Interim Results

14th Jul 2008 07:16



14 July 2008

 

EMERALD ENERGY PLC ("EMERALD" OR THE "COMPANY") ANNOUNCES RESULTS FOR THE HALF-YEAR PERIOD ENDED 30 JUNE 2008

 

HIGHLIGHTS

Development of Khurbet East field progressing: initial development wells drilled, early production facilities installed, and commencement of production expected in August 2008;

At least one exploration well planned in Block 26 for the second half of 2008;

Vigia No.5 development well flow tested at over 1,000 bopd; better than expected result supports further development of the field;

Colombia average gross production of 2,901 bopd (2007: 3,661 bopd), with Emerald net entitlement of 1,621 bopd (2006: 2,254 bopd). Current gross production rate in excess of 4,000 bopd;

Adjusted EBITDA for the period of $20.1 million (2007: $14.4 million), 40% higher than the same period last year;

Profit after tax for the period of $12.4 million (2007: $4.1 million), 202% higher than the same period last year;

Cash reserves of $48.4 million (2007: $11.0 million).

INTERIM MANAGEMENT REPORT

OUTLOOK

In Syria, the Company has had an exciting first half of the year with start-up activities on Khurbet East accelerating the date of expected first production; in Colombia development activities indicate further development potential of an existing field. Exploration activities in both Syria and Colombia are creating an exploration drilling programme with the potential to discover material reserves.

In the Khurbet East field, the initial development wells have been drilled and the early production facilities, capable of processing some 10,000 barrels per day, have been installed. Facilities testing and well tie-back operations are being conducted and production is expected to commence in August. The 3D seismic surveys acquired towards the end of last year have now been interpreted and at least one exploration well is expected to be drilled in the second half of the year.

In Colombia, the development drilling programme commenced with a success, the Vigia No.5 well, which is now producing at over 1,000 bopd. Vigia No.6 is now being drilled and later in the year, the Company will drill one further well in the Campo Rico field, and possibly one more well in Vigia, which, when combined with gross production rates of over 4,000 bopd, achieved in early July, is expected to enhance production in the second half of the year. The planned three well exploration programme has commenced with the Capella No.1 well in the Ombu block.

We are optimistic that the plans for the current year, financed by cash resources and strong cash flow expected from production, will continue to deliver growth for the Company and enhance shareholder value.

SUMMARY FINANCIAL RESULTS

		1H 2008		1H 2007
		mbbl		mbbl
Gross production		528		663
Entitlement production		295		408
		$ '000		$ '000
Revenue		29,592		20,687
Production costs		(4,872)		(5,211)
Adjusted EBITDA*		20,066		14,424
Profit before tax		18,962		8,289
		$		$
Earnings per ordinary share on diluted basis		0.20		0.07

(*) EBITDA is earnings before interest (and other finance income and costs), tax, depreciation, depletion, amortisation and write-offs (including impairment) of oil & gas assets. Adjusted EBITDA is calculated before share based payments, charged to the income statement under IFRS 2.

In the six months to 30 June 2008, the Group achieved average revenue of $96.62 per barrel for 306 mbbl of entitlement production and inventory sold. The sales price is based upon the benchmark prices of West Texas Intermediate and Vasconia Blend; it is subject to an oil quality price adjustment and a discount reflecting the cost of transporting the oil to the international markets. In the period, West Texas Intermediate oil price averaged about $109 per barrel.

In the same period, production costs per barrel of entitlement production were $16.52, some 29% higher than $12.77 achieved in the comparative period of last year, reflecting an industry wide increase in the cost base, caused primarily by the oil price increases, the lower levels of production compared to that achieved in the first half of 2007, and the strengthening of the Colombian peso in relation to the US dollar.

Reduced entitlement production in the first half of 2008 (at 56% of gross production compared to 62% achieved in the same period of last year) resulted from the end of cost recovery in the Gigante field prior to the beginning of 2008.

In the reported period, EBITDA and profit were affected by an increase in administrative expenses before share based payments to $4.545 million (2007: $2.009 million), reflecting (a) National Insurance Contribution provision of $1.547 million (2007: credit of $0.005 million) relating to increase in employer's liability in respect of future exercise of options under the Emerald Energy Plc Discretionary Share Option Scheme, caused by a 96% increase in the Company's share price, and (b) the strengthening of the Colombian peso in relation to the US dollar.

In the reported period, profit before tax was increased by an impairment charge reversal of $3.541 million, resulting from the ceiling test review of the Vigia field following the better than expected results from the Vigia No.5 development well.

REVIEW OF OPERATIONS

Syria, Block 26 - Exploration and Development

 

The second appraisal well in the Khurbet East field, Khurbet East No.3, reached a total depth of 2,050 metres, encountered the Cretaceous Massive reservoir as expected, and was flow tested across the full section of the main Massive reservoir in January 2008 at an oil rate of 3,420 barrels per day. 

During February 2008, approval for commercial development of the Khurbet East field was granted by the Syrian Ministry of Petroleum and Mineral Resources and the Syrian Petroleum Company, and the application for a Development Area of approximately 100 square kilometres covering the Khurbet East field was granted by the Syrian Ministry of Petroleum and Mineral Resources. 

Khurbet East No.4, located approximately 150 metres from the Khurbet East No.1 well, reached a total depth of 1,935 metres in March 2008 and was not flow tested.  

The first horizontal production well in the field, Khurbet East No.5, was drilled in May 2008 with a horizontal section of 300 metres and was flow tested at an oil rate of 2,041 barrels per day. The flow rate was restricted by the well testing equipment, resulting in a pressure drawdown of less than 10 psi at the reservoir. Analysis of the downhole pressure data indicated the same excellent reservoir properties as seen in the other Khurbet East wells.  The second horizontal production well in the field, Khurbet East No.6, was drilled in June 2008 with a horizontal section of 200 metres and was not flow tested.

The procurement, construction and installation of the early production facilities in the Khurbet East field were completed at the end of June.  These facilities, capable of processing some 10,000 barrels per day, are being tested and commissioned prior to start-up for commercial oil production.

The five producer wells already drilled in the Cretaceous Massive reservoir in the Khurbet East field are being connected by flowlines to the early production system.  After these connections are completed, three of the wells, Khurbet East No.4, No.5, and No.6 will be immediately available for production.  The remaining two wells, Khurbet East No.2 and Khurbet East No.3 will be re-entered, completed as production wells and then will also be available for production. These operations are expected to be completed by early August.

Production from the field is expected to commence during August 2008. 

The Khurbet East No.1 well, drilled to a total depth of 3,800 metres, may be used to further appraise the deeper Triassic Kurrachine Dolomite and Butmah reservoirs and is therefore not currently included in the development plan for the shallower Massive reservoir.

The 3D seismic data acquired over the Khurbet East field and a separate area to the south of the field has been interpreted and will assist in locating future development wells in the Khurbet East field and in progressing exploration leads in these areas.

At least one exploration well in Block 26 is expected to be drilled in the remainder of 2008 and rig commitments adequate for both the development and exploration requirements have been secured.

 

Colombia - Exploration and Development

 

Emerald contracted a rig to drill two wells with the option of an additional two wells. The first well, the Vigia No.5 development well in the Vigia field, has been drilled to the target reservoirs and completed as an oil producer. The well encountered the targeted Cretaceous Une and Gacheta reservoirs higher than anticipated in the pre-drill estimates.  Both reservoirs were oil-bearing with more net pay thicknesses in the Une and Gacheta reservoirs than were seen in the Vigia No.1 well, the previously best performing well in the field. Vigia No.5 was completed in the Une reservoir and initially tested, under natural flow, at a rate of over 1,000 barrels of oil per day with only a small amount of water. 

Following these encouraging results in the Vigia No.5 well, another development well, Vigia No.6, has commenced drilling in the field.  The Company believes that there may be potential for at least one further development well in the field to optimise recovery. Following this operation, the rig will move to drill the Campo Rico No.5 development well.  Each well is expected to take approximately one month to drill and evaluate, with a further two weeks for rig moves between wells.

Emerald has also contracted a smaller rig for a period of up to one year.  The rig mobilised to the Ombu block in June 2008 and has commenced drilling the Capella No.1 well which is expected to take approximately one month to drill and evaluate. If hydrocarbons are encountered, the well will undergo an extended period of up to six months of production testing to determine if commercial development is feasible.  The Company estimates, based on the analysis of previous exploration activity in the area, that the structure may contain over 30 million barrels of unrisked recoverable resources. 

In the Ombu block, the initial phase of exploration has been extended to September 2008 to allow for the drilling of one exploration well in substitution of the original 2D seismic data acquisition commitment. If the second phase of exploration is entered into, one further well has to be drilled by November 2008.

Emerald has entered into a farmout agreement with Canacol Energy Inc. ("Canacol"), subject to a number of conditions, under which Canacol pays 100% of the cost of the drilling, evaluation and production testing of the Capella No.1 well to earn a 10% interest in the Ombu block. The agreement also includes terms under which Canacol may increase its interest in the Ombu block in two stages up to a 30% interest by paying 100% of the cost of up to a further 14 wells, plus a 2D and a 3D seismic survey.

The Company entered into the second phase of exploration in the Maranta and Jacaranda blocks in March 2008, each with a twelve month duration and a work commitment of one exploration well. 

In the Jacaranda block, access to the Jacinto prospect location has been impeded by the exceptionally heavy rains experienced in recent months. Drilling on this prospect is now expected to commence in the fourth quarter of 2008.  The Jacinto prospect has a previously reported unrisked prospective resource potential, estimated by the Company, of over 10 million barrels.  This well is expected to have a total depth of approximately 6,000 feet and is expected to take approximately one month to drill and evaluate.

Drilling in the Maranta block is likely to commence in the fourth quarter of 2008 on the Mirto prospect which the Company estimates may contain unrisked recoverable resources in the range of 5 to 15 million barrels.

In April 2008, Emerald was awarded the Agerato exploration and production contract area located in the Putumayo Basin, approximately 75 kilometres to the south-east of the Company's Maranta contract area.  The Company believes the area may be on geological trend with discoveries to the south in Ecuador and that the prospective depths may be relatively shallow at approximately 7,000 feet.  The initial phase of the exploration period, which may be extended to accommodate consultation with indigenous communities, is twelve months and the minimum work programme comprises the acquisition of 35 kilometres of new 2D seismic data and the re-processing of 40 kilometres of existing 2D seismic data.

The Company elected In March 2008 not to undertake any further exploration well commitment in the Campo Rico block, thus ending the exploration period of the contract.  The Company relinquished approximately 47% of the area but retains the right to explore within the remaining area which includes the prospectivity previously identified in the block. 

 

Colombia - Production

 

During the first half of 2008, gross production averaged 2,901 barrels of oil per day and net entitlement averaged 1,621 barrels of oil per day.  Production was lower than expected due to a second failure of the electrical submersible pump in the Gigante No.1A well; the pump was replaced with a larger pump and the well was returned to production in late June. Gross production in early July has been over 4,000 barrels of oil per day as the Vigia No.5 and Gigante No.1A wells have been stabilising. 

PRINCIPAL RISKS AND UNCERTAINTIES

The Company and its subsidiaries (jointly, the "Group"), is subject to various risks and uncertainties that may impact its business in the remaining six months of the financial year as well as in the more distant future. The principal risks and uncertainties, faced by the Group, include: 

Exploration Risk

The business of oil and gas exploration involves a high degree of risk, which even a combination of experience, knowledge and careful evaluation may not be able to fully mitigate. Few properties that are explored are ultimately developed into producing fields. Substantial expenditure is required to establish hydrocarbon reserves through seismic surveys and exploration drilling. There is no assurance that hydrocarbons will be discovered or, even if they are, that economically viable quantities of them can be recovered from the areas by the Group's existing or future E&P licenses.

Reserve Estimates

Petroleum engineers' projections of future production from oil and gas reserves are derived from historic production records and volumetric estimates. The levels of production actually achieved may differ significantly from petroleum engineers' estimates. The current value of such future production is based upon projections of future oil and gas prices and drilling and operating costs. Such projections may turn out to be inaccurate. Adverse movements in any of these variables may result in lower levels of production that had been estimated by petroleum engineers.

Operational Risk

The operations of the Group may be disrupted by a variety of risks and hazards, which are beyond the control of the Group, including environmental hazards, industrial accidents, occupational and health hazards, technical failures, labour disputes, unusual or unexpected geological formations and extended interruptions due to increment of hazardous weather conditions, explosions and other accidents. These risks and hazards could also result in damage to, or the destruction of, production facilities, personal injury, environmental damage, business interruption, monetary losses and possible legal liability. While the Group currently maintains insurance within ranges of coverage consistent with industry practice, no assurance can be given that the Group will be able to obtain such insurance at reasonable rates (or at all), or that any coverage it obtains will be adequate and available to cover any such claims.

Oil and Gas Price Risk

The profitability of the Group's operation is dependent upon the market price of hydrocarbons, which has fluctuated widely in the past. Oil and gas prices are affected by numerous factors beyond Emerald's control, including international economic and political conditions, level of supply and demand, policies of the Organisation of Petroleum Exporting Countries and currency exchange rates. Movements in market prices could render uneconomic any of the extraction or exploration activities undertaken or to be undertaken.

International Operations in Territories Susceptible to Political or Other Instability

The Group's operations may be susceptible to political, social and economic instability and civil disturbances. Risks for the Group in operating in such areas include:

Disruption of operations, including strikes, civil actions, political interference or terrorism;

Changes to the fiscal regime, including changes in the rates of income and corporation tax or changes to the terms of the E&P contracts;

Changed in local governments, resulting in introduction of new restrictions, including the imposition of tariffs and limitations on imports or exports; and

Expropriation of assets.

Any of the above factors could result in disruptions to the Group's business, increased costs or reduced future growth opportunities. Potential losses caused by these disruptions may not be covered by insurance.

Competition

The Group competes with numerous other companies (many of which have greater financial resources than the Group) and individuals in the search for and acquisition of hydrocarbons as well as for the recruitment and retention of its senior personnel and qualified employees.

STATEMENT OF DIRECTORS' RESPONSIBILITIES

The Directors are responsible for keeping proper accounting records which disclose with reasonable accuracy at any time the financial position of the Company and enable them to ensure that the financial statements comply with the requirements of the Isle of Man Companies Acts 1931 to 2004. They are also responsible for safeguarding the assets of the company, for taking reasonable steps for the prevention and detection of fraud and other irregularities.

The Directors are also required to prepare financial statements for the group in accordance with International Financial Reporting Standards ("IFRS") and Article 4 of the International Accounting Standard ("IAS") Regulation.

IAS 1 requires that financial statements present fairly for each reporting period the Group's financial position, financial performance and cash flows. This requires the faithful representation of the effects of transactions, other events and conditions in accordance with the definitions and recognition criteria for assets, liabilities, income and expenses set out in the International Accounting Standards Board's 'Framework for the preparation and presentation of financial statements'. In virtually all circumstances, a fair presentation will be achieved by compliance with all applicable IFRS. A fair presentation also requires the Directors to:

consistently select and apply appropriate accounting policies;

present information, including accounting policies, in a manner that provides relevant, reliable, comparable and understandable information;

provide additional disclosures when compliance with the specific requirements in IFRS is insufficient to enable users to understand the impact of particular transactions, other events and conditions on the entity's financial position and financial performance; and

state that the group has complied with IFRS, subject to any material departures disclosed and explained in the financial statements. 

Financial statements are published on the Group's website. The maintenance and integrity of the Group's website is the responsibility of the Directors. The Directors' responsibility also extends to the ongoing integrity of the financial statements contained therein.

The Directors confirm that they have complied with these requirements, and, having a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future, continue to adopt the going concern basis in preparing the financial statements.

Alastair Beardsall, Chairman of the Board

Angus MacAskill, Chief Executive

Edward Grace, Finance Director

Keith Henry, Senior Non-Executive Director

Fred Ponsonby, Non-Executive Director

Merfyn Roberts, Non-Executive Director

14 July 2008

CONDENSED FINANCIAL STATEMENTS

UNAUDITED GROUP INCOME STATEMENT

			Half year to 30 June	Half year to 30 June	Year to 31 December
			2008	2007	2007
			$ '000	$ '000	$ '000
Revenue from oil sales			29,592	20,687	44,357
Cost of sales
	Production costs		(4,872)	(5,211)	(10,924)
	Expensed exploration costs		(122)	(15)	(50)
	Depletion and depreciation of oil and gas assets		(4,048)	(4,035)	(10,207)
	Write-offs of unsuccessful exploration costs		-	(1,288)	(9,834)
	Impairment reversal		3,541	-	-
Total cost of sales			(5,501)	(10,549)	(31,015)
Gross profit			24,091	10,138	13,342
Other income/(expenses)			(33)	972	1,254
Administrative expenses
	General and administrative expenses before share-based payments		(4,545)	(2,009)	(4,637)
	Share-based payments		(128)	(1,392)	(1,622)
Total administrative expenses			(4,673)	(3,401)	(6,259)
Profit from operations before tax and finance income			19,385	7,709	8,337
Finance costs			(1,369)	(62)	(1,372)
Finance income			946	642	1,624
Profit before tax			18,962	8,289	8,589
Tax expense
	Current tax charge for the year		(3,808)	(2,369)	(2,097)
	Deferred tax credit/(charge) for the year		(2,710)	(1,815)	59
Total tax expense			(6,518)	(4,184)	(2,038)
Profit/(loss) for the year attributable to equity holders of the parent			12,444	4,105	6,551
Basic earnings per ordinary share			$0.21	$0.07	$0.11
Diluted earnings per ordinary share			$0.20	$0.07	$0.11

UNAUDITED GROUP BALANCE SHEET

		30 June 2008	30 June 2007	31 December 2007
		$ '000	$ '000	$ '000
Non-current assets
Property, plant and equipment		80,391	35,487	66,859
Intangible assets		6,251	38,602	4,527
Deferred tax		-	152	127
Investments in subsidiaries		-	-	-
		86,642	74,241	71,513
Current assets
Inventories		5,115	5,591	6,241
Trade and other receivables		6,014	2,515	4,715
Prepayments		258	306	132
Corporation tax debtor		-	-	824
Cash and cash equivalents		48,358	11,047	40,169
Restricted cash collateral		1,109	358	3,493
		60,854	19,817	55,574
Total assets		147,496	94,058	127,087
Current liabilities
Trade and other payables		4,314	1,598	4,321
Accruals		4,974	1,259	2,017
Provisions		410	410	410
Corporation tax creditor		2,482	502	-
		12,180	3,769	6,748
Non-current liabilities
Deferred tax		8,528	8,319	6,420
Debt component of convertible bonds		24,781	-	24,269
		33,309	8,319	30,689
Equity attributable to the shareholders
Issued share capital		9,839	9,825	9,825
Share premium		50,359	50,359	50,359
Retained earnings and reserves		41,809	21,786	29,466
		102,007	81,970	89,650
Total liabilities and shareholders' equity		147,496	94,058	127,087

UNAUDITED GROUP CASH FLOW STATEMENT

		Half year to 30 June 2008	Half year to 30 June 2007	Year to 31 December 2007
		$ '000	$ '000	$ '000
Cash flow from operating activities
Profit from operations before tax and finance income and costs		19,385	7,709	8,337
Share based payments		128	1,392	1,622
Depletion and depreciation		4,094	4,035	10,299
Write-offs of unsuccessful exploration costs		-	1,288	9,834
Impairment reversal		(3,541)	-	-
Exchange gains		273	393	404
Operating profit before changes in working capital and provisions		20,339	14,817	30,496
Movement in inventory		1,127	(942)	(1,592)
Movement in operating receivables		959	1,785	(3,377)
Movement in operating payables		776	(3,041)	(1,899)
Cash flow from operating activities		23,201	12,619	23,628
Profit tax paid		(977)	(961)	(2,016)
Net cash flow from operations		22,224	11,658	21,612
Cash flow from investing activities
Capital investment in Colombia		(6,464)	(8,996)	(12,189)
Capital investment in Syria		(7,173)	(7,597)	(14,138)
Investment in subsidiaries		-	-	-
Interest received		673	406	1,220
		(12,964)	(16,187)	(25,107)
Cash flow from financing activities
Gross proceeds from issue of equity		-	-	-
Costs relating to issue of equity, incl. cash settlement of share options exercises		(215)	-	-
Gross proceeds from issue of convertible bonds		-	-	30,000
Costs relating to issue of convertible bonds		-	-	(1,268)
Interest paid and banking charges		(856)	(219)	(830)
		(1,071)	(219)	27,902
Net change in cash and cash equivalents		8,189	(4,748)	24,407
Cash at period start		40,169	15,762	15,762
Period cash flow		8,189	(4,748)	24,407
Currency translation		-	33	-
Cash and cash equivalents at period end		48,358	11,047	40,169

UNAUDITED GROUP STATEMENT OF CHANGES IN EQUITY

GROUP:	Share capital(1)	Share premium(2)	Shares to be issued(3)	Equity portion of convertible bonds(4)	Retained earnings (5)	Total
	$ '000	$ '000	$ '000	$ '000	$ '000	$ '000
Balance at 31 December 2006	9,216	40,838	10,130	-	16,288	76,472
Changes in equity:
Income for the period	-	-	-	-	4,105	4,105
Issue of new share capital	609	9,521	(10,130)	-	-	-
Share based payments	-	-	-	-	1,392	1,392
Balance at 30 June 2007	9,825	50,359	-	-	21,785	81,969
Balance at 31 December 2006	9,216	40,838	10,130	-	16,288	76,472
Changes in equity:
Income for the period	-	-	-	-	6,551	6,551
Issue of new share capital	609	9,521	(10,130)	-	-	-
Issue of convertible bonds	-	-	-	5,005	-	5,005
Share based payments	-	-	-	-	1,622	1,622
Balance at 31 December 2007	9,825	50,359	-	5,005	24,461	89,650
Changed in equity:
Income for the period	-	-	-	-	12,444	12,444
Issue of new share capital	14	-	-	-	(229)	(215)
Share based payments	-	-	-	-	128	128
Balance at 30 June 2008	9,839	50,359	-	5,005	36,804	102,007

The following describes the nature and purpose of each reserve within shareholders' equity:

Share capital (1)	Nominal value of amounts subscribed for share capital
Share premium (2)	Amounts subscribed for share capital in excess of nominal value
Shares to be issued (3)	Shares issued to Soyuzneftegas Limited pursuant to the SNG Overseas Limited Share Purchase Agreement
Equity portion of convertible bonds (4)	Portion of convertible bonds recognised as equity on issuance of Series A and Series B senior unsecured convertible bonds
Retained earnings (5)	Cumulative net gains and losses recognised in the income statement. Retained earnings include fair value of the share options issued under the Company's discretionary share option plan and recognised on the date of the grant as well as effects of cashless exercise and cash settlement of the exercises of share options under the Emerald Energy Plc Discretionary Share Option Scheme and cumulative effect of historical differences arising from conversion of reserves from source to reporting currency

NOTES TO THE FINANCIAL INFORMATION

Basis of Preparation

The Group follows International Financial Reporting Standards, endorsed by the EU, as the basis for preparation of its financial statements. These financial statements are prepared on the historical basis as modified by the requirements of IFRS to present financial assets and liabilities at their fair value, making the required adjustment through the income statement.

The financial information presented above does not constitute statutory accounts within the meaning of Isle of Man Companies Acts 1931 to 2004. This financial information has been prepared on the basis consistent with the accounting policies applied for the year ended 31 December 2007 and in accordance with the requirements of IAS 34, 'Interim Financial Reporting'.

Segment Information

The Group is engaged in oil and gas exploration and production activities only. As the operating businesses are organised and managed separately on a country-by-country basis, segment information is reported geographically only.

Currently, the Group and its companies are not involved in transfer pricing.

	Syria	Colombia	London Head Office	Group
	$ '000	$ '000	$ '000	$ '000
Half Year to 30 June 2008
Revenue from oil sales	-	29,592	-	29,592
Cost of sales	-	(5,424)	(77)	(5,501)
Gross profit	-	24,168	(77)	24,091
Other income/(expenses)	-	(33)	-	(33)
Administrative expenses	-	(1,760)	(2,913)	(4,673)
Profit from operations before tax and finance	-	22,375	(2,990)	19,385
Finance costs	-	(48)	(1,321)	(1,369)
Finance income	-	295	651	946
Profit before tax	-	22,622	(3,660)	18,962
Tax expense	-	(6,518)	-	(6,518)
Profit/(loss) for the period	-	16,104	(3,660)	12,444

	Syria	Colombia	London Head Office	Group
	$ '000	$ '000	$ '000	$ '000
Half Year to 30 June 2007
Revenue from oil sales	-	20,687	-	20,687
Cost of sales	(1,264)	(9,270)	(15)	(10,549)
Gross profit	(1,264)	11,417	(15)	10,138
Other income/(expenses)	-	972	-	972
Administrative expenses	-	(1,006)	(2,395)	(3,401)
Profit from operations before tax and finance	(1,264)	11,383	(2,410)	7,709
Finance costs	(1)	(59)	(2)	(62)
Finance income	-	396	246	642
Profit before tax	(1,265)	11,720	(2,166)	8,289
Tax expense	-	(4,184)	-	(4,184)
Profit/(loss) for the period	(1,265)	7,536	(2,166)	4,105

	Syria	Colombia	London Head Office	Group
	$ '000	$ '000	$ '000	$ '000
Year to 31 December 2007
Revenue from oil sales	-	44,357	-	44,357
Cost of sales	(1,267)	(29,710)	(38)	(31,015)
Gross profit	(1,267)	14,647	(38)	13,342
Other income/(expenses)	-	1,254	-	1,254
Administrative expenses	-	(2,782)	(3,477)	(6,259)
Profit from operations before tax and finance	(1,267)	13,119	(3,515)	8,337
Finance costs	(9)	(22)	(1,341)	(1,372)
Finance income	-	438	1,186	1,624
Profit before tax	(1,276)	13,535	(3,670)	8,589
Tax expense	-	(2,038)	-	(2,038)
Profit/(loss) for the period	(1,276)	11,497	(3,670)	6,551

Earnings per Ordinary Share

Basic earnings per share amounts are calculated by dividing profit for the period attributable to ordinary equity holders of the parent by the weighted average number of ordinary shares outstanding during the period.

Diluted earnings per share amounts are calculated by dividing the profit for the period attributable to ordinary equity holders of the parent by the weighted average number of ordinary shares outstanding during the year plus the weighted average number of ordinary shares that would be issued on the conversion of all the dilutive potential ordinary shares into ordinary shares.

The following reflects the income and share data used in the basic and diluted earnings per share computations:

	Half year to 30 June 2008	Half year to 30 June 2007	Year to 31 December 2007
	$ '000	$ '000	$ '000
Net profit/(loss) for the period attributable to equity holders	12,444	4,105	6,551

	Half year to 30 June 2008	Half year to 30 June 2007	Year to 31 December 2007
Basic weighted average number of shares**	59,599,549	57,253,215	58,432,720
Dilutive potential ordinary shares:
Shares to be issued on conversion of convertible bonds*	143,526	-	-
Employee share options	2,142,968	1,318,161	1,441,588
Diluted weighted average number of shares	61,886,043	58,571,376	59,874,308

(*) Series A bonds are convertible into 2,564,282 ordinary shares of the Company at 290 pence per share and Series B bonds are convertible into 2,754,229 ordinary shares of the Company at 270 pence per share. As the average share price in 2007 was below either of the conversion prices, the shares potentially issuable on conversion of the bonds did not contribute to the computation of diluted weighted average number of shares.

(**) Basic weighted average number of shares in the half-year period to 30 June 2007 has been restated to conform with the method adopted for the computation of the basic weighted average number of shares in the full year to 31 December 2007 and the half year to 30 June 2008.

There have been no other transactions involving ordinary shares or potential ordinary shares between the reporting date and completion of these financial statements.

Dividends

No dividend was declared in the reporting period (2007: Nil).

Auditors' Review

This half-yearly financial report has not been reviewed by the Group's auditors, BDO Stoy Hayward.

Approval of Half-Yearly Financial Report

This unaudited half-yearly financial report was approved by directors on 13 July 2008.

Subsequent Events

There were no material subsequent events between 30 June 2008 and the date of this document other than disclosed in this document.

ENDIR SFWSMLSASESW

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Emerald Energy