Interim Results

RNS Number : 3121D

Desire Petroleum PLC

12 September 2008

 

 

Desire Petroleum plc

 

(“Desire” or “the Company”)

 

Interim Results

 

 

 

·; Farm-out agreement signed with Arcadia Petroleum Ltd (“Arcadia”)

·; Arcadia to drill 2 wells at no cost to Desire

·; Desire maintaining 57.5% interest in Ann prospect which has unrisked potential recoverable reserves 202mmboe

 

·; Award of new exploration licence to Desire and Arcadia containing part of large Alpha prospect

·; Unrisked potential recoverable reserves for Alpha is 7.8Tcf (15Tcf in upside case)

 

·; Desire still holds 100% of the majority of the prospects in its inventory

 

·; Following agreement with Arcadia, Desire to drill 2 wells for its own account

 

·; Loss for period: £356,000 (2007: £628,000)

 

·; Loss per share for period: 0.16p (2007: 0.28p)

 

·; Cash at end of period: £21.6m (2007: £21.2m)

 

 

 

 

CHAIRMAN’S STATEMENT

 

The past six months has seen a major advance in the Company’s exploration plans for the North Falkland Basin. A farm-out agreement with Arcadia Petroleum Ltd. (“Arcadia”) has been signed and a new exploration licence, PL034, has been awarded to the Company (20%) and Arcadia (80%). This new licence is the key to unlocking an exciting new gas play that the Company has identified, of which Alpha is the largest prospect. Under the terms of the farm-out agreement, Arcadia will drill and test two wells and pay the associated mobilisation and demobilisation costs whilst Desire has undertaken to drill two wells for its own account.

 

Arcadia will drill and test the Ann prospect, paying 85% of the costs to earn a 35% interest in a sub-area of Tranche C. Under the terms of a previous farm-out agreement, Rockhopper Exploration plc will pay the remaining 15% of the Ann well costs to earn a 7.5% interest in Tranches C and D. This will leave Desire with a 57.5% interest in the Ann prospect for which the Desire unrisked, mid-estimate of potential recoverable reserves is 202 million barrels of oil. 

 

In addition, Arcadia will drill and test the major new gas prospect named Alpha which is located partly on the existing Desire licences, Tranches I and L, and partly on the newly awarded licence, PL034. The Alpha prospect is a large well-defined, structural closure, covering an area of over 300 square kilometres. It is associated with a very strong AVO anomaly which, in addition to significantly de-risking the prospect, suggests that the reservoir is gas charged. Desire’s unrisked, mid-estimate for the potential recoverable reserves for Alpha is 7.8 trillion cubic feet (TCF) with 15 TCF in the upside case.

 

By drilling a well on the Alpha prospect Arcadia will earn a 50% interest in block 25/10 in Tranche I and a 50% interest in part of Block 25/15 in Tranche L. Based on the current mapping, Desire estimates that it has an interest of approximately 30% in the total Alpha prospect.

 

Maps showing all these licence changes can be found on the Company’s website at www.desireplc.co.uk.

 

Over the last twelve months Desire’s re-mapping of the North Falkland Basin, added to new geophysical studies, has shown that there is significant gas potential in the basin as well as that for oil. The new Alpha prospect is the best example of this but the Dawn, Kate, Ruth and Barbara prospects may also be gas rather than oil prospects. Updated volumetrics for these prospects, based on gas, can also be seen on the website. The unrisked mid-estimate for the recoverable gas potential of this new gas play, (including 100% of Alpha) is 9 TCF with an unrisked upside potential of 21 TCF. With these prospects now assigned to the gas play, the unrisked, mid-estimate for Desire’s oil prospects still exceeds 3.5 billion barrels of recoverable oil.

 

Technical studies on Tranche F are continuing and the interpretation of the site survey data acquired in 2007 over Ann, Alpha, Dawn/Jacinta, Barbara and Ruth has now been finished. The recent completion of a benthic sampling programme over Tranches I and L and the newly awarded PL034 licence will enable the Environmental Impact Assessment to be completed prior to the year end.

 

The loss for the half-year ended 30 June 2008 was £ 356,000, compared with a

£ 628,000 loss for the previous half-year.

 

Administrative expenses were higher than the corresponding period due to reduced recharges to joint venture licences. The share-based payment expense was similar to last year’s level. Foreign exchange showed a small gain with the US-dollar exchange rate standing at $ 1.99/£ at the beginning and end of the period. Finance income at £320,000 was significantly lower than the previous half-year as a consequence of the significant cuts in US interest rates during the period.

 

With our new partner on board plus our own cash resources we are now in a much stronger position to make a firm commitment for a drilling rig. Whilst there is no slackening in the rig market there are opportunities that are actively being pursued. 

 

 

Yours sincerely,

Stephen Phipps

Chairman 

 

 

CONSOLIDATED INCOME STATEMENT

FOR THE SIX MONTHS ENDED 30 JUNE 2008

 

 

 

CONSOLIDATED BALANCE SHEET

AS AT 30 JUNE 2008

 

 

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

FOR THE SIX MONTHS ENDED 30 JUNE 2008

 

CONSOLIDATED CASH FLOW STATEMENTFOR THE SIX MONTHS ENDED 30 JUNE 2008

	6 Months ended 30.06.08 £’000	6 Months ended 30.06.07 £’000	Year ended 31.12.07 £’000
Net cash from operating activities	(481)	(216)	(760)
Investing activities Interest paid	(6)	-	-
Interest received	320	515	1,025
Purchase of tangible and intangible assets	(150)	(1,493)	(2,108)
Net cash from/(invested in) investing activities	164	(978)	(1,083)
Financing activities Proceeds on issue of shares	193	96	1,026
Net cash from financing activities	193	96	1,026
Net decrease in cash and cash equivalents	(124)	(1,098)	(817)
Cash and cash equivalents at the beginning of the period	21,623	22,772	22,772
Effect of foreign exchange rate changes	2	(476)	(332)
Cash and cash equivalents at the end of the period	21,501	21,198	21,623

 

 

NOTES TO THE INTERIM FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED 30 JUNE 2008

 

 

1 - Basis of preparation and accounting policies

The results for the six months to 30 June 2008 have been prepared in accordance with International Financial Reporting Standards (IFRS). The financial information does not constitute statutory accounts as defined by section 240 of the Companies Act 1985. Full accounts of the Company for the year ended 31 December 2007, on which the Auditors gave an unqualified report, have been delivered to the Registrar of Companies.

 

2 - Segmental information

Based on risks and returns, the Directors consider that the primary reporting format is by business segment. The Directors consider that there is only one business segment, being the exploration and production of oil and gas.

 

3 - Loss per share

The calculation of basic earnings per share is based upon the loss for the period and the weighted-average number of shares in issue during the period

 

 

 

 

When the Group reports a loss for the period then, in accordance with International Accounting Standard 33, the share options are not considered dilutive.

 

NOTES TO THE INTERIM FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED 30 JUNE 2008

 

4 - Tax

Current tax comprises a provision for tax on the interest receivable less any allowable expenses, and any adjustment for over or under provision in prior periods.

 

5 - Copies of report

Copies of this interim statement can be viewed on the Company’s website and

will be available to the public at the Registered Office, Mathon Court, Mathon, Malvern, Worcestershire, WR13 5NZ. 

 

INDEPENDENT REVIEW REPORT TO

DESIRE PETROLEUM PLC

Introduction

We have reviewed the accompanying balance sheet of Desire Petroleum Plc as of 30 June 2008 and the related statements of income, changes in equity and cash flows for the six month period then ended, and a summary of significant accounting policies and other explanatory notes. Management is responsible for the preparation and fair presentation of this interim financial information in accordance with International Financial Reporting Standards. Our responsibility is to express a conclusion on this interim financial information based on our review.

 

Scope of Review

We conducted our review in accordance with International Standard on Review Engagements 2410, "Review of Interim Financial Information Performed by the Independent Auditor of the Entity." A review of interim financial information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

 

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the accompanying interim financial information does not give a true and fair view of the financial position of the entity as at 30 June 2008, and of its financial performance and its cash flows for the six month period then ended in accordance with International Financial Reporting Standards as applicable in the United Kingdom.

UHY Hacker Young Manchester LLP

Manchester

2008

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