20th Dec 2007 07:44
Pantheon Resources PLC20 December 2007 Preliminary Results for the Period Ended 30 June 2007 Pantheon Resources plc ("Pantheon" or "the Company"), the UK based independentoil and gas exploration company focused on the U.S. Gulf of Mexico region, todayannounces its preliminary results for the period ended 30 June 2007. TheCompany has published its annual report and accounts for the year ended 30 June2007 and hard copies are being posted to shareholders. In addition, the annualreport and accounts can be obtained free of charge for a period of one monthfollowing the date of this announcement from the offices of the Company'snominated adviser, Oriel Securities Limited, being 125 Wood Street, London EC2V7AN. HIGHLIGHTS • First commercial discovery and production within six months of initial public offering ("IPO"); • Cash flow being generated from existing discoveries; • Asset base expanded and diversified; • Asset portfolio retains potential for major growth in reserves and production; • Active drilling programme has commenced with spudding of well on Nottoway prospect; • Board strengthened with appointment of new independent non-executive director; • Search for CEO advanced; • Successful placing of 1.5 million shares in November 2007 providing additional funding to help finance the drilling programme, as well as for the provision of general working capital; • Pre-tax loss including writedowns previously announced of £5,095,034 (2006: pre tax loss £339,314). Chairman's Report Pantheon ended its financial year awaiting its first significant production andcash flow, on the brink of an active drilling programme and having refreshed anddiversified its asset portfolio. This was achieved within 18 months of itsinitial public offering ("IPO") in April 2006. The scale of the transformationmay be measured as, at the beginning of the period, drilling had not evencommenced on any of the Group's exploration prospects. The second half of the financial year was dominated by the drilling of theWilson well, just as the first half had been focussed on the testing of the PlumDeep prospect. Success was attained at Wilson with a declaration ofcommerciality on 18 June 2007. At the end of the financial year work wasunderway to tie this well into the sales pipeline. Since the end of thefinancial year, Wilson has been brought on-stream and is now in an extendedproduction test phase. The disappointment and uncertainty created by the deeper zones at Plum Deep onlyserved to intensify Pantheon's efforts to secure other potential high impactventures. Since May 2007, two high impact ventures, Bullseye and SouthLouisiana, have been added to the portfolio, both located in Louisiana. TheSouth Louisiana venture has had a number of benefits to Pantheon. Apart fromadding another high impact project to Pantheon's portfolio, it also providedlower risk targets with the Point Clair prospect. Moreover, since theacquisition of South Louisiana, additional exploration prospects have beenidentified on the venture. Pantheon continues to analyse further opportunities in conjunction withestablished operators. The aim is to enhance shareholder value and returns. Thisis in line with its stated strategy. Since the financial year end, Pantheon hasfarmed-into the Dunn Deep #2 well on Padre Island, which has subsequently proveda natural gas discovery. The period from farm-in to first production amounted tojust over six weeks. This highlights the ability to obtain rapid cash flow andgood returns in an energy-thirsty, low sovereign risk market with excellentinfra-structure. The changed asset base has led to a consideration of the resources that Pantheonneeds to deploy in the future. Pantheon has maintained a strategy of keepingcorporate overheads low since its IPO. However the company is now at a stage ofdevelopment where additional senior management is required. The board hasalready been strengthened by the appointment of John Walmsley as a non-executivedirector in August 2007. His extensive experience in the oil and gas industryhas proven invaluable in his short tenure. With six producing wells from a total of nine wells drilled since the Company'sformation and heading into a period of further drilling, the Company believes itan ideal time to appoint a Chief Executive Officer. The search is now advanced.The Company is delighted with the response which has identified several highcalibre candidates to date, and detailed discussions are underway in relation tothis matter. Once this key appointment is confirmed, then it should be followedby further positions. High oil and natural gas prices may have led to a resurgence of the global oiland gas industry over the past years but they have also heralded a less welcometrend. Costs have risen, wells have been delayed due to a tight rig market andthe general workforce has suffered from inexperience following years ofunder-investment and cut-backs. Pantheon has not been immune to these trends.Both the Wilson and Plum Deep wells recorded cost over-runs from initialbudgets. While testing programmes account for some of the additional costburden, these factors have contributed. Since the year-end, Pantheon has raised £900,000 by way of a placing of1,500,000 ordinary fully paid up shares at a price of 60p per share withinstitutional investors. This was oversubscribed. The proceeds have providedPantheon with additional funding to help finance the drilling programmes inSouth Louisiana and Texas, as well as for the provision of general workingcapital. Pantheon is now facing a period of rising production and cash flow. Drilling hascommenced on the Nottoway prospect with the spudding of the Fay Weill et al wellon 12 October. This well should be followed by others, Bullseye and Point Clair,over the coming months as the exploration programme gathers pace. In itsrelatively short time as a public company, Pantheon has made significantprogress. This should provide a foundation on which to build a focusedexploration and production company. Post-balance sheet events Appointment of Director On 1 August 2007, Pantheon announced the appointment of Mr John Walmsley as adirector of the company. Mr Walmsley's extensive experience in the oil and gasindustry has proven invaluable since his appointment. Capital Raising Since the year-end, Pantheon has raised £900,000 by way of a placing of1,500,000 ordinary fully paid up shares at a price of 60p per share withinstitutional investors. This was oversubscribed. The proceeds have providedPantheon with additional funding to help finance the drilling programmes inSouth Louisiana and Texas, as well as for the provision of general workingcapital. Dunn Deep #2 In early August 2007, Pantheon farmed-into an appraisal/development well of theMid-Frio La Playa #1 natural gas find ("Dunn Deep #1"). Although located onPadre Island, Dunn Deep #2 is separate from the Padre Island Joint Venture.Pantheon had a 10% paying interest to earn approximately a 7.5% working interest("WI"). This equated to a one-third for one-quarter farm-in. This representedvery favourable terms relative to normal industry agreements for a farm-in to adevelopment well. It should be noted that Pantheon does not have an interest inDunn Deep #1. The operator is BNP, a private Texas-based company. The Dunn Deep #2 well commenced drilling on 15 August, 2007. The main objectivein Dunn Deep #2 was the Marg Tex 35 formation. This is the same zone as thattested successfully at the Wilson discovery. Planned total measured depth of10,542 feet was achieved and electric logs were run. Net pay of 20 feet wasencountered within a 50 feet gross interval in the main objective. No flowtesting was undertaken. On 7 September 2007, it was announced that Dunn Deep#2would be completed as a natural gas producer. Dunn Deep #2 came on-stream on 17 September 2007, less than two weeks fromconfirmation of a commercial discovery. An early hook-up to the sales grid wasachievable as the well had been drilled from an existing site. Initial gross production from the field was 3 million standard cubic feet of gasper day and 60 barrels a day of condensate. This has risen to a stabilised rateof 4.8 mmcfd of natural gas. Wilson Subsequent to the financial year-end, Pantheon has seen the start-up of theWilson #1 well on 10 September 2007 in which it has a 31.77% working interest.Initial gross output from Wilson was 2.5 mmcfd of natural gas. Production Subsequent to the financial year-end, Pantheon has seen the commencement ofproduction from two of its wells located on Padre Island. These have augmentedexisting output from the four producing wells on Project Wharton. Averageproduction to Pantheon for the July to September period was 359 mcfd on aworking interest basis compared with the 74.1 mcfd averaged for the previousthree month period. Table 2 provides a quarterly breakdown of production. Table 1 :Pantheon Quarterly Natural Gas Production on Working Interest Basis(mcfd) Q1 Q2 Q3 Q4 (Jul-Sep) (Oct-Dec) (Jan-Mar) (Apr-Jun) 2006 0.7 32.3 81.7 74.1 2007 359.2 South Louisiana The first well on Pantheon's South Louisiana venture, Fay Weil Ross et al #1,commenced drilling on 12 October 2007. This well is scheduled to be a 15,498feet test of the Nottoway Prospect, a salt feature unknown until a new 3Dseismic survey was shot in late 2005. This well is located to the south of BatonRouge near the small community of White Castle, Louisiana. On 17 December it was announced that the well had reached a measured depth ("MD") of 12,025 feet at which point 7 5/8 inch casing is being set. Thetarget horizons have yet to be reached. Hydrocarbon shows were encountered inthe mud logs in shallower zones. These shallower zones have been logged. Theresults of these electric logs suggest the presence of a thin hydrocarbon payzone. Two factors should be highlighted. First, these shows were encountered in areservoir that was not considered either a primary or secondary objective priorto drilling. Secondly, the occurrence of hydrocarbons at this shallower depthshould not be interpreted as an indication of the presence of hydrocarbons ineither the primary or secondary zone. The Nottoway Prospect is located between two existing oil and gas fields, WhiteCastle Dome and Laurel Ridge. Deeper exploration was undertaken on both fieldsin 2006. New discoveries were made in both White Castle Dome and Laurel RidgeField in the deeper Oligocene section in 2006. Similar zones are objectives inthe Nottoway Prospect. Padre Island Pantheon notes that BNP and Golden Gate Petroleum are in current discussionsconcerning the terms and conditions for the drilling of the Manzano well.Following the outcome of these discussions Pantheon will gain greater visibilityon the timing of this well. DIRECTORS' REPORT FOR THE PERIOD ENDED 30 JUNE 2007 The Directors present their report together with the audited accounts ofPantheon Resources Plc ("Pantheon" or "the Company") and its subsidiaryundertakings (together "the Group") for the year ended 30 June 2007. Principal activity The Company is registered in England and Wales, having been incorporated on 8March 2005 under the Companies Act with registered number 5385506 as a publiccompany limited by shares. The principal activity of the Group is the investment in oil and gas explorationand development. The Group operates in its parent undertaking and in the USAthrough subsidiary companies, details of which are set out in the note 8 tothese accounts. Results and dividends The Group results for the period are set out on page 18. The Directors do notpropose to recommend any distribution by way of a dividend for the year ended 30June 2007. Use of financial instruments Pantheon's financial risk management objectives are to minimise debt, to fundexploration activity through equity financing and to ensure sufficient workingcapital for the Group's overhead and capital expenditure commitments. This isachieved by prudent financial management and careful management of the Group'scash balances, both short and long term. The Group does not use derivativefinancial instruments. The financial risk management objectives and policies ofthe Group set out in Note 18 of the Financial Statements include the Group'sexposure to price, liquidity and credit risk. Information to shareholders - website The Group maintains its own website (www.pantheonresources.com) to facilitateprovision of information to external stakeholders and potential investors and tomeet the new AIM guidance. Group structure and changes in share capital Details of movements in share capital during the period are set out in Note 14to these accounts. Report on Directors' remuneration and service contracts The service contracts of all the Directors are subject to a six monthtermination period. Pensions The Group does not operate a pension scheme for Directors or employees. Directors' remuneration Remuneration of Directors was as follows: Fees/basic Employers Benefits 2007 salary NI in kind Total £ £ £ £ S Graham 44,269 5,731 - 50,000R Rosenthal 44,269 5,731 - 50,000J Hondris 37,002 4,665 - 41,667A Waller 25,000 - - 25,000 150,540 16,127 - 166,667 Supplier payment policy The Company's policy is that payments to suppliers are made in accordance withthose terms and conditions agreed between the Company and its suppliers,providing that all trading terms and conditions have been complied with. Political and charitable contributions There were no political or charitable contributions made by the Company duringthe year ended 30 June 2007. Remuneration and Audit committees The company does not at present operate a Remuneration committee. It is expectedthat such a committee will be established in the forthcoming year as the companygrows. The audit committee meets twice per year to discuss half yearly and annualresults. For the annual results, the independent auditors, UHY Hacker Young LLP,are invited to discuss the results and their assessment of internal controls. The Chairman of the Audit committee is John Walmsley, and the otherparticipating member is Justin Hondris. DIRECTORS' REPORT FOR THE PERIOD ENDED 30 JUNE 2007 Statement of directors' responsibilities The Directors are responsible for preparing the financial statements inaccordance with applicable laws and International Financial Reporting Standards.Company Law requires the Directors to prepare financial statements for eachfinancial period which give a true and fair view of the state of affairs of theGroup and of the Company and of the profit or loss of the Group for that period. In preparing those financial statements, the Directors are required to: • select suitable accounting policies and then apply them consistently; • make judgements and estimates that are reasonable and prudent; • prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Group will continue in business; • state whether applicable accounting standards have been followed, subject to any material departures disclosed and explained in the financial statements. The Directors confirm that the financial statements comply with the aboverequirements. The Directors are responsible for keeping proper accounting records whichdisclose with reasonable accuracy at any time the financial position of theGroup and Company and to enable them to ensure that the financial statementscomply with the Companies Act 1985. The Directors are also responsible forsafeguarding the assets of the Group and hence for taking steps for theprevention and detection of fraud and other irregularities. The Directors areresponsible for the maintenance and integrity of the corporate and financialinformation included on the Company's website. Statement of disclosure to the auditors So far as the Directors are aware: • there is no relevant audit information of which the Company's auditors are unaware; and • all the Directors have taken steps that they ought to have taken to make themselves aware of any relevant audit information and to establish that the auditors are aware of that information. Auditors On 30 April 2007 the Company's auditors, UHY Hacker Young, transferred theirbusiness into a limited liability partnership, UHY Hacker Young LLP ("the LLP"),and the office of auditor has passed to the LLP. In accordance with Section 385of the Companies Act 1985, a resolution proposing that UHY Hacker Young LLP bereappointed as auditors of the Company and that the Directors be authorised todetermine their remuneration will be put to the next Annual General Meeting. INDEPENDENT AUDITORS' REPORT TO THE MEMBERS OF PANTHEON RESOURCES PLC FOR THEPERIOD ENDED 30 JUNE 2007 We have audited the Group and Parent Company financial statements (the "financial statements") of Pantheon Resources plc for the year ended 30 June 2007which comprise the Group income statement, the Group and Parent Companystatements of changes in equity, the Group and Parent Company balance sheets,the Group and Parent Company cash flow statements and the related notes. Thesefinancial statements have been prepared in accordance with the basis and theaccounting policies set out therein. This report is made solely to the Company's members, as a body, in accordancewith Section 235 of the Companies Act 1985. Our audit work has been undertakenso that we might state to the Company's members those matters we are required tostate to them in an auditor's report and for no other purpose. To the fullestextent permitted by law, we do not accept or assume responsibility to anyoneother than the Company and the Company's members as a body, for our audit work,for this report, or for the opinions we have formed. Respective responsibilities of directors and auditors The Directors' responsibilities for preparing the Annual Report and thefinancial statements in accordance with applicable law and InternationalFinancial Reporting Standards ("IFRS") as adopted by the European Union are setout in the Statement of Responsibilities of Those Charged with Governance. Our responsibility is to audit the financial statements in accordance with therelevant legal and regulatory requirements and International Standards onAuditing (UK and Ireland). We report to you our opinion as to whether the financial statements give a trueand fair view and are properly prepared in accordance with the Companies Act1985. We also report to you whether, in our opinion, the information given inthe Directors' report is consistent with the financial statements. In addition,we report to you if, in our opinion, the Company has not kept proper accountingrecords, if we have not received all the information and explanations we requirefor our audit, or if information specified by law regarding directors'remuneration and other transactions with the Company is not disclosed. We read other information contained in the Annual Report, and consider whetherit is consistent with the audited financial statements. This other informationcomprises the Chairman's Statement, Review of Operations and Directors' Report.We consider the implications for our report if we become aware of any apparentmisstatements or material inconsistencies with the financial statements. Ourresponsibilities do not extend to any other information. Basis of opinion We conducted our audit in accordance with International Standards on Auditing(UK and Ireland) issued by the Auditing Practices Board. An audit includesexamination, on a test basis, of evidence relevant to the amounts anddisclosures in the financial statements. It also includes an assessment of thesignificant estimates and judgements made by the Directors in the preparation ofthe financial statements, and of whether the accounting policies are appropriateto the Company's and the Group's circumstances, consistently applied andadequately disclosed. We planned and performed our audit so as to obtain all the information andexplanations which we considered necessary in order to provide us withsufficient evidence to give reasonable assurance that the financial statementsare free from material misstatement, whether caused by fraud or otherirregularity or error. In forming our opinion, we also evaluated the overalladequacy of the presentation of information in the financial statements. Opinion In our opinion: • the Group financial statements give a true and fair view, in accordancewith IFRSs as adopted by the European Union, of the state of the Group's affairsas at 30 June 2007 and of the Group's loss for the year then ended; • the Parent Company financial statements give a true and fair view, inaccordance with IFRSs as adopted by the European Union as applied in accordancewith the provisions of the Companies Act 1985, of the state of the ParentCompany's affairs as at 30 June 2007; • the financial statements have been properly prepared in accordance withthe Companies Act 1985; and • the information given in the Directors' report is consistent with thefinancial statements. UHY Hacker Young 19 December 2007 Chartered Accountants Registered Auditors St. Alphage House 2 Fore Street London EC2Y 5DH CONSOLIDATED INCOME STATEMENT FOR THE YEAR ENDED 30 JUNE 2007 Notes 2007 2006 £ £ Turnover 3 23,693 -Cost of sales (877) - Gross profit 22,816 - Administrative expenses before share basedpayments and impairment losses (427,679) (238,536)Share based payments 19 (487,540) (161,513)Impairment of intangible assets 12 (4,438,420) -Total administration expenses 4 (5,353,639) (400,049) Operating loss 4 (5,330,823) (400,049) Finance revenue 6 235,789 60,535 Loss before taxation (5,095,034) (339,514) Taxation 7 - - Loss for the year (5,095,034) (339,514) Loss per ordinary share - basic and diluted 2 (32.76)p (8.33)p The comparative amounts represent the results for the period from the date ofincorporation on 8 March 2005 to 30 June 2006. All of the above amounts are in respect of continuing operations. CONSOLIDATED AND COMPANY STATEMENT OF CHANGES IN NET EQUITY FOR THE YEAR ENDED30 JUNE 2007 Share Share Retained Currency Equity capital premium earnings reserve reserve Total £ £ £ £ £ £ GroupAt 1 July 2006 155,524 9,698,748 (339,514) - 161,513 9,676,271Net loss for the year - - (5,095,034) - - (5,095,034)Foreign currency - - - (234,275) - (234,275)Share based payment - - - - 487,540 487,540 Balance at 30 June 2007 155,524 9,698,748 (5,434,548) (234,275) 649,053 4,834,502 CompanyAt 1 July 2006 155,524 9,698,748 (301,025) - 161,513 9,714,760Net loss for the year - - (4,969,235) - - (4,969,235)Share based payment - - - - 487,540 487,540 Balance at 30 June 2007 155,524 9,698,748 (5,270,260) - 649,053 5,233,065 CONSOLIDATED BALANCE SHEET AS AT 30 JUNE 2007 Notes 2007 2006 £ £Fixed assetsIntangible fixed assets 12 3,792,161 1,818,024Tangible fixed assets 13 249,566 - 4,041,727 1,818,024 Current assetsTrade and other receivables 9 69,049 109,907Cash and cash equivalents 10 1,447,432 8,409,699 1,516,481 8,519,606 Creditors: amounts falling due within one year 11 723,706 661,359Net current assets 792,775 7,858,247 Total assets less liabilities 4,834,502 9,676,271 Capital and reservesCalled up share capital 14 155,524 155,524Share premium account 9,698,748 9,698,748Retained losses (5,434,548) (339,514)Currency reserve (234,275) -Equity reserve 649,053 161,513 Shareholders' funds 4,834,502 9,676,271 The financial statements were approved by the Board on 19 December 2007 COMPANY BALANCE SHEET AS AT 30 JUNE 2007 Notes 2007 2006 £ £ASSETS Fixed assetsTangible fixed assets 12 2,077 - Debtors: amounts falling due after one year 9 3,801,339 1,240,113 Current assetsTrade and other receivables 9 60,098 109,907Cash and cash equivalents 10 1,434,390 8,409,699 1,494,488 8,519,606 Creditors: amounts falling due within one year 11 64,839 44,959Net current assets 1,429,649 8,474,647 Total assets 5,233,065 9,714,760 Capital and reservesCalled up share capital 14 155,524 155,524Share premium account 9,698,748 9,698,748Retained losses (5,270,260) (301,025)Equity reserve 649,053 161,513 Shareholders' funds 5,233,065 9,714,760 The financial statements were approved by the Board on 19 December 2007 CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 30 JUNE 2007 Notes 2007 2006 £ £ Net cash (outflow)/ inflow from operating activities 15 (424,943) 312,916 Cash flows from investing activitiesInterest received 235,789 60,535Acquisition of tangible fixed assets (2,769) -Net funds used for capital expenditure (6,536,068) (1,818,024)Net cash inflow from investing activities (6,303,048) (1,757,489) Cash flows from financing activitiesProceeds from issue of shares - 10,420,061Issue costs - (565,789)Net cash inflow from financing activities - 9,854,272 Net (decrease)/increase in cash and cash equivalents (6,727,991) 8,409,699 Effect of foreign currency translation reserve (234,276) 400,756 - Cash and cash equivalents at the beginning of the year 8,409,699 - Cash and cash equivalents at the end of the period 10 1,447,432 8,409,699 COMPANY STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 30 JUNE 2007 Notes 2007 2006 £ £ Net cash (outflow)/ inflow from operating activities 15 (424,454) (155,087) Cash flows from investing activitiesInterest received 235,789 60,535Acquisition of tangible fixed assets (2,769) -Loans to group companies (6,783,875) (1,350,021)Net cash inflow from investing activities (6,550,854) (1,289,486) Cash flows from financing activitiesProceeds from issue of shares - 10,420,061Issue costs - (565,789)Net cash inflow from financing activities - 9,854,272 Net (decrease)/increase in cash and cash equivalents (6,975,309) 8,409,699 Cash and cash equivalents at the beginning of the year 8,409,699 - Cash and cash equivalents at the end of the period 10 1,434,390 8,409,699 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2007 1. Accounting policies A summary of the principal accounting policies, all of which have been appliedconsistently throughout the period, is set out below. 1.1. Basis of preparation The financial statements have been prepared using the historical costconvention. In addition, the financial statements have been prepared inaccordance with the International Financial Reporting Standards ("IFRS")including IFRS 6, Exploration for and Evaluation of Mineral Resources, asadopted by the European Union ("EU") and in accordance with the provisions ofthe Companies Act 1985. The group's financial statements for the year ended 30 June 2007 were authorisedfor issue by the board of Directors on 19 December 2007 and the balance sheetswere signed on the Board's behalf by Mr J Hondris. The group financial statements are presented in UK pounds sterling. In accordance with the provisions of the Section 230 of the Companies Act 1985,the Company has not presented a profit and loss account. A loss for the yearended 30 June 2007 of £4,969,235 (2006: loss for period of £301,025) has beenincluded in the income statement. 1.2. Basis of consolidation Subsidiaries are fully consolidated from the date on which control istransferred to the Group. They are de-consolidated from the date that controlceases. The purchase method of accounting is used to account for the acquisitionof subsidiaries by the Group. The cost of an acquisition is measured as the fairvalue of the assets given, equity instruments issued and liabilities incurred orassumed at the date of exchange, plus costs directly attributable to theacquisition. Identifiable assets acquired and liabilities and contingentliabilities assumed in a business combination are measured initially at theirfair values at the acquisition date, irrespective of the extent of any minorityinterest. The excess of the cost of acquisition over the fair value of theGroup's share of the identifiable net assets acquired is recorded as goodwill. Goodwill arising on acquisitions is capitalised and subject to impairmentreview, both annually and when there are indications that the carrying value maynot be recoverable. Inter-company transactions, balances and unrealised gains on transactionsbetween group companies are eliminated. All the companies over which the Company has control apply, where appropriate,the same accounting policies as the Company. 1.3. Revenue Oil and Gas revenue represents amounts invoiced (exclusive of sales relatedtaxes) for the Group's share of oil and gas sales in the year. Interest revenue is recognised on a proportional basis taking into account theinterest rates applicable to the financial assets. 1.4. Foreign currency translation (i) Functional and presentational currency Items included in the Group's financial statements are measured using UnitedStates Dollars ("US$"), which is the currency of the primary economicenvironment in which the Group operates ("the functional currency"). Thefinancial statements are presented in Pounds Sterling ("£"), which is thefunctional currency of the Company and is the Group's presentation currency. The individual financial statements of each Group company are presented in thefunctional currency of the primary economic environment in which it operates. (ii) Transactions and balances Transactions in foreign currencies are translated into sterling at the rate ofexchange ruling at the date of the transaction. Monetary assets and liabilitiesdenominated in foreign currencies are translated at the rate of exchange rulingat the balance sheet date. The resulting exchange gain or loss is dealt with inthe income statement. The assets, liabilities and the results of the foreign subsidiary undertakingsare translated into Sterling at the rates of exchange ruling at the year end.Exchange differences resulting from the retranslation of net investments insubsidiary undertakings are treated as movements on reserves. 1.5. Cash and cash equivalents The company considers all highly liquid investments, with a maturity of 90 daysor less to be cash equivalents, carried at the lower of cost or market value. 1.6. Deferred taxation Deferred tax is provided in full, using the liability method, on temporarydifferences arising between the tax bases of assets and liabilities and theircarrying amounts in the financial statements. Deferred tax is determined usingtax rates (and laws) that have been enacted or substantially enacted by thebalance sheet date and expected to apply when the related deferred tax isrealised or the deferred liability is settled. Deferred tax assets are recognised to the extent that it is probable that thefuture taxable profit will be available against which the temporary differencescan be utilized. 1.7. Exploration and development costs All costs associated with oil, gas and mineral exploration and investments arecapitalised on a project by project basis, pending determination of thefeasibility of the project. Costs incurred include appropriate technical andadministrative expenses but not general corporate overheads. If an explorationproject is successful, the related expenditures will be transferred to DevelopedOil and Gas Properties and amortised over the estimated life of the commercialreserves on a unit of production basis. Where a licence is relinquished orproject abandoned, the related costs are written off. Where the Group maintainsan interest in a project, but the value of the project is considered to beimpaired, a provision against the relevant capitalised costs will be raised. The recoverability of all exploration and development costs is dependent uponthe discovery of economically recoverable reserves, the ability of the group toobtain necessary financing to complete the development of the reserves andfuture profitable production or proceeds from the disposition thereof. Amounts recorded for these assets represent costs and are not intended toreflect present or future values. 1.8. Impairment of exploration and development costs and depreciation offixed assets The carrying value of unevaluated areas is assessed on at least an annual basisor when there has been an indication that impairment in value may have occurred. The impairment of unevaluated prospects is assessed based on the Directors'intention with regard to future exploration and development of individualsignificant areas and the ability to obtain funds to finance such explorationand development. Developed Oil and Gas Properties are amortised over the estimated life of thecommercial reserves on a unit of production basis. The cost of other fixed assets is written off by equal annual instalments overtheir expected useful lives, as follows: Office equipment - two years. 1.9. Financial instruments International Accounting Standard 32 requires information to be disclosed aboutthe impact of financial instruments on the Group's risk profile, how the risksarising from financial instruments might affect the entity's performance, andhow these risks are being managed. The Group's policies include that no trading in derivative financial instrumentsshall be undertaken. These disclosures have been made in Note 18 to the accounts. 1.10. Share based payments In the prior year the Company made share-based payments to certain directors andadvisers by way of issue of share options. The fair value of these payments iscalculated by the Company using the Black-Scholes option pricing model. Theexpense is recognised on a straight line basis over the period from the date ofaward to the date of vesting, based on the Company's best estimate of sharesthat will eventually vest. 1.11. Critical accounting estimates and judgements The preparation of financial statements in conformity with InternationalFinancial Reporting Standards requires the use of accounting estimates andassumptions that affect the reported amounts of assets and liabilities at thedate of the financial statements and the reported amounts of income and expensesduring the reporting period. Although these estimates are based on management'sbest knowledge of current events and actions, actual results ultimately maydiffer from those estimates. IFRS also require management to exercise itsjudgement in the process of applying the Group's accounting policies. The areas involving a higher degree of judgement or complexity, or areas whereassumptions and estimates are significant to the financial statements, are asfollows: Impairment of intangible assets Determining whether an intangible asset is impaired requires an estimation ofwhether there are any indications that its carrying value is not recoverable. At each reporting date, the company reviews the carrying value of its tangibleand intangible assets to determine whether there is any indication that thoseassets have been impaired. If such an indication exists, the recoverable amountof the asset, being the higher of the asset's fair value less costs to sell andvalue in use, is compared to the asset's carrying value. Any excess of theasset's carrying value over its recoverable amount is expensed to the incomestatement. Expenditure and Development Expenditure and development costs are amortised over the life of the areaaccording to the rate of depletion of the economically recoverable reserves. Ifthe amount of economically proven reserves varies, this will impact on theamount of the asset which should be carried on the balance sheet. Share based payments The Group records charges for share based payments. For option based share based payments management estimate certain factors usedin the option pricing model, including volatility, exercise date of options andnumber of options likely to be exercised. If these estimates vary from actualoccurrence, this will impact on the value of the equity carried in the reserves. 1.12. New standards and interpretations not applied During the year, the IASB and IFRIC have issued a number of new standards,amendments and interpretations with an effective date after the date of thesefinancial statements. Of these, only the following are expected to be relevantto the Group: IFRS 7 Financial instruments: Disclosures 1 January 2007 IFRS 8 Operating segments 1 January 2009 IAS1 Presentation of Financial Statements: Capital Disclosures 1 January 2007 IFRIC 10 Interim Financial Information and Impairment 1 November 2006 The directors do not anticipate that the adoption of these standards andinterpretations will have a material impact on the Group's financial statementsin the period of initial application. 2. Loss per share The basic loss per share of 32.76p (2006: 8.33p) for the Group is calculated bydividing the loss for the year by the weighted average number of ordinary sharesin issue of 15,552,329 (2006: 4,074,045). Share options issued on 4 April 2006 are anti-dilutive. Full details of theshare options issued are set out in note 19. 3. Segmental information The primary segmental reporting is determined to be geographical segmentaccording to the location of the assets. The Directors do not believe that thereis a secondary segment that could be reported. All turnover relates to income from the Group's oil and gas assets and isderived from the United States. The loss for the year is analysed by geographical area as follows: Geographical segment (Group) United Kingdom United States Total £ £ £ Turnover: - 23,693 23,693Cost of sales - (877) (877)Interest receivable 235,789 - 235,789Impairment of investment - (4,438,420) (4,438,420)Share-based payments (487,540) - (487,540)Administration expenses (406,198) (21,481) (427,679) Loss before taxation (657,949) (4,437,085) (5,095,034) The net operating assets are analysed by geographical area as follows: Geographical segment (Group) United Kingdom United States Total £ £ £ Developed oil & gas properties - 247,489 247,489Exploration and development costs - 3,792,161 3,792,161Fixed assets 2,077 - 2,077Trade and other receivables 60,098 8,951 69,049Cash and cash equivalents 1,447,432 - 1,447,432Trade and other payables (64,837) (658,869) (723,706) Net assets 1,444,770 3,389,732 4,834,502 4. Operating loss 2007 2006 £ £This is stated after charging:Auditors' remuneration- In capacity as auditor (group and company) 12,000 8,000- Other services pursuant to legislation 4,962 -Foreign exchange loss - 38,489 5. Directors' emoluments 2007 2006 £ £ Wages and salaries 150,540 121,875Social security costs 16,127 9,642 166,667 131,517There are no employees other than the Directors. 6. Finance revenue 2007 2006 £ £ Bank interest 235,789 60,535 7. Taxation 2007 2006 £ £ Factors affecting the tax charge for the periodLoss on ordinary activities before taxation (5,095,034) (339,514) Loss on ordinary activities before taxationmultiplied by standard rate of corporationtax of 30.00% (1,528,510) (101,854) Effects of:Non deductible expenses 153,762 12,445Timing differences not recognised 48,454Tax losses carried forward 1,374,748 40,955 Current tax charge - - Factors that may affect future tax charges At the balance sheet date, the Group has unused United Kingdom tax lossesavailable for offset against suitable future profits in the United Kingdom. Adeferred tax asset has not been recognised in respect of such losses due touncertainty of future profit streams. 8. Subsidiary entities The Company currently has the following wholly owned subsidiaries all of whichwere incorporated on 3 February 2006: Country of PercentageName Incorporation ownership Activity Hadrian Oil & Gas LLC United States 100% Holding company Agrippa LLC United States 100% Holding company Pantheon Oil & Gas LP United States 100% Oil & gas exploration company Pantheon Oil & Gas LP is 99% owned by Agrippa LLC as its limited partner and 1%by Hadrian Oil & Gas LLC as its general partner. 9. Trade and other receivables Group Group Company Company 2007 2006 2007 2006 £ £ £ £ Amounts falling due within one year:Trade receivables 8,951 - - -Prepayments and accrued income 54,286 73,457 54,286 73,457Other receivables 5,812 36,450 5,812 36,450 69,049 109,907 60,098 109,907 Amounts falling due after more than one year : Amount due from subsidiary undertakings - - 3,801,339 1,240,113 10. Cash and cash equivalents Group Group Company Company 2007 2006 2007 2006 £ £ £ £ Cash at bank and in hand 1,447,432 8,033,232 1,434,390 8,033,232Cash equivalents - 376,467 - 376,467 1,447,432 8,409,699 1,434,390 8,409,699 11. Trade and other payables Group Group Company Company 2007 2006 2007 2006 £ £ £ £ Trade creditors 1,005 1,005Other payables - 36,959 - 36,959Accruals 722,701 624,400 63,834 8,000 723,706 661,359 64,839 44,959 12. Intangible assets Exploration and development costs £ GroupCostAt 30 June 2006 1,818,024Additions 6,536,068Reclassified to Tangible assets (268,823) At 30 June 2007 8,085,269 ImpairmentAt 30 June 2006 -Impairment during the period 4,438,420Foreign exchange movement (145,312) At 30 June 2007 4,293,108 Net book value 3,792,161 At 30 June 2007 At 30 June 2006 1,818,024 The Company had no intangible assets at either 30 June 2007 or 30 June 2006. 13. Tangible assets Developed Oil & Gas Properties Office £ Equipment Total Group £ £CostAt 30 June 2006 - - -Reclassified from Intangible assets 268,823 - 268,823Additions - 2,769 2,769 At 30 June 2007 268,823 2,769 271,592 DepreciationAt 30 June 2006 - - -Depreciation for the year 21,334 692 22,026 At 30 June 2007 21,334 692 22,026 Net book value At 30 June 2007 247,489 2,077 249,566 At 30 June 2006 - - - Office Equipment £ CompanyCostAt 30 June 2006 -Additions 2,769 At 30 June 2007 2,769 DepreciationAt 30 June 2006 -Depreciation for the year 692 At 30 June 2007 692 Net book value At 30 June 2007 2,077 At 30 June 2006 - 2007 2006 £ £14. Called up share capital Authorised:1,000,000,000 ordinary shares of £0.01 each 10,000,000 10,000,000 Allotted, issued and fully paid:15,552,329 ordinary shares of £0.01 each 155,524 155,524 There were no changes to the issues share capital during the year. 15. Net cash (outflow)/ inflow from operating activities Group Group 2007 2006 £ £ Operating loss (5,330,823) (400,049)Impairment 4,438,420 -Depreciation 22,027 -Cost of issuing share options 487,540 161,513Decrease/(increase) in trade and other receivables 40,858 (109,907)Increase in trade and other payables 62,347 661,359 Net cash (outflow)/ inflow from operating activities (424,943) 312,916 Company Company 2007 2006 £ £ Operating loss (5,205,023) (361,560)Impairment 4,289,948 -Depreciation 692 -Cost of issuing share options 487,540 161,513Decrease/(increase) in trade and other receivables 49,809 -Increase in trade and other payables 19,880 44,960 Net cash (outflow)/ inflow from operating activities (424,454) (155,087) 16. Control No one party is identified as controlling the Company 17. Decommissioning expenditure The Directors have considered the environmental issues and the need for anynecessary provision for the cost of rectifying any environmental damage, asmight be required under local legislation. In their view, no provision isnecessary for any future costs of decommissioning or any environmental damage. 18. Financial instruments At 30 June 2007, the Group had cash on one month term deposits of £nil (2006:£7,000,000). The Company's exposure to interest rate risk, which is the riskthat a financial instrument's value will fluctuate as a result of changes inmarket interest rates and the effective weighted average interest rates onclasses of financial assets and financial liabilities, was as follows: Weighted Average Fixed Non - Interest Interest Rate interest rate Bearing 2007 2007 2007Financial assets: % £ £ Cash on Deposit 4.1 1,434,390 - Net Fair Value The net fair value of financial assets and financial liabilities approximates totheir carrying amount as disclosed in the balance sheet and in the relatednotes. Currency Risk The functional currency for the Group's operating activities is the PoundSterling and for exploration activities the United States of America dollar.The Group has not hedged against currency depreciation but continues to keep thematter under review. Financial risk management The Directors recognise that this is an area in which they may need to developspecific policies should the Group become exposed to wider financial risks asthe business develops. 19. Share based payments Included within administration expenses is a charge for issuing share options. Group Group Company Company 2007 2006 2007 2006 £ £ £ £ Cost of issuing share options 487,540 161,513 487,540 161,513 Number ofExercise price Value Options granted andPounds Pence held at 30 June 2007 1.00 42.474 483,284 1.25 35.116 250,000 1.50 31.116 650,000 2.00 23.806 650,000 The share options, detailed above, were granted on 4 April 2006 and will beexercisable between the first and fifth anniversary of Admission to AIM and arenon-transferable. No options were exercised, forfeited or expired during the period. The option values were calculated with reference to the Black-Scholes optionpricing model taking into account the following input assumptions: Share price £1.00 Exercise Price As stated above Expected volatility 50% Vesting period 1 year Expected dividends Nil Risk free interest rate 5.42% The volatility percentage is an estimation of the expected volatility in theshare price for a junior exploration Company which is listed on AIM havingregard to comparative companies, quantum of cash raised, targeted(institutional) investment group and risk profile. 20. Post balance sheet events Appointment of Director On 1 August 2007, Pantheon announced the appointment of Mr John Walmsley as adirector of the company. Mr Walmsley's extensive experience in the oil and gasindustry has proven invaluable since his appointment. Capital Raising On 21 November, 2007 Pantheon raised £900,000 by way of a placing of 1,500,000ordinary fully paid up shares at a price of 60p per share with institutionalinvestors. Issue of Options to new Director On 2 November, 2007 Pantheon granted options to subscribe for 300,000 shares toits newly appointed director, Mr John Walmsley. The price payable for theseshares is 100p for the first 100,000 shares, 150p for the second 100,000 sharesand 200p for the remaining 100,000 shares. New Projects On 17 July, 2007 Pantheon announced its farm-in to the Bullseye prospect inLouisiana, and on 7 August 2007 Pantheon farmed into a development well at PadreIsland which was subsequently announced as a discovery. On 16 October, 2007Pantheon announced the spudding of the Fay Weil Ross et al#1 well designed totest the Nottoway prospect. This well is still currently being drilled. Contacts: Pantheon Resources Plc Sue Graham, Chairman +44 20 7379 0118 Oriel Securities Limited Scott Richardson Brown +44 20 7710 7600 This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
Pantheon Resources plc