30th Aug 2007 12:53
Lansdowne Oil & Gas plc30 August 2007 Lansdowne Oil & Gas plc ("Lansdowne" or the "Company") Interim results for the six months to 30 June 2007 Lansdowne, the Irish focused oil and gas exploration company, announcesunaudited interim results for the six months to 30 June 2007. Financial Highlights • Loss after tax for period £816,000 (2006 : £166,000) • Loss includes £544,000 write-off of intangible exploration assets Operational highlights •Licence 4/07 granted 100 per cent to Company over area which includes Midleton and East Kinsale prospect areas •Licence 5/07 granted to Company (77 per cent) over area containing Rosscarbery prospect •Potentially commercial gas discovery by Island Oil and Gas plc on neighbouring acreage demonstrates the viability of the gas play in the Celtic Sea. •Celtic Sea remains a favourable tax regime for operations after publication of new Irish fiscal terms Johnny Greenall, Chairman of Lansdowne, commented: "The Group is delighted to have been awarded the Rosscarbery and Midleton / EastKinsale Licences and is already moving ahead to start planning for drilling thekey prospects. Discussions with potential farm-in partners have been continuingand the recent clarification on the licence position and the fiscal terms willallow us to move ahead on a much firmer footing." Enquiries: Lansdowne Oil & Gas plc 01224 748 480Steve Boldy, Chief Executive OfficerChris Moar, Finance Director John East & Partners LimitedDavid Worlidge 020 7628 2200 Chairman's Statement In my last statement, in May this year, I explained that a review of oil and gasfiscal terms by the Irish Government and a pending general election in Irelandhad delayed progress with our various Licence applications. I am delighted toreport significant progress on that front and can confirm that Lansdowne hasbeen awarded two Standard Exploration Licences. The results of the fiscal review were announced by Eamon Ryan, the IrishMinister for Communications Energy and Natural Resources on 1 August, 2007 . Thekey fiscal change under the new licensing terms is the introduction of a ProfitResources Rent Tax ("PRRT"), which will be levied in addition to the currentCorporation Tax of 25 per cent. This new tax will operate on a graded basis of profitability. Marginal projectswill be unaffected, still paying 25 per cent, with more profitable projectsfacing PRRT on a scale of rates taking their aggregate tax burden to a maximumrate of 40 per cent. Confirmation of the new terms has removed the uncertainty introduced by theannouncement of the review and the linking of the new tax to profitabilityrather than production has been welcomed. Worked examples of differing fieldsizes, contained in the Indecon Report that accompanied the announcement of thenew terms, indicate no change in the Net Present Value ("NPV") of a 50 bcf gasfield offshore Ireland under the new terms. A 100 bcf gas field displays a 4 percent reduction in NPV, a 250 bcf gas field a 6 per cent reduction in NPV and a500bcf gas field a 9 per cent reduction in NPV. All the worked examples show that NPVs for fields offshore Ireland are higherthan for comparable sized fields offshore UK and Norway. The Lansdowne Board considers the new terms offer a fair balance betweencontinuing to encourage exploration, whilst providing for a greater return tothe Irish state in these times of higher oil and gas prices. Lansdowne has been awarded Licence 4/07 which extends over parts of blocks 49/11, 49/12, 49/17 and 49/18 and contains the Midleton and East Kinsale prospectareas. This Licence has been granted to Lansdowne on a 100 per cent basis. Lansdowne has also been awarded an interest in Licence 5/07, which extends overparts of blocks 48/17, 48/18, 48/19, 48/22 and 48/24 and contains theRosscarbery prospect, as well as the Galley Head (48/18-1) and Carrigaline (48/24-4) gas discoveries. This Licence has been granted to Lansdowne (Operator 77per cent) and partners. The Group is delighted to have been awarded these Licences and is already movingahead to start planning for drilling the key prospects. Discussions withpotential farm-in partners have been continuing and the recent clarification onthe licence position and the fiscal terms will allow us to move ahead on a muchfirmer footing. Our application to convert the Seven Heads Oil Licensing Option into a LeaseUndertaking is still under discussion with the Department of Communications,Energy and Natural Resources. Our application to extend the first phase of the Frontier Exploration Licence 1/05 in the Donegal Basin has not been granted. It was not possible to extend thisLicence without entering into a further drilling commitment and we did notconsider that that level of commitment was merited. Consequently that Licencehas been relinquished. Financial results This is the first financial information presented by the Group that has beenprepared under the International Financial Reporting Standards ("IFRS"). Thetransition to IFRS resulted in no numerical adjustments to the correspondingamounts in the prior interim period. The Group recorded a loss after tax of £816,000 for the first six months of 2007compared to a loss of £166,000 for the first six months of 2006. The loss forthe period includes the write off of £544,000 of intangible exploration assetsheld against the Donegal Licence. Group operating expenses for the first half of 2007 were £286,000 and are inline with expectations. The Group was not fully operational until the secondquarter of 2006, resulting in lower operating expenses of £183,000 for the firsthalf of 2006. Net finance income was £17,000 for both the current and prior interim periods.The higher cash balances in 2006, generated by the Initial Public Offering, wereheld on deposit for a shorter period than the lower cash balances in 2007. Total equity attributable to the equity holders of the Company has fallen from£2.7 million as at 30 June 2006 to £1.7 million as at 30 June 2007. The decreasereflects primarily the Donegal write off of £544,000 and operating expenses of£537,000 in the intervening period between these two reporting dates. Outlook The success of Island's drilling programme in the Celtic Sea this summer, whichrecorded potentially commercial gas flows from Cretaceous reservoirs in the 49/23-2 Old Head and the 57/2-3 Schull appraisal wells, once again demonstrates theviability of this gas play in the Celtic Sea. The clarification of the licensing and fiscal terms and the award of newExploration Licences clear the way for Lansdowne to move forward to the nextstage of the Group's development, which will focus on drilling wells to searchfor additional gas reserves in the Celtic Sea. The Group is currently evaluatingthe options available for raising the requisite funding to support the wellprogramme. John Greenall Chairman 30 August 2007 Condensed Consolidated Interim Income Statement Half-year ended 30 June 2007 2006 (unaudited) (unaudited) Note £'000 £'000Continuing operationsCost of sales (3) -Write-off of intangible exploration assets 4 (544) - --------- ---------Gross loss (547) - Operating expenses (286) (183) --------- ---------Operating loss (833) (183) Finance income 19 17Finance expense (2) - --------- ---------Loss before taxation (816) (166)Taxation - - --------- ---------Loss for the financial period (816) (166) --------- --------- Loss per shareBasic and diluted 3 (3.9p) (1.1p) --------- --------- Condensed Consolidated Interim Balance Sheet 30 June 31 December2006 30 June 2007(unaudited) (audited) 2006 restated (unaudited) Note £'000 £'000 £'000AssetsNon-current assetsIntangibleexploration/appraisalassets 4 1,176 1,645 1,529Property, plant &equipment 1 - - ------------ ---------- --------- 1,177 1,645 1,529 ------------ ---------- ---------Current assetsTrade and otherreceivables 49 102 106Cash and cashequivalents 671 968 1,581 ------------ ---------- --------- 720 1,070 1,687 ------------ ---------- ---------Total assets 1,897 2,715 3,216 ------------ ---------- --------- LiabilitiesCurrent liabilitiesTrade and otherpayables (199) (215) (493) ------------ ---------- ---------Total liabilities (199) (215) (493) ------------ ---------- --------- ------------ ---------- ---------Net assets 1,698 2,500 2,723 ------------ ---------- --------- EquityShare capital 1,041 1,041 1,041Share premium 1,712 1,712 1,712Retained earnings (1,055) (253) (30) ------------ ---------- ---------Total equity 1,698 2,500 2,723 ------------ ---------- --------- Condensed Consolidated Interim Statement of Cash Flows Half-year ended 30 June 2007 2006 (unaudited) (unaudited) Note £'000 £'000Cash flows from operating activities:Continuing operations 5 (220) (150) ------------- ----------Net cash used in operating activities (220) (150) ------------- ---------- Cash flows from investing activities:Interest received 16 1Acquisition of intangible exploration assets (90) (10)Acquisition of property, plant and equipment (1) - ------------- ----------Net cash used in investing activities (75) (9) ------------- ---------- Cash flows from financing activities:Issue of share capital in Company - 2,350Payment of transaction costs - (611) ------------- ----------Net cash from financing activities - 1,739 ------------- ---------- Net (decrease)/increase in cash and cashequivalents (295) 1,580Cash and cash equivalents at start of period 968 -Effect of exchange rate fluctuations on cashheld (2) - ------------- ----------Cash and cash equivalents at end of period 671 1,580 ------------- ---------- Notes to the Interim Statement 1. Basis of Presentation This condensed consolidated interim financial information for the half yearended 30 June 2007 is unaudited, and has been prepared on the basis of the IFRSaccounting policies to be adopted in the financial statements for the periodended 31 December 2007 and with IAS 34, 'Interim financial reporting' as adoptedby the European Union ("EU"). Statutory accounts for the year ended 31 December2006 have been delivered to the Registrar of Companies. The report of theauditors on those accounts was unqualified and did not contain any statementunder section 237 of the Companies Act 1985. It did, however, contain anemphasis of matter over the going concern basis of preparation for the Group.Therefore, this financial information should be read with due regard to theuncertainties described within note 1 of the financial statements for the yearended 31 December 2006. The first uncertainty has been removed with the IrishGovernment publishing its fiscal terms and granting the Licences for the CelticSea (see Chairman's statement). The second uncertainty surrounding futurefunding remains. 2. Segmental Reporting The Group has only one reportable business segment, which is the exploration foroil and gas reserves in Ireland. All operations are classified as continuing. 3. Loss per Share The loss for the period was wholly from continuing operations. Half year ended 30 June (pence per share) 2007 2006Loss per share for loss from continuing operations attributableto the equity holders of the Company - basic and diluted (3.9) (1.1) The calculations were based on the following information. £'000 £'000Loss attributable to equity holders of the Company (816) (166) Weighted average number of shares in issue - basic and diluted 20,815,953 15,269,448 4. Capital Expenditure and Impairment Tangible and intangible assets £'000Six months ended 30 June 2006Opening net book amount at 1 January 2006 -Acquisition 474Additions 270Transfers from Ramco group at fair value 785 ----------Closing net book amount at 30 June 2006 1,529 ---------- Six months ended 30 June 2007Opening net book amount at 1 January 2007 1,645Additions 76Write off of intangible exploration assets (544) ----------Closing net book amount at 30 June 2007 1,177 ---------- Exploration costs of £544,000 capitalised against the Donegal Licence have beenwritten off during the period. The Group participated in the Inishbegexploration well which was drilled in August 2006. This frontier explorationwell, operated by Lundin Exploration B.V., was located offshore Ireland in Block13/12 off the northwest coast of County Donegal. It was designed to target alarge but shallow Triassic gas prospect. Under the terms of a farm-outagreement, the Group was carried through all the costs associated with thedrilling and testing of the well. The well was plugged and abandoned in August2006. In the 2006 financial statements the Group reported that an extension toPhase I of the Donegal Licence had been applied for, in return for a limitedwork programme. The response from the Irish Petroleum Affairs Division ("PAD")indicated that to continue with the original Licence would require a furtherwell commitment. The majority of the Group's partners in the joint venture didnot wish to continue with the Licence and the Group and the remaining partnerwere not prepared to support a well commitment on their own. For these reasonsthe Licence has been relinquished. 5. Reconciliation of Loss for the Period to Net Cash Used in OperatingActivities Six months ended 30 June 2007 2006 £'000 £'000 Loss for period (816) (166)Adjustments for:Intangible assets written off 544 -Equity settled share-based payment transactions 14 -Net finance income (17) (17) --------- ----------Operating cash flows before movements in workingcapital (275) (183) Change in trade and other receivables 78 (40)Change in trade and other payables (23) 73 --------- ----------Net cash used in operating activities (220) (150) --------- ---------- 6. Copies of the Interim Report Copies of this interim report will be posted to all shareholders of the Company. Further copies can be obtained from the Company Secretary, Lansdowne Oil & Gasplc, Britannia House, Endeavour Drive, Arnhall Business Park, Westhill,Aberdeenshire AB32 6UF and from the Company's websitewww.lansdowneoilandgas.com. 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