on delivery ofproduct. Regal Petroleum plc Notes forming part of the financial statements for the six months ended 30 June2007 3 Share based (charge)/credit 30-Jun-07 30-June-06 31-Dec-06 (unaudited) (unaudited) (audited) $'000 $'000 $'000 Share based (charge)/credit (7,337) 91 (387) --------- --------- -------- The current period share based charge relates to equity awards to new directors,senior managers and external service providers who have been appointed since mid2006. This charge has been verified by an independent firm specialising in thevaluation of awards that are within the scope of IFRS 2. All share based awards of the Group to date have been equity settled as definedby IFRS 2 Share based payments, therefore there has been no adverse cash impactto the Company arising from these charges. The fair value of these awards hasbeen determined at the date of grant of the award allowing for the effect of anymarket-based performance conditions. The fair value, adjusted by the Group'sestimate of the number of awards that will eventually vest as a result ofnon-market conditions, is expensed uniformly over the vesting period. The fair values were calculated using a binomial option pricing model withsuitable modifications to allow for employee turnover after vesting and earlyexercise. Where necessary this model was supplemented with a Monte Carlo model.The inputs to the model include: the share price at date of grant; exerciseprice; expected volatility; expected dividends; risk free rate of interest; andpatterns of exercise of the plan participants. 4 Loss per ordinary shareThe calculation of basic loss per ordinary share has been based on the loss forthe period and 129,608,291 ordinary shares, being the average number of sharesin issue for the period to 30 June 2007. Regal Petroleum plc Notes forming part of the financial statements for the six months ended 30 June2007 5 Reconciliation of operating loss to operating cash flow 30-Jun-07 30-June-06 31-Dec-06 (unaudited) (unaudited) (audited) $'000 $'000 $'000 Operating loss (10,311) (4,316) (72,271)Depreciation, amortisation andimpairment charges 549 437 2,943Exchange differences 54 (247) (388)Movement in provisions 786 11 754(Increase)/decrease in inventories (26) (2) 1Decrease in debtors 468 1,669 1,580Increase/(decrease) in creditors 299 (335) (195)Current asset investment - - 116Share option charge/(credit) 7,337 (91) 387Exceptional share based charge - - 49,049 --------- --------- --------Net cash generated from operations (844) (2,874) (18,024) --------- --------- -------- INDEPENDENT REVIEW REPORT BY THE AUDITORSTO REGAL PETROLUM PLC Introduction We have been instructed by the Company to review the financial information forthe six months ended 30 June 2007 set out on pages 10 to 17 which comprises theconsolidated income statement, consolidated balance sheet, consolidatedstatement of recognised income and expenditure, consolidated statement ofchanges in equity, consolidated cash flow statement and related notes. We have read the other information contained in the interim report andconsidered whether it contains any apparent misstatements or materialinconsistencies with the financial information. Directors' responsibilities The interim report, including the financial information contained therein, isthe responsibility of, and has been approved by the directors. The directors areresponsible for preparing the interim report in accordance with the AIM ruleswhich require that the half-yearly report must be presented and prepared in aform consistent with that which will be adopted in the AIM company's annualaccounts having regard to the accounting standards applicable to such annualaccounts. Review work performed We conducted our review in accordance with guidance contained in Bulleting 1999/4 issued by the Auditing Practices Board. A review consists principally ofmaking enquiries of group management and applying analytical procedures to thefinancial information and underlying financial data and, based thereon,assessing whether the accounting policies and presentation have beenconsistently applied unless otherwise disclosed. A review excludes auditprocedures such as tests of controls and verification of assets, liabilities andtransactions. It is substantially less in scope than an audit performed inaccordance with Auditing Standards and therefore provides a lower level ofassurance than an audit. Accordingly we do not express and audit opinion on thefinancial 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 2007. UHY Hacker Young LLPChartered AccountantsLondon 26 September 2007 This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
RPT.L