3rd Apr 2006 07:02
Star Energy Group PLC03 April 2006 Star Energy Group plc Preliminary Audited Results for the year ended 31 December 2005 Star Energy, the onshore UK oil and gas E&P company focused on building asignificant multi-site gas storage business, announces preliminary results forthe year ended 31 December 2005. Operational Highlights • First gas storage facility, the 10 bcf Humbly Grove gas store, started operations in November 2005 • £38.5 million acquisition in August of Pentex, the onshore UK oil and gas company, increased proven and probable oil and gas reserves by 16.5 million boe • Total number of oil and gas fields operated by Star Energy increased to 26 (2004: 14), extending the potential for further gas storage projects • Average oil production for the year, including five months contribution from Pentex, was 4,178 bopd (2004 full year: 3,021 bopd) • Proven and probable oil and gas reserves independently assessed at 26.3 million boe as at 31 December 2005 (2004: 14.7 million boe, based on management's assessment) Financial Highlights • Turnover increased 40% to £24.7 million (2004: £17.1 million) • EBITDA increased 235% to £9.4 million (2004: £2.8 million) after one-off administrative expenses of £nil (2004: £2 million) • Profit before tax of £2.1 million (2004: £2.1 million loss) after total one-off costs of £nil (2004: £2.2 million) • Basic earnings per share of 1.82 pence per ordinary share (2004: loss of 6.85 pence) • Capital expenditure of £67.5 million (2004: £15.6 million) with £60.9 million (2004: £12.9 million) in respect of the Humbly Grove gas storage facility Roland Wessel, Chief Executive of Star Energy, said: "The acquisition of Pentex has resulted in the Company owning and operating twothirds of all the proven and producing onshore UK oil and gas reservoirs, andgives us the greatest potential to develop additional gas stores. Theacquisition also helped to increase our proven and probable oil and gas reservesby 78% to 26.3 million boe. "In November, our first gas storage facility at Humbly Grove came on stream andinitial indications are that it is performing in line with expectations. "Although we remain concerned at the difficulties faced in obtaining planningpermission for future storage projects, the increased level of support fromCentral Government, coupled with ever strengthening market drivers, gives uscause for optimism and we look forward to the next year with confidence andenthusiasm." 3 April 2006 EnquiriesStar Energy Roland Wessel 020 7730 6663 Colin Judd 020 7730 6663 College Hill Associates 020 7457 2020 Ben Brewerton Strategy Star Energy's primary focus is to build a significant multi-site gas storagebusiness. We aim to consolidate our existing oil and gas production business toprovide the depleted reservoirs that form the basis of future gas stores. Wewill exploit our expertise in operating onshore oil and gas fields safely andresponsibly in environmentally sensitive areas. Star Energy will take advantageof opportunities to expand its asset base in the UK and, if possible,continental Europe. Chairman's Statement 2005 was a landmark year in the development of Star Energy's business. InNovember our first gas storage facility at Humbly Grove began operations, whilein August we completed the acquisition of Pentex Management Limited ('Pentex'),further strengthening our onshore Exploration and Production portfolio, andadding additional sites with potential for gas storage development. 2005 was also a year in which UK gas supplies were never far from the headlines.Concerns over possible winter supply shortages combined with substantialincreases in prices have alarmed consumers and raised major issues for theGovernment to address in its current Energy Review. Amongst these issues is theincreased awareness both of the important role played by gas storage inmaintaining supply and curbing price increases, and the acute shortage of suchstorage capacity in the UK. Star Energy is in an excellent position to provide substantial extra storage. Wehave accelerated our engineering and development programmes with the objectiveof adding 80-90 bcf of additional capacity within the next five to seven years.This objective will incur significant capital expenditure, which we will look tofund though the debt and equity markets. We remain extremely concerned, however,that this development plan will be held back by the current UK planning andpermitting regime, which fails to facilitate the timely development of keystrategic infrastructure such as gas storage. Indeed, our application toLincolnshire County Council to develop the Welton site was rejected despite astrong recommendation from the planning officers. We will be taking thisapplication forward on appeal, and we are encouraged by the increasing level ofsupport we are receiving from Central Government. The strong interest and support from investors in our business was very welcomeduring the year. Our raised profile as a significant player in the gas market,coupled with greater liquidity in our shares following the Pentex acquisition,underpinned good growth in our share price, positioning Star Energy as one ofthe 30 largest businesses by market value listed on AIM by the end of the year. We report a profit for the year of £1.3 million (2004: £2.9 million loss) afterone-off costs of £nil (2004: £2.2 million). Shareholders' funds have increasedfrom £56.8 million as at 31 December 2004 to £91.0 million as at 31 December2005 as a result of the placing of 19.1 million shares to raise net proceeds of£31.9 million for the acquisition of Pentex. On behalf of the Board, I would like to thank all our stakeholders and ourhard-working management and staff for their support in 2005, and we look forwardto further success in 2006. Stephen Gutteridge Chairman Chief Executive's Review The year's activities were dominated by two events; the commissioning of theCompany's first gas store at Humbly Grove in Hampshire and the acquisition ofPentex. Operational from November 2005, the Company's first gas storage project, the 10bcf Humbly Grove gas store, is the Company's first step in its plan to build80-90 bcf of additional gas storage capacity over the next five to seven years. The Humbly Grove gas store construction started well with the 27 km 24" diameterpipeline completed ahead of schedule and all major plant and equipment deliveredon time and within budget. The four new gas storage wells were also completed intime, albeit with some cost overruns. The construction progress during thesummer months was compromised by the EPC contractor, AMEC, which has resulted insignificant cost overruns of some £11 million, the majority of which have onlyrecently been brought to the attention of Star Energy. The Company intends tomitigate these cost overruns by using the adjudication clause and, if necessarythe arbitration clause in its contract with AMEC. Despite these disappointments,we are confident that, based on initial indications, the Humbly Grove facilitywill perform in line with expectations. In August 2005, the Company took another significant step in its developmentthrough the acquisition of Pentex for an initial consideration of £38.5 million.The acquisition added valuable additional oil and gas reserves and boosted theCompany's oil and gas production for 2005 to 4,658 boepd (2004: 3,502 boepd).Not only does the purchase increase profitability, it also adds a large numberof proven and producing reservoirs, some of which may form the basis ofpotential future gas storage projects. In addition to the gas storage wells at Humbly Grove, two new infill wells weredrilled at Singleton and one gas well at Humbly Grove into the Rhaeticformation. A 3D seismic survey was undertaken at Albury. Stronger oil prices have improved the profitability of the business and enhancedour ability to fund the expenditure on engineering and planning activities forfuture gas storage projects. Although we remain concerned at the difficulties faced in obtaining planningpermission for future storage projects, the increased level of support fromCentral Government, coupled with ever strengthening market drivers, gives uscause for optimism and we look forward to the next year with confidence andenthusiasm. Roland Wessel Chief Executive Officer Consolidated profit and loss account for the year ended 31 December 2005 Year ended Year ended 31 December 31 December 2004 2005 Continuing Acquired Total Total operations operations Note £'000 £'000 £'000 £'000Turnover 18,275 6,437 24,712 17,144 Depletion and depreciation (4,527) (1,244) (5,771) (4,166)Other cost of sales (10,421) (2,145) (12,566) (9,342)Total cost of sales (14,948) (3,389) (18,337) (13,508) Gross profit 3,327 3,048 6,375 3,636 Corporate AIM admission and restructuring - - - (1,452)costsOther administrative expenses (2,449) (575) (3,024) (3,547)Administrative expenses (2,449) (575) (3,024) (4,999)Other income 210 78 288 15 Operating profit/(loss) 1,088 2,551 3,639 (1,348)Interest receivable and similar income 528 700 Interest payable and similar charges (2,108) (1,460) Profit/(loss) on ordinary activities before 2,059 (2,108)taxationTax charge on profit/(loss) on ordinary (795) (742)activities Profit/(loss) for the year 1,264 (2,850)Finance costs on non-equity shares - (658) Retained profit/(loss) for the financial 1,264 (3,508)year Pence PenceBasic profit / (loss) per share 3 1.82 (6.85)Diluted profit / (loss) per share 3 1.81 (6.85) Consolidated balance sheet at 31 December 2005 2005 2004 £'000 £'000 £'000 £'000Fixed assetsIntangible assets 205 -Tangible assets 173,852 53,298 Current assetsStocks 361 297Debtors 8,118 6,390Cash in hand and at bank 17,283 12,357 25,762 19,044Creditors: amounts falling due within one year (32,983) (9,344) Net current (liabilities) / assets (7,221) 9,700 Total assets less current liabilities 166,836 62,998 Creditors: amounts falling due after more than (57,693) (413)one yearProvisions for liabilities and charges (18,099) (5,812) Net assets 91,044 56,773 Capital and reservesCalled up share capital 7,937 6,025 Share premium account 125,457 94,604 Merger reserve (45,093) (45,093)Profit and loss account 2,743 1,237 Equity shareholders' funds 91,044 56,773 Consolidated cash flow statement for the year ended 31 December 2005 2005 2004 Note £'000 £'000 £'000 £'000Cash flow from operating activities 5 19,219 2,013 Returns on investments and servicing of finance 392 Interest received 528 Interest paid (1,710) (710) Interest element of finance lease rental (77) (129)payments (1,259) (447)Taxation (215) (163)Capital expenditure and financial investment Purchase of tangible fixed assets (69,922) (10,716)Acquisitions (45,845) - Cash outflow before management of (98,022) (9,313) liquid resources and financing Financing Issue of ordinary share capital 35,000 78,250 Issue costs of equity shares (3,060) (4,806) Redemption of shares - (32,948) Increase in long term borrowing 72,230 - Repayment of debt due after more than one - (17,638) year Debt arrangement fee - (863) Capital element of finance lease rental (1,064) (921) payments 103,106 21,074 Increase in cash in the year 5,084 11,761 Reconciliations of movements in group shareholders' funds for the year ended 31 December 2005 2005 2004 £'000 £'000Retained profit/ (loss) for the financial year 1,264 (3,508)Add back undeclared dividends on non-equity shares - 494Add back premium paid on redemption of redeemable preference 10p shares - 164Issue of shares 34,999 78,250Share issue costs (2,234) (4,806)Redemption of 'B' ordinary shares - (16,781)Redemption of redeemable preference 10p shares - (16,167)Costs relating to share incentive plans 242 - Net addition to shareholders' funds 34,271 37,646Opening shareholders' funds 56,773 19,127Closing shareholders' funds 91,044 56,773 Notes: 1. The financial information set out above does not constitutethe Company's statutory accounts for the period ended 31 December 2005 or 2004.The statutory accounts for 2005 will be delivered to the Registrar of companies,following the company's annual general meeting. The auditors have reported onthose accounts; their report was unqualified and did not contain statementsunder section 237(2) or (3) of the Companies Act 1985. 2. No dividend is proposed. 2005 2004 Earnings Weighted Per Earnings Weighted Per share average number share average amount of shares amount number of shares £ Pence £ PenceBasic EPS 1,264,000 69,261,413 1.82 (3,508,000) 51,219,990 (6.85) Diluted 1,264,000 69,972,958 1.81 (3,508,000) 51,219,990 (6.85)EPS 3. Earnings per share (EPS) The dilutive elements of the issued share capital relate to Share IncentivePlans and an Approved Share Option Scheme as detailed within Share incentiveplans. The calculation of the diluted EPS assumes all criteria giving rise tothe dilution of the EPS are achieved and all outstanding share options areexercised. 4. On 8 August 2005, Star Energy Group completed the acquisition of100% of the share capital of Pentex Management Limited and its subsidiaries, acompany incorporated in the United Kingdom whose principle activity is that ofoil and gas exploration, for an initial consideration of £38,469,000. A furtherconsideration of £5,100,000 is contingent on planning permission being grantedin respect of a gas storage project at Gainsborough. The acquisition method ofaccounting has been adopted for the acquisition and the results have beenconsolidated since 8 August 2005. The completed acquisition includes all ofPentex Management Limited's subsidiary companies, as detailed in theShareholders' Circular dated 13 July 2005. 5. Reconciliation of operating profit to operating cash flows 2005 2004 £'000 £'000Operating profit /(loss) 3,639 (1,348)Non cash items (46) 118Depreciation, depletion and impairment charges 5,936 4,331(Increase) / decrease in stock (15) 120(Increase) in debtors (1,175) (1,260)Increase in creditors 10,880 52Net cash inflow from operating activities 19,219 2,013 6. Analysis of debt At Cash flow Other non Exchange At end of beginning cash movement year of year charges £'000 £'000 £'000 £'000 £'000Cash in hand and at bank 12,357 5,084 - (158) 17,283 Debt due within one year - (13,421) - - (13,421) Debt due after one year - (58,809) 1,473 - (57,336)Obligations under finance leases andHP contracts (1,384) 1,064 (377) - (697)Total 10,973 (66,082) 1,096 (158) (54,171) 7. Copies of the annual report and accounts will be posted to allshareholders. Further copies will be available from the Company's head officesat 6th Floor, 5 Lower Belgrave Street, London, SW1W 0NR from the date ofposting. Telephone +44 (0) 20 7730 6663. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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