28th Sep 2005 07:00
Emerald Energy PLC28 September 2005 28 September 2005 EMERALD ENERGY PLC ("EMERALD" OR THE "COMPANY") ANNOUNCES INTERIM RESULTS FOR THE SIX MONTHS ENDED 30 JUNE 2005 HIGHLIGHTS • The Company completed successfully the drilling of three wells during the period and a further one well since the period end; • Production increased over six months from an average of 2,344 bopd in December 2004 to 2,745 bopd in June 2005; • The Company currently has five wells in operation producing in excess of 4,000 bopd; • Two additional wells will be put on production when construction of an enlarged surface facility at the Vigia field is completed at the end of 2005. Summary financial results 1H 2005 1H 2004 Bbl of oil Bbl of oilGross production 460,000 159,000Gross production after royalties 408,000 130,000Attributable production 255,000 120,000Attributable production sold, including costrecovery 353,000 130,000 $ '000 $ '000Revenue 12,386 3,303Adjusted EBITDA(*) 4,831 1,292Profit before tax 3,265 932 Cents CentsEarnings per share 3.15 2.10________________________________________________________________________________ (*) Adjusted EBITDA is earnings before interest, tax, depletion, depreciation,amortisation, exceptional items and non-cash charges relating to share basedcompensation and cost recovery. In the six months to 30 June 2005, prevailing oil prices allowed the Company toachieve an average revenue of $35.09 per barrel of oil sold, compared to $25.41per barrel, achieved in the same period of last year. Production costs incurredin the reporting period reflect the increased level of exploration activitiesdirected at acquisition of E&P licenses, as well as market-driven increases inthe supplier costs directly linked to the increases in demand for oil. Of the 353,000 barrels of oil sold by Emerald, 98,000 barrels represent partialrecovery of reimbursable costs incurred by Emerald in the Campo Rico block. Inaccordance with the terms of the Campo Rico Association Contract, 55,000 barrelsof oil produced in the Campo Rico block were delivered to Ecopetrol ascontribution towards Ecopetrol's share of the Campo Rico oil production.Ecopetrol's share of production costs has been fully expensed by the Company andwill be recovered by Emerald from the Campo Rico field production, once thefield is granted either commercial or sole risk status by Ecopetrol. In the reporting period, the increased level of production and favourableeconomic environment allowed Emerald to achieve profit before exceptional itemsand deferred tax provisions of $3,003,000 compared to $1,067,000 achieved forthe whole of 2004. Commenting on the results, Chairman and Chief Executive, Alastair Beardsall,said: "Steady growth in production, achieved on the back of our exploration success inthe Campo Rico block in 2004, allowed Emerald to capitalise on the exceptionalstrength of the oil pricing environment in the first half of 2005. Furtherexploration success in discovering the Vigia field in the Campo Rico blockearlier this year has added to the Company's ability to deliver growth. Thisunderlying growth in both production and cashflow allows Emerald to continue itsactive exploration programme into the next twelve months. The first half resultsannounced today demonstrate our continuing progress in becoming a significantplayer in the E&P sector." Operations review Campo Rico block Since 1 January 2005 to the date of this report, Emerald has successfullydrilled four new wells in the Campo Rico block in the Llanos basin. Completionof Campo Rico #3, the first well this year, was followed by the explorationsuccess of the Vigia #1 well, 11 km east of the Campo Rico field. Discovery ofthe Vigia field led to two further wells, Vigia #2 and #3, drilled back-to-backfrom the same drilling location. Subsequent to the end of the reporting period, the Company completed theremedial cementation of, and put on production, the Campo Rico #2 and #3 wellsin the Campo Rico field and commenced production from the Vigia #1 well in theVigia field, bringing the total count of producing wells, including Gigante 1A,to five. The Vigia #2 and #3 wells will be put on production by the end of theyear when larger capacity surface production facilities are completed. Anindependent evaluation of Vigia reserves is currently in progress. Acquisition of 3D seismic covering some 172 sq km of the Campo Rico block isnearing completion. The data will be processed and interpreted to assist theCompany in planning the forthcoming drilling campaign in the block due tocommence by January 2006. Matambo block Gigante #1A has continued producing at a steady rate, averaging 701 bopd in thereporting period and as at the date of this report has produced a total of twomillion barrels of oil. The Company is continuing to evaluate its options withregard to further development of the Gigante field. Fortuna block During the second half of 2005 the Company plans to spud an exploration well inthe block. Silfide #1 will be drilled to 5,000 ft targeting the Lisama sandsthat lie around the flanks of the Totumal field high. El Algarrobo block In El Algarrobo block, where Rancho Hermoso is the operator and Emerald farmedin for a 50% working interest, drilling of the exploration well, Agueda #1, isbeing planned for early 2006. Delays in the drilling of this well have beencaused by adverse weather conditions that hindered the civil construction workrequired before the rig can be mobilised to the drilling location. Technical Evaluation Agreements (TEAs) The Company continues to evaluate the potential of 9,500 sq km it had securedunder the four TEAs with the Colombian hydrocarbon licensing authority, AgenciaNacional de Hidrocarburos. The studies being carried out in the Mantecal,Altamira, Cachama and Las Brisas areas include an aero-magnetic survey designedto identify anomalies in the surface magnetic fields as well as reprocessing andinterpretation of existing seismic and well data. The Company will completeevaluation of the Mantecal and Altamira TEAs by the end of October 2005 and theCachama and Las Brisas TEAs by June 2006. Outlook Over the next twelve months, the Company is planning to drill at least fourexploration wells and a number of development wells. The thrust of operationswill continue to be early production from newly drilled wells and optimisationof fields that have been put on production. Alastair Beardsall, Chairman and Chief Executive28 September 2005 UNAUDITED CONSOLIDATED INCOME STATEMENT__________________________________________________________________________________ Restated Restated__________________________________________________________________________________ Half year to Half year to Year to 30 June 30 June 31 December 2005 2004 2004 Notes: $ '000 $ '000 $ '000__________________________________________________________________________________ Revenue from oil sales 12,386 3,303 12,529 Cost of sales:Production costs (3) (4,219) (861) (4,677)Depletion and depreciation of oiland gas assets (1,180) (613) (1,523)Cost recovery (1,800) -- (1,272)___________________________________________________________________________________ Gross profit 5,187 1,829 5,057Other income 29 65 63General and administrative expenses (4) (2,210) (2,286) (3,993)___________________________________________________________________________________Profit/(loss) from operationsbefore tax and financeincome/(costs) 3,006 (392) 1,127Finance costs -- -- --Finance income 259 58 230Exceptional item - settlementof -- 1,266 1,266insurance claim ------ ------- ------- --------------------------------Profit before tax 3,265 932 2,623Tax charge for the period (262) (56) (290)Deferred tax (1,441) -- 3,158------------------------ ------ ------- ------- --------Profit for the period 1,562 876 5,491------------------------ ------ ------- ------- --------Earnings per ordinary share (5) 3.15c 2.10c 12.38c------------------------ ------ ------- ------- --------Earnings per ordinary share ondiluted basis (5) 3.01c 2.00c 11.85c___________________________________________________________________________________ Half year to Year to 30 June 31 December 2004 2004 $ '000 $ '000________________________________________________________________________________Profit prior to adoption of IFRS 1,716 6,475 Share based compensation (IFRS2) (646) (855)Depletion (96) 62Depreciation (92) (184)Exploration costs, previously capitalised -- (122)Foreign exchange (6) 115________________________________________________________________________________Profit after adoption of IFRS 876 5,491________________________________________________________________________________ UNAUDITED CONSOLIDATED BALANCE SHEET Restated Restated________________________________________________________________________________ 30 June 30 June 31 December 2005 2004 2004 $ '000 $ '000 $ '000________________________________________________________________________________Non-current assetsOil and gas assets 35,274 20,785 23,712Other assets 281 200 283---------------------------- ------- ------- -------- 35,555 20,985 23,995Current assetsInventories 231 305 157Trade and other receivables 3,331 1,626 1,748Prepayments 57 19 --Deferred tax 1,717 -- 3,158Corporation tax debtor 571 -- 269Cash and short-term deposits 17,013 6,373 23,646---------------------------- ------- ------- -------- 22,920 8,323 28,978---------------------------- ------- ------- --------TOTAL ASSETS 58,475 29,308 52,973________________________________________________________________________________ Current liabilitiesTrade and other payables 7,740 985 4,016Provisions 1,545 1,478 1,388---------------------------- ------- ------- -------- 9,285 2,463 5,404 Equity attributable to the shareholders ofthe parent Issued share capital 8,068 6,676 8,068Share premium 27,479 12,947 27,479Retained earnings and reserves 13,643 7,222 12,022------------------------ ------- ------- -------- 49,190 26,845 47,569---------------------------- ------- ------- -------- 58,475 29,308 52,973________________________________________________________________________________ STATEMENT OF CHANGES IN EQUITY Adoption of IFRS Adoption of Successful Efforts Depreciation Pre-license Depletion costs $ '000 $ '000 $ '000 $ '000 $ '000________________________________________________________________________________ As at 1 January 2004 Issued share capital 27,767 -- -- -- 27,767 Share premium 39,541 -- -- -- 39,541 Retained earningsand reserves (42,038) -- -- -- (42,038) 25,270 -- -- -- 25,270________________________________________________________________________________ At 30 June 2004 Issued share capital 6,676 -- -- -- 6,676 Share premium 12,947 -- -- -- 12,947 Retained earningsand reserves 7,410 (92) -- (96) 7,222 ---------------------- -------- --------- -------- ------- 27,033 (92) -- (96) 26,845________________________________________________________________________________ As at 31 December 2004 Issued share capital 8,068 -- -- -- 8,068 Share premium 27,479 -- -- -- 27,479 Retained earningsand reserves 12,265 (184) (122) 62 12,021 --------- -------- --------- -------- ------- 47,812 (184) (122) 62 47,568________________________________________________________________________________ UNAUDITED GROUP CASH FLOW STATEMENT Restated Restated________________________________________________________________________________ Half year to Half year to Year to 30 June 2005 30 June 31 December 2004 2004 $ '000 $ '000 $ '000________________________________________________________________________________Cash flow from operatingactivities Profit/(loss) from operations beforetax and finance income/(costs) 3,006 (392) 1,128Depletion, depreciation andother non-cash items 1,545 1,684 3,134Net cost recovery 280 -- 1,272------------------------- ----- ------- ------- --------Adjusted EBITDA 4,831 1,292 5,534Increase in inventory (74) (282) (134)Increase in operating debtors (1,661) (1,325) (1,471)Increase in operating creditors 777 (147) 219Foreign exchange 44 -- (17)Loss on disposal of assets 2 30 1________________________________________________________________________________ 3,919 (432) 4,132 Profit tax paid (302) (111) (559)Exceptional item -- 1,266 1,266------------------------- ----- ------- ------- --------Cash flow from operating activities 3,617 723 4,839________________________________________________________________________________Cash flow from investingactivitiesPurchase of property, plantand (10,352) (3,508) (6,326)equipmentInterest received 274 58 221------------------------- ----- ------- ------- -------- (10,078) (3,450) (6,105)________________________________________________________________________________Cash flow from financingactivitiesProceeds from issue of shares -- -- 16,713Share issue expenses -- -- (790)------------------------- ----- ------- ------- -------- -- -- 15,923------------------------- ----- ------- ------- --------Net increase/(decrease) incash and cash equivalents (6,461) (2,727) 14,657 -------------------------Foreign currency translation (174) 149 38Cash and cash equivalents atperiod start 23,648 8,951 8,951 Cash and cash equivalents atperiod end 17,013 6,373 23,646________________________________________________________________________________ Note: 'Increase in operating creditors' and 'purchase of property, plant andequipment' reflect the changes resulting from adoption of IFRS. 'Increase ofoperating creditors' is affected by the adjustment for non-cash items, includingIFRS 2 adjustment, made to 'Profit/(loss) from operations before tax and financeincome/(costs)'. 'Purchase of property, plant and equipment' is affected byexpensing the pre-license costs, which were capitalised prior to adoption ofIFRS. Notes to the Financial Information 1. Accounting policies and presentation of financial information(*) The financial information presented above does not constitute statutory accountswithin the meaning of section 240 of the Companies Act 1985. The financialinformation for the year ended 31 December 2004 has been derived from thestatutory accounts for that year and restated under International FinancialReporting Standards (IFRS). The statutory accounts, upon which the auditorsissued an unqualified opinion, were delivered to the Isle of Man Registrar ofCompanies. Adoption of IFRS With effect from 1 January 2005, Emerald Energy Plc has adopted IFRS. TheCompany has applied certain standards under IFRS which have not been fullyendorsed by the EU. The following standards had an impact on the presented financial information: Under IFRS 2, share based payments are measured and recognised in the incomestatement. The Company has not utilised the exemption available on transition toIFRS, relating to IFRS 2. The fair value of the issued share options wascalculated using Black Scholes method and expensed in full.Under IAS 16, oil and gas assets with identifiable economic lives that areshorter than the length of the license, are evaluated, grouped and depreciatedbased upon their useful lives, rather than depleted based on recovery ofreserves, as has been the practice previously. Under IAS 21, the company is required to convert its sterling expenditure at theaverage rate for the period rather than the closing rate, as has been thepractice previously. Under IAS 38, all expenditures on projects where the company has no E&P licensewere fully expensed. In accordance with IFRS 1, First Time Adoption of IFRS, the Company has electedto use the following exemptions: (1) to measure items of property, plant and equipment at the date oftransition to IFRS at their deemed cost under UK GAAP;(2) to present the disclosure required by IFRS 6 or comparative periods inthe first IFRS financial statement;(3) to deem cumulative translation differences for all foreign operations tobe zero at the date of transition to IFRS and the gain or loss on a subsequentdisposal of any foreign operation shall exclude translation differences thatarose before the date of transition to IFRS and shall include later translationdifferences. Successful Efforts method of accounting With effect from 1 January 2005, Emerald Energy Plc has changed from Full Costto Successful Efforts method of accounting. In accordance with the requirementsof the Successful Efforts method of accounting, depletion charge calculationswere performed on a field by field basis, rather than for the entire SouthAmerica pool, as has been the practice previously. (*) The full set of accounting policies is presented on the Company's web-site,www.emeraldenergy.com 2. Exchange ratesWhere applicable, the following foreign exchange rates were applied 30 June 30 June 31 December 2005 2004 2004 $ $ $________________________________________________________________________________UK pound sterling - average rate for theperiod 1.8727 1.8226 1.8323UK pound sterling - closing rate for theperiod 1.7925 1.8137 1.9199________________________________________________________________________________ Prior to the introduction of IFRS the income statement was translated at theclosing rate for the period. Under IFRS the income statement is translated atthe average rate. 3. Production costs Production costs include direct costs associated with running field productionfacilities and transportation of oil to the point of sale. The costs associatedwith the commissioning of production facilities are generally capitalised. Thecosts of geological and geophysical studies conducted prior to acquisition ofthe license are expensed in accordance with IAS 38. 4. General and administrative expenses The charge of $2,210,000 (2004: $2,286,000) relating to the administrativeexpenses in the six months to 30 June 2005 includes a charge of $120,000 (2004:$646,000) relating to the cost of share options issued as required under IFRS 2. 5. Earnings per ordinary share The calculation of earnings per ordinary share is based on the profitattributable to shareholders of $1,562,000 (2004: $876,000) and on the weightedaverage number of shares in issue during the period of 49,527,994 (2004:41,786,899). The calculation of the earnings per ordinary share on a diluted basis is basedon the profit attributable to shareholders of $1,562,000 (2004: $876,000) and on51,887,862 (2004: 43,792,243) ordinary shares, calculated as follows:________________________________________________________________________________ Half year to Half year to Year to 30 June 30 June 31 December 2005 2004 2004------------------------ ------- ------- --------Basic weighted average number of 49,527,994 41,786,899 44,367,265sharesDilutive potential ordinary shares: Employee share options 2,359,868 2,005,344 2,006,422------------------------ ------- ------- -------- 51,887,862 43,792,243 46,373,687________________________________________________________________________________ Earnings per share numbers for the half year to 30 June 2004 have been restatedfor the effects of the Placing and Open Offer (August 2004). 6. Dividends No dividend was declared in the reporting period ( 2004: nil). 7. Auditors' review These unaudited interim accounts have not been reviewed by the Group's auditors,Ernst & Young. 8. Approval of accounts These unaudited interim accounts were approved by the board of directors on 27September 2005. 9. Subsequent events There were no material subsequent events between 30 June 2005 and the date ofthis document.________________________________________________________________________________ (1) All comparisons, unless otherwise stated, are with the equivalent period of the prior year.(2) All the production numbers and monetary amounts have been rounded to the nearest thousand.(3) Bopd is barrels of oil per day.(4) 2004 interim and full year results have been restated under IFRS. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
Emerald Energy