19th Sep 2005 07:01
Burren Energy PLC19 September 2005 19 September 2005 Burren Energy Plc ("Burren" or "the Group") Interim Results for the six months ended 20 June 2005 Burren Energy (LSE:BUR), the independent oil and gas exploration and productioncompany, today announces its interim results for the six months ended 30 June2005. These interim results are prepared under International Financial ReportingStandards (IFRS). All comparisons are based on an IFRS restatement of UK GAAPfinancial information for the first six months of 2004, the reconciliation ofwhich is included in this statement. The Group has adopted US dollars as itsreporting currency with effect from 2005. In a separate announcement, Burren today announced the results of 4 developmentwells drilled on the M'Boundi field during August and September 2005. Highlights Financial Highlights • Turnover up by 166% to US$168.1 million (H1 2004 : US$63.1 million) • Pretax profit up by 388% to US$97.2 million (H1 2004 : US$19.9 million) • Profit after tax up by 575% to US$82.9 million (H1 2004 : US$12.3 million) • Basic earnings per share up by 564% to US cents 59.9 (H1 2004 US cents 9.0) • Net cash from operating activities up by 179% to US$108.6m (H1 2004 : US$38.9m) • Operating cost per bbl* down to US$2.55 / bbl (H1 2004 : US$2.90 / bbl) • Interim dividend of 2.5 pence per share (H1 2004 : Nil) * working interest basis Operating Highlights • Average production up by 95% to 29,100 bopd (H1 2004 : 14,960 bopd) on working interest basis and by 90% to 22,200 bopd (H1 2004 : 11,710 bopd) on entitlement basis • 24 new development wells in Turkmenistan and Congo on production since January • Current working interest production over 34,000 bopd following recent M'Boundi drilling success. • Interpretation of recently acquired 2D and 3D seismic in Turkmenistan and Congo well under way, anticipating the start of exploration drilling in Q4 Corporate Highlights • 8 year extension of M'Boundi development licence as part of farm-in by Congo state-owned oil company (subject to government ratification) • Signature of North Hurghada Marine concession agreement in Egypt • Acquisition of 26% interest in Hindustan Oil Exploration Company (HOEC) Finian O'Sullivan, Chief Executive Officer, commented: "The first half of 2005 has proved to be a record period for us, with profitsafter tax up nearly six-fold. Pleasingly, we have also almost doubled productionto 22,200 bopd, on an entitlement basis, whilst reducing the operating cost perproduction barrel to one of the lowest levels amongst our peers. Our record of production growth through field development activity willcontinue. Over the next year we will participate in 18 exploration wells alongthe trend of our proven hydrocarbon systems. Together, these drilling programmeswill demonstrate the full value of our assets." Analysts Presentation At 9.30 am (BST) the Company will be holding an Interim Results presentation foranalysts at the offices of Pelham PR: No 1 Cornhill, London, EC3V 3ND Webcast and Conference Calls In conjunction with the Company's Interim Results presentation for analysts inLondon there will be a simultaneous conference call and webcast. Participantswill be able to view the Interim Results presentation via the company website:www.burren.co.uk 9.30 am (BST): Conference Call - Please call +44 (0) 20 8901 6985. A replayfacility will be available from one hour after the conference call for 24 hours.To access the replay facility please call +44(0)20 8515 2499. The passcode is677470#. 9.30 am (BST): Webcast - Please visit: http://www.investorcalendar.com/IC/CEPage.asp?ID=94984An archive of the Webcast will be available from this afternoon. Enquiries: Burren Energy Tel : 020 7484 1900Finian O'Sullivan, Chief Executive OfficerAndrew Rose, Chief Financial Officerwww.burren.co.uk Pelham PR Tel: 020 7743 6676James HendersonAlisdair Haythornthwaite EDITORS NOTES Burren Energy is an independent oil and gas exploration and production group,headquartered in London. It is focused on four principal regions: the Caspianregion of the former Soviet Union, West Africa, North Africa and through astrategic investment stake in the Hindustan Oil Exploration Company, India. Chairman's Statement Burren's results for the first half of 2005 were extremely strong, driven by acombination of rising oil prices and sharply higher production. After taxprofits reached US$ 82.9 million, up nearly six-fold on the first half of 2004and comfortably ahead of the full year 2004 figure, and earnings per share grewby 564% to US 59.9 cents (H1 2004 : US 9.02 cents). The company is declaring aninterim dividend of 2.5 pence per share, which compares with 3.0 pence per sharepaid in respect of the full year 2004. Average production on a working interest basis increased by 95% to 29,100 bopdand on an entitlement basis by 90% to 22,200 bopd. Of note is the fact that ouroperating cost per production barrel has continued to reduce : for the firsthalf it was US$ 2.55 / bbl compared with US$ 2.90 / bbl in the first half of2004 (both figures on a working interest basis). We have made material progress in developing our two core assets, having sinceJanuary completed and brought on production 24 development wells, 11 inTurkmenistan and 13 in Congo, taking group working interest production from26,450 bopd in January to over 34,000 bopd at the present time. Theinterpretation of the 3D seismic data acquired in Turkmenistan and Congo is wellunder way and we expect to be identifying targets for drilling in the fourthquarter. I was also delighted to see the pleasing results from the developmentdrilling programme on the M'Boundi field in Congo announced today. In Egypt wehave signed our second concession agreement, North Hurghada Marine, and expectto commence drilling on our existing East Kanayis block in December. In February of this year Burren made an initial acquisition of a 26%shareholding in Hindustan Oil Exploration Company ("HOEC"), which represented anattractive opportunity to enter the Indian oil and gas industry. This initialinvestment has already shown a significant return, increasing in market valuefrom US$26 million to US$60 million. The mandatory open offer for a further 20%of equity in HOEC, which this purchase triggered, has now concluded with nomaterial take up : a result which was expected given that the offer price wasfixed back in February. Now that the open offer has expired Burren can moveforward in supporting HOEC technically and financially to achieve its keyobjective of developing the PY-1 gas field, where it is intended to reach firstproduction by the 2nd quarter of 2007. Burren continues to view India asaffording significant opportunities in oil and gas, and we maintain our originalobjective of seeking ways to acquire up to 51% of HOEC but only at an acceptableprice. In August we announced that Burren and the operator, Maurel & Prom, had enteredinto a conditional agreement for SNPC, the Congolese state oil company, toacquire an interest in the M'Boundi field and Kouilou exploration area in returnfor (inter alia) an 8 year extension of the M'Boundi development licence. Theagreement, which has yet to be completed, may not become effective before theend of this year : until this time our interest in the asset remains at 35%.Burren believes that there is significant value to be generated from theextension of the M'Boundi licence as and when expected increases in the fieldarea and enhanced recovery rates from water injection become a reality.Additionally we believe that the adjacent Noumbi licence, ratification of whichis a condition of the deal with SNPC, offers exciting exploration possibilities. Activity by area is described in more detail below. Turkmenistan Working interest production increased by 50% year on year in the first half of2005, averaging 15,150 bopd (H1 2004 : 10,100 bopd). In the year to date 12development wells have been drilled, 7 shallow and 5 deep. Working interestproduction is currently 15,650 bopd. We expect to drill one further deepdevelopment well before moving our existing rig on to spud the first of a seriesof exploration wells to the east of the Burun field before the end of the year.A new drilling rig, capable of handling higher pressure exploration wells, isnow on course to arrive in December following completion of its currentassignment, and will join the exploration programme beginning with a well on thesouth flank of the Burun field. A third drilling rig is in the process of beingsourced. Interpretation of the 540 sq km of 3D Seismic acquired over the Nebit Dag PSAarea outside the Burun field is nearing completion, and we are in the process offinalising sites for 2006 exploration drilling in the fourth quarter. Investment in production facilities has continued, with two additional gascompressors being installed and a further two due to arrive later this year. Apilot 5,000 bwpd water injection project is also expected to start up by yearend. Congo In the first six months of 2005 Congo working interest production increased by187% year-on-year, averaging 13,950 bopd (H1 2004 : 4,900 bopd). There are now 4rigs operational on the M'Boundi field, having drilled and completed 17 wells inthe year to date of which all but 3 have been (or will shortly be) placed onproduction. As a result of 4 recent successful wells M'Boundi productioncurrently stands at over 52,000 bopd gross, or 18,200 bopd attributable toBurren's 35% working interest, from 34 wells. We expect up to 8 further wells tobe drilled and completed during 2005, making a total of 25 for the year. TheKouakouala field is producing at 1,300 bopd gross (325 bopd attributable toBurren's 25% working interest) with no further drilling activity planned. Work is under way to expand the M'Boundi processing capacity from 60,000 bopd to90,000 bopd and a pilot 20,000 bwpd water injection scheme is scheduled to beoperational in the second quarter of next year. Drilling targets on the potential extensions to the M'Boundi field and elsewherein the Kouilou licence area will be agreed in the fourth quarter of this yearupon completion of the 3D and 2D seismic interpretation, with drilling expectedto commence towards the end of the year. Egypt A provisional drilling programme of three shallow Cretaceous wells and a deeperJurassic well on the East Kanayis concession (Burren 100% working interest) hasbeen drawn up. A rig has now been secured (subject to final EGPC approval)andshould be mobilising in November, later than we had envisaged owing to the acutecompetition for rigs in Egypt. Tenders are in progress for new 2D and 3Dseismic to improve our knowledge of the deeper Jurassic level where there ispotential for gas-condensate accumulations. The concession agreement for North Hurghada Marine offshore licence was signedin August and data collection has commenced. It is planned to shoot 2D and 3Dseismic in the first quarter of 2006 subject to vessel availability.Parliamentary approval for the North Lagia Concession is anticipated later thisyear. India (HOEC : Burren 26%) HOEC declared a profit after tax of Rs. 385 million (US$8.6 million) for theyear ended 31 March 2005, compared with Rs. 221 million (US$4.8 million) for theprevious year. Burren's 26% share of HOEC's profit between acquisition and 30June 2005 was Rs. 21 million (US$0.5 million). Average gross production over theyear from the PY-3 oil field, the company's principal current source of cashflow, increased by 53% to 6,269 bopd (4,108 bopd in the 2003/4 financial year).HOEC continues to work towards securing the financing for its major PY-1 gasdevelopment. Shipping Shipping has performed well in the first six months of the year and shown asmall gross profit compared with a loss in both halves of 2004. Financial results The results for the period have been prepared for the first time underInternational Financial Reporting Standards ("IFRS") and also in US dollars,which is the functional currency of the group and which has been adopted as thereporting currency with effect from 2005. Comparative financial information forthe first six months of 2004 has been restated according to IFRS in US dollars. The revenue growth of 166% to US$168.1 million (H1 2004 : 63.1 million) stemmedfrom the twin drivers of increased sales volumes and higher oil prices.Entitlement production grew by 90% to 22,200 bopd (H1 2004 : 11,710 bopd), butin Nebit Dag an underlift of 255,000 bbls had developed by period end so theaverage group sales volume was only 20,310 bopd. Had these barrels been liftedat the average realised price for Nebit Dag crude, revenues would have increasedby US$11.6 million and pretax profit by US$9.9 million. The average realised oilprice (before losses on oil price derivative contracts) in the period wasUS$43.9 compared with US$29.7 in H1 2004. Cost of sales rose by 75% to US$63.5 million (H1 2004 : US$36.3 million). Withincost of sales, losses on oil price derivatives amounted to US$14.3 million inthe period. Of these US$9.6 million were realised losses, representing 2,740bopd hedged under a Brent price collar with a cap of US$30.2, and US$4.7 millionwere unrealised losses arising from the mark-to-market of outstanding contractsat the period end. These outstanding contracts all expire by the end of 2005.Depreciation tripled to US$32.0 million (H1 2004 : US$10.6 million) asproduction volumes increased and higher depreciation rates per barrel wereapplied, but administrative expenses were down slightly at US$6.4 million (H12004 : US$6.6 million). Pretax profit increased by 388% to US$97.2 million (H1 2004 : US$19.9 million).Higher current and deferred tax charges in Turkmenistan caused the tax charge torise to US$14.2 million (H1 2004 : US$7.7 million), leaving after tax profits upby 575% to US$82.9 million (H1 2004 : US$12.3 million). Operating cash flow rose by 179% to US$108.6 million (H1 2004 : US$38.9million), after a US$20.5 million increase in working capital arising from theincreased sales revenues over the period. Total investment, including thepurchase of 26% of HOEC and the US$25.1 million of cash placed in a blockedescrow account to back the open offer, was US$136.1 million, leading to a netoutflow before financing of US$27.5 million. Given the negligible take up of theopen offer substantially all of the US$25.1 million escrow account monies willbe released back to Burren shortly. Excluding India, capital expenditure wasUS$85.0 million. Health Safety Environment & Community ("HSEC") With the assistance of external consultants Burren is developing an enhanced setof HSEC policies and key performance indicators against which the company willreport with effect from 2005. Burren's safety record in the year to date hasbeen excellent, with no serious incidents reported. Outlook Going forward through 2006 Burren will continue to develop its core assets. Weexpect group working interest production to reach 37,000 bopd at year-end 2005,giving an average working interest production for the year as a whole of some31,000 bopd, although entitlement production for the year as a whole is notexpected to exceed the figure for the first half of the year owing to the effectof high oil prices on the M'Boundi entitlement barrels under the PSA terms.Despite this entitlement effect the current strong oil price will lead to asubstantial increase in profit for the year as a whole compared with 2004. The focus of Burren's activity over the remainder of 2005 and in 2006 willincreasingly be the exploration drilling programmes in Turkmenistan, Congo andEgypt. Commencing in the fourth quarter two large rigs will be dedicated tocontinuous drilling in Turkmenistan, where we expect to drill a minimum of 8deep wells over the period to end 2006. In Congo we expect to drill a similarnumber of wells, and in Egypt we anticipate some 4 wells over the period. By theend of 2006 we expect to have up to 6 rigs engaged in exploration drilling andto have drilled nearly 20 exploration wells in all. Preliminary prospectsidentified for this drilling amount to some 750 million bbls of estimatedpotential gross field reserves (490 million bbls on a working interest basis).This exploration is underpinned by solid production which is fully benefitingfrom current high oil prices. The future looks exciting and I look forward to the rest of the year withconfidence. Brian LaversChairman 19 September 2005 Production Summary --------- ---------------------------------- Current HI 2005 H1 2004 H1 y/y bopd average average increase --------- ---------------------------------- TurkmenistanGross Field 19,500 19,000 14,180 34%Working Interest * 15,650 15,150 10,100 50%Net Entitlement n/a 12,300 8,210 50% CongoGross Field 52,480 40,370 14,070 187%Working Interest 18,230 13,950 4,860 187%Net Entitlement n/a 9,910 3,470 186% Group TotalGross Field n/m n/m n/m n/mWorking Interest 33,880 29,100 14,960 95%Net Entitlement n/a 22,210 11,680 90% * excludes Initial Oil to which Turkmenneft is entitled Independent Review Report to Burren Energy Plc Introduction We have been instructed by the Company to review the consolidated financialinformation for the six months ended 30 June 2005 and the six months ended 30June 2004 which comprises the Group income statement, Group statement of totalrecognised income and expense, Group statement of changes in shareholders'equity, Group balance sheet, Group cash flow statement and related notes 1 to11. We have read the other information contained in the interim report andconsidered whether it contains any apparent misstatements or materialinconsistencies with the financial information. This report is made solely to the Company in accordance with Bulletin 1999/4issued by the Auditing Practices Board. Our work has been undertaken so that wemight state to the Company those matters we are required to state to them in anindependent review report and for no other purpose. To the fullest extentpermitted by law, we do not accept or assume responsibility to anyone other thanthe Company for our review work, for this report, or for the conclusions we haveformed. Directors' responsibilities The interim report, including the financial information contained therein, isthe responsibility of, and has been approved by, the directors. The directorsare responsible for preparing the interim report in accordance with the ListingRules of the Financial Services Authority and the requirements of InternationalAccounting Standard 34 'Interim Financial Reporting' ("IAS 34") which requirethat the accounting polices and presentation applied to the interim figures areconsistent with those applied in preparing the preceding annual accounts exceptwhere any changes, and the reasons for them, are disclosed. International Financial Reporting Standards As disclosed in note 1, the next annual financial statements of the Company willbe prepared in accordance with International Financial Reporting Standards asadopted for use in the EU. Accordingly, the interim report has been prepared inaccordance with IAS 34 and the requirements of International Financial ReportingStandard 1, 'First Time Adoption of International Financial Reporting Standards'relevant to interim reports. Review work performed We conducted our review in accordance with the guidance contained in Bulletin1999/4 issued by the Auditing Practices Board for use in the United Kingdom. Areview consists principally of making enquiries of Group management and applyinganalytical procedures to the financial information and underlying financial dataand, based thereon, assessing whether the accounting policies and presentationhave been consistently applied unless otherwise disclosed. A review excludesaudit procedures such as tests of controls and verification of assets,liabilities and transactions. It is substantially less in scope than an auditperformed in accordance with International Standards on Auditing (UK andIreland) and therefore provides a lower level of assurance than an audit.Accordingly, we do not express an audit opinion on the financial information. Review conclusion On the basis of our review we are not aware of any material modifications thatshould be made to the financial information as presented for the six monthsended 30 June 2005 and the six months ended 30 June 2004. Deloitte & Touche LLPChartered AccountantsLondon19 September 2005 Notes: A review does not provide assurance on the maintenance and integrity ofthe website, including controls used to achieve this, and in particular onwhether any changes may have occurred to the financial information since firstpublished. These matters are the responsibility of the directors but no controlprocedures can provide absolute assurance in this area. Legislation in the United Kingdom governing the preparation and dissemination offinancial information differs from legislation in other jurisdictions.' Group Income Statement Unaudited Unaudited Audited 6 months to 6 months to Year ended 30 June 30 June 31 December 2005 2004 2004 NOTES US$'000 US$'000 US$'000 REVENUE 2 168,080 63,078 185,787Cost of sales (63,492) (36,300) (87,866) ---------- --------- ---------GROSS PROFIT 104,588 26,778 97,921 Administrative expenses (6,432) (6,593) (10,723) Other operating expenses (523) - (12) Share of associate's profit 6 483 - - ---------- --------- ---------OPERATING PROFIT 98,116 20,185 87,186 Interest and investment income 394 278 678Finance costs (1,330) (533) (1,709) ---------- --------- ---------PROFIT ON ORDINARY ACTIVITIES BEFORE TAX 97,180 19,930 86,155 Tax on profit on ordinary activities 5 (14,249) (7,650) (17,748) ---------- --------- ---------PROFIT ATTRIBUTABLE TO EQUITY HOLDERS OF PARENT COMPANY 82,931 12,280 68,407 Dividends declared 9 (7,550) - - ---------- --------- ---------RETAINED PROFIT FOR THE PERIOD 75,381 12,280 68,407 ---------- --------- --------- Earnings per ordinary share - basic (US cents) 3 59.9 9.0 50.1 Earnings per ordinary share - diluted (US cents) 3 57.9 8.6 47.9 Group Statement of Total Recognised Income and Expense Unaudited Unaudited Audited 6 months to 6 months to Year Ended 30 June 30 June 31 December 2005 2004 2004 NOTES US$'000 US$'000 US$'000 Exchange differences on translation of subsidiaries and associates (237) 20 188 ---------- --------- ---------Net (loss)/income recognised directly in equity (237) 20 188 Profit for the period 82,931 12,280 68,407 ---------- --------- ---------Total recognised income and expense for the period 82,694 12,300 68,595 ========== ========= ========= Group Statement of changes in Shareholders' Equity Share Re- Profit Share premium valuation Other Merger Shares to and loss Total capital account reserve Reserve Reserve be issued account US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 At 1 January 2005 45,419 87,409 27,295 3,096 (12,716) 4,364 107,893 262,760Retained profit for the - - - - - - 75,381 75,381periodShares issued in the period 712 857 - - - - - 1,569Transfer of additional depreciation on revaluedassets - - (717) - - - 717 -Deferred share awards - - - - - 524 - 524Exchange adjustments - - - - - - (237) (237) ------- ------- ------- ------- ------- ----- ------- -------At 30 June 2005 46,131 88,266 26,578 3,096 (12,716) 4,888 183,754 339,997 ======= ======= ======= ======= ======= ===== ======= ======= Share Re- Profit Share premium valuation Other Merger Shares to and loss Total capital account reserve Reserve Reserve be issued account US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 At 1 January 2004 44,695 87,050 28,805 3,096 (12,716) 20 36,728 187,678Retained profit for the - - - - - - 12,280 12,280periodShares issued in the period 718 295 - - - - - 1,013Transfer of additional depreciation on revaluedassets - - (1,022) - - 1,022 - -Deferred share awards - - - - - 4,105 1,061 5,166Exchange adjustments - - - - - - 20 20 ------- ------- ------- ------- ------- ----- ------- -------At 30 June 2004 45,413 87,345 27,783 3,096 (12,716) 4,125 51,111 206,157 ======= ======= ======= ======= ======= ===== ======= ======= Group Balance Sheet Unaudited Unaudited Audited 30 June 30 June 31 December 2005 2004 2004 NOTES US$'000 US$'000 US$'000 ASSETSNon-current assetsIntangible assets other than goodwill 10,341 5,620 8,381Property, plant and equipment 285,732 203,535 253,826Investment in associate 6 26,094 - - ------- -------- -------- 322,167 209,155 262,207 Current assetsInventories 1,283 931 1,015Trade and other receivables 7 85,522 17,001 37,673Cash and cash equivalents 24,678 34,650 39,962 ------- -------- -------- 111,483 52,582 78,650 ------- -------- --------Total assets 433,650 261,737 340,857 ------- -------- -------- LIABILITIESCurrent liabilitiesTrade and other payables (38,928) (24,389) (43,600)Fair value of derivatives (15,172) (13,027) (10,528)Short term borrowings (10,695) (663) (580) ------- -------- -------- (64,795) (38,079) (54,708) Non-current liabilitiesBorrowings (5,615) (6,312) (4,121)Provision for deferred tax (23,243) (11,189) (19,268) ------- -------- -------- (28,858) (17,501) (23,389) Total liabilities (93,653) (55,580) (78,097) ------- -------- -------- NET ASSETS 339,997 206,157 262,760 ======== ======= ========= EQUITYCalled up share capital 46,131 45,413 45,419Share premium account 88,266 87,345 87,409Other reserves 3,096 3,096 3,096Merger reserve (12,716) (12,716) (12,716)Revaluation reserve 26,578 27,783 27,295Shares to be issued 4,888 4,125 4,364Profit and loss account 183,754 51,111 107,893 ------- -------- --------TOTAL EQUITY 339,997 206,157 262,760 ======== ======= ========= Group Cash flow Statement Unaudited Unaudited Audited 6 months 6 months Year to to ended 30 June 30 June 31 December 2005 2004 2004 US$'000 US$'000 US$'000 OPERATING ACTIVITIESCash flow generated by operations 4 110,251 38,945 100,177Taxation paid (1,628) - (130) ------- -------- --------NET CASH FROM OPERATING ACTIVITIES 108,623 38,945 100,047 INVESTING ACTIVITIESPurchases of intangible fixed (1,959) (1,829) (4,591)assets other than goodwillPurchases of property, plant and equipment (83,005) (40,842) (87,347)Investment in associate 6 (26,010) - -Deposit in blocked account (25,130) - - ------- -------- --------NET CASH USED IN INVESTING ACTIVITIES (136,104) (42,671) (91,938) FINANCING ACTIVITIESInterest received 485 278 589Interest paid (615) (409) (565)Arrangement and facility fee - - (518)Interest element of finance lease rentals (617) - (620)Issue of ordinary share capital 1,569 1,013 1,083Receipt from loans 15,000 360 360Repayment of loans (3,200) - (4,501)Capital element of finance lease rentals (192) - (3,809) ------- -------- --------NET CASH PROVIDED BY/ (USED IN) 12,430 1,242 (7,981)FINANCING ACTIVITIES NET (DECREASE)/ INCREASE IN CASH AND CASH EQUIVALENTS (15,051) (2,484) 128CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 39,962 37,123 37,123Effect of foreign exchange rate changes (233) 11 2,711 ------- -------- --------CASH AND CASH EQUIVALENTS AT END 24,678 34,650 39,962OF PERIOD ======== ======= ======== Notes to the Interim ReportFor the six months to 30 June 2005 1. Basis of Preparation In 2004 the Group prepared its consolidated financial statements under UKgenerally accepted accounting principles ("UK GAAP"). The full accounts for theyear ended 31 December 2004, which received an unqualified report from theauditors and did not contain a statement under section 237(2) or (3) of theCompanies Act 1985, have been filed with the Registrar of Companies. On 1January 2005, in accordance with European law, the Group adopted InternationalFinancial Reporting Standards ("IFRS"). This interim financial report hastherefore been prepared using accounting policies that the Group believes willcomply with IFRS, in so far as they are likely to be codified and endorsed by EUmember states for the full year, including IAS 34 "Interim Financial Reporting".These accounting policies, together with the Group's IFRS restated financialinformation for the year ended 31 December 2004 were published by the Company on30 August 2005 and are available on the Company's website on www.burren.co.uk. Arestatement of the Group's results for the 6 months ended 30 June 2004 underIFRS is provided in note 11. The interim financial information for the 6 months ended 30 June 2004 and 30June 2005 is unaudited and does not constitute statutory accounts as defined insection 240 of the Companies Act 1985. The auditors have carried out a review ofthe financial information for these periods and their report is included as partof this announcement. This interim report was approved by the Board of Directors on 16 September 2005. 2. Segmental Analysis 6 months ended 30 June 2005Analysis by activity Upstream Shipping Total US$'000 US$'000 US$'000Turnover 161,324 6,756 168,080 ------- ------ -------Segment gross profit 104,368 220 104,588 ------- ------ ------- WestAnalysis by geographical area Caspian Africa Total US$'000 US$'000 US$'000Turnover 95,152 72,926 168,080 ------- ------ -------Segment gross profit 64,589 39,999 104,588 ------- ------ ------- 6 months ended 30 June 2004Analysis by activity Upstream Shipping Total US$'000 US$'000 US$'000Turnover 58,079 4,999 63,078 ------- ------ -------Segment gross profit / (loss) 27,358 (580) 26,778 ------- ------ ------- WestAnalysis by geographical area Caspian Africa Total US$'000 US$'000 US$'000Turnover 45,992 17,086 63,078 ------- ------ -------Segment gross profit 21,132 5,646 26,778 ------- ------ ------- 12 months ended 31 December 2004Analysis by activity Upstream Shipping Total US$'000 US$'000 US$'000Turnover 173,778 12,009 185,787 ------- ------ -------Segment gross profit / (loss) 98,758 (837) 97,921 ------- ------ ------- WestAnalysis by geographical area Caspian Africa Total US$'000 US$'000 US$'000 Turnover 123,552 62,235 185,787 ------- ------ -------Segment gross profit 71,968 25,953 97,921 ------- ------ ------- 3. Earnings per Ordinary Share 6 months to 6 months to Year endedEarnings per ordinary share 30 June 30 June 31 December 2005 2004 2004 US$'000 US$'000 US$'000Profit:Basic and diluted earnings per share 82,931 12,280 68,407 ======== ======= ======= Number Number NumberWeighted average number ofshares:For basic earnings per share 138,380,457 136,175,373 136,635,254Executive Share Option Scheme 2,416,304 3,209,294 2,989,839Long Term Incentive Plan 1,337,802 1,518,485 1,459,099Performance share plan 369,546 481,922 289,100Other share options 533,053 1,212,424 1,366,626Deferred share awards 143,822 125,842 73,032 ----------- ----------- -----------Diluted number of shares 143,180,984 142,723,340 142,812,950 ======== ======= =======Basic earnings per share (US cents) 59.9 9.0 50.1Diluted earnings per share (US cents) 57.9 8.6 47.9 4. Reconciliation of Operating Profit to Cash Flow Generated by Operations 6 months 6 months Year ended to to 31 30 June 30 June December 2005 2004 2004 US$'000 US$'000 US$'000 Operating profit 98,116 20,185 87,186Add: Depreciation 32,036 10,614 30,182Add: Non-cash charge in respect of incentive schemes 525 1,449 5,518Less: Share of associate's profit (483) - -Increase in inventory (269) (55) (139)Increase in trade and other receivables (22,410) (3,790) (18,309)(Decrease) increase in trade and other payables (1,908) 2,982 (800)Change in fair value of derivatives 4,644 7,560 5,061 ------ ------ -------Net cash flow generated by operations 110,251 38,945 100,177 ------ ------ ------- 5. Taxation 6 months to 6 months to Year ended 30 June 30 June 31 December 2005 2004 2004 US$'000 US$'000 US$'000Current tax:UK corporation tax - - 261Foreign tax 10,274 - 1,758 -------- -------- ------- 10,274 - 2,019 -------- -------- ------- Deferred tax:Timing differences 3,975 7,650 16,426Attributable to a decreasein the rate of corporation tax - - (697) -------- -------- ------- 3,975 7,650 15,729 -------- -------- ------- 14,249 7,650 17,748 ======== ======== =======6. Acquisition of Associate On 14 February 2005, the Group acquired 100% of the issued share capital ofUnocal Bharat Limited ("UBL"), a company incorporated in Bermuda, for cashconsideration of US$26 million. The principal asset of UBL is a 26% interest inHindustan Oil Exploration Company Limited ("HOEC"), a publicly quoted Indian oiland gas exploration and production company. An analysis of the Group's 26% shareof HOEC's assets and liabilities is shown below. Book Fair value Fair value adjustments Value US$'000 US$'000 US$'000Net assets acquired (Group share) Property, plant and equipment 3,371 23,093 26,464Intangibles other than goodwill 2,432 - 2,432Investments 1,193 - 1,193Deferred tax assets 546 - 546Inventories 190 - 190Trade and other receivables 9,387 - 9,387Cash and cash equivalents 337 - 337Trade and other payables (1,573) (3,407) (4,980)Loans (1,787) - (1,787)Deferred tax liabilities - (7,773) (7,773) ------ -------- ------ 14,096 11,914 26,010 ====== ======== ======Consideration paidsatisfied by cash 26,010 ====== The movement in the Group's investment in HOEC since acquisition is as follows: US$'000At acquisition 26,010Share of profit to 30 June 2005 483Dividend receivable (399) ------At 30 June 2005 26,094 Hardy Oil and Gas Limited ("Hardy"), a company incorporated in the Isle of Man,has instigated legal action asserting that the acquisition of UBL by Burreninfringed upon its rights, principally those of pre-emption, under a shareholderagreement signed in 1998 amongst the major shareholders of HOEC at that time. Itis disputed that Hardy is party to the shareholder agreement and that theacquisition of UBL infringed upon the terms of that agreement. In the opinion ofthe directors, it is not probable that the outcome of these actions will resultin any material adverse change to the reported financial position of the Group. 7. Trade and Other Receivables Included in this balance at 30 June 2005 is US$25 million (30 June and 31December 2004 : US$ nil) held on deposit in a blocked account in relation to anOpen Offer for an interest of up to 20% HOEC launched by the Group on 16 August2005. The offer closed on 5 September 2005 and acceptances were negligible.Substantially all of this deposit will therefore be returned to Burren. 8. Assignment of Interest in Kouilou PSA On 28 June 2005 Burren entered into an agreement to assign 10% of its current35% interest in the Kouilou PSA to SNPC, the state-owned national oil company ofthe Republic of Congo, leaving Burren with a residual interest of 31.5%. TheKouilou PSA includes the M'Boundi field and the exploration rights to theKouilou permit area. Cash consideration receivable by Burren is US$35 million,payable 50% in cash at completion with the balance payable out of future profitoil accruing to SNPC under the terms of the PSA. Completion of the transaction is subject to the satisfaction of a number ofconditions by the Government of the Republic of Congo, the most significant ofwhich are (i) the granting of a new development licence for the M'Boundi fieldwith a term of 20 years from the date of grant and an optional 5 year extension,in place of the current development licence which expires in 2017 but may beextended for a further 5 years; and (ii) the extension of the Kouakoualaproduction licence, which currently expires in January 2008, for a further 10years. The effect of this transaction will be recognised in the financial statementsupon completion. 9. Dividends A US$7.6 million dividend, being 3.0 pence per share, was declared during thefirst 6 months of 2005 in relation to the results of the year ended 31 December2004. Since 30 June 2005 the Directors have approved the payment of an interimdividend of 2.5 pence per share, which will be paid on 28 October 2005 toshareholders on the register at the close of business on 30 September 2005. 10. Post Balance Sheet Events Since 30 June 2005 the Group has signed a new US$80 million 4 year revolvingreserve-based secured loan facility, which will be available for generalcorporate purposes. The facility, which has been arranged by Natexis BanquesPopulaires and is being syndicated among a small number of European banks, hasthe capacity to be increased to US$150 million upon further syndication. Thefacility is expected to remain undrawn initially. 11. Restatement of 30 June 2004 Comparative Financial Statements underInternational Financial Reporting Standards ("IFRS") The restated IFRS Group balance sheets at 1 January 2004 (the date of transitionto IFRS) and at 31 December 2004 (the date of the last UK GAAP financialstatements) and the restated IFRS group income statement for the 2004 financialyear, together with the accounting policies adopted in relation thereto and fullreconciliations to the corresponding UK GAAP figures, have already beenpublished on the company's website, (www.burren.co.uk). The restated IFRS consolidated balance sheet at 30 June 2004 and the restatedIFRS group income statement for the six months ended 30 June 2004 are set outbelow to enable a comparison of the 2005 interim figures with those published inthe corresponding period of the previous financial year. 11.1 Restated Consolidated Income Statement for the six months ended 30 June2004 Effect of transition UK GAAP* UK GAAP to IFRS IFRS NOTES £ '000 US$'000 US$'000 US$'000 Revenue a 30,618 55,823 7,255 63,078Cost of sales- Depreciation (5,821) (10,614) - (10,614)- Losses on oil price derivative contracts a - - (14,815) (14,815)- Other cost of sales (5,963) (10,871) - (10,871) -------- --------- -------- --------Gross profit 18,834 34,338 (7,560) 26,778Charge in respect of incentive schemes b (2,411) (4,397) 909 (3,488)Other administrative expenses (1,703) (3,105) - (3,105) -------- --------- -------- --------Total administrative expenses (4,114) (7,502) 909 (6,593) Operating profit 14,720 26,836 (6,651) 20,185Interest and investment income 152 278 - 278Finance costs (292) (533) - (533) -------- --------- -------- --------Profit on ordinary activities before tax 14,580 26,581 (6,651) 19,930Tax on profit on ordinary activities c (4,196) (7,650) - (7,650) -------- --------- -------- --------Profit attributable to equity holders of parentcompany 10,384 18,931 (6,651) 12,280 ======= ========= ========= ========= *Burren previously reported in pounds sterling but adopted US$ as itspresentational currency on 1 January 2005. Notes to the Consolidated Income Statement for the six months ended 30 June 2004 (a) Oil price derivative contracts Under UK GAAP realised losses on oil price derivative contracts were netted offagainst turnover. Under IFRS, hedge accounting treatment for the outstandingcontracts is not achievable owing to the absence of documentation demonstratingthe effectiveness of the contract from the outset. Realised losses on thesecontracts, amounting to US$7,255,000, have, therefore, been included in cost ofsales and revenue has been increased by an equivalent amount. Under UK GAAP unrealised gains and losses on oil price derivative contractsrelating to expected future sales of crude were only accounted for when therelated physical transaction occurred. However, under IFRS, such contracts aremarked to market and the fair value recognised in the balance sheet. Theresultant movement in fair values is recognised in the profit and loss account:this amounted to a loss of US$7,560,000. Together with realised losses ofUS$7,255,000 this resulted in a total loss on oil price derivatives contracts ofUS$14,815,000. (b) Charge in respect of share incentive schemes The Group operates a number of share incentive schemes. Under UK GAAP, deferredshare awards were valued at their intrinsic value at the balance sheet date(having no regard to potential future share price movements) and charged to theincome statement in the financial year to which the award related. IFRS requires deferred share awards granted by the Group to employees to bevalued at fair value at the grant date. Such fair value should be based on amodel appropriate to value the inherent optionality of the incentive schemesincluding but not limited to potential future share price movements, and chargedto the income statement pro rata over the vesting period of the related awards. The transitional provisions of IFRS 2 allow that share incentive options grantedbefore 7 November 2002 or which vested before 1 January 2005 are exempt fromrestatement. On this basis restatements have only been required for thefollowing two schemes: Performance Share Plan The cost in relation to this plan, which consists of share options grantedbefore flotation and vesting over a 3 year period, was fully charged to theincome statement in the 6 months ended 30 June 2004 under UK GAAP as the relatedperformance criteria had been met in full. Under IFRS this charge is spread overthe vesting period. This has resulted in a credit to the income statement ofUS$959,000. Annual Profit Share Scheme (APSS) This scheme includes both a cash and a deferred share element, with sharesissued under the latter vesting over a 3-year period. The cost of both elementsof this scheme was fully charged to the income statement under UK GAAP. UnderIFRS, the deferred share element of this charge is spread over the vestingperiod. This has resulted in a charge to the income statement of US$50,000. This accounting change has therefore reduced the charge in respect of shareincentive schemes by US$909,000. (c) Taxation There was no impact on current or deferred tax charges for the half year ended30 June 2004. This was because the adjustments either increased the size of adeferred tax asset that has not been treated as recoverable or because theyarose in a jurisdiction with a zero percentage tax rate. 11.2 Restated Consolidated Balance Sheet at 30 June 2004 Effect of transition UK GAAP* UK GAAP to IFRS IFRS NOTES £ '000 US$'000 US$'000 US$'000 ASSETSNon-current assetsIntangible assets other than goodwill d 1,021 1,851 3,769 5,620Property, plant and equipment e - 203,535 203,535Tangible fixed assets 114,811 208,096 (208,096) - ------- ------- -------- ------- 115,832 209,946 (791) 209,155 Current assetsInventory 514 931 - 931Trade and other receivables 9,380 17,001 - 17,001Cash and cash equivalents 19,117 34,650 - 34,650 ------- ------- -------- ------- 29,011 52,582 - 52,582 ------- ------- -------- -------TOTAL ASSETS 144,843 262,528 (791) 261,737 ------- ------- -------- ------- LIABILITIESCurrent liabilitiesTrade and other payables (13,456) (24,389) - (24,389)Fair value of derivatives f - - (13,027) (13,027)Short term borrowings (366) (663) - (663) ------- ------- -------- ------- (13,822) (25,052) (13,027) (38,079) Non-current liabilitiesBorrowings (3,482) (6,312) - (6,312)Provisions (6,173) (11,189) - (11,189) ------- ------- -------- ------- (9,655) (17,501) - (17,501) ------- ------- -------- -------TOTAL LIABILITIES (23,477) (42,552) (13,027) (55,580) ------- ------- -------- ------- NET ASSETS 121,366 219,975 (13,818) 206,157 ======= ======== ======== =======EQUITYCalled up share capital 25,055 45,413 - 45,413Share premium account 48,190 87,345 - 87,345Other reserves 1,708 3,096 - 3,096Merger reserve (7,016) (12,716) - (12,716)Revaluation reserve 15,329 27,783 - 27,783Shares to be issued g 2,934 5,316 (1,191) 4,125Profit and loss account h 35,166 63,738 (12,627) 51,111 ------- ------- -------- -------TOTAL EQUITY 121,366 219,975 (13,818) 206,157 ======= ======== ======== ======= *Burren previously reported in pounds sterling but adopted US$ as itspresentational currency on 1 January 2005. Notes to the Consolidated Balance Sheet as at 30 June 2004 (d) Intangible assets other than goodwill Under UK GAAP, intangible fixed assets represented pre-licence acquisition costsand exploration and evaluation ("E&E") costs of individual licence interestsheld outside the depreciable cost pools pending determination of commerciality.Under IFRS, intangible assets have been adjusted to write off cumulativepre-licence acquisition costs of US$507,000 and to include E&E costs ofUS$4,276,000 that under UK GAAP had been capitalised in a full cost pool withintangible fixed assets, giving a net increase in intangible assets ofUS$3,769,000. Additional details are provided in the supplemental intangibleassets note (note 11.4). (e) Property, plant and equipment Under UK GAAP, tangible fixed assets comprised: • oil and gas properties for which the existence or otherwise of commercial reserves had been established, recorded by reference to broad, geographic cost pools. This caption also included certain exploration and evaluation expenditure incurred within the cost pools. • Other fixed assets, including non oil & gas specific plant and equipment, office furniture, barges and tugs. Under IFRS, all amounts previously classified as tangible fixed assets have beenrecorded as property, plant and equipment except for exploration and evaluationexpenditure of US$4,276,000 in relation to non-producing fields for which theexistence of commercial reserves has not yet been determined (reclassified tointangible assets). Additional cumulative depreciation of US$285,000 has alsobeen charged under IFRS, since costs are depreciated by reference to specificfields rather than regional cost pools. Additional details are provided in thesupplemental property, plant and equipment note (note 11.4). (f) Unrealised gains & losses on oil price derivative contracts The liability of US$13,027,000 recognised under IFRS represents themark-to-market liability (unrealised loss) of the Brent collar contracts thatwere open at the period end based on market quotations. (g) Shares to be issued The difference between the measurement and accounting treatment of shareincentive scheme awards is described in note (b) above. Under both UK GAAP andIFRS charges made to income in respect of share incentive scheme awards arecredited to a "Shares to be Issued" reserve. The US$1,191,000 reduction in thisreserve reflects the cumulative reduction in share incentive scheme charges toincome, of which US$909,000 was credited to the 2004 half-year income statement. (h) Profit and loss account The above adjustments result in a US$12,627,000 reduction in retained earnings. 11.3 Restated Consolidated Cash Flow Statement for the period ended 30 June 2004 UK GAAP* UK GAAP Effect of IFRS £ '000 US$'000 transition US$'000 to IFRS (see note Note i) US$'000Operating activitiesCash flow generated by operations 21,367 38,945 - 38,945Taxation paid - - - - ------- ------ ----- -------Net cash from operating activities 21,367 38,945 - 38,945 ------- ------ ----- -------Investing activitiesPurchases of intangible assets other than goodwill (203) (370) (1,459) (1,829)Purchases of property, plant and equipment j - - (40,842) (40,842)Purchases of tangible fixed assets j (23,202) (42,301) 42,301 - ------- ------ ----- -------Net cash used in investing activities (23,405) (42,671) - (42,671) ------- ------ ----- -------Financing activitiesInterest received 152 278 - 278Interest paid (223) (408) - (408)Issue of ordinary share capital 556 1,012 - 1,012Receipt from loans 197 360 - 360 ------- ------ ----- -------Net cash provided by financing activities 682 1,242 - 1,242 ------- ------ ----- -------Net decrease in cash and cash equivalents (1,356) (2,484) - (2,484)Cash and cash equivalents at beginning of period 20,788 37,123 - 37,123Effect of foreign exchange rate changes (315) 11 - 11 ------- ------ ----- -------Cash and cash equivalents at end of period 19,117 34,650 - 34,650 ====== ======= ===== ====== *Burren previously reported in pounds sterling but adopted US$ as itspresentational currency on 1 January 2005. Certain captions have beenreclassified in accordance with IAS 1 "Presentation of Financial Statements". Notes to the Consolidated Cash Flow Statement for the six months ended 30 June2004 (i) Reclassifications from UK GAAP The UK GAAP £ denominated figures are shown after reclassifying certain standardheadings under UK GAAP (being taxation, returns on investments and servicing offinance and capital expenditure) to their equivalents under IFRS. (j) Reclassification of fixed asset expenditure Purchases of tangible fixed assets under UK GAAP have been reclassified topurchases of intangible assets and purchases of property, plant and equipmentunder IFRS. 11.4 Supplemental Non-Current Asset Notes as at 30 June 2004 Intangible assets other than goodwill Exploration Total and US$'000 evaluation assets US$'000 Net book value Under UK GAAP 1,851 1,851Reclassifications from PP&E 4,276 4,276Write-off of pre-licence costs (507) (507) ----- ------Under IFRS 5,620 5,620 ===== ======Property, plant and equipment Production Exploration Other Total assets and US$'000 US$'000 evaluation assets US$'000 US$'000 Net book valueUnder UK GAAP (Tangible fixed assets) 203,406 - 4,690 208,096Reclassifications to intangibles (4,276) - - (4,276)Increase in accumulated depreciation (285) - - (285) --------- ----- --------- --------Under IFRS 198,845 - 4,690 203,535 ========= ===== ========= ========Glossary 2D, 3D two (three) dimensional (in relation to seismic surveys) bbl barrel of oil bopd barrels of oil per day bwpd barrels of water per day Congo The Republic of Congo (Brazzaville) Contractor the contracting party or parties to a PSA or PSC other than the State. There may be several contracting parties with different participating interests, one of which is designated as Operator. EGPC Egyptian General Petroleum Corporation, Egypt's principal state oil company entitlement with reference to oil & gas reserves or production, that share of the working interest amount to which the Group is entitled after taking account of the State's entitlement under terms of the relevant PSA or PSC Gross with reference to oil & gas reserves or production, the total amount of recoverable reserves or physical production before taking account of any State or Contractor entitlements. HOEC Hindustan Oil Exploration Company HSEC Health, Safety, Environment and Community PSA, PSC production sharing agreement (contract) SNPC Societe Nationale des Petroles du Congo working with reference to oil & gas reserves or production, thatinterest share of the gross amount which is the same as the Group's participating interest in the Contractor group for the PSA or PSC in question, before taking account of any State entitlement. In the case of Nebit Dag, working interest figures exclude Initial Oil to which the State is entitled in priority and which falls outside the terms of the PSA. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
Burford Capital