Interim Results

Aminex PLC 28 September 2005 Interim Results for the six months ended 30 June 2005 Aminex, the oil and gas company listed on the London and Irish Stock Exchanges, today announces its interim results for the half year ended 30 June 2005 Highlights • Production Sharing Agreement signed with North Korea • Placing and Open Offer of new shares raises net US$8 million • Satisfactory settlement reached with Petrom SA over Nyuni cost dispute • Farm-out agreement over part of Nyuni acreage signed with East Coast Energy Ltd • Net loss for period of US$1.9 million (2004: loss US$1.15 million) OVERVIEW During the period under review Aminex negotiated and finalised a form of model Production Sharing Agreement ("PSA") with the authorities in North Korea as part of its work obligation under the 2004 Petroleum Agreement with the government of that country and applied for formal exploration licences using the model PSA negotiated. In Tanzania geological and geophysical work continued on the Nyuni licence in preparation for exploration activity due to be carried out during the three year second period of the Nyuni-East Songo-Songo PSA which commenced in November 2004. A satisfactory conclusion was negotiated with Petrom SA over a long-running farm-out dispute in connection with the Nyuni-1 well. Also in the period Aminex drilled the first of four development wells on the South Weslaco Field and worked over the Sunny Ernst-1 well on the Alta Loma property, both in Texas. Since the end of the period a placing and open offer to shareholders was successfully completed and the proceeds are being used to progress work on the Group's existing projects as well as to advance other opportunities. In August the Group achieved the unusual step of signing a PSA with the North Korean authorities covering virtually the entire country and its offshore waters, east and west. Aminex took the view from the outset that the country's geological potential outweighed the risk that the nuclear dispute would escalate out of control. The recent news from Beijing of the preliminary success of the long running and controversial six-party negotiations appears to vindicate this position. Earlier this month, the Group also announced that it had concluded a farm-out agreement for part of the Nyuni East Songo-Songo PSA in Tanzania with East Coast Energy of Canada ("East Coast"). A seismic survey is due to commence over Nyuni in October as part of this farm-out agreement and Aminex will take advantage of the seismic vessel's presence in the area to shoot new seismic over the part of Nyuni which has not been farmed out to East Coast. This will include the prospect which was drilled in 2003-4 as the Nyuni-1 well and which found evidence of Jurassically sourced crude oil in East Africa for the first time. A number of other opportunities are currently under review and some are at an advanced stage of negotiation. FINANCIAL REVIEW The results for the six-month period ended 30 June 2005 have been prepared in accordance with International Financial Reporting Standards ("IFRS"). The results and cash flow statements for the six-month period ended 30 June 2004 and the twelve-month period ended 31 December 2004 as well as the balance sheets at 1 January 2004, 30 June 2004 and 31 December 2004 have been restated from the originally adopted Irish GAAP to conform with IFRS. Detailed movements between the original Irish GAAP figures and the IFRS figures are set out in the accompanying notes to the financial statements. Gross profit amounted to $0.4 million for the first six months of 2005 ($0.98 million for the first six months of 2004). The 2004 figure included the operating profit of the Vinton Dome property which was sold in December 2004 and which accounted for 70% of the Group's oil production in the period. Following a successful recompletion, the Alta Loma gas well was brought back on production towards the end of June 2005 having been out of commission since September 2004. As a consequence, gas production in the USA during the period has been significantly reduced. The Group benefited from higher oil and gas prices during the current period achieving $46.03 per barrel of oil, an increase of $10.85 over the comparative period, and $7.03 per mcf of gas, an increase of $0.59 per mcf over the comparative period. After charging administrative expenses of $2.23 million (2004: $2.13 million net of an offsetting profit of $143,000 on the sale of a Corsair drilling rig) and financing costs of $87,000 (2004: $Nil), the net loss for the period amounted to $1.92 million (2004: loss $1.15 million). Exploration and evaluation expenditures of $0.12 million during the current period related to the Group's assets in North Korea and Tanzania. A provision of $2.3 million relating to the Group's future decommissioning liability in the USA has been set up at the beginning of the period with the associated cost included in additions to property, plant and equipment. The high level of current trade and other receivables at the period end includes the proceeds receivable from the Placing and Open Offer made to shareholders during June 2005 and which was paid in early July. TANZANIA The second period of the Nyuni East Songo-Songo permit commenced in November 2004 and involves a two well drilling commitment. This PSA was the first in Tanzania ever to have been extended into a second period. The Nyuni prospect itself, drilled in 2003/4, fully justifies further work and there are at least four other untested prospects over which seismic will be shot in the fourth quarter of this year. Approximately 25% of the PSA has been farmed out to East Coast which is the operator of the neighbouring Songo-Songo producing gas field and the farm-out area adjoins the Songo-Songo field. Songo-Songo has now been on successful commercial production for over a year and it is an opportune time to appraise the possibility of its extension into Aminex's acreage. A new commercial gas well drilled under the farm-out agreement could be rapidly hooked up to Songo-Songo's existing production facilities and would fulfil one well out of the two well PSA obligation. Nyuni-1, a completely separate structure, was spudded before Songo-Songo came on stream. The East Coast farm-out remains subject to formal Tanzanian government approval. Elsewhere in Tanzania, Aminex is now close, it believes, to finalising a PSA for the southern 12,000 square kilometre Ruvuma area currently held under a technical evaluation agreement. Tanzania and the East African margin generally are attracting increasing industry interest. Since our last report to shareholders Mozambique has launched a licensing round, Exxon-Mobil has farmed into large tracts offshore Madagascar, while Tanzania itself has an ongoing deep water licensing round. Aminex believes the timing of its entry into Tanzania was good and looks forward to making further progress on its large acreage portfolio. NORTH KOREA Since signing a Petroleum Agreement last year Aminex moved quickly to establish a model PSA, applied for acreage and has now signed a comprehensive PSA. During this time an extensive data evaluation exercise has taken place including numerous visits by Aminex specialists to Pyongyang where good working relations have been established with Korean specialists. On 4 August Aminex and its wholly-owned subsidiary Korex Ltd. entered into a PSA with the North Korean authorities covering all the prospective basins in the West Sea, onshore North Korea and in the East Sea. This represents major progress since the original Petroleum Agreement was signed in 2004. The PSA is for a nine year period divided into three sub-periods, in the first of which Aminex will acquire new seismic and either drill a new well or re-enter an existing West Sea discovery well. USA Following an extended recompletion, the Alta Loma Sunny Ernst #1 well resumed production during June having been shut in since the previous September. The first of a four well development programme at South Weslaco was drilled during the period and is currently being tied-in for production. The second well was spudded on 19 September and is drilling ahead at the date of this report. Two further wells are planned during the remainder of 2005. The advantage of high prices has been offset to some extent by the difficulty in sourcing drilling rigs during a period of excessive demand as a result of which the South Weslaco project has not progressed as quickly as planned and no production from new drilling is included in the current financial results. During the period, a decision was made to plug and abandon the Sabine Lake well which ceased production at the beginning of this year. Oil production at the Somerset field has been maintained and a start made on a programme for plugging and abandoning redundant wells and facilities. As a consequence of the sale of the Vinton properties at the end of 2004 and also the delayed commencement of gas from the Alta Loma well, production in the USA declined below that of the prior period. Major efforts are under way to restore the production levels MOCOH JOINT VENTURE Aminex has been co-operating for some time with Mocoh SA, a petroleum trading company with existing operations in a number of African countries, to pool resources in the search for new upstream opportunities where a combination of Mocoh's established presence and Aminex's technical capabilities can be brought to bear for mutual advantage. This co-operation has now been formalised to cover three countries; Sudan, Madagascar and Congo-Brazzaville. Any licence award will be shared on a 50-50- basis by Mocoh and Aminex, each party paying for its own share of licence expenditures. A joint company known as Amicoh has now been formed and co-operation may be extended to include other countries in the region. LIQUEFIED NATURAL GAS Aminex continues to work with Liquefied Natural Gas Ltd. of Australia ("LNGL") to identify suitable opportunities for co-operation in the development of stranded gas fields suitable for small scale LNG operations. EGYPT As previously announced to shareholders, Aminex participates in the share capital of Red Sea Petroleum Ltd which made an unsuccessful application for new acreage in 2004 in very competitive circumstances. Red Sea is currently actively pursuing other opportunities in Egypt and has recently applied for further acreage. PROSPECTS The Aminex Group has now established a strong exploration portfolio at a time of high oil and gas prices and unprecedented international exploration activity by large and small oil companies alike. The company is working hard to build on this position. 28 September 2005 Enquiries: Aminex PLC Brian Hall, Chief Executive +44 (0) 20 7240 1600 Simon Butterfield, Finance Director +44 (0) 20 7240 1600 College Hill Ben Brewerton +44 (0) 20 7457 2020 Nick Elwes +44 (0) 20 7457 2020 CONSOLIDATED INCOME STATEMENT for the six months ended 30 June 2005 Unaudited Unaudited Unaudited 6 months ended 6 months ended Year ended 30 June 2005 30 June 2004 31 December 2004 Notes $'000 Restated Restated $'000 $'000 Revenue 2 1,258 3,108 5,384 Cost of sales (734) (1,716) (3,182) Depletion (128) (414) (777) Gross profit 396 978 1,425 Administrative expenses (net) 3 (2,230) (2,128) (5,436) Purchaser's share of Vinton Dome profit - - (532) Loss from operations (1,834) (1,150) (4,543) Financing costs (net) 4 (87) - (19) Loss before tax (1,921) (1,150) (4,562) Income tax expense - - - Net loss for the period 2 (1,921) (1,150) (4,562) Basic and diluted loss per share (cent) 5 (1.92) (1.26) (4.90) STATEMENT OF RECOGNISED INCOME AND EXPENSE for the six months ended 30 June 2005 Unaudited Unaudited Unaudited 6 months ended 6 months ended Year ended 30 June 2005 30 June 2004 31 December 2004 Restated Restated $,000 $'000 $'000 Foreign exchange translation differences 7 (46) (57) Group loss after tax for the financial period (1,921) (1,150) (4,562) Total recognised income and expense for the financial period (1,914) (1,196) (4,619) Attributable to: Equity holders of the Company (1,914) (1,196) (4,619) CONSOLIDATED BALANCE SHEET At 30 June 2005 Unaudited Unaudited Unaudited 30 June 30 June 31 December 2005 2004 2004 Restated Restated Notes $'000 $'000 $'000 Assets Exploration and evaluation assets 14,429 13,884 14,310 Property, plant and equipment 11,028 13,637 8,313 Other investments 381 868 - Total non current assets 25,838 28,389 22,623 Trade and other receivables 10,398 6,570 6,102 Cash and cash equivalents 554 377 767 Total current assets 10,952 6,947 6,869 Total assets 36,790 35,336 29,492 Equity Issued capital 6 11,003 6,197 6,777 Share premium 6 40,088 35,311 36,222 Capital conversion reserve fund 234 234 234 Foreign currency reserve fund (50) (46) (57) Retained earnings (20,488) (15,155) (18,567) Total equity 30,787 26,541 24,609 Liabilities Interest-bearing loans and borrowings 34 55 51 Abandonment and site restoration provision 2,311 - - Total non-current liabilities 2,345 55 51 Bank overdraft 434 197 - Interest-bearing loans and borrowings 28 293 47 Trade and other payables 3,196 8,250 4,785 Total current liabilities 3,658 8,740 4,832 Total liabilities 6,003 8,795 4,883 Total equity and liabilities 36,790 35,336 29,492 CONSOLIDATED STATEMENT OF CASHFLOWS for the six months ended 30 June 2005 Unaudited Unaudited Unaudited 6 months 6 months Year ended ended ended 30 June 30 June 31 December 2005 2004 2004 Restated Restated Notes $'000 $'000 $'000 Operating activities Loss for the period (1,921) (1,150) (4,562) Depreciation and impairment 147 438 827 Foreign exchange losses 18 (46) (68) Financing costs (net) 87 - 19 Loss/(gain) on sale of property, plant and equipment 8 (106) (121) Loss on sale of listed investment - - 184 Equity-settled share-based payment charge 7 78 238 Decrease/(increase) in debtors 4,772 (468) - (Decrease)/increase in creditors (3,208) 2,284 707 Cash generated from operations (90) 1,030 (2,776) Interest paid (11) (14) (34) Tax paid - - - Net cash (outflows)/inflows from operating activities (101) 1,016 (2,810) Investing activities Acquisition of property, plant and equipment (282) (36) (159) Expenditure on exploration and evaluation assets (209) (3,308) (5,522) Proceeds from sale of property, plant and equipment 18 193 5,276 Proceeds from sale of investments - 2,003 2,687 Interest received 2 14 15 Net cash (outflows)/inflows from investing activities (471) (1,134) 2,297 Financing activities Proceeds from the issue of share capital - - 1,265 Payment of transaction costs (39) - (34) Loans repaid (36) (26) (145) Loans received - 153 23 Net cash (outflows)/inflows from financing activities (75) 127 1,109 Net (decrease)/increase in cash and cash equivalents 7 (647) 9 596 Cash and cash equivalents at 1 January 767 171 171 Cash and cash equivalents at end of the financial period 7 120 180 767 Provisional Principal Accounting Policies under IFRS in the Restated 2004 Financial Statements and Interim Financial Statements for six months ended 30 June 2005. Statement of Provisional Accounting Policies Statement of compliance Aminex PLC prepared its financial statements up to and including 31 December 2004 in accordance with Irish GAAP. As part of the European Commission's plan to develop a single European capital market, all publicly quoted companies in the EU are required to prepare consolidated financial statements in accordance with International Financial Reporting Standards (IFRS) as endorsed by the European Commission in respect of accounting periods commencing on or after 1 January 2005. The financial information presented in this Interim Statement has been prepared in accordance with the recognition and measurement principles of IFRS and Interpretations issued by the International Accounting Standards Board (IASB) and its committees, including those issued by the predecessor International Accounting Standards Committee that have been subsequently authorised by the IASB, which are expected to be endorsed by the EU and which are effective for accounting periods ending on 31 December 2005. Qualifications to be taken into account The majority of the International Financial Reporting Standards have been endorsed by the European Commission. However, a number of IFRS remain to be endorsed at the date of publication of this document, and failure to endorse these outstanding standards in time for 2005 financial reporting could lead to changes in the basis of accounting or in the basis of presentation of certain financial information from that adopted for the purposes of this Interim Statement. Furthermore, the restated 2004 financial information attached to this Interim Statement and the Interim Statement itself is subject to the issuance by the International Accounting Standards Board of additional interpretations prior to the end of 2005 which may have retrospective impact and thus require to be applied in the 2005 financial statements and the related 2004 comparatives. As a result, it is possible that further changes may be required to the 2004 financial information attached to this Interim Statement prior to its inclusion as comparative information in the published 2005 year-end consolidated financial statements. First time adoption This is the first time that the Group has presented financial information in accordance with the recognition and measurement principles of IFRS which are set out in these accounting policies. The impact of the application of the recognition and measurement principles of these IFRS accounting policies on the financial information presented in respect of the period ended 30 June 2004 and the year ended 31 December 2004 have been set out in Appendix 1. This Appendix includes reconciliations of equity and profit or loss for comparative periods reported under Irish GAAP (previous GAAP) to those reported for those periods under these IFRS accounting policies. In accordance with IFRS 1, which establishes the framework for transition to IFRS by a first time adopter such as Aminex PLC, the Group has elected to avail itself of a number of specified exemptions from the general principal of retrospective restatement as follows: First time adoption (continued) • IFRS requires that on disposal of a foreign operation, the cumulative amount of currency translation differences previously recognised directly in reserves for that operation be transferred to the income statement as part of the profit or loss on disposal. Aminex PLC has deemed the cumulative currency translation differences applicable to foreign operations to be zero as at the transition date. The cumulative currency translation differences arising before the transition date have been reclassified as part of retained earnings. • In accordance with the exemption allowed on transition to IFRS, the fair value calculations in respect of share based payments under IFRS-2 Share Based Payment, have only been applied in respect of share options granted after 7 November 2002. Basis of preparation The financial statements are presented in US dollars, rounded to the nearest thousand ($'000) except when otherwise indicated. The financial statements are prepared on a historical cost basis except for the measurement at fair value of share options and the present value of the abandonment provisions. The preparation of interim financial statements requires management to use judgements, estimates and assumptions that affect the application of policies and reported amounts of assets, liabilities, income and expenses. Actual results may differ from those estimates. Basis of consolidation The consolidated interim statements comprise the financial statements of Aminex PLC and its subsidiaries. Subsidiaries are consolidated from the date on which control is transferred to the Group and cease to be consolidated from the date on which effective control is transferred out of the Group. Control exists when the company has the power, directly or indirectly, to govern the financial and operating policies of an entity so as to obtain economic benefits from its activities. Financial statements of subsidiaries are prepared for the same reporting year as the parent company. The Group will continue to prepare the statutory separate financial statements of Group companies under the GAAP applicable in their country of incorporation but adjustments have been made to the results and financial position of such companies to bring their accounting policies into line with those of the Group. All inter-company balances and transactions, including unrealised profits arising from inter-group transactions, have been eliminated in full. Unrealised losses are eliminated in the same manner as unrealised gains except to the extent that there is evidence of impairment. Revenue recognition Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Group, that it can be reliably measured, that performance has occurred under a service contract and that the significant risks and rewards of ownership of the goods have passed to the buyer. Revenue comprises the invoiced value of goods and services supplied by the Group and excludes inter-company sales, trade discounts and value added tax. Services are invoiced as they are performed and goods are invoiced when supplied. Royalties Royalties are charged to the profit and loss account in the period in which the related production is accounted for. Employee benefits (a) Pensions and Other Post-employment Benefits The group contributes towards the cost of certain individual employee pension plans. Annual contributions are based upon a percentage of gross annual salary. Pension contributions are recognised as an expense in the income statement on an accruals basis. (b) Share-based payment For equity-settled share-based payment transactions (i.e. the issuance of share options), the Group measures the services received and the corresponding increase in equity at fair value at the measurement date (which is the grant date) using a recognised valuation methodology for the pricing of financial instruments (i.e. the binomial model). Given the share options granted do not vest until the completion of a specified period of service, the fair value assessed at the grant date is recognised in the income statement over the vesting period as the services are rendered by employees. For options granted to Directors, there is no vesting period and the fair value is recognised in the income statement at the date of the grant. The share options issued by the Company are not subject to market-based vesting conditions as defined in the IFRS. Non-market vesting conditions are not taken into account when estimating the fair value of share options as at the grant date; such conditions are taken into account through adjusting the number of equity instruments included in the measurement of the transaction amount so that, ultimately, the amount recognised equates to the number of equity instruments that actually vest. The expense in the income statement in relation to share options represents the product of the total number of options anticipated to vest and the fair value of these options, this amount is allocated to accounting periods on a straight-line basis over the vesting period. Given that the performance conditions underlying the Group's share options are non-market in nature, the cumulative charge to the income statement is reversed only where an employee in receipt of share options leaves the company prior to completion of the service period. The proceeds received by the Company on the exercise of share entitlements are credited to share capital and share premium. In line with the transitional provisions applicable to a first-time adopter of International Financial Reporting Standards, as contained in IFRS 2 Share-based Payment, the Group has elected to implement the measurement requirements of the IFRS in respect of share options that were granted after 7 November 2002 that had not vested as at the effective date of the standard (1 January 2005). In accordance with the standard, the disclosure requirements of IFRS 2 have been applied in relation to all outstanding share-based payments regardless of their grant date. The Group does not operate any cash-settled share-based payment schemes or share-based payment transactions with cash alternatives as defined in IFRS 2. The fair value of options granted is recognised as an employee expense with a corresponding increase in equity. Net financing costs Net financing costs comprise interest payable on borrowings calculated using the effective interest rate method, interest receivable on funds invested, the imputed interest on the fair value of the abandonment and site restoration provision and applicable foreign exchange gains and losses. Interest income is recognised in the income statement as it accrues, using the effective interest method. The interest expense component of finance lease payments is recognised in the income statement using the effective interest rate method. Leases Finance leases, which transfer to the Group substantially all the risks and benefits of ownership of the leased asset, are capitalised at the inception of the lease at the fair value of the leased asset or if lower the present value of the minimum lease payments. The corresponding liability to the lessor is included in the balance sheet as a finance lease obligation. Lease payments are apportioned between the finance charges and reduction of the lease obligation so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are charged to the income statement as part of finance costs. Capitalised leased assets are depreciated over the shorter of the estimated useful life of the asset or the lease term. Leases where the lessor retains substantially all the risks and benefits of ownership of the assets are classified as operating leases. Operating lease payments are recognised as an expense in the income statement on a straight line basis over the lease term. Tax The tax expense in the income statement represents the sum of the tax currently payable and deferred tax. Tax currently payable is based on taxable profit for the year. Taxable profit differs from net profit as reported in the income statement because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are not taxable or deductible. The Group's liability for current tax is calculated using rates that have been enacted or substantially enacted at the balance sheet date. Tax is recognised in the income statement except to the extent that it relates to items recognised directly in equity. Deferred income tax is provided, using the liability method, on all differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes except those arising from non deductible goodwill or on initial recognition of an asset or liability which affects neither accounting nor taxable profit. Deferred income tax assets and liabilities are not subject to discounting and are measured at the tax rates that are expected to apply in the year when the asset is expected to be realised or the liability to be settled. Deferred income tax assets are recognised for all deductible differences, carry forward of unused tax credits and unused tax losses, to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, and the carry forward of unused tax credits and unused tax losses can be utilised. The carrying amount of deferred income tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profit would be available to allow all or part of the deferred income tax asset to be utilised. Earnings per ordinary share Basic earnings per share is computed by dividing the net profit for the financial period attributable to ordinary shareholders by the weighted average number of ordinary shares in issue that ranked for dividend during the financial period. Diluted earnings per share is computed by dividing the profit for the financial period attributable to ordinary shareholders by the weighted average number of ordinary shares in issue after adjusting for the effects of all potential dilutive ordinary shares that were outstanding during the financial period. Foreign currency translation The presentation currency of the Group and the functional currency of Aminex PLC is the US dollar (US$). Transactions in foreign currencies are recorded at the rate of exchange ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are retranslated into the functional currency at the rate of exchange at the balance sheet date. All translation differences are taken to the consolidated income statement with the exception of differences on foreign currency borrowings that provide a hedge against a net investment in a foreign entity. These are taken directly to equity together with the exchange difference on the net investment in the foreign entity until the disposal of the net investment, at which time they are recognised in the consolidated income statement. Results and cash flows of non-dollar subsidiary undertakings are translated into dollars at average exchange rates for the year, and the related balance sheets have been translated at the rates of exchange ruling at the balance sheet date. Adjustments arising on translation of the results of non--dollar subsidiary undertakings at average rates, and on the restatement of the opening net assets at closing rates, are dealt with in a separate translation reserve within equity, net of differences on related currency borrowings. All other translation differences are taken to the income statement. On disposal of a foreign entity, accumulated currency translation differences are recognised in the income statement as part of the overall gain or loss on disposal; the cumulative currency translation differences arising prior to the transition date have been set to zero for the purposes of ascertaining the gain or loss on disposal of a foreign operation subsequent to 1 January 2004. Goodwill and fair value adjustments arising on acquisition of a foreign operation are regarded as assets and liabilities of the foreign operation, are expressed in the functional currency of the foreign operation and are recorded at the exchange rate at the date of the transaction and subsequently retranslated at the applicable closing rates. Exploration and evaluation assets Exploration and evaluation assets comprise the pre-licence, licence acquisition, exploration and appraisal costs incurred in respect of undeveloped oil and gas properties. When a decision is reached with regard to the commercial viability of the property, the associated expenditures are transferred to the relevant geographical cost pools included under developed and producing oil and gas properties within "Property, plant and equipment". Property, plant and equipment (a) Developed and producing oil and gas properties The Group uses the full cost method of accounting for its developed and producing oil and gas properties under which all costs associated with property acquisition, exploration and development activities, whether or not productive, are capitalised in separate geographical cost pools based upon the income generating operations of the Group and are stated in the balance sheet at cost less amortisation. Interest on borrowings is capitalised into development projects up to the time of revenue generation. Depletion Capitalised costs, together with anticipated future development costs calculated at price levels ruling at the balance sheet date, are amortised on a unit of production basis. Amortisation is calculated by reference to the proportion that production for the period bears to the total of the estimated remaining commercial reserves as at the beginning of the period. Changes in reserves quantities and cost estimates are recognised prospectively. Oil and gas property costs in certain instances include gross interest payable on borrowings to finance development. All proceeds received from the disposal of oil and gas properties are credited to the relevant geographical cost pool. Impairment The net book value of developed and producing oil and gas properties by geographical pool is assessed each year and compared with estimated future cash flows of proven and probable oil and gas reserves. To the extent that the carrying amount of the asset exceeds the recoverable amount, being the estimated discounted future cash flows, the asset is written down to its recoverable amount. Any impairment in developed and producing oil and gas properties is reflected as a charge to the income statement. Abandonment costs Provision is made for the abandonment costs of oil and gas wells. The cost of abandonment is determined through discounting the amounts expected to be payable to their present value at the date the provision is recorded. The unwinding of the discount is reflected as an interest charge in the income statement over the life of the well (transition date to the expected date of abandonment of the well). (b) Other Property, Plant and Equipment Other property, plant and equipment are stated at cost less accumulated depreciation and impairment losses. Depreciation is calculated to write off the original cost of property, plant and equipment less their estimated residual value over their expected useful lives on a straight line basis. The estimated useful lives applied in determining the charge to depreciation are as follows: Leasehold property 2% - 4% Plant and equipment 20 - 33.3% Motor vehicles 25% The useful lives and residual values are reassessed annually. On disposal of property, plant and equipment the cost and related accumulated depreciation and impairments are removed from the financial statements and the net amount less any proceeds is taken to the income statement. The carrying amounts of the Group's property, plant and equipment are reviewed at each balance sheet date to determine whether there is any indication of impairment. An impairment loss is recognised whenever the carrying amount of an asset or its cash generation unit exceeds its recoverable amount. Impairment losses are recognised in the income statement unless the asset is recorded at a revalued amount in which case it is firstly dealt with through the revaluation reserve with any residual amount being transferred to the income statement. Subsequent costs are included in an asset's carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the replaced item can be measured reliably. All other repair and maintenance costs are charged to the income statement during the financial period in which they are incurred. Business combinations The purchase method of accounting is employed in accounting for the acquisition of subsidiaries by the Group. The Group has availed itself of the exemption under IFRS 1, "First-time Adoption of International Financial Reporting Standards", whereby business combinations prior to the transition date of 1 January 2004 are not restated. IFRS 3, "Business Combinations", has been applied with effect from the transition date of 1 January 2004 and goodwill amortisation ceased from that date. The costs of a business combination is measured as the aggregate of the fair value at the date of exchange of assets given, liabilities incurred or assumed and equity instruments issued in exchange for control together with any directly attributable costs. Deferred expenditure arising on business combinations is determined through discounting the amounts payable to their present value at the date of exchange. The discount element is reflected as an interest charge in the income statement over the life of the deferred payment. In the case of a business combination the assets and liabilities are measured at their provisional fair values at the date of acquisition. Adjustments to provisional values allocated to assets and liabilities are made within 12 months of the acquisition date and reflected as a restatement of the acquisition balance sheet. Joint Ventures - jointly controlled operations Joint controlled operations are those activities over which the Group exercises joint control with other participants, established by contractual agreement. The Group recognises, in respect of its interests in jointly controlled operations, the assets that it controls, the liabilities that it incurs, the expenses that it incurs and its share of the income that it earns from the sale of goods or services by the joint venture. Goodwill Goodwill written off to reserves under Irish GAAP prior to 1998 has not been reinstated and will not be included in determining any subsequent profit or loss on disposal. Goodwill on acquisitions is initially measured at cost being the excess of the cost of the business combination over the acquirer's interest in the net fair value of the identifiable assets, liabilities and contingent liabilities. Following initial recognition, goodwill is measured at cost less any accumulated impairment losses. Goodwill relating to acquisitions from 1 January 2004 and the deemed cost of goodwill carried in the balance sheet at 1 January 2004 is not amortised. Goodwill is reviewed for impairment annually or more frequently if events or changes in circumstances indicate that the carrying value may be impaired. As at the acquisition date, any goodwill acquired, is allocated to each of the cash-generating units expected to benefit from the combination's synergies. Impairment is determined by assessing the recoverable amount of the cash-generating unit to which the goodwill relates. Where goodwill forms part of a cash-generating unit and part of the operation within that unit is disposed of, the goodwill associated with the operation disposed of is included in the carrying amount of the operation when determining the gain or loss on disposal of the operation. Goodwill disposed of in this circumstance is measured on the basis of the relative values of the operation disposed of and the proportion of the cash-generating unit retained. Financial assets Investments in subsidiary undertakings are stated at cost less provision for impairment in the Company's balance sheet. Investments in companies are stated at cost less any provision required for impairment in value. Cash and Cash Equivalents Cash and short term deposits in the balance sheet comprise cash at bank and in hand and short term deposits with an original maturity of three months or less. Bank overdrafts that are repayable on demand and form part of the Group's cash management are included as a component of cash and cash equivalents for the purposes of the statement of cashflows. Trade and other Receivables Trade receivables, which generally have 30 to 90 day terms, are recognised and carried at original invoice amount less an allowance for any potential shortfall in receipt. An estimate of any shortfall in receipt is made when collection of the full amount is no longer probable. Bad debts are written off when identified. Provisions A provision is recognised in the balance sheet when the Group has a present legal or constructive obligation as a result of a past event, and it is probable that an outflow of economic benefits would be required to settle the obligation. If the effect of the time value of money is material, provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects the time value of money and, where appropriate, the risks specific to the liability. Where discounting is used, the increase in the provision due to the passage of time is recognised as a borrowing cost. Segment Reporting A segment is a distinguishable component of the Group that is engaged either in providing products or services (business segment), or in providing products or services within a particular economic environment (geographical segment), which is subject to risks and rewards that are different from those other segments. The Group has identified the geographical segments as the primary segments and the business segments as the secondary segments. Principal New Accounting Pronouncements IFRS 6 and the potential impacts. In 2004, the IASB issued IFRS 6 Exploration for and Evaluation of Mineral Resources to address the accounting issues in relation to costs incurred in exploration for and evaluation of mineral resources. There are a number of areas where IFRS 6 will require changes to existing accounting practices and therefore to reported financial performance and position. Entities typically have one accounting policy for all costs incurred prior to production. The adoption of IFRS 6 will require entities to reconsider the accounting treatment for costs incurred during each of pre-exploration and exploration and evaluation activities. An entity must develop a separate accounting policy for expenditure related to each of: pre-exploration activities, exploration and evaluation activities and development activities. IFRS 6 permits, in many cases, an entity that incurs exploration and evaluation (E&E) expenditure to continue its existing accounting policies with respect to such expenditure. IFRS6 requires entities to identify and account for pre-exploration, E&E and development expenditure separately. E&E expenditure may include the cost (and directly attributable cost of acquisition) of the licence itself. Capitalised E&E costs must be segregated and classified as either tangible or intangible assets, according to their nature. E&E costs can be expensed as incurred or capitalised, in accordance with the entity's selected accounting policy. E&E expenditure rarely will include costs incurred prior to the acquisition of an exploration licence. The standard provides guidance on the testing for impairment of amounts recognised as E&E assets and specifies disclosures for these assets and related expenditure. Previous GAAP impairment policies cannot be continued automatically; instead the general impairment tests must be applied in measuring the impairment of exploration and evaluation assets when there are indicators that the carrying amount of an exploration and evaluation asset may exceed its recoverable amount. The test for recoverability of exploration and evaluation assets can combine several cash generating units, so long as the group is not larger than a segment. This standard is effective for annual periods beginning on or after 1 January 2006. We are currently evaluating the effect IFRS 6 will have on our financial position or results of operations. NOTES TO THE INTERIM FINANCIAL STATEMENTS (unaudited) for the six months ended 30 June 2005 1. Accounting policies As outlined in the provisional accounting policies, the financial information has been prepared in accordance with the recognition and measurement principles of all International Financial Reporting Standards (IFRS), including Interpretations issued by the International Accounting Standards Board ("IASB") and it's committees and endorsed or expected to be endorsed by the European Commission. 2. Segmental disclosure The Group's revenue and profits arise from oil and gas production in the USA and the provision of oilfield equipment and services in Europe. The Group's net assets are located in the USA, Tanzania and Europe. Unaudited Unaudited Unaudited 6 months ended 6 months ended 30 year ended June 2004 31 December 2004 Revenue 30 June 2005 Restated Restated $'000 $'000 $'000 USA 769 2,185 4,048 Europe 489 923 1,336 1,258 3,108 5,384 Segment result - loss after tax USA (99) 37 (955) Tanzania (407) (25) (480) Europe (55) 5 (85) Central costs (1,360) (1,167) (3,042) Net loss for the (1,921) (1,150) (4,562) period NOTES TO THE INTERIM FINANCIAL STATEMENTS (unaudited) for the six months ended 30 June 2005 2. Segmental disclosure (continued) Unaudited Unaudited Unaudited 6 months ended 6 months ended Year ended 30 June 2005 30 June 2004 31 December 2004 Restated Restated $'000 $'000 $'000 USA 11,575 14,899 9,357 Tanzania 14,796 18,183 19,244 North Korea 127 - - Europe 10,292 2,254 891 36,790 35,336 29,492 Less: liabilities (6,003) (8,795) (4,883) Net assets 30,787 26,541 24,609 Net assets before borrowings have been adjusted to eliminate the impact of intercompany financing. 3. Administrative expenses (net) Included in administrative expenses are the following gains and losses arising from other income and the disposal of assets: Unaudited Unaudited Unaudited 6 months ended 6 months ended Year 30 June 2005 30 June 2004 ended 31 December 2004 $'000 $'000 $'000 Rental income 30 21 49 Gain/(loss) on the disposal of property, plant and equipment 9 121 (46) Loss on the disposal of listed investment - - (184) NOTES TO THE INTERIM FINANCIAL STATEMENTS (unaudited) for the six months ended 30 June 2005 4. Financing costs (net) Unaudited Unaudited Unaudited 6 months ended 6 months ended year ended 30 June 2005 30 June 2004 31 December 2004 $'000 $'000 $'000 Interest receivable 2 14 15 Interest payable (9) (12) (28) Finance cost of abandonment and site restoration provision (78) - - Interest on finance leases (2) (2) (5) Other interest - - (1) (87) - (19) 5. Loss per share Unaudited Unaudited Unaudited 6 months ended 6 months ended Year ended 30 June 2005 30 June 2004 31 December 2004 Restated Restated $'000 $'000 $'000 (a) Numerator for basic and diluted loss per share: Net loss for the financial period ($'000) 1,921 1,150 4,562 (b) Weighted average number of shares: Weighted average number of ordinary shares in issue for calculation of basic earnings per share (million) 100,091,324 90,940,068 93,014,594 The loss attributable to ordinary shareholders and the weighted average number of ordinary shares for the purpose of calculating the diluted loss per ordinary share are identical to those used for basic loss per Ordinary Share. This is because the exercise of share options would have the effect of reducing the loss of ordinary share and is therefore anti-dilutive. (c) Basic and diluted loss per share (cents) 1.92 1.26 4.90 NOTES TO THE INTERIM FINANCIAL STATEMENTS (unaudited) for the six months ended 30 June 2005 6. Issued share capital and share premium Issued Share capital premium $'000 $'000 At 1 January 2005 6,777 36,222 Issue of shares in return for 10% interest in Kobril Ltd. - first instalment - net of issue costs 67 85 Proceeds from placing and open offer net of issue costs 4,159 3,774 Equity-settled share-based payment expenses - 7 At 30 June 2005 11,003 40,088 7. Reconciliation of net cash flow to movement in net debt Unaudited Unaudited Unaudited 6 months ended 6 months ended Year ended 30 June 2005 30 June 2004 31 December 2004 Restated Restated $'000 $'000 $'000 Net (decrease)/increase in cash and cash equivalents (213) 31 421 Decrease/(increase) in debt (434) (22) 175 Changes in net cash resulting from cash Flows (647) 9 596 Currency translation adjustment - - - Net (decrease)/increase in net cash (647) 9 596 Net cash at start of period 767 171 171 Net cash at end of period 120 180 767 8. Statutory Information The financial information for the six month periods to 30 June and the year to 31 December is unaudited and does not constitute statutory accounts within the meaning of Section 19 of The Companies (Amendment) Act 1986. This announcement is being sent to shareholders and will be made available at the Company's registered office at 6 Northbrook Road, Dublin 6 and at the Company's UK representative office at 10 Bedford Street, London WC2E 9HE Appendix I Reconciliation from Irish GAAP to IFRS ___________________________________________________________________________ Introduction As part of the European Commission's plan to develop a single European capital market, all publicly quoted European companies in the EU are required to prepare consolidated financial statements in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Commission in respect of accounting periods commencing on or after 1 January 2005. Consolidated Balance Sheet At 1 January 2004 Reconciliation from Irish GAAP to IFRS Irish Foreign Currency Conversion GAAP Reserve IFRS restated 01-Jan-04 IAS 21 01-Jan-04 Notes $'000 $'000 $'000 Assets Exploration and evaluation assets 11,068 - 11,068 Property plant and equipment 12,834 - 12,834 Other investments 868 - 868 Total non current assets 24,770 - 24,770 Investment held for sale 2,003 - 2,003 Trade and other receivables 6,102 - 6,102 Cash and cash equivalents 346 - 346 Total current assets 8,451 - 8,451 Total Assets 33,221 - 33,221 Equity Issued capital 6,172 - 6,172 Share premium 35,258 - 35,258 Capital conversion reserve fund 234 - 234 Foreign currency reserve fund 2 316 (316) - Retained earnings 2 (14,321) 316 (14,005) Total equity 27,659 - 27,659 Liabilities Interest-bearing loans and borrowings 88 - 88 Total non current liabilities 88 - 88 Bank overdraft 175 - 175 Interest-bearing loans and borrowings 132 - 132 Trade and other payables 5,167 - 5,167 Total current liabilities 5,474 - 5,474 Total liabilities 5,562 - 5,562 Total equity and liabilities 33,221 - 33,221 Consolidated Income Statement For the six months ended 30 June 2004 Reconciliation from Irish GAAP to IFRS Irish GAAP Restated 6 months Other 6 months ended Income ended 30-Jun-04 30-Jun-04 $'000 $'000 $'000 Notes Revenue - continuing operations 3,108 - 3,108 Cost of sales (1,716) - (1,716) Depletion (414) - (414) Gross profit 978 - 978 Administrative expenses 1 (2,271) 143 (2,128) Loss from operations (1,293) 143 (1,150) Financing costs (net) 2 143 (143) - Loss before tax (1,150) - (1,150) Income tax expense - - - Loss after tax (1,150) - (1,150) Basic and diluted loss per share (cent) (1.26) (1.26) Statement of recognised income and expense For the six months ended 30 June 2004 Reconciliation from Irish GAAP to IFRS Irish GAAP Restated 6 months 6 months ended Ended 30-Jun-04 30-Jun-04 Notes $'000 $'000 Foreign exchange translation differences (46) (46) Loss after tax for the financial period (1,150) (1,150) Total recognised income and expenses for the (1,196) (1,196) financial period Attributable to: Equity holders of the Company (1,196) (1,196) Consolidated Balance Sheet At 30 June 2004 Reconciliation from Irish GAAP to IFRS Foreign Irish Currency IFRS GAAP Conversion Restated 30-Jun-04 Reserve 30-Jun-04 $'000 $'000 $'000 Notes Assets Exploration and evaluation 13,884 - 13,884 assets Property plant and equipment 13,637 - 13,637 Other investments 868 - 868 Total non current assets 28,389 - 28,389 Trade and other receivables 6,570 - 6,570 Cash and cash equivalents 377 - 377 Total current assets 6,947 - 6,947 Total Assets 35,336 - 35,336 Equity Issued capital 6,197 - 6,197 Share premium 35,311 - 35,311 Capital conversion reserve 234 - 234 fund Foreign currency reserve fund 2 270 (316) (46) Retained earnings 2 (15,471) 316 (15,155) Total equity 26,541 - 26,541 Liabilities Interest bearing loans and 55 - 55 borrowings Total non current liabilities 55 - 55 Bank overdraft 197 - 197 Interest bearing loans and 293 - 293 borrowings Trade and other payables 8,250 - 8,250 Total current liabilities 8,740 - 8,740 Total liabilities 8,795 - 8,795 Total equity and liabilities 35,336 - 35,336 Consolidated Income Statement For the twelve months ended 31 December 2004 Reconciliation from Irish GAAP to IFRS IFRS Irish GAAP restated 12 months Share based 12 months Ended payment Other Ended 31-Dec-04 IFRS 2 IAS 31-Dec-04 Notes $'000 $'000 $'000 $'000 Revenue - continuing operations 5,384 - 5,384 - Cost of sales (3,182) - - (3,182) Depletion (777) - - (777) Gross profit 1,425 - - 1,425 Administrative expenses 1 (5,094) (161) (181) (5,436) Purchasers' share of Vinton Dome (532) - - (532) profit Loss on disposal of property, 1 (46) - 46 - plant and equipment Loss on disposal of investment 1 (184) - 184 - Loss from operations (4,431) (161) 49 (4,543) Financing costs (net) 2 30 - (49) (19) Loss before tax (4,401) (161) - (4,562) Income tax expense - - - - Loss after tax (4,401) (161) - (4,562) Basic and diluted loss per share (cent) (4.73) (4.90) Statement of recognised income and expense For the year ended 31 December 2004 Reconciliation from Irish GAAP to IFRS Irish GAAP Share based Restated Year payment Year ended IFRS 2 Ended 31-Dec-04 $'000 31-Dec-04 Notes $'000 $'000 $'000 Foreign exchange translation differences (57) - (57) Loss after tax for the financial period (4,401) (161) (4,562) Total recognised income and expenses for the financial period (4,458) (161) (4,619) Attributable to: Equity holders of the Company (4,458) (161) (4,619) Consolidated Balance Sheet At 31 December 2004 Reconciliation from Irish GAAP to IFRS Irish Foreign currency Share IFRS GAAP Conversion Based restated Reserve Payment 31-Dec-04 IAS 21 IFRS 2 31-Dec-04 Notes $'000 $'000 $'000 $'000 Assets Exploration and 14,310 - - 14,310 evaluation assets Property plant and 8,313 - 8,313 equipment Total non current 22,623 - - 22,623 assets Trade and other 6,102 - - 6,102 receivables Cash and cash 767 - - 767 equivalents Total current assets 6,869 - - 6,869 Total Assets 29,492 - - 29,492 Equity Issued capital 6,777 - - 6,777 Share premium 36,061 - 161 36,222 Capital conversion 234 - - 234 reserve fund Foreign currency 259 (316) - (57) reserve fund 2 Retained earnings 2 (18,722) 316 (161) (18,567) Total equity 24,609 - - 24,609 Liabilities Interest bearing loans 51 - - 51 and borrowings Total non current 51 - - 51 liabilities Interest bearing loans 47 - - 47 and borrowings Trade and other 4,785 - - 4,785 payables Total current 4,832 - - 4,832 liabilities Total liabilities 4,883 - - 4,883 Total equity and 29,492 - - 29,492 liabilities Notes to accompany Group Income Statement and Group Balance Sheet Six months ended 30 June 2004 and year ended 31 December 2004 Reconciliation from Irish GAAP to IFRS CONSOLIDATED INCOME STATEMENT 1. Administration expenses Notes 30-Jun-04 31-Dec-04 $'000 $'000 Previous GAAP balance 2,271 5,094 (IFRS 2) Share based payment (i) - 161 Rental Income (ii) (21) (49) (Gain)/loss on sale of property, plant and equipment (iii) (122) 46 Loss on disposal of investment (iii) - 184 Restated IFRS balance 2,128 5,436 (i) IFRS 2 "Share-based Payment", requires that an expense for share-based payments, which in the case of Aminex are share options, be recognised in the income statement based on their fair value at the date of grant. This expense, which is primarily in relation to the Aminex PLC share option scheme is recognised over the vesting period of the schemes. Fair value calculations have been applied in respect of share options granted after 7 November 2002 as permitted under the framework for transition to IFRS. The fair value of the share options to be expensed is determined by using option pricing models and the Group has used the binomial model in its evaluation. The charge recognised in the Income Statement over the vesting period of three years has been adjusted to reflect the expected and actual levels of vesting. Where there is no vesting period and options are exercisable immediately, the value of the options has been charged to the Income Statement at the date of grant. The following inputs were used in determining the fair value of share entitlements: • The exercise price which is the market price at the date the share entitlements were granted. • Future price volatility was based on historical volatility as a guide and was assessed over the last three to four years • The risk free interest rate used in the model is the rate applicable to Irish Government Bonds with a remaining term equal to the expected term of the share entitlements being valued • Expected share purchase/dividend payments. An expense of $7,000 has been recognised in the Group Income Statement in respect of six months ended 30 June 2005 and an expense of $161,000 for the year ended 31 December 2004 and this is based on share options granted in July 2004 and February 2005. No expense was made to the Income Statement during the six months ended 30 June 2004 as no options were granted in the period nor were any options granted after the exemption date of 7 November 2002 which required to be written off over a vesting period. (ii) Under IFRS income received from the sub lease of a rented property is netted against rental payments on that property as opposed to being shown as other income under Irish GAAP. This adjustment has no effect on retained earnings. (iii) This adjustment is to reclassify gain/loss on disposal from a separate line item before operating profit to administration expenses. This adjustment has no effect on retained earnings. 2. Retained earnings Notes 1-Jan-04 30-Jun-04 31-Dec-04 $'000 $'000 $'000 Previous GAAP balance (14,321) (15,471) (18,722) (IAS 12) Foreign currency conversion reserve (i) 316 316 316 (IFRS 2) Share based payment (ii) - - (161) Subtotal 316 316 155 Restated IFRS balance (14,005) (15,155) (18,567) (i) Under IAS 32 the Group has deemed the cumulative currency translation difference applicable to foreign operations to be zero as at the transition date. The cumulative amount of currency translation differences previously recognised directly in foreign currency reserves has been transferred to retained earnings. (ii) See note 1 (i). This information is provided by RNS The company news service from the London Stock Exchange

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