28th Feb 2007 07:01
Cambrian Oil & Gas PLC28 February 2007 28th February 2007 AIM: COIL Cambrian Oil & Gas Plc ("COIL" or "the Company") Interim Group Results for the six-months ending 31st December 2006 The Directors of Cambrian Oil & Gas announce the Company's unaudited accountsfor the six months ending 31st December 2006. Highlights •Acquisition of a 22% interest in MEO Australia Ltd ("MEO") with projects advancing towards drilling in late 2007 demonstrating near term growth in value • Increased holding in Elko Energy to 33%; Elko is considering acquisition of additional projects prior to listing •Continued improvement in performance of the water injection pilot project on the Beshkent-Togap oil field in Kyrgyz Republic •Acquisition of an additional 40km of 2D seismic at Tash Kumyr, Kyrgyz Republic •Completion of further Gore Surveys (surface geochemistry) over the Tash Kumyr, Pishkaran and Toktogul prospects •Granting of a new licence (No. 618-NP) adjoining the Tash Kumyr licence •Retained loss for the period of £331,000 •Cash of £0.7m as at 31 December 2006 John Byrne, Chairman of Cambrian Oil & Gas commented: "In this reporting period Cambrian Oil & Gas has achieved a major change in itsfuture outlook due to the 22% acquisition of MEO. MEO has done a great job inpositioning themselves positively in Australia by gaining Governmentenvironmental approvals for planned, major, offshore LNG and methanol processingplants. With drilling expected to commence at three wells on its major prospectslater this year, this investment is already showing a material increase invalue. "Progress continues on our Kyrgyz projects and we look forward to reporting newdevelopments. "The Directors recently recommended shareholders accept an offer from XtractEnergy to acquire 100% of COIL, by way of a scheme of arrangement under section425 of the Companies Act 1985. Xtract Energy has a range of complementary energyprojects. The combined entity will present a new look, diversified energycompany with multiple avenues for growth and improved ability to fund plannedexpansions." Enquiries: Neale Taylor Victoria Thomas Cambrian Oil & Gas plc Parkgreen Communications Tel: +44 (0)20 7409 0890 Tel: +44 (0)20 7851 7480 Peter Jackson/ Paul Dudley W.H. Ireland Limited Tel: +44 (0) 20 7220 1666 Cambrian Oil and Gas Plc Interim Report for the six months ended 31st December 2006 The Directors have the pleasure in presenting the Company's unaudited accountsfor the half year ended 31st December 2006. Chief Executive's Report The Company incurred a retained loss of £0.33 million for the six months periodto 31 December 2006 as a result of its active development and explorationactivities during the period. During the reporting period, the Company reports the following progress: MEO Australia (MEO) The Company purchased approximately 48.5 million shares in MEO Australia for atotal cost of £4.3 million at an average share price of A$0.22 per share. TheCompany also received approximately 40.9 million options to purchase anequivalent number of MEO shares at A$0.25 per share; these options expire inApril 2007. The total MEO holding has an implied value of £15.9 million (basedon yesterday's closing MEO share price of A$0.55) - showing an approximatelythree fold increase in value. MEO acquired 504 sq km of 3D seismic over its Epenarra/Heron prospect, where gaswas previously tested with implied rich gas liquids. 600 line km of 2D seismichas also been acquired over the Blackwood prospect. Interpretation of bothsurveys is expected to be completed by March 2007 and the Company will then usethese interpretations to select potential drill sites. MEO has announced plans to drill two wells on one or both of these prospectsbefore the end of 2007. Elko Energy During the period the Company acquired warrants in an additional 15 millionshares in Canadian registered Elko Energy Inc for £1.5 million increasing itsinterests to 17.5 million shares at a cumulative cost of £1.8 million.Conversion into ordinary shares was deemed effective 4th November 2006,representing 33% of the issued share capital, from when Elko Energy has beenaccounted for as an associate of the group. Elko is considering acquisition ofadditional projects prior to listing. Kyrgyz Projects 2006 seismic acquisition programme completed Approximately 40 km of additional 2D seismic was acquired over a number ofprospects in the Tash Kumyr licence and adjoining West Kyzyl Djar licence. Thisdata is now being processed and interpreted in Germany and being combined withdata from our 2005 survey. Additional data is being sourced from archive recordsin Russia for reprocessing and inclusion in the interpretation. The Companyexpects to have an upgraded structural map of our main prospects in Q1 2007 andwill use this map to identify potential drill targets. The Company is talking to other operators in the Kyrgyz Republic to sharemobilization of a drilling rig, which can be used to commence drilling in H22007 or early 2008. 2006 GoreTM geochemical survey programme completed Approximately 400 GORE-SORBERTM modules were deployed and recovered over threemain exploration areas: Tash Kumyr, Pishkaran and Toktogul. Results are nowbeing interpreted and a final report is expected in Q1 2007. Tash Kumyr resultswill be used in conjunction with the new Tash Kumyr seismic interpretation toidentify potential drill targets in this area. Preliminary results show possible hydrocarbon anomalies that correlate withanomalies previously identified in the Tash Kumyr area. A new material anomalyhas been identified at Pishkaran, where our 2003 screening survey highlighted apossible area of interest. Early work is encouraging in that this geochemicalanomaly aligns with surfaced mapped geology and structures in this area. A detailed survey over the Toktogul structure in an intermountain sub-basin inthe central part of the Kyrgyz Republic showed possible subsurface hydrocarbonresponses within parts of the structure. These early results are encouraging andwork is in progress to compare these results with our understanding of thegeology and the Toktogul structure. The major risks are adequate local supply ofsource rocks and sufficient maturation to generate hydrocarbons. New Licence at West Kyzyl Djar (618-NP) and 2 Djetelmass wells identified aspossible workover candidates The Company was granted a new licence, No. 618-NP, over an area adjoining itsexisting Tash Kumyr licence. This new licence area may potentially containextensions of prospects mapped in the Tash Kumyr area. Review of information for this new licence area revealed two shut-in wells thathad been previously operated by what is now Uzbekneftegaz when the whole areawas under Soviet administration. Inspection of the wellheads shows these wellsas possible candidates for workovers to establish oil flow. Oil is visible atthe well head in each case. Well records are being recovered and will bereviewed before we finalise plans to conduct one or more workovers on thesewells. Workovers can be completed by rigs available in the area at reasonablylow costs; if screening indicates favourable conditions then these wells will betested to see if they can be put back into production. We will conduct possibleseismic and Gore surveys to remap the field and assess if additional wells canbe drilled on the structure. Beshkent-Togap Water Injection Project Incremental oil production has continued to increase and was above 100 grossincremental tonnes per month in January 2007 (approximately 75 tonnes per monthfor COIL's current net 70% share under the production sharing arrangement withKyrgyzneftegaz). For a graph of the Incremental Oil Production for the Beshkent Pilot Projectplease copy and paste the following link into your browser: http://www.rns-pdf.londonstockexchange.com/rns/9887r_-2007-2-27.pdf Improvements were achieved in operating performance and increased waterinjection is being achieved. An additional injection well will be commissionedat the pilot project site to further improve the performance. As part of reviewing future plans, COIL has identified a number of producingwells where performance could be improved by adding perforations and conductingcement squeezes to shut-off water producing zones. One test example has beencompleted successfully. Work is also underway to design facilities to expand water injection across therest of the field - utilising the experience obtained in the relatively smallpilot project; it is hoped to complete this design work satisfactorily beforemid-year and to work with Kyrgyzneftegaz to develop an operating agreement forexpanding the project. Xtract/COIL Scheme of Arrangement Subsequent to the period end, the boards of COIL and Xtract Energy reachedagreement as to the terms of the acquisition by Xtract Energy of all of the COILshares it does not already own by means of a scheme of arrangement under section425 of the Companies Act 1985 ("the Scheme"). Under the proposed terms of theScheme, COIL shareholders will receive 9 new Xtract Energy shares for every 10COIL shares. The closing mid market prices per share of Xtract Energy and COILon 9 February 2007, being the last business day prior to date of theannouncement in relation to the Scheme, were 5.25 pence and 3.625 pencerespectively. Based on these closing mid prices, the Scheme: •Values each COIL share at 4.725 pence; •Values COIL at approximately £14.85 million (on an undiluted basis); and •Represents a premium to COIL shareholders of approximately 30.3%. The COIL board believes that COIL shareholders will benefit from: •Exposure to a more diversified asset portfolio; •Additional management expertise; •Removal of the multiple holding company discount on COIL's associated investments, especially its major investment in MEO; •A broader institutional shareholder base; •Improved access to funding, particularly in regard to COIL participating in any future major funding for MEO's planned drilling program, which starts later this year; •Potential for increased liquidity through the exchange of their COIL shares for Xtract shares. Neale Taylor Chief Executive Officer Cambrian Oil and Gas Plc Independent Review Report to Cambrian Oil and Gas Plc Introduction We have been instructed by the Company to review the financial informationcomprising the consolidated income statement, consolidated statement of totalrecognised gains and losses, consolidated balance sheet, consolidated cash flowstatement and notes thereon and we have read the other information contained inthe interim report and considered whether it contains any apparentmis-statements or material inconsistencies with the financial information. This report is made solely to the Company in accordance with guidance containedin Bulletin 1999/4 "Review of interim financial information" issued by theAuditing Practices Board. To the fullest extent permitted by law, we do notaccept or assume responsibility to anyone other than the company, for our work,for this report, or for the conclusions we have formed. Directors' responsibilities The interim report, including the financial information contained therein, isthe responsibility of, and has been approved by the Directors. The directors areresponsible for preparing the interim report in accordance with the rules of theLondon Stock Exchange for companies trading securities on the AlternativeInvestment Market which require that the half-yearly report be presented andprepared in a form consistent with that which will be adopted in the company'sannual accounts having regard to the accounting standards applicable to suchannual accounts. Review work performed We conducted our review in accordance with guidance contained in Bulletin 1999/4issued by the Auditing Practices Board for use in the United Kingdom by auditorsof fully listed companies. A review consists principally of making enquiries ofthe Directors and applying analytical procedures to the financial informationand underlying financial data and based thereon, assessing whether theaccounting policies and presentation have been consistently applied unlessotherwise disclosed. A review excludes audit procedures such as tests ofcontrols and verification of assets, liabilities and transactions. It issubstantially less in scope than an audit performed in accordance with UnitedKingdom Auditing Standards and therefore provides a lower level of assurancethan an audit. Accordingly we do not express an audit opinion on the financialinformation. 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 31st December 2006. CHAPMAN DAVIS LLP Chartered Accountants 2 Chapel Court London SE1 1HH 27th February 2007 Consolidated Profit and Loss Account For the 6 months ended 31st December 2006 Six months ended Year ended 31st December 30th June --------------------------------------- Notes 2006 2005 2006 (Unaudited) (Unaudited) (Audited) £'000 £'000 £'000 Administrative expenses (305) (308) (505) ---------- ---------- ----------Operating loss (305) (308) (505) Share of operating loss inassociates (27) - - Interest received on bank 15 41 64depositsInterest payable on loans (23) - - ---------- ---------- ----------Loss on ordinary activitiesbefore (340) (267) (441)taxation Taxation - - - ---------- ---------- ----------Loss for the period (340) (267) (441) Equity minority interests 9 11 11 ---------- ---------- ----------Retained loss for the period (331) (256) (430) ---------- ---------- ---------- Loss per share - basic 2 (0.16)p (0.24)p (0.4)p ---------- ---------- ---------- Consolidated Statement of Total Recognised Gains and Losses Six months ended Year ended 31st December 30th June ---------------------------------------- 2006 2005 2006 (Unaudited) (Unaudited) (Audited) £'000 £'000 £'000 Retained loss for the period (331) (256) (430)Exchange differences on 26 - -retranslation ---------- ---------- ----------Total recognised loss for the (305) (256) (430)period ---------- ---------- ---------- Consolidated Balance Sheet At 31st December 2006 31st December 30th June ------------------------------------- Notes 2006 2005 2006 (Unaudited) (Unaudited) (Audited) £'000 £'000 £'000Fixed assetsIntangible assets 2,291 2,153 2,094Tangible fixed assets 188 157 164Investments 6,082 243 243 ---------- ---------- ---------- 8,561 2,553 2,553 Current assetsStocks 14 - -Debtors 329 257 309Cash at bank and in hand 698 1,300 961 ---------- ---------- ---------- 1,041 1,557 1,270 Creditors: amounts falling duewithin one year (268) (275) (155) ---------- ---------- ----------Net current assets 773 1,282 1,115 ---------- ---------- ----------Net assets 9,334 3,835 3,616 ---------- ---------- ---------- Capital and reservesCalled up share capital 4 3,143 1,082 1,082Share premium 4 5,722 1,758 1,759Merger reserve 4 1,602 1,602 1,602Share based payment reserve 4 8 - -Profit and loss account 4 (1,052) (573) (747) ---------- ---------- ----------Equity shareholders' funds 4 9,423 3,869 3,696 Equity minority interests (89) (34) (80) ---------- ---------- ---------- 9,334 3,835 3,616 ---------- ---------- ---------- Consolidated Cash Flow Statement For the 6 months ended 31st December 2006 ---------------- --------- Six months ended Year ended 31st December 30th June ------------------------------------ Notes 2006 2005 2006 (Unaudited) (Unaudited) (Audited) £'000 £'000 £'000 Reconciliation of operatingloss to net cash outflow fromoperating activitiesOperating loss (305) (308) (505)Increase in stocks (3) - -Increase in debtors (5) (164) (216)Increase in creditors 20 164 44Depreciation 9 4 19Exchange gain - - (49) --------- --------- ---------Net cash outflow fromoperating (284) (304) (707)activities Returns on investments andservicing of financeInterest received 15 41 64 --------- --------- ---------Net cash inflow from returnsoninvestments and servicing of 15 41 64finance Capital expenditure andfinancial investmentPurchase of tangible fixed (33) (47) (69)assetsPurchase of intangible fixed (197) (235) (173)assetsPurchase of investments (1,545) (243) (243)Investment in associates 3 (4,321) - - --------- --------- ---------Net cash outflow from capitalexpenditure and financialinvestment (6,096) (525) (485) FinancingIssue of share capital 4 6,181 - 1Share issue expenses paid 4 (149) - -Proceeds/(repayments) onshort-term 70 (320) (320)loans --------- --------- ---------Net cash inflow/(outflow) fromfinancing 6,102 (320) (319) --------- --------- ---------Decrease in cash in the period (263) (1,108) (1,447) --------- --------- --------- Reconciliation of net cashflow to movement in net funds(Decrease)/increase in cash inthe (263) (1,108) (1,447)periodDecrease/(increase) in shortterm (70) 320 320loans --------- --------- ---------Change in net funds (333) (788) (1,127)Net funds at beginning of 961 2,088 2,088period --------- --------- ---------Net funds at end of period 628 1,300 961 --------- --------- --------- Notes to the Interim Report For the 6 months ending 31st December 2006 1. BASIS OF PREPARATION This interim report was approved by the Directors on 27th February 2007. Theinterim results have not been audited, but were the subject of an independentreview carried out by the Company's auditors, Chapman Davis LLP. Their reviewconfirmed that the figures were prepared using applicable accounting policiesand practices consistent with those adopted in the annual report. The financialinformation contained in this interim report does not constitute statutoryaccounts as defined by Section 240 of the Companies Act 1985. These financial statements have been prepared under the historical costconvention and in accordance with applicable United Kingdom accountingstandards. The group financial statements consolidate the financial statements of theCompany and its subsidiaries and associates under the acquisition method ofaccounting from or to the date on which control passed. The Group's share of theresults and net assets of associates is accounted using the net equity methodfrom or to the date the group acquired significant influence. The Company has implemented Financial Reporting Standard 20 - Share basedpayment (FRS20) which requires share options to be fair valued at the date ofgrant and charged to the profit and loss account over the vesting period of theoption. 2. LOSS PER SHARE Six months ended Year ended 31st December 30th June ---------------------------------------------- 2006 2005 2006 (Unaudited) (Unaudited) (Audited) £'000 £'000 £'000 Loss for the period (331) (256) (430) ---------- ---------- ---------- Number of Number of Number of shares shares sharesWeighted averagenumber of shares 205.8m 108.2m 48.5m ---------- ---------- ---------- Loss per share -basic (0.16p) (0.24p) (0.4p) ---------- ---------- ---------- No diluted loss per share is presented as the effect of exercise of outstandingoptions is to decrease the loss per share. 3. ACQUISITIONS During the period the Company acquired 48.5m ordinary shares in MEO AustraliaLimited ("MEO") for £4,321,000, together with 40.9m options exercisable atA$0.25, increasing its shareholding to 24.6% on 20th September 2006 from when ithas been accounted as an associate of the Group. MEO is listed on the AustralianStock Exchange. Since the MEO placing on 5th December 2006 the Company's dilutedholding stands at 21.8%. During the period the Company acquired warrants in an additional 15m shares inCanadian registered Elko Energy Inc for £1,545,000 increasing its interests to17.5m shares at a cumulative cost of £1.8m. Conversion into ordinary shares wasdeemed effective 4th November 2006, representing 33% of the issued sharecapital, from when Elko Energy has been accounted for as an associate of thegroup. 4. RECONCILIATION OF MOVEMENT IN GROUP SHAREHOLDERS' FUNDS Share Share Merger Share Profit Total Capital premium Reserve based and loss payment account reserve £'000 £'000 £'000 £'000 £'000 £'000 At 1st July2006 1,082 1,759 1,602 - (747) 3,696Loss for theperiod - - - - (331) (331)Shares issued 2,061 4,120 - - - 6,181Share issueexpenses - (157) - 8 - (149)Exchangedifference onretranslation - - - - 26 26 ------- -------- -------- -------- -------- -------At 31stDecember 2006 3,143 5,722 1,602 8 (1,052) 9,423 ------- -------- -------- -------- -------- ------- On 26th July 2006 the Company completed a placing and open offer of 50 millionnew ordinary shares of 1p each at 3p per share generating cash consideration of£1.5m net of expenses. On 23rd October 2006 the Company completed a second placing and open offer of151,766,661 shares generating £4.5m cash consideration net of expenses. During November 2006, 4.3m shares were issued for £0.1m cash, to satisfywarrants exercised. 5. POST BALANCE SHEET EVENTS On 12th February 2007 the Boards of Xtract Energy Plc ("Xtract") and CambrianOil & Gas plc ("COIL") announced that they had reached agreement on the terms ofa recommended proposal for COIL shareholders (other than Xtract) to acquireshares in Xtract for shares in COIL by way of scheme of arrangement undersection 425 of the Companies Act 1985 (the "Scheme"). Under the proposed termsof the Scheme, COIL shareholders will receive 9 new Xtract shares for every 10COIL shares. The closing mid market prices per share of Xtract and COIL on 9February 2007 were 5.25 pence and 3.625 pence respectively. The Scheme requiresapproval by COIL shareholders (other than Xtract) and the sanction of the Court. 6. ULTIMATE PARENT COMPANY AND CONTROLLING PARTY The group's immediate parent company is Xtract Energy plc. The group's ultimateparent company and controlling party is Cambrian Mining plc. 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