26th Sep 2007 07:02
Petroceltic International PLC26 September 2007 Petroceltic International plc Interim Results and Operations Update for the Six Months Ended 30 June 2007 Petroceltic International plc ("Petroceltic" or the "Company") the independentoil & gas exploration company operating in Algeria, Italy, Ireland and Tunisiatoday announced its interim results for the period ended 30 June 2007. The mainpoints are: • Foundations laid for extensive 2008/9 exploration and appraisal period • Seismic surveys precede multi-well 2008 drilling programme • Major licence and exploration expansion in Italy • Submissions lead to inclusion of 7 additional discovery wells in Algerian production sharing contract • Appointments strengthen Board • Well funded for commitments • Partner approaches expand exploration options Brian O'Cathain, Executive Chairman of Petroceltic commented: "We are facing an exciting period of development for the company over the next eighteen months, with exploration and appraisal drilling planned in all of our areas of activity. We are focused on Mediterranean and North African markets where we believe that we have a competitive edge. We have in place an experienced managerial and technical team, which we will continue to develop. We have the right people, the right portfolio and the right financial capacity to ensure that the company will continue to add shareholder value in this period of difficult market conditions." A copy of the Stock Exchange Announcement is attached: Press Enquiries to: John Craven /Brian O'Cathain, Petroceltic Tel: +353 (1) 4959285James Henderson / Alisdair Haythornthwaite, Pelham PR Tel: +44 20 7743 6676Joe Murray, Murray Consultants Tel: +353 (1) 4980300 Executive Chairman's Statement I am pleased to be able to report on the progress made by Petroceltic in itsexploration and production business during the first half of 2007. During the first half of this year the foundations were laid for an excitingphase of development by Petroceltic in 2008 and 2009. Work on refininglocations for a multi-well drilling programme was advanced, a major expansion ofthe company's Italian licence areas was progressed, discovery reports were filedin Algeria and the board was strengthened with the appointment of a newExecutive Chairman and Senior Independent Director. The company's area of operation is the Mediterranean and North Africa oilprovinces. During the first half the company focused on enhancing seismic dataover prospective drilling locations in these areas and this work will continuefor the remainder of the year. In 2008 a multiwell drilling programme is planedfor Italy, Algeria and Tunisia. Algeria: Following early drilling success in Algeria, Petroceltic and itspartner Sonatrach has recently awarded contracts to acquire and process a highquality 3D seismic survey over the Northern section of the Ain Tsila Ridge areaof the Isarene permit. The seismic work will focus on identifying areas ofenhanced permeability on the target reservoirs. It is expected to commence inNovember 2007 and take six months to complete. Processing will be carried outsimultaneously with acquisition of the survey, and we expect to see the firstresults in January 2008. On completion of this survey, Petroceltic expects to drill up to five wells onthe permit designed to further delineate the potential oil and gas reserves onthe licence. This area is considered by the partners to hold prospective gasresources in the range of 2 to 6 trillion cubic feet of gas. In January and March 2007 the Company submitted discovery reports for the HassiTab Tab (HTT- 2) and the Isas (ISA-1) discoveries to its partner, the Algerianstate oil company Sonatrach. As a result of the fulfilment and success of thecompany's licence commitments, these submissions triggered the inclusion of sixpre-existing gas discovery wells and one oil discovery well within the currentproduction sharing contract. These wells, which were drilled by previousoperators, flowed hydrocarbons from the same geological formations as thediscoveries tested in HTT-1 and ISA-1. Petroceltic is in a unique position in Algeria, operating a significant licencewith Sonatrach as our partner, one of only a three AIM listed companies to enjoythis position. The Directors believe that there is considerable upside potentialin undeveloped discovered reserves in Algeria , and we look forward tocontinuing to develop our portfolio in Algeria with our partner Sonatrach. Italy: In Italy, the company is engaged in a major licence expansion programmein areas where relatively large discoveries are being made. Italy is anattractive exploration territory with good infrastructure, strong demand forenergy sources and good fiscal terms. The company expects to drill on itscurrent acreage in 2008. Petroceltic was granted exclusive permit application status in seven new Licenceapplications in April in the Central Adriatic area and a further two licenceapplications are under consideration by the Ministry of Economic Development.In September, the Company was notified that final Ministerial approval wasgranted for the onshore 615 km2 Civitaquana permit, where Petroceltic has a 40per cent interest. Tunisia: Petroceltic is planning to bring in a partner to its licence inTunisia, ahead of drilling. Approaches have been received from a number ofpotential partners in relation to the Ksar Hadada block. Interpretation of newseismic data recently acquired on this block has revealed a number of prospects.A search is currently underway to locate a rig suitable for drilling inTunisia in 2008. Exploration partners: Petroceltic has adequate financial resources for itscurrent commitments and is further extending its exploration funding optionsthrough entering in to joint ventures with exploration partners. These arebeing advanced on a number of fronts. At 30 June 2007, the company had cashbalances of US$27.9 million. Financial: The accounts for the period are the first to have been prepared bymanagement to reflect the recognition and measurement principles ofInternational Financial Reporting Standards expected to be adopted for use inthe European Union by 31 December 2007. This has lead to restatement of thefinancial position as at 30 June 2006 and 31 December 2006. The Company reports a loss after taxation of US$919,000 for the period. Revenuefor the period is significantly down due to lower gas prices in 1st half 2007versus 1st half 2006, technical problems with production on the Kinsale Head gasfield, and natural decline in the field. There was no exploration write off forthe period. Outlook: This is an exciting time in the oil industry, with crude oil prices ata record level and increasing concern over security and diversity of energysupply to European markets. High prices bring their own challenges, not least insecuring access to equipment and resources at reasonable prices. However, withits focus on the Mediterranean and North Africa and the potential for highimpact exploration finds on Europe's doorstep, Petroceltic is well placed togenerate significant growth in shareholder value in the years ahead. Notes to Editors: Petroceltic International plc is a leading Upstream Oil and Gas Exploration andProduction Company, focused on the Mediterranean and North African area, andlisted on the London Stock Exchange's AIM Market and the Irish Sock Exchange'sIEX Market. The company has exploration assets in Algeria, Tunisia and Italy anda royalty interest in the Kinsale Head gas field in Ireland. Petroceltic is ina unique position in Algeria, operating a significant licence in partnershipwith Sonatrach the state oil company, one of only three AIM listed companies toenjoy this position. PETROCELTIC INTERNATIONAL PLC CONSOLIDATED INCOME STATEMENTFor the period ended 30 June 2007 Full year Unaudited Unaudited ended 6 months ended 6 months ended 31 December 30 June 2007 30 June 2006 2006 US$'000 US$'000 US$'000 Revenue 140 610 1,266 Administrative expenses (1,089) (818) (2,577)Amortisation (26) (25) (51)Exploration costs written off - - (5,756)Cost of share based payments (843) (873) (1,832)Results from operating activities (1,818) (1,106) (8,950) Interest income 826 750 1,870Gain on investments 20 138 299Foreign currency gain 53 212 545 Loss before tax (919) (6) (6,236) Income tax expense - - (102) Loss for the period (919) (6) (6,338) Basic loss per share in cents (0.12) (0.00) (0.92)Diluted loss per share in cents (0.12) (0.00) (0.92) PETROCELTIC INTERNATIONAL PLC CONSOLIDATED STATEMENT OF MOVEMENTS IN EQUITYFor the period ended 30 June 2007 Full year Unaudited Unaudited ended 6 months ended 6 months ended 31 December 30 June 2007 30 June 2006 2006 US$'000 US$'000 US$'000 (Loss)/profit for the period (919) (6) (6,338)Increase in share based payment reserve 843 873 1,832Foreign currency translation differences - 1,390 1,842for foreign subsidiariesShare issues, net of costs - 41,005 40,993Opening equity 71,607 33,278 33,278Closing equity 71,531 76,540 71,607 The results and movements in equity for the half-year ended 30 June 2006 and forthe year ended 31 December 2006 have been restated to reflect the recognitionand measurement principles of International Financial Reporting Standardsexpected to be adopted for use in the European Union by 31 December 2007. Seebasis of preparation at note 1. PETROCELTIC INTERNATIONAL PLC CONSOLIDATED BALANCE SHEETAs at 30 June 2007 Unaudited Unaudited 31 December 30 June 2007 30 June 2006 2006 US$'000 US$'000 US$'000 AssetsIntangible assets 43,528 20,966 41,767Investments 728 560 708Total non-current assets 44,256 21,526 42,475 Trade and other receivables 648 642 985Cash and cash equivalents 27,854 54,873 33,410Total current assets 28,502 55,515 34,395 Total assets 72,758 77,041 76,870 EquityIssued share capital 26,191 26,203 26,191Share premium 113,079 113,078 113,079Capital conversion reserve fund 51 51 51Share based payment reserve 8,306 6,504 7,463Foreign currency translation reserve 1,842 1,390 1,842Retained earnings (77,938) (70,686) (77,019)Total equity 71,531 76,540 71,607 Liabilities- all currentTrade and other payables 1,227 501 5,263 Total equity and liabilities 72,758 77,041 76,870 The financial position as at 30 June 2006 and 31 December 2006 have beenrestated to reflect the recognition and measurement principles of InternationalFinancial Reporting Standards expected to be adopted for use in the EuropeanUnion by 31 December 2007. See basis of preparation at note 1. PETROCELTIC INTERNATIONAL PLC CONSOLIDATED CASH FLOW STATEMENTFor the period ended 30 June 2007 Full year Unaudited Unaudited ended 6 months ended 6 months ended 31 December 30 June 2007 30 June 2006 2006 US$'000 US$'000 US$'000Cash flows from operating activitiesLoss before tax (919) (6) (6,236)Interest income (826) (750) (1,870)Amortisation 26 25 51Gain on financial investments (20) (138) (299)Cost of share based payments 843 873 1,832Foreign currency translation differences for - 1,602 1,841foreign subsidiariesExploration costs written off - - 5,756Cash from operations before changes in working (896) 1,606 1,075capital Decrease/(increase) in trade and other 337 254 (190)receivables(Decrease)/increase in trade and other (4,036) (220) 4,682payablesNet cash from operating activities (4,595) 1,640 5,567 Cash flows from investing activitiesExpenditure on intangible assets (1,787) (7,844) (34,427)Interest received 826 750 1,870(Purchase)/sale of financial investments - (13) 1Net cash used in investing activities (961) (7,107) (32,556) Cash flows from financing activitiesProceeds from the issue of new shares - 41,006 40,994Cash outflow from repayment of debt - (71) -Net cash used in financing activities - 40,935 40,994 Net (decrease)/increase in cash and cash (5,556) 35,468 14,005equivalentsCash and cash equivalents at start of period 33,410 19,405 19,405Cash and cash equivalents at end of period 27,854 54,873 33,410 The cash flows for the half-year ended 30 June 2006 and for the year ended 31December 2006 have been restated to reflect the recognition and measurementprinciples of International Financial Reporting Standards expected to be adoptedfor use in the European Union by 31 December 2007. See basis of preparation atnote 1. NOTES TO THE CONSOLIDATED INTERIM FINANCIAL STATEMENTS 1. BASIS OF PREPARATION and provisional accounting policies A. BASIS OF PREPARATION European Union (EU) law requires that the next annual consolidated financialstatements of the Group for the year ended 31 December 2007 be prepared inaccordance with accounting standards adopted for use in the EU. This interim financial information has been prepared on the basis of therecognition and measurement requirements of International Financial ReportingStandards and International Accounting Standards (collectively 'IFRS') in issuethat either are adopted for use in the EU and effective (or available for earlyadoption) at 31 December 2007 or are expected to be adopted and effective (oravailable for early adoption) at 31 December 2007 the Group's first annualreporting date at which it is required to use accounting standards adopted foruse by the EU. Based on these recognition and measurement requirementsmanagement has made assumptions about the accounting policies expected to beapplied when the first annual financial statements are prepared in accordancewith accounting standards adopted by the EU for the year ending 31 December2007. The accounting standards adopted for use in the EU that will be effective (oravailable for early adoption) in the annual financial statements for the yearending 31 December 2007 are still subject to change and to additionalinterpretations and therefore cannot be determined with certainty. Accordingly,the accounting policies for that annual period will be determined finally onlywhen the annual financial statements are prepared for the year ending 31December 2007. The interim consolidated financial information was authorised for issue by theDirectors on 26 September 2007. An explanation of how the transition to IFRS has affected the financialinformation is outlined below: First time adoption of IFRS Up to and including the year ended 31 December 2006, the Group's financialstatements were prepared in accordance with generally accepted accountingprinciples as promulgated by the Institute of Chartered Accountants in Ireland(Irish GAAP). IFRS 1 'First-time adoption of International Financial Reporting Standards' isthe accounting standard governing the implementation of IFRS for the first time.This standard allows or requires a number of exceptions to its generalprinciples that the standards in force at the reporting date should be appliedretrospectively. At the transition date, 1 January 2006, the exemption toretrospective implementation availed of is that the Group has assumed that theCurrency Translation Reserve at 1 January 2006 is nil. Under IFRS, available for sale financial assets are carried at their fair value,with gains or losses taken through the income statement. Under Irish GAAP, thesewere carried at cost. The effect of this change is as follows: • The loss for the six month period ended 30 June 2006 has been reduced by $138,000 and financial assets at 30 June 2006 has been increased by that amount. • The loss for the year ended 31 December 2006 has been reduced by $299,000 and financial assets at 31 December 2006 has been increased by that amount. • Financial assets and shareholders' equity at 1 January 2006 have been increased by $354,000. Basis of measurement The consolidated financial statements have been prepared on the historical costbasis. Functional and presentation currency These consolidated financial statements are presented in US dollars, which isthe Company's functional currency. All financial information presented in USdollars has been rounded to the nearest thousand. Use of estimates and judgements The preparation of financial statements requires management to make judgements,estimates and assumptions that affect the application of accounting policies andthe reported amounts of assets, liabilities, income and expenses. Actual resultsmay differ from these estimates. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisionsto accounting estimates are recognised in the period in which the estimate isrevised and in any future periods affected. In particular, significant areas of estimation uncertainty and criticaljudgements in applying accounting policies that have the most significant effecton the amount recognised in the financial statements are in the following areas: • Measurement of the recoverable amounts of intangible assets • Utilisation of tax losses • Measurement of share-based payments B. BASIS OF CONSOLIDATION The consolidated financial statements include the financial statements of thecompany and all of its subsidiary undertakings drawn up to period end.Intra-group balances, and any unrealised income and expenses arising fromintra-group transactions, are eliminated in preparing the consolidated financialstatements. Subsidiary undertakings are consolidated on the basis of acquisitionaccounting whereby fair values at the date of acquisition are attributed to theunderlying identifiable assets (principally oil and gas interests) of thesubsidiary undertakings. In the Company balance sheet, investments in subsidiaries are stated at costless provision for impairment. C. Revenue Revenue represents royalty income and is recognised as the royalty falls due. D. INTANGIBLE FIXED ASSETS Intangible fixed assets consist of oil and gas interests. Exploration assets arestated at original cost less any provision for impairment. Producing assets arestated at original cost net of accumulated amortisation and any provision forimpairment. Capitalisation of these assets takes place from the point at whichthe Group has obtained the legal rights to explore a specific area. Exploration costs and directly attributable overheads incurred on oil and gasprojects are deferred until results of the related projects, based on geographicareas, are known. If a project is successful, the related expenditures will beamortised over the life of the estimated reserves on the unit of productionbasis. E. Impairment The carrying amounts of the Group's non-financial assets, other than deferredtax assets are reviewed at each reporting date to determine whether there is anyindication of impairment. If any such indication exists then the asset'srecoverable amount is estimated. For intangible assets that have indefinitelives or that are not yet available for use, recoverable amount is estimated ateach reporting date. An impairment loss is recognised if the carrying amount of an asset or itscash-generating unit exceeds its recoverable amount. A cash-generating unit isthe smallest identifiable asset Group that is expected to generate cash flowsthat largely are independent from other assets and Groups. Impairment losses arerecognised in profit or loss. Impairment losses recognised in respect ofcash-generating units are allocated first to reduce the carrying amount of anygoodwill allocated to the units and then to reduce the carrying amount of theother assets in the unit (group of units) on a pro rata basis. The recoverable amount of an asset or cash-generating unit is the greater of itsvalue in use and its fair value less costs to sell. In assessing value in use,the estimated future cash flows are discounted to their present value using apre-tax discount rate that reflects current market assessments of the time valueof money and the risks specific to the asset. F. FOREIGN CURRENCY Foreign currency transactions Transactions in foreign currencies are translated to the respective functionalcurrencies of Group entities at exchange rates at the dates of the transactions.Monetary assets and liabilities denominated in foreign currencies at thereporting date are retranslated to the functional currency at the exchange rateat that date. The foreign currency gain or loss on monetary items is thedifference between amortised cost in the functional currency at the beginning ofthe period, adjusted for effective interest and payments during the period, andthe amortised cost in foreign currency translated at the exchange rate at theend of the period. Foreign currency differences arising on retranslation arerecognised in profit or loss. Foreign operations The assets and liabilities of foreign operations are translated to US dollars atexchange rates at the reporting date. The income and expenses of foreignoperations are translated to US dollars at exchange rates at the dates of thetransactions. Foreign currency differences are recognised directly in equity. Since 1 January2006, the Group's date of transition to IFRS, such differences have beenrecognised in the foreign currency translation reserve (FCTR). When a foreignoperation is disposed of, in part or in full, the relevant amount in the FTCR istransferred to profit or loss. G. TAXATION Income tax expense comprises current and deferred tax. Income tax expense isrecognised in profit or loss except to the extent that it relates to itemsrecognised directly in equity, in which case it is recognised in equity. Current tax is the expected tax payable on the taxable income for the year,using tax rates enacted or substantively enacted at the reporting date, and anyadjustment to tax payable in respect of previous years. Deferred tax is recognised using the balance sheet method, providing fortemporary differences between the carrying amounts of assets and liabilities forfinancial reporting purposes and the amounts used for taxation purposes.Deferred tax is not recognised for the following temporary differences: theinitial recognition of goodwill, the initial recognition of assets orliabilities in a transaction that is not a business combination and that affectsneither accounting nor taxable profit, and differences relating to investmentsin subsidiaries to the extent that they probably will not reverse in theforeseeable future. Deferred tax is measured at the tax rates that are expectedto be applied to the temporary differences when they reverse, based on the lawsthat have been enacted or substantively enacted by the reporting date. A deferred tax asset is recognised to the extent that it is probable that futuretaxable profits will be available against which temporary difference can beutilised. Deferred tax assets are reviewed at each reporting date and arereduced to the extent that it is no longer probable that the related tax benefitwill be realised. H. PENSIONS The Group contributes to a defined contribution pension scheme for certainexecutives. Pension scheme costs are accounted for on an accruals basis. I. ISSUE EXPENSES AND SHARE PREMIUM ACCOUNT Issue expenses are written off against the premium arising on the issue of sharecapital. J. SHARE BASED PAYMENTS The Group has applied the requirements of IFRS 2 'share based payments'. TheGroup issues share options as an incentive to certain key management and staff(including directors). The fair value of share options granted to directors andemployees under the company's option schemes is recognised as an expense with acorresponding credit to the share based payments reserve. The fair value ismeasured at grant date and spread over the period during which the awards vest.The fair value is measured using a binomial lattice model, taking into accountthe terms and conditions upon which the options were granted. A discount formarket conditions has been applied to the fair values determined by the binomialmodel based on a Monte Carlo simulator analysis. The options issued by the Group are subject to both market-based and non-marketbased vesting conditions. Market conditions are included in the calculation offair value at the date of the grant. Non-market vesting conditions are nottaken into account when estimating the fair value of awards as at grant date;such conditions are taken into account through adjusting the number of equityinstruments that are expected to vest. The Group has issued warrants to its Italian joint venture partners in returnfor interests in the exploration licence BR.268.RG offshore Italy. The fairvalue of these warrants was determined in accordance with IFRS 2 based upon avaluation model. The deemed cost of these warrants has been capitalised asintangible assets in the Group's balance sheet in accordance with the Group'saccounting policy. The deemed cost of these warrants has been reflected asfinancial fixed assets in the company's balance sheet as representing capitalcontributions to the Group's Italian subsidiary. The corresponding credit hasbeen recorded in the share based payment reserve in both the Group and companybalance sheets. The proceeds received net of any directly attributable transactions costs willbe credited to share capital (nominal value) and share premium when options orshare warrants are converted into ordinary shares. K. INVESTMENTS- AVAILABLE FOR SALE ASSETS The Group's investments in equity securities are classified asavailable-for-sale financial assets. Subsequent to initial recognition, they aremeasured at fair value and changes therein are recognised in the incomestatement. L. Earnings per share The Group presents basic and diluted earnings per share (EPS) data for itsordinary shares. Basic EPS is calculated by dividing the profit or lossattributable to ordinary shareholders of the Company by the weighted averagenumber of ordinary shares outstanding during the period. Diluted EPS isdetermined by adjusting the profit or loss attributable to ordinary shareholdersand the weighted average number of ordinary shares outstanding for the effectsof all dilutive potential ordinary shares, which comprise convertible notes andshare options granted to employees. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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