26th Sep 2005 07:02
Dragon Oil PLC26 September 2005 DRAGON OIL PLC ("DRAGON" or the "Company") 2005 INTERIM RESULTS Dragon, an international oil and gas exploration and production company, todayannounced its interim results for the period ended 30 June 2005. Dragon'sprincipal asset is a Production Sharing Agreement ("PSA") in the ChelekenContract Area, in the eastern Caspian Sea offshore Turkmenistan. HIGHLIGHTS 1H 2005 1H 2004 Turnover US$112.8 million US$34.8 millionOperating profit US$77.6 million US$17.4 millionProfit after tax US$49.6 million US$15.3 millionBasic earnings per share 11.46 cents 3.78 centsCash inflow from operating activities US$87 million US$23.4 million • Increase in operating profit to US$77.6 million (1H 2004: US$17.4million) primarily due to higher oil prices and increased production. • Increase in average gross production during the period to 19,533barrels of oil per day ("bopd") (1H 2004: 10,879 bopd), of which 14,044 bopd (1H2004: 6,614 bopd) was attributable to Dragon. • Share placement and open offer to fund drilling and non drillingcapital expenditure for the field development plan, raising an amount ofUS$156.2 million net of expenses. Cash in hand and at bank increased to US$195million at 30 June 2005. • Repaid US$40 million loan facility with Emirates National Oil Company(ENOC) LLC Ltd ("ENOC") in May 2005. Total debt, net of costs, at 30 June 2005was US$32.1 million. • Under the continuous drilling programme, one well was drilled from theLAM 10 platform. This well was tested in July 2005 at a combined rate of 1,603bopd. An additional five wells were worked over during the period which yieldedan initial production gain of 2,546 bopd. • Progress on the new build LAM A wellhead and production platform andnew onshore 50,000 bopd process facilities are on target and expected to becompleted in Q4 and Q2 2006, respectively. Mr Hussain M. Sultan, Chairman, commented: "This is an excellent half year result which was achieved through a combinationof production growth and the significantly higher oil price over the same periodlast year. Production growth remains our priority, and this is being achievedthrough the continuous drilling and well workover programmes. We areaccelerating this in the second half of the year with the mobilisation of asecond workover unit in addition to the continuing drilling programme on theLAM10 platform. Although drilling well 10/110 took longer than expected due to technicalreasons, we have overcome these issues with the more recent well 10/111. Dragon successfully completed the marine 3-D seismic survey in the ChelekenContract Area. A total of 654 square kilometres of data has now been acquiredover the LAM and Zhdanov fields, and over other undrilled structures in theCheleken Contract Area. Processing of the marine 3-D seismic data was completed in August 2005 and theinitial results of the new data have already been used to select the location ofthe new LAM A platform and to plan further development wells on the LAM 10platform. Full interpretation and re-mapping is expected to be completed in 1Q2006, providing a clearer picture of the fields' internal reservoirarchitecture, improving identification of drilling targets and reducinguncertainty. In addition, the seismic data will be utilised to identify newopportunities outside the existing developed areas. Although the interpretationhas just started it is apparent that some prospective new locations for drillingare likely to be identified within the Cheleken Contract Area." Given high near-term commodity prices and the positive production outlook,Dragon is set for a strong second half performance." Enquiries:Dragon Oil plc (+971 4 3053600) Citigate Dewe Rogerson (+44 20 7638 9571)Hussain M. Sultan, Chairman & Chief Executive Officer Martin Jackson, George Cazenove CHAIRMAN'S STATEMENT I am pleased to announce positive operating results achieved in the half yearended 30 June 2005. The Company has achieved excellent growth, due primarily toincreased production and strong crude oil prices. Operating Performance The average gross production from the Cheleken Contract Area during the periodwas 19,533 bopd (1H 2004: 10,879 bopd) of which 14,044 bopd (1H 2004: 6,614bopd) were attributable to Dragon. Barrels of oil sold amounted to 2,586,672bbls during 1H 2005 (1H 2004: 1,103,469 bbls), of which 1,226,193 bbls were soldthrough Neka using the Iranian swap agreement and 1,360,479 bbls were soldthrough Baku, an alternative export route. Dragon has signed a contract for an initial two year term with North DrillingCompany of Iran for the Iran Khazar jack-up rig. This rig was mobilized to theCheleken Contract Area in March 2005 to commence drilling from the LAM 10platform. Following the refurbishment of the LAM 10 platform and installation of anin-field pipeline, drilling re-commenced at the end of December 2004 and well 10/110 was drilled and completed. This well evaluated the deep reservoir zones bydrilling to 4,458 m in Zone 12. The deep reservoir Zones 11 and 12, were drilledand tested for the first time at the well 10/110 location. Although these zonestested water, significant oil potential exists and they will be furtherevaluated at an up-dip location as part of the ongoing field development. Thewell tested oil from Zones 4, 5, 8 and 9 at a combined rate of 1,603 barrels ofoil per day, however, technical problems prevented access below Zone 5 and thewell was put on production in July 2005 from Zones 4 and 5 only. Followingcompletion of well 10/110 the next well, well 10/111 was drilled to a totaldepth (TD) of 3,544 metres in 48 days without any difficulties. This well hasbeen completed and will be tested from Zones 4, 5, and 6. A dual stringcompletion has been installed in this well enabling multiple zones to beproduced at the same time, thus accelerating the oil production. It is plannedto use this type of completion in future wells. Five wells were successfully worked over in the first half of the year. Well 21/107 was re-completed with a hydraulic workover unit ("HWU"). Reservoir Zones 4and 5 were perforated resulting in incremental production of 1,481 barrels ofoil per day. In addition, rigless workovers were conducted on 4 wells 21/108, 63/64, 63/65 and 63/85 which achieved initial additional production of 1,065 bopd.The workover programme with the HWU has continued in August with well 63/55resulting in incremental production of 1,298 bopd. The programme will continueutilising the existing HWU, and a second HWU is currently being mobilised to theCheleken Contract Area. The second unit is expected to commence work on Zhdanovfield in October 2005. Dragon successfully completed the marine 3-D seismic survey in the ChelekenContract Area in April 2005. This is a key milestone in the development of theCheleken Contract Area. A total of 654 square kilometres of data has beenacquired over the LAM and Zhdanov fields, and further drillable structures inthe Cheleken Contract Area have been identified. Part of the seismic data on the LAM field was 'fast-track' processed andinterpreted, and the results have been utilised to select the location of a newLAM A wellhead and new production platform which will be installed in 2006.Processing of the full seismic data was completed in August 2005, andinterpretation and re-mapping is expected to be completed in 1Q 2006. Inaddition to identification of new drilling opportunities Dragon expects themarine 3-D seismic survey to provide a clearer picture of the fields' internalreservoir architecture, thereby improving identification of drilling targets andreducing uncertainty. Significant progress was made on Dragon's two major Engineering, Procurement andConstruction ("EPC") contracts. An EPC contract was awarded in December 2004 fora new build LAM A wellhead and production platform. Engineering design of thejacket and topside facilities was progressed in 1H 2005. Fabrication is expectedto commence in October 2005, and installation and commissioning is planned forQ4 2006. An EPC contract for a new onshore process facility was awarded in April2005. This facility will provide processing of up to 50,000 bopd from the LAMfield, together with crude oil storage. Engineering design, site preparation andcivil construction work as well as fabrication of the main plant are inprogress. Construction is expected to be completed by December 2005 and the newprocess facility is expected to be commissioned in Q2 2006. Board Change Mr. Essa Almulla recently resigned as Executive Director and Chief ExecutiveOfficer of the Company because of his wish to pursue his own personal businessinterests. Mr. Hussain Sultan currently executive Chairman of Dragon hasassumed the role of Chief Executive Officer. The Board of Dragon would like to take this opportunity to record its gratitudeto Mr. Almulla for the work which he has performed for the Company and wish himwell for the future. Financial Review The financial information presented in this Interim Report has been prepared inaccordance with Dragon's accounting policies under International FinancialReporting Standards ("IFRS"). In May 2005, Dragon raised additional funding to support its long term fielddevelopment plan pursuant to the private placement and open offer of 99,564,661Ordinary Shares at a price of £0.88 each, raising a net amount of US$156.2million. Proceeds of the equity issued were utilised to fully repay the US$40million ENOC loan facility. While Dragon continues to utilise the loan facility provided by the EuropeanBank for Reconstruction and Development ("EBRD") which is due for repayment infull by 2008, an amount of US$0.5 million of the facility was repaid to EBRDduring the six months to 30 June 2005. In August 2005, a further US$5.4 millionof principal was repaid to EBRD and is accordingly reclassified as a currentliability together with an amount of US$5.4 million which is due to be repaid inFebruary 2006 under the loan agreement. Dragon has recognised an estimated net deferred tax liability of US$21.9 milliondue to the timing differences between the charges to the income statement andthose computed under the tax laws of Turkmenistan. Turnover increased to US$112.8 million in 1H 2005 as compared to US$34.8 millionfor the corresponding period last year. The increase of US$78 million isattributed to increased production, and higher oil prices realised during theperiod. During the period operating and production costs increased to US$18.8 million(1H 2004: US$10 million) primarily due to direct costs attributable to higherproduction, sales and additional provision for warehouse inventory. Consequent to the increased production and revision in depletion rate arisingout of an increase in the long-term oil price forecast to US$ 30 per barrelapplied by Dragon in the calculation of its' entitlement barrels, theDepreciation Depletion and Amortisation ("DD&A") charge for the period increasedto US$15.6 million (1H 2004: US$5.3 million). Administrative expenses amounted to US$3.2 million (1H 2004: US$2.3 million)primarily due to the diminution in value of the financial derivative held forhedging purposes, increased staff costs and recognition of employee compensationcost with respect to share-based payments in accordance with IFRS 2. Net finance costs decreased to US$2.4 million (1H 2004: US$3.5 million) mainlydue to higher interest income on deposits. Exchange rate movements during theperiod resulted in a charge of US$3.7 million (1H 2004: gain of US$1.1 million)mainly due to the weakening of sterling during the period. Other income increased to US$2.4 million during 1H 2005 (1H 2004: US$0.2million), following the conversion of redeemable convertible preference sharesheld by Dragon in Celtic Resources (Holdings) Plc into ordinary shares on 30June 2005 and is fair valued through the income statement. Consequently, Dragon recorded a profit for the period of US$49.6 millioncompared to US$15.3 million for the first half of 2004. Cash and cash equivalents held by Dragon increased to US$182 million at 30 June2005, primarily due to the net proceeds following equity issued during theperiod. Cash inflow from operating activities amounted to US$87 million (1H2004: US$23.4 million). The net book value of tangible fixed assets increased to US$362.6 millioncompared to US$342 million at the end of 2004 mainly due to the continueddrilling activity. Current assets increased by US$159.9 million to US$218.4million mainly due to an increase in cash balances, resulting from net proceedsfrom equity issue and realisation of better prices for crude oil sales. The total liabilities decreased by US$25.5 million to US$80.8 million mainly dueto repayment of the ENOC loan facility and part repayment of the EBRD facility,and recognition of the net deferred tax liability. Outlook The continuous drilling programme is progressing with the Iran Khazar jack-updrilling rig and the Company is seeking to contract a second jack-up drillingrig in 2006 with the objective of accelerating field development and improvingproduction. The workover programme will continue in 2005 and 2006 utilising the existingHWU, a second HWU is currently being mobilised to the Cheleken Contract Area andis expected to commence work in the Zhdanov field in October 2005. Part of the seismic data on the LAM field was 'fast-track' processed,interpreted, and the results have been utilised to select the location of thenew LAM A wellhead platform. Interpretation of the marine 3-D seismic data andre-mapping is expected to be completed in Q1 2006. In addition to theidentification of new drilling opportunities Dragon expects the marine 3-Dseismic survey to provide a clearer picture of the fields' internal reservoirarchitecture, thereby improving identification of drilling targets and reducinguncertainty. Significant progress has been made on Dragon's two major EPC contracts. The LAMA platform is planned to be installed and commissioned in Q4 2006. The newonshore process facility will provide processing of up to 50,000 bopd from theLAM field, together with crude oil storage. This facility is expected to becommissioned in Q2 2006. Contingent gas resources in the Cheleken Contract Area have been independentlyassessed at 3.4 TCF. These resources are undeveloped and represent a significantpotential resource. Following a concept design study for gas utilizationconducted last year, Dragon plans to develop the gas and is reviewing variousoptions. Hussain M. SultanChairman & CEO 26 September 2005 Consolidated interim condensed income statement (unaudited), Notes 6 months ended 30 6 months ended 30 Year ended 31 Dec June 2005 June 2004 2004 US$'000 US$'000 US$'000 Revenue 2 112,790 34,809 97,074 Cost of salesOperating and production costs (18,820) (10,049) (20,151)Depletion 3 (15,584) (5,311) (16,596) --------------- -------------- --------------Gross profit 78,386 19,449 60,327 Administrative expenses (3,193) (2,252) (5,383)Other income 2,419 214 418 --------------- -------------- -------------- Operating profit 77,612 17,411 55,362 Finance costs (net) (2,436) (3,472) (6,926)Foreign exchange (loss)/gain (3,763) 1,335 1,309 --------------- -------------- --------------Profit on ordinary activities before 71,413 15,274 49,745taxation Taxation - deferred tax charge 9 (21,853) - - -------------- ------------- -------------Profit on ordinary activities after 49,560 15,274 49,745taxation ======== ======= =======Earnings per shareBasic 5 11.46c 3.78c 12.31cFully diluted 5 11.27c 3.74c 12.17c ======== ========= ========= The results for both periods have been derived from continuing operations. Nogains or losses were recognised other than those reflected in the above incomestatements. Consolidated interim condensed balance sheet (unaudited) Notes 30 June 2005 30 June 2004 31 Dec 2004 US$'000 US$'000 US$'000ASSETS Non-current assetsOil and gas interests 362,576 302,114 341,853Property, plant and equipment 64 121 121 --------------- --------------- --------------- 362,640 302,235 341,974 --------------- --------------- ---------------Current assetsInventories 11,284 9,165 13,538Investment 2,347 - -Trade and other receivables 9,806 5,204 5,551Cash at bank and in hand 7 194,997 38,029 39,437 ---------------- ---------------- -------------- 218,434 52,398 58,526 ----------------- ----------------- ---------------Total assets 581,074 354,633 400,500 ========== ========= ========= EQUITYCapital and reserves Called -up equity share capital 11 79,212 66,332 66,335Share premium account 11 216,036 72,257 72,688Capital redemption reserve 77,150 77,150 77,150Fair value reserve 283 - -Retained earnings 127,627 43,596 78,067 --------------- --------------- ---------------Total equity 500,308 259,335 294,240 --------------- --------------- ---------------LIABILITIESNon-current liabilities Borrowings 8 21,289 32,371 26,547 ------------- ------------- -------------Current liabilitiesTrade and other payables 26,824 25,844 34,980Net deferred tax liability 9 21,853 - -Borrowings 8 10,800 37,083 44,733 ------------- ------------- -------------- 59,477 62,927 79,713 ------------- ------------- --------------Total liabilities 80,766 95,298 106,260 ---------------- ---------------- -----------------Total equity and liabilities 581,074 354,633 400,500 ========= ========= ========= Consolidated interim condensed statement of changes in shareholders' equity(unaudited) Called - up Share Capital Fair value Retained equity share premium redemption reserve earnings Total capital reserve USD'000 USD'000 USD'000 USD'000 USD'000 USD'000 At 1 January 2004 66,274 72,646 77,150 - 28,322 244,392Shares issued during 58 41 - - - 99the periodIssue costs - (430) - - - (430)Profit for the period - - - - 15,274 15,274 ---------------- ---------------- ---------------- ---------------- ---------------- -----------------At 30 June 2004 66,332 72,257 77,150 - 43,596 259,335Shares issued during 3 1 - - - 4the periodIssue costs expensed - 430 - - - 430Profit for the period - - - - 34,471 34,471 ---------------- ---------------- ---------------- ---------------- ---------------- ----------------At 31 December 2004 66,335 72,688 77,150 - 78,067 294,240Shares issued during 12,877 153,087 - - - 165,964the period Share issue expenses - (9,739) - - - (9,739) Profit for the period - - - - 49,560 49,560 Employee compensation - value of services - - - 283 - 283provided ----------------- ---------------- ----------------- ----------------- ----------------- ----------------- At 30 June 2005 79,212 216,036 77,150 283 127,627 500,308 ======== ======== ======== ======= ======== ======== Consolidated interim condensed cash flow statement (unaudited) Notes 6 months ended 6 months ended Year ended 30 June 2005 30 June 2004 31 Dec 2004 US$'000 US$'000 US$'000 Operating activities Cash generated from operations 6 87,037 23,365 72,164 ------------------ ------------------ ------------------Investing activitiesAdditions to oil and gas interests (44,780) (32,299) (76,055)Interest received on bank deposits 1,001 58 388Decommissioning fund (1,697) (2) (2,162)Interest collateral account (5,646) (998) (7) ------------------ ------------------ ------------------Net cash used in investing activities (51,122) (33,241) (77,836) ------------------ ------------------ ------------------Financing activitiesProceeds from issue of equity share 165,964 99 103capitalShare issue expenses (9,739) - -Debt repayments (40,500) (1,700) (1,700)Interest paid (3,423) (3,697) (7,673) ------------------ ------------------ ------------------Net cash provided by (used in)financing activities 112,302 (5,298) (9,270) ------------------ ------------------ ------------------Net increase / (decrease) in cash andcash equivalents 148,217 (15,174) (14,942)Cash and cash equivalents at the 7beginning of the period 34,097 49,039 49,039 --------------------- --------------------- ---------------------Cash and cash equivalents at the end 7,12of the period 182,314 33,865 34,097 ========= ========= ========= NOTES TO THE INTERIM RESULTS (1) Basis of preparation The interim financial statements of Dragon Oil Plc and its subsidiaryundertakings (together "Dragon") are incorporated in Dragon's consolidatedinterim condensed financial statements. These are prepared in accordance withInternational Accounting Standard 34 'Interim Financial Reporting'.Thefinancial information presented in this Interim Report has been prepared inaccordance with Dragon's accounting policies under International FinancialReporting Standards ("IFRS"). The transition date for implementation of IFRS byDragon was 1 January 2004. The financial statements for the six months ended 30June 2004 and for the year ended 31 December 2004, which were prepared inaccordance with accounting practice generally accepted in the Republic ofIreland, have been restated under IFRS with effect from the transition date. Thenext annual financial statements of the group will be prepared in accordancewith accounting standards adopted for use in the European Union. Approved IFRS Dragon's accounting policies under IFRS are based on the Financial ReportingStandards and Interpretations issued by the International Accounting StandardsBoard ("IASB") and on International Accounting Standards ("IAS") and StandingInterpretations Committee Interpretations approved by the predecessorInternational Accounting Standards Committee that have been subsequentlyauthorised by the IASB and remain in effect. The majority of the IASs / IFRSs have been approved by the European Commission.However, a number of IASs / IFRSs remain to be approved at the date ofpublication of this document, and failure to approve these outstanding standardsin time for 2005 financial reporting could lead to changes in the basis ofaccounting or in the basis of presentation of certain financial information fromthat adopted for the purposes of this Interim report. Furthermore, the financial information provided in this document is subject tothe issuance by the International Accounting Standards Board of additionalInterpretations prior to the end of 2005 which may have retrospective impact andthus require to be applied in the 2005 financial statements and the related 2004comparatives. As a result, it is possible that further changes may be requiredto the full year 2004 financial information contained in this document prior toits inclusion as comparative data in the published 2005 year-end consolidatedfinancial statements under IFRS. Accounting policies The accounting policies used are consistent with those set out in the auditedAnnual Report for the year ended 31 December 2004 which is available on Dragon'swebsite http://www.dragonoil.com/, except for the following: • As part of Dragon's adoption of IFRS, an election was made under IFRS1 First-time Adoption of International Financial Reporting Standards as at 1January 2004 in respect of IFRS 2 Share - Based Payment that has only beenapplied to options issued after 7 November 2002 and not vested by 1 January2005. • Cash and cash equivalents comprise cash on hand together with demanddeposits. Deposits repayable on demand are defined as short-term, highly liquidinvestments that are readily convertible to known amounts of cash and which aresubject to an insignificant risk of changes in value. (2) All trading activity arose from a single class of business, crude oilsales and related activities in Central Asia. Accordingly, no segmentalinformation is provided. (3) Dragon's share of proven and probable oil reserves, at 30 June 2005is 292 million barrels (2004: 315 million barrels) of total field reserves of658 million barrels (2004: 661 million barrels). In arriving at Dragon's shareof reserves and, consequently, the depletion charge, significant assumptionshave been made in the following areas and any material change to the underlyingassumptions will have a material effect on Dragon's share of oil reserves andtherefore the annual depletion charge: • management's long term view of the crude oil price for the next 30years; • timing of the capital expenditure spend; • crude oil production profile for the next 30 years; and • cost estimates for capital and non-capital expenditure and productioncosts. Effective from 1 January 2005, Dragon revised its long-term view of oil pricesfrom US$25 per barrel to US$30 per barrel. The effect of an upward revision inthe long-term oil price is to lower the number of attributable reserves toDragon and this consequently increases the depletion charge per barrel. Thisrevision has resulted in the increase in depletion charge for the period by US$1million. (4) The Directors do not recommend the payment of a dividend in respectof the six months ended 30 June 2005 (2004: nil). (5) The calculation of basic earnings per ordinary share is based on theweighted average number of 432,535,574 ordinary shares in issue during the sixmonths to 30 June 2005 (1H 2004: 404,013,422) and on the profit for the periodof US$49.6 million (1H 2004: Profit of US$15.3 million). Calculation of fully diluted earnings per ordinary share is based on the dilutednumber of 439,745,015 ordinary shares in issue during the six months to 30 June2005 (1H 2004: 408,495,662) and is adjusted to assume conversion of allpotential dilutive options over ordinary shares. (6) Reconciliation of profit before tax to cash generated from operations 6 months ended 6 months ended Year ended 30 June 2005 30 June 2004 31 Dec 2004 US$'000 US$'000 US$'000 Profit on ordinary activities before 71,413 15,274 49,745taxationAdjustments for:Depletion and depreciation 15,640 5,374 16,717Provision for slow moving inventories 1,900 - 379Fair valuation of options 283 - -Other income (2,347) - -Write down of oil derivative put option - 779 -Interest received on bank deposits (1,001) (58) (388)Interest expense and loan issue costs 3,438 3,530 7,314 ------------------- ------------------- -------------------Operating cash flow before changes in 89,326 24,899 73,767working capitalChanges in working capital-inventories before movement in provision 354 (4,432) (9,184) -trade and other receivables (4,255) (227) 205-trade and other payables 1,612 3,125 7,376 ------------------- ------------------- -------------------Cash generated from operations 87,037 23,365 72,164 ========= ========= ========= (7) Cash at bank and in hand 30 June 2005 30 June 2004 31 Dec 2004 US$'000 US$'000 US$'000 Cash at bank and in hand 194,997 38,029 39,437Less: Decommissioning fund (6,224) (3,356) (4,527)Less: Interest collateral account (6,459) (808) (813) ------------------- ----------------- -----------------Cash and cash equivalents 182,314 33,865 34,097 ========= ======== ======== Included in cash at bank are term deposits of US$ 116.2 million (2004: US$1million). Term deposits represent interest bearing deposits with a maturity ofless than three months. Amounts held in the decommissioning fund reflectsDragon's contractual obligations under the PSA to set aside specific amounts fordecommissioning activities and the interest collateral account relates to theamount that Dragon is required to maintain in order to meet the interestobligations under the terms of the EBRD facility. The recoverability of amounts recorded as assets for oil and gas interests isdependent upon the satisfactory completion of the development of the oilreserves in Turkmenistan. In May 2005, Dragon issued 99,564,661 ordinary sharesof Euro 0.10 at Stg 88p per share pursuant to a private placing and open offer.Costs associated with the issue of these shares were US$9.7 million. ENOC hassubscribed fully to its entitlement of 23,849,866 ordinary shares of Euro 0.10each under the open offer, the proceeds of which were utilised to repay theexisting loan of US$40 million due to ENOC. (8) The EBRD loan facility has a term of 7 years commencing from 29December 2000. This loan is secured in favour of EBRD by the pledge of theshares of the following subsidiaries of Dragon Oil Plc: Dragon (Holdings) Ltd.,Tampimex Oil Trading Ltd., D&M Drilling Ltd. and Dragon Oil (Turkmenistan) Ltd.These subsidiaries own substantially all the assets of Dragon. Dragon's rightsand benefits under certain agreements, in particular the PSA, have also beenassigned to EBRD and this loan agreement includes certain other conditions andcovenants. There were no further drawdowns during the period under the EBRD loan facility.During the period, US$0.5 million was repaid in February 2005 following theseventh borrowing base review. Subsequent to the period-end, an amount ofUS$5.4 million was repaid in August 2005, and a further amount of US$5.4 millionis due to be repaid in February 2006 under the terms of the loan facility. Theseamounts are accordingly reclassified at the period-end as amounts falling duewithin one year. The net proceeds of the loan at 30 June 2005 were US$32.1 million afterdeducting financing costs of US$0.9 million. Interest is charged on outstandingamounts at LIBOR plus 325 basis points. (9) Dragon has recognised an estimated net deferred tax liability ofUS$21.9 million due to the timing differences between the charges to the incomestatement and those computed under the tax laws of Turkmenistan. (10) During the period, Dragon has issued an irrevocable stand-byletter of credit in favour of the jack-up rig contractor in an amount of US$2.5million as security for payments in connection with rental of the jack-up rigand relevant equipment and services under the contract. The stand-by letter ofcredit is valid until 14 May 2007. (11) In May 2005, the Company issued 99,564,661 ordinary shares of Euro0.10 at Stg 88p per share pursuant to a private placing and open offer. Costsassociated with the issue of these shares were US$ 9.7 million. ENOC hassubscribed fully to its entitlement of 23,849,866 ordinary shares of Euro 0.10each under the open offer, the proceeds of which were utilised to repay theexisting loan of US$40 million due to ENOC. The Company also issued 210,000ordinary shares of Euro 0.10 each pursuant to the exercise of share optionsduring the period. The shares issued during the period resulted in an increaseof US$12.9 million and US$143.3 million (net of costs) in Equity Share Capitaland Share Premium account respectively. (12) Dragon reported under Irish GAAP in its previously publishedfinancial statements for the year ended 31 December 2004. There were nodifferences noted in the net assets and profit as reported under Irish GAAP asat 30 June 2004 and 31 December 2004 to the revised net assets and profit underIFRS as reported in these financial statements. The main IFRS transition effect presented by Dragon in its statement of cashflow for the six months ended 30 June 2004 and 31 December 2004 is that cash andcash equivalents under Irish GAAP included term deposits with a maturity periodof not more than 24 hours. Under IFRS, term deposits with the original maturityperiod of three months or less, totalling US$15.2 million and US$0.3 millionrespectively are considered as cash and cash equivalent. Independent review report to Dragon Oil plc Introduction We have been instructed by the company to review the financial information forthe six months ended 30 June 2005 which comprises consolidated interim balancesheet as at 30 June 2005 and the related consolidated interim statements ofincome, cash flows and changes in shareholders' equity for the six months thenended and related notes. We have read the other information contained in theinterim report and considered whether it contains any apparent misstatements ormaterial inconsistencies with the financial information. 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 ListingRules of the Irish Stock Exchange. As disclosed in note (1) the next annual financial statements of the group willbe prepared in accordance with accounting standards adopted for use in theEuropean Union. This interim report has been prepared in accordance withInternational Accounting Standard 34, 'Interim financial reporting'. The accounting policies are consistent with those that the directors intend touse in the next annual financial statements. This interim financial informationhas been prepared in accordance with those IFRS standards and IFRICinterpretations issued and effective or issued and early adopted as at the timeof preparing this information (September 2005). The IFRS standards and IFRICinterpretations that will be applicable and adopted for use in the EuropeanUnion at 31 December 2005, are not known with certainty at the time of preparingthis interim financial information. 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 Republic of Ireland. 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 disclosed accounting policies havebeen applied. A review excludes audit procedures such as tests of controls andverification of assets, liabilities and transactions. It is substantially lessin scope than an audit and therefore provides a lower level of assurance.Accordingly we do not express an audit opinion on the financial information.This report, including the conclusion, has been prepared for and only for thecompany for the purpose of the Listing Rules of the Irish Stock Exchange and forno other purpose. We do not, in producing this report, accept or assumeresponsibility for any other purpose or to any other person to whom this reportis shown or into whose hands it may come save where expressly agreed by ourprior consent in writing. 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. PricewaterhouseCoopersChartered AccountantsDublin26 September 2005 Notes: (a) The maintenance and integrity of the Dragon Oil web site is theresponsibility of the directors; the work carried out by the auditors does notinvolve consideration of these matters and, accordingly, the auditors accept noresponsibility for any changes that may have occurred to the interim reportsince it was initially presented on the web site. (b) Legislation in the Republic of Ireland governing the preparation anddissemination of financial information may differ from legislation in otherjurisdictions. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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