19th Sep 2006 07:02
Emerald Energy PLC19 September 2006 19 September 2006 For immediate release EMERALD ENERGY PLC ("EMERALD" OR THE "COMPANY") ANNOUNCES INTERIM RESULTS FOR THE SIX MONTHS ENDED 30 JUNE 2006 Highlights • Average daily gross production for the period was 3,677 bopd, an increase of 45% compared to the 6 month period to 30 June 2005; • In Colombia, Emerald currently has ten production wells on 5 fields with nine in operation producing total some 4,200 bopd; • Since February 2006 Emerald has participated in the drilling of 5 wells, 3 exploration and 2 development wells, resulting in 1 new discovery and 2 new wells on production; • Drilling of the Tigris exploration well commenced on 10 September 2006 and is currently drilling ahead at 522 metres; • In September 2006 Emerald signed a new Exploration & Production Contract with ANH for the Maranta block located in southwest Colombia. Summary financial results 1H 2006 1H 2005 --------- --------- mbbl mbbl --------- ---------Attributable gross production 665 460Entitlement production 441 353 --------- --------- $ '000 $ '000 --------- ---------Revenue 21,290 12,386Production costs (6,042) (3,888)Adjusted EBITDA(*) 13,216 4,831Profit before tax 5,413 3,265 --------- --------- Cents Cents --------- ---------Earnings per share 3.83 3.15------------------------------ --------- --------- (*) 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 2006, the Group achieved average revenue of $48.28per barrel of entitlement production, an increase of 38% when compared to $35.09per barrel, achieved in the same period of last year. Emerald sells itsentitlement production to third parties in the proximity of its operations. Thesales price is based upon the benchmark price of West Texas Intermediate orVasconia Blend; it is subject to the customary oil quality price adjustment anda discount to reflect the cost of transporting the oil to the internationalmarkets. Production costs incurred in the reporting period reflect increases insupplier costs influenced by the increased activity in the oil sector. Of the 441,000 barrels of oil sold by Emerald, 142,000 barrels represent partialrecovery of reimbursable costs incurred by Emerald in the Campo Rico block inColombia. In accordance with the terms of the Campo Rico Association Contract,158,000 barrels of oil produced in the Campo Rico and Vigia fields weredelivered to Ecopetrol as their share of production. Ecopetrol's share ofproduction costs in the Vigia field has been fully expensed by the Group andwill be recovered when the field is granted either commercial or sole riskstatus by Ecopetrol. In the reporting period, the increased level of production and the favourableeconomic environment allowed Emerald to achieve profit before tax of $5,413,000an increase of 66% when compared to $3,265,000 achieved for the correspondingperiod in 2005. Board Change On 4 September 2006 Emerald appointed Angus MacAskill a director and its ChiefOperating Officer. Commenting on the results, Chairman and Chief Executive, Alastair Beardsall,said: "These results show a strong improvement over the same reporting period lastyear. In this period of higher oil prices, acquiring reserves and production isexpensive. We have continued to grow our reserves and increase our productionthrough exploration and development drilling, we remain focused on anexploration driven strategy for delivering cost-effective growth. The coming twelve months look very exciting for Emerald with the drilling of theTigris exploration well underway, the spudding of the Aureliano exploration wellin November 2006, and our plans to drill the Gigante No.2 well advancing,hopefully, to a spud date before the end of 2007." Operations review - Colombia Campo Rico block The Centauro Sur No.1 well, drilled in April 2006, on a prospect located to thesouth of the Campo Rico field, discovered oil in the Mirador formation. A secondwell on the Centauro Sur field was drilled in July 2006. Both wells are now onproduction. The Las Acacias No.1 well, drilled in May 2006, on a prospect located to thesouth of the Vigia field, failed to recover hydrocarbons to surface. The well isnow being tested as a disposal well for water produced from the Vigia field.Using Las Acacias No.1 as a water disposal well will reduce the ongoing cost ofdisposing of the water produced in the Vigia field, will allow Emerald torecover part of its cost from Ecopetrol's share of the Vigia oil production andwill save the cost of drilling a dedicated water disposal well that was part ofthe original drilling programme. The Vigia No.4 well was drilled in August 2006 as a step out appraisal well totest a westward extension to the Vigia field, and was evaluated asnon-commercial. The well has been plugged and abandoned. A proportion of thedrilling costs will be recovered from Ecopetrol's share of Vigia's oilproduction in line with the fiscal terms of the Campo Rico Association Contract. Matambo block A programme to acquire 40 square kilometres of 3D seismic to cover the Gigantestructure is being prepared and will assist in determining the location fordrilling the Gigante No.2 well. Discussions with Ecopetrol continue over theirparticipation in the drilling of the Gigante No.2 well. If the well is drilledas a development well inside the joint operations area, previously known as thesole risk area, Ecopetrol is entitled to participate and will pay 50% of thedrilling and operating costs and receive 50% of the production after royalties.If Ecopetrol declines to participate in a development well, Emerald may drillthe well on a sole risk basis, with an entitlement to recover 200% of the wellcost from any future production. If the well is drilled outside of the jointoperations area as an exploration well, Emerald will pay 100% of the costs withEcopetrol retaining the right to participate in 50% of any future production,subject to Emerald's right to recover 50% of the costs incurred prior toEcopetrol's back-in. Due to the long lead times required to source drillingmaterials and a drilling rig with sufficient capacity to drill to the estimateddepth of 16,000 feet, the drilling of the Gigante No.2 well may not be startedbefore the fourth quarter of 2007. Fortuna block The Silfide No.1 well on the Fortuna block was produced for several weeks at anaverage rate of 25 bopd. Geological, reservoir and production data is beingevaluated to determine if the well would respond to a hydraulic fracturetreatment to enhance the production rate. El Algarrobo block The Agueda No.1 exploration well (Emerald 50% working interest) was drilled inMarch 2006 on a prospect located to the north of the producing Rancho Hermosofield in the Llanos basin. The well was evaluated as non-commercial and pluggedand abandoned. The drilling of this well satisfied the work obligations underthe El Algarrobo Association Contract, which has now been relinquished. Maranta block In September 2006 the Company signed the Maranta Exploration & ProductionContract with the National Hydrocarbon Agency of Colombia (ANH). The Marantablock, located in the southwest of Colombia and northeast of the producingfields of the Putumayo basin, covers some 365 square kilometres. The initialphase of the exploration period will be 18 months and the minimum work programmecomprises the acquisition of 30 kilometres of new 2D seismic data and there-processing of 40 kilometres of the existing 2D seismic data. If Emeraldelects to enter the second phase, the minimum work programme will also includethe drilling of one well to an estimated depth of some 11,000 feet. Technical Evaluation Agreements (TEAs) The Group completed the evaluation of the Cachama and Las Brisas areas under theterms of TEAs with the ANH. The TEAs have now expired and Emerald is progressingapplications with the ANH for exploration rights over certain areas. Future drilling programme The drilling contract for Saxon's Rig 223 has been extended to January 2008 toensure Emerald has drilling capacity available for its next drilling campaign.Rig 223 is currently on loan to another operator to drill in the MiddleMagdalena valley basin where Emerald's Fortuna Block is located. Emerald's nextdrilling campaign will include both exploration and development wells and isexpected to commence with the drilling of the Aureliano No.1 exploration well inNovember 2006. The Aureliano prospect, adjacent to the Totumal oil field, issituated within the Fortuna block. The Totumal field produced more than 800,000barrels of oil from La Luna, a Cretaceous limestone formation, until late 1993when it was shut-in by Ecopetrol. In addition to drilling the Aureliano No.1,two of the existing Totumal wells are being evaluated as re-entry candidates tore-commence production from the Totumal field. Production Daily gross production for the first six months of 2006 averaged 3,677 bopd,compared to 2,542 bopd and 4,053 bopd achieved in the first and the secondhalves of 2005, respectively. Emerald currently has ten production wells withnine on production currently lifting about 4,200 bopd in total. In the sixmonths to the end of June 2006, in addition to the natural decline in oilproduction from individual wells, production was impaired by the failures ofrented surface and downhole hydraulic pumping systems. The fields benefit fromactive aquifers which assist overall field recovery but result, in the absenceof other factors such as changing well completion configurations, in decreasingoil production rates and increasing water production rates from individual wellsover time. The switch to electrical submersible pumps (ESPs) was accelerated due to theinability of suppliers to deliver suitable hydraulic pumps on time. Currently,including both replacement and new installations, Emerald operates six wellswith ESPs, which offer greater variability of pump output and better overallreliability. Emerald plans to replace three more of the hydraulic pumps withESPs by the year end. The Campo Rico field has three wells on production at an aggregate rate of about1,560 bopd. The Vigia field has three wells on production at an aggregate rateof about 640 bopd. The Centauro Sur field is currently being produced with twowells at about 1,100 bopd. As these fields are settling into long term flowregimes, the initial production rates are now stabilising. The Gigante No.1Awell has undergone a scheduled chemical treatment and is on production atapproximately 900 bopd. The Silfide No.1 well is shut-in pending a decision tofracture the productive horizon. The Gigante 1A well and the Campo Rico field are now operated as jointoperations with Ecopetrol with both production and costs shared between theparties in accordance with the relevant Association Contracts. Emerald hasapplied for the commerciality status of the Vigia, Silfide and Centauro Surfields and is awaiting Ecopetrol's decision. Operations review - Syria North Souedieh exploration well was drilled during the second quarter of 2006.Gas shows were recorded while drilling and interpretation of the electricwireline logs identified potential hydrocarbon zones. However, no hydrocarbonswere recovered when tested using a wireline conveyed testing tool. The well hasbeen suspended while the acquired data is reviewed and alternative testingoperations are considered. The Tigris exploration well was spud on 10 September 2006. The well is expectedto take between 90 and 120 days to drill to its targeted depth of 4,500 metresand will test the Tigris prospect located beneath the large Souedieh field. TheSouedieh field, owned and operated by Syrian Petroleum Company (SPC), currentlyproduces approximately 85,000 bopd. The S1100 well drilled more than a decadeago by SPC penetrated the Tigris prospect and encountered gas in several zones,some of which, when flow tested, produced gas to surface. The potentialhydrocarbon layers within the Tigris prospect have been mapped using the 3Dseismic data, previously acquired by SPC over the Souedieh field. Using theexisting dataset, Ryder Scott LP, independent reserve engineers, completed astudy of the Tigris structure to determine its potential to contain either gasor oil. The Ryder Scott study has concluded that, if the Tigris structure contains gas,then the potential gross Probable and Possible reserves are 884 bcf of gas(equivalent to 145 mmboe) and, if the Tigris structure is an oil accumulation,then the potential gross Possible reserves are 104 mmbbl of oil and 64 bcf ofgas (equivalent to 114 mmboe). Ryder Scott has valued Emerald's share at $494million in the event that Tigris is a gas accumulation and at $452 million inthe event that Tigris is an oil accumulation. Emerald holds a 50% workinginterest in the contract to explore, develop and produce hydrocarbons from Block26. Copies of the Ryder Scott reserves and evaluation reports may be found onthe Group's web site. Outlook Over the next twelve months, the Group is planning to drill at least fourexploration wells and a number of development wells. The thrust for operationswill be to establish early production from the successful new wells and tomaintain steady production from existing wells in the currently producingfields. Alastair Beardsall, Chairman and Chief Executive 19 September 2006 UNAUDITED GROUP INCOME STATEMENT Half year to Half year to Year to 30 June 30 June 31 December 2006 2005 2005 $ '000 $ '000 $ '000 Revenue from oil sales 21,290 12,386 32,079 Cost of sales Production costs (6,042) (3,888) (9,640) Expensed exploration costs (98) (331) (1,098) Depletion and depreciation of oil and gas assets (2,869) (1,180) (4,959) Write-offs of unsuccessful exploration costs (1,303) - (687) Cost recovery (2,994) (1,800) (3,826) -------- -------- -------- Gross profit 7,984 5,187 11,869 -------- -------- --------Other income 634 29 304 General and administrative expenses (3,485) (2,210) (4,632) -------- -------- --------Profit from operations before tax andnet finance costs 5,133 3,006 7,541 -------- -------- --------Finance costs (122) - (7) Finance income 402 259 489 -------- -------- --------Profit before tax 5,413 3,265 8,023 -------- -------- --------Current tax charge for the period (2,437) (262) (1,641) Deferred tax charge for the period (830) (1,441) (2,143) -------- -------- --------Profit for the period 2,146 1,562 4,239---------------------- -------- -------- -------- ---------------------- -------- -------- -------- Earnings per ordinary share 3.83c 3.15c 8.24c Earnings per ordinary share on diluted basis 3.60c 3.01c 7.84c---------------------- -------- -------- -------- UNAUDITED GROUP AND COMPANY BALANCE SHEETS Group Company -------------------------------------- -------------------------------------- 30 June 2006 30 June 2005 31 December 30 June 2006 30 June 2005 31 December 2005 2005 $ '000 $ '000 $ '000 $ '000 $ '000 $ '000---------------- ------ ------ ------- ------ ------ ------- Non-currentassets Property, plant& equipment - intangible oil and gas assets 31,721 11,900 23,146 9,241 11,900 5,740 - tangible oil and gas assets 32,937 23,374 32,472 32,937 23,374 32,472Other assets 664 281 15 664 281 15Investments - - - 22,480 - 17,406 ------ ------ ------- ------ ------ ------- 65,322 35,555 55,633 65,322 35,555 55,633 ------ ------ ------- ------ ------ -------Current assets Inventories 722 231 234 722 231 234Trade andotherreceivables 2,973 3,388 5,568 2,989 3,388 5,584Deferred tax - 1,717 829 - 1,717 829Corporationtax debtor - 571 - - 571 -Cash andshort-termdeposits 18,095 17,013 20,679 18,095 17,013 20,679 ------ ------ ------- ------ ------ ------- 21,790 22,920 27,310 21,806 22,920 27,326-------------- ------ ------ ------- ------ ------ ------- -------------- ------ ------ ------- ------ ------ -------Total assets 87,112 58,475 82,943 87,128 58,475 82,959-------------- ------ ------ ------- ------ ------ ------- Currentliabilities Trade andother payables 4,153 7,740 5,410 4,169 7,740 5,426Accruals 2,986 1,135 1,014 2,986 1,135 1,014Provisions 410 410 410 410 410 410 ------ ------ ------- ------ ------ ------- 7,549 9,285 6,834 7,565 9,285 6,850 ------ ------ ------- ------ ------ -------Non-currentliabilities Deferred tax 2,099 - 2,099 2,099 - 2,099Other payables 10,130 - 10,130 10,130 - 10,130 ------ ------ ------- ------ ------ ------- 12,229 - 12,229 12,229 - 12,229 ------ ------ ------- ------ ------ -------Equity attributable to theshareholders Issued sharecapital 9,216 8,068 9,203 9,216 8,068 9,203Share premium 40,838 27,479 40,784 40,838 27,479 40,784Retainedearnings andreserves 17,280 13,643 13,893 17,280 13,643 13,893 ------ ------ ------- ------ ------ ------- 67,334 49,190 63,880 67,334 49,190 63,880 ------ ------ ------- ------ ------ ------- ---------------- ------ ------ ------- ------ ------ -------Totalliabilitiesand equity 87,112 58,475 82,943 87,128 58,475 82,959---------------- ------ ------ ------- ------ ------ ------- UNAUDITED GROUP AND COMPANY CASH FLOW STATEMENTS Group Company -------------------------------------- -------------------------------------- 30 June 2006 30 June 2005 31 December 30 June 2006 30 June 2005 31 December 2005 2005 $ '000 $ '000 $ '000 $ '000 $ '000 $ '000---------------- ------ ------ -------- ------ ------ ------- Cash flow from operatingactivities Profit fromoperationsbefore tax andnet financecosts 5,133 3,006 7,541 5,133 3,006 7,541Share basedpayments 917 120 599 917 120 599Depletion anddepreciation 2,869 1,425 4,815 2,869 1,425 4,815Write-offs ofunsuccessfulexplorationcosts 1,303 - 687 1,303 - 687Net costrecovery 2,994 280 2,306 2,994 280 2,306 ------ ------ -------- ------ ------ ------- 13,216 4,831 15,948 13,216 4,831 15,948 ------ ------ -------- ------ ------ -------Movement ininventory (488) (74) (77) (488) (74) (77)Movement intrade debtors 1,728 (1,661) (1,725) 1,728 (1,661) (1,725)Movement intradecreditors (1,496) 777 2,396 (1,496) 777 2,396 ------ ------ -------- ------ ------ ------- Cash flow fromoperatingactivities 12,960 3,873 16,542 12,960 3,873 16,542 ------ ------ -------- ------ ------ ------- -------Profit tax paid (1,065) (302) (1,384) (1,065) (302) (1,384)-------------- ------ ------ -------- ------ ------ -------Net cash flowfromoperations 11,895 3,571 15,158 11,895 3,571 15,158---------------- ------ ------ -------- ------ ------ ------- Cash flow frominvesting activities Capitalinvestment inColombia (10,077) (10,350) (25,623) (10,077) (10,350) (25,623)Capitalinvestment inSyria (5,074) - (16) - - -Purchase of50% interestin Block 26,Syria - - (7,260) - - (7,260)Investment insubsidiaries - - - (5074) - (16)Interestreceived 280 274 524 280 274 524 ------ ------ -------- ------ ------ ------- (14,871) (10,076) (32,375) (14,871) (10,076) (32,375) ------ ------ -------- ------ ------ ------- Cash flow fromfinancing activities Net proceedsfrom issue ofequity 67 - 14,440 67 - 14,440 ------ ------ -------- ------ ------ ------- ------- 67 - 14,440 67 - 14,440 ------ ------ -------- ------ ------ ------- ---------------- ------ ------ -------- ------ ------ ------- Net change incash andequivalents (2,909) (6,505) (2,777) (2,909) (6,505) (2,777)---------------- ------ ------ -------- ------ ------ ------- Cash andequivalents atperiod start 20,679 23,648 23,646 20,679 23,648 23,646 Period cashflow (2,909) (6,505) (2,777) (2,909) (6,505) (2,777) Currencytranslation 325 (130) (190) 325 (130) (190)---------------- ------ ------ -------- ------ ------ ------- Cash andequivalents atperiod end 18,095 17,013 20,679 18,095 17,013 20,679---------------- ------ ------ -------- ------ ------ ------- GROUP AND COMPANY STATEMENT OF CHANGES IN EQUITY Share capital Retained Translation Total earnings reserve ------------------- --------- -------- -------- --------Balance at 31December 2004 35,547 8,417 884 44,848Issue of new share capital - - - -Profit for theperiod - 1,562 - 1,562Translationdifferences - - 2,780 2,780------------------- --------- -------- -------- --------Balance at 30June 2005 35,547 9,979 3,664 49,190------------------- --------- -------- -------- -------- ------------------- --------- -------- -------- --------Balance at 31December 2004 35,547 8,417 884 44,848Issue of newshare capital 14,440 - - 14,440Profit for theperiod - 4,239 - 4,239Translationdifferences - - 353 353------------------- --------- -------- -------- --------Balance at 31December 2005 49,987 12,656 1,237 63,880------------------- --------- -------- -------- --------Issue of newshare capital 67 - - 67Profit for theperiod - 2,146 - 2,146Translationdifferences - - 1,241 1,241------------------- --------- -------- -------- --------Balance at 30June 2006 50,054 14,802 2,478 67,334------------------- --------- -------- -------- -------- NOTES TO THE FINANCIAL INFORMATION Basis of Preparation The financial information presented above does not constitute statutory accountswithin the meaning of section 240 of the Companies Act 1985. This financialinformation has been prepared on the basis consistent with the accountingpolicies applied for the year ended 31 December 2005. The statutory accounts,upon which the auditors issued an unqualified opinion, were delivered to theIsle of Man Registrar of Companies. Exchange Rates From 1 January 2006, all of the sterling transactions are translated in to USdollars at the dollar/sterling exchange rate prevailing on the transaction date.In the six-month period to 30 June 2005 and in the twelve-month period to 31December 2005, the following foreign exchange rates were applied: 30 June 2005 31 December 2005 $ $------------------------ ------------- ------------Pounds sterling - average rate for theperiod 1.8727 1.8189Pounds sterling - closing rate for theperiod 1.7925 1.7166------------------------ ------------- ------------ Earnings per Ordinary Share Basic earnings per share amounts are calculated by dividing profit for theperiod attributable to ordinary equity holders of the Company by the weightedaverage number of ordinary shares outstanding during the period. Diluted earnings per share amounts are calculated by dividing profit for theperiod attributable to ordinary equity holders of the Company by the weightedaverage number of ordinary shares outstanding during the period plus theweighted average number of ordinary shares that would be issued on theconversion of all of the dilutive potential ordinary shares into ordinaryshares. The following reflects the income and share data used in the basic and dilutedearnings per share computations: Half year to Half year to Year to 30 30 31 December June June 2005 2006 2005 -------------------- ----------- ----------- --------- $ '000 $ '000 $ '000-------------------- ----------- ----------- ---------Profit attributableto ordinary shares 2,146 1,562 4,239-------------------- ----------- ----------- --------- Number of Number of Number of shares shares shares-------------------- ----------- ----------- ---------Basic weighted average number of shares 56,089,216 49,527,994 51,475,647Dilutive potentially shares:Employee share options 1,833,771 2,359,868 2,149,487Shares to be issued toSoyuzneftegas Limited 1,735,616 -- 421,918-------------------- ----------- ----------- ---------Diluted weightedaverage numberof shares 59,658,603 51,887,862 54,047,052 ----------- ----------- --------- Dividends No dividend was declared in the reporting period (2005: Nil). Auditors' Review These unaudited interim accounts have not been revived by the Group's auditors,Ernst & Young. Approval of Accounts These unaudited interim accounts were approved by the Board of Directors on 18September 2006. Subsequent Events There were no material subsequent events between 30 June 2006 and the date ofthis document. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
Emerald Energy