Final Results
Ascent Resources PLC
19 March 2007
Ascent Resources plc / Epic: AST / Index: AIM / Sector: Oil and Gas
Ascent Resources plc ('Ascent' or the 'Company')
Final Results
Ascent Resources plc, the AIM-traded oil and gas exploration and production
company with assets in six countries across Europe, announces its results for
the 18 month period to 31 December 2006.
Overview
• Fast growing European gas and oil exploration company, with over 20 oil
and gas projects across six countries in Europe
• Portfolio development focused on generating value from proving reserves
• Drilled two discoveries, gas in Hungary and oil in Italy, from first
three wells
• Currently drilling the fourth well, Homtomin-4 in Spain
• Six more wells planned for the remainder of 2007
• Increased interest in the Anagni oil discovery in the Frosinone
Exploration Permit in Italy
• Pre-tax loss of £1,978,126, in-line with budgets
• Fully diluted Loss Per Share of 0.81p
• Institutional placing raising £3.3 million net of expenses
• Experienced corporate and operations team in place
Ascent Resources Managing Director Jeremy Eng said, 'In my opinion, there are a
number of prerequisites for a successful oil and gas company. These include a
diverse portfolio of assets at various stages of the exploration and development
cycle, a sensible risk-reward profile, a technical and corporate team capable of
sustaining a rapid development schedule and strong institutional backing. I
believe Ascent has all of these.
We have an extensive portfolio of over 20 oil and gas exploration projects
across six European countries. We commenced assembling the portfolio in early
2005, when there was no recognition of the potential of the secondary European
exploration plays. The selection criteria adopted included targeting mature oil
and gas provinces and our projects are in areas with working hydrocarbon systems
and developed infrastructure. The strength of the portfolio is demonstrated by
two discoveries, one oil and one gas, in the first three wells of our initial
drilling campaign. Up to six more wells are planned for the remainder of 2007;
but even with these, still less than half the portfolio will have been explored.
As with our recent acquisition in Slovenia, we continue to assess selectively
further opportunities in Europe to add to the Company's assets.'
CHAIRMAN'S STATEMENT
Ascent Resources plc has expanded rapidly during this 18 month period after
assembling a diverse and robust portfolio during 2005. It is now an established
European oil and gas exploration and production company and 2006 witnessed the
Company's move into a phase of value realisation from its exploration,
development and production assets across six European countries.
Your Board is encouraged by the potential of the portfolio and particularly by
the early results of the exploration and appraisal programmes, which have
delivered two discoveries out of three wells drilled to date and have identified
further drilling prospects.
The management of our operations was strengthened considerably during the period
and the Company is now suitably equipped with the skills and experience to
deliver on future work commitments. The addition of Peter Earl and Nigel Moore
to the Board as Non-Executive Directors completed our strategy of assembling a
Board of Directors capable of managing the development of Ascent into a
substantial exploration and production entity. We also appointed an experienced
Group Operations Manager, Fraser Pritchard and a Finance Manager, Alistair Jury,
both of whom are providing valuable support to Jeremy Eng as Managing Director.
Our portfolio was rationalised during late-2006 and early-2007 by acquiring
interests in Slovenia, which is a cross-border continuation of our South West
Hungary tight gas play, and by a profitable divestment of our minority interests
in Romania. We have also announced today that we have increased our interest in
Frosinone Exploration Permit, Italy from 70% to 80% and will become the
principal contractor.
The Company now retains operator status and majority ownership in most of its
projects. The Board believes this to be an important factor in controlling the
projects and it enables the Company to optimise work programmes to maximise
value.
Ascent is in the first stage of value realisation across its portfolio. We have
drilled wells in Hungary and Italy and are now drilling in Spain. The work
programmes in these countries will continue through 2007, and similar programmes
are scheduled to start in Switzerland, Slovenia and the Netherlands.
In line with expectations we are reporting a pre-tax loss of £1,978,126
We have today announced that the Company is raising £3.3 million net of expenses
through an institutional placing, which confirms solid support from existing
institutional investors and sees the entry of some new institutions. The
proceeds from the placing will be used primarily to fund the increase in our
interest in the Frosinone Exploration Permit in Italy and to evaluate the oil
discovery that was made there in January 2007.
I would like to thank everyone involved with the Company for their hard work and
dedication in moving Ascent into its new position. I look forward to working
with them in 2007 to continue to build Ascent into a successful company. I
would also like to thank our shareholders for their ongoing support and I am
confident that their loyalty will be further rewarded in the future. I am
excited by the prospects open to us in 2007 and the Board looks forward to
reporting to shareholders on progress during the year.
John Kenny
Chairman
OPERATIONAL REVIEW
Ascent has moved to the next phase of its development and implemented an
aggressive exploration and drilling programme aimed at crystallising the
potential of its portfolio. The Company's drilling campaign is on-going and the
results of the first three wells underlining the strength of the portfolio with
gas discovery in Hungary and an oil discovery in Italy.
HUNGARY
In Hungary, Ascent operates through its 90% owned joint venture company,
PetroHungaria Kft. PetroHungaria drilled two wells were in the Nyirseg area of
north eastern Hungary in Q3 2006. These, with two further wells to be drilled in
the Q2 2007, will earn Ascent's partners DualEx of Canada a 37.5%, and Petro
Pequnia of Sweden, a 2% working interest in the project.
In November 2006, the Company announced its first gas discovery following the
drilling and testing of the PEN-104 well in the area of the Peneszlek gasfield.
A second well, the Fehergyarmat 2 ('FGY-2') well was spudded in late November.
Although finding good quality reservoir it did not contain gas. The results of
these wells were sufficiently encouraging for the partners to commit to the
drilling of the second two optional wells under the farm-in agreement.
Ascent also progressed the MOL Tight Gasfield re-development project. Technical
studies confirmed the economic viability of the project will use horizontal
recompletion techniques to improve the productivity of wells in low productivity
reservoirs. Subject to final project sanction, the first two horizontal
recompletions may be drilled in Q4 2007. In this project, PetroHungaria drills
the wells and the MOL provides the production infrastructure with the resulting
production divided between the two companies.
ITALY
In Italy, Ascent commenced its Italian drilling programme in the Latina Valley
to the south east of Rome and also initiated programmes to explore acreage in
the highly prospective Po Valley, Cento and Bastiglia permits.
The Anagni-1 well has discovered an oil reservoir and the well has been
temporarily completed to allow for the procurement of additional equipment to
enable the well evaluated. Seismic acquisition in the well is designed to
evaluate the structure and to investigate the complete Carbonate sequence. It
is planned to re-enter the Anagni-1 well when the rig has completed drilling the
Hontomin-4 well in Spain and returned to Italy. The rig will deepen the well
and will undertake a full production test to determine the characteristics of
the reservoir. Agreement has been reached with Pentex Italia Limited that
Ascent, through its wholly owned Italian subsidiary, Ascent Resources Italia
srl, will increase its interest by 10% to 80% and in due course take over
operatorship.
Ascent farmed into the onshore Fiume Arrone exploration permit to the west of
Rome along the Latium coast. Gas shows have been detected in wells drilled
nearby and a gas exploration well is planned to be drilled after the testing
operations on Anagni-1 are complete. Ascent's working interest will be 40% and
other partners in the project are JKX Oil & Gas plc, Oracle Energy Corporation
of Canada and Italmin Exploration srl.
After acquiring and reprocessing seismic data and completing geological studies
on its 100% owned Cento and Bastiglia Exploration Permits in the central part of
the Po Valley, Ascent is now in the process of farming out an interest in these
permits. The farm-out is for two wells to be drilled in 2007 and in 2008.
SPAIN
In Spain, Ascent now controls 88.75% of the producing Ayoluengo oil field in the
Sedano Basin in northern Spain following the purchase of a further 25% interest
in the field. The remaining 11.25% is owned by Gold Oil plc. Ascent also has
50% interests in three exploration licences in the area, Basconcillos, Huemeces
and Valderedibles with Tethys Oil AB of Sweden. During the period, an
application was made for a further exploration licence to the north west of the
Ayoluengo field to be called Rocamundo. This application has been made with
Tethys and Shesa, a regional oil exploration company based in Bilbao.
On the Ayoluengo field, production enhancement and operating efficiency
programmes have been implemented. Thus far these initiatives have only
counteracted the production decline in the field and production has remained
steady. Other possibilities are being investigated in order to increase the
production and profitability of the field. Current production averages 120
barrels of oil per day.
The Huermeces exploration licence contains the Hontomin oil discovery which was
drilled by Chevron in 1960s and produced, for a short time, good quality oil.
Geological and seismic studies were conducted during 2006 and resulted in a
decision to drill an up-dip appraisal well. This well is being drilling now.
Once the well has been drilled, with satisfactory results, the testing and
completion of it as a producer will use the Ayoluengo field workover rig and
facilities.
In the Basconcillos-H licence the possibility of re-entering the Tozo-1 well was
studied. The Tozo-1 well contains an untested gas reservoir after the well was
closed in by the operator in the 1960's following the production of a few
thousand barrels of oil. The objective of the re-entry is to test the well and
evaluate its viability for a gas to power project producing electricity to be
sold to the power grid. Permitting and site preparations have been completed
and the use of the Ayoluengo field rig to undertake the re-entry is under
consideration.
The Rocamundo application is for an area where two deeper wells have been
drilled and high pressure gas has been detected. These gas prone formations are
in Traissic formations that underlie a thick layer of salt on top of which is
the Ayoluengo oilfield.
SWITZERLAND
In Switzerland, the Company has been awarded a third exploration permit. In
addition to the two permits already awarded in the Canton of Bern, this permit
is in the Canton of Vaud and contains the Essertines oil discovery drilled by
BEB in 1962. All the permits are held by a joint venture between SEAG of Zurich
(10%) and Borona Holdings (90%), a wholly owned subsidiary of Ascent.
During the period, the Company's efforts have been focused on preparing a
comprehensive Prospectivity Report and Prospect Inventory across the three
exploration permits. This work involved collecting, re-examining and collating
the hydrocarbon exploration archive material, reprocessing seismic data,
acquiring new passive spectral seismic surveys and new geochemical analyses to
type source rocks. These results were integrated into a new geological model
and prospect catalogue and with the completion of this work, the next stage of
the exploration effort, finding suitable drilling locations, has now commenced.
The first locations will be in the Hermrigen and Vaud permits, and subject to
locations, permitting and rig availability, drilling is targeted for the Q4 2007
or early 2008.
NETHERLANDS
In November 2006 Ascent was awarded four exploration areas offshore the
Netherlands, P4 in the 'P' quadrant adjacent to the UK-Netherlands median line
and M8, M10 and M11 all contiguous licences in the 'M' quadrant. In terms of
exploration and development potential the area is considered prospective for
gas. In the Quadrant M, there are already two discoveries, one each in M11 and
M10. According to the data released by the Ministry of Economic Affairs and
TNO, the Netherlands Geological Survey, these discoveries are both gas which is
produced from Rotliegend sandstones. The work that is on-going in these areas
is initially the re-interpretation of the existing seismic data. 3-D surveys
have been acquired over most of the Quadrant M area and various vintages of 2-D
data are available over both Block P4 and Quadrant M.
SLOVENIA
In March this year Ascent acquired the Nemmoco Slovenia Corporation ('NSC'). The
assets of NSC's, located in eastern Slovenia near Lendava, include a 45%
interest and operatorship of the Joint Venture that owns the development rights
to the Petisovci Dolina ('P-D') oil and gasfields and a 15.75% interest and
operatorship of the Joint Venture that owns the development rights to the
underlying Petisovci Globoki ('P-G') gasfield. The P-G gasfield is reservoired
in similar formations to the reservoirs of south west Hungary which is the
subject of the MOL Tight Gasfield Re-development project.
Independent consultants have estimated that P-D and P-G both have substantial
additional reserves and it is the Company's intention to prove the economic
potential of the area through a targeted work programme.
ROMANIA
In April 2006, Ascent purchase Millennium International Resource Corporation ('
MIRC') which owned a 5% share of three exploration projects in Romania. In
January 2007, MIRC was sold to the project operator, Aurelian Oil and Gas plc.
GABON
Ascent owns a 1.75% Net Profits Interest in two Production Sharing Contracts
offshore Gabon. During the period, Ascent disposed of a 20% interest in the
adjacent Ibekelia Technical Evaluation Area to Afren plc.
The period under review has seen the start of operations by Ascent Resources and
with excellent results so far. The Company will have a very busy year in 2007
and this busy schedule does not even include the appraisal work that naturally
follows on from exploration success.
Jeremy Eng
Managing Director
CONSOLIDATED PROFIT AND LOSS ACCOUNT
FOR THE 18 MONTH PERIOD ENDED 31 DECEMBER 2006
18 months ended 9 months ended
31 December 2006 30 June 2005
(Restated)
Unaudited Audited
Notes £ £
Group turnover - Acquisitions 384,499 -
Cost of sales - Acquisitions (320,343)
-
Gross profit 64,156 -
Other operating income 3
139,180 -
Administrative expenses before (1,652,726) (407,487)
impairment of exploration expenditure
(intangible fixed assets), amortisation
of goodwill and charge for share based
payments
Impairment of exploration 5 (242,708)
expenditure -
Release of negative goodwill 5 142,071 (10,553)
Share based payments 11 (576,380) (290,600)
Total administrative expenses 2 (2,329,743) (708,640)
Group operating loss :
Continuing (1,606,115) (708,640)
Acquisitions (520,292)
-
(2,126,407) (708,640)
Interest receivable 129,117 15,594
Interest payable (11,514)
-
Loss on ordinary activities before taxation (2,008,804) (693,046)
Taxation - -
Loss on ordinary activities after taxation (2,008,804) (693,046)
Minority interest 30,678 1,314
Loss for the period (1,978,126) (691,732)
Loss per share - pence 4
Basic (0.81)p (0.54)p
Diluted (0.81)p (0.54)p
STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES
FOR THE 18 MONTH PERIOD ENDED 31 DECEMBER 2006
18 months ended 31 9 months ended
December 2006 30 June 2005
(Restated)
Unaudited Audited
£ £
Retained loss for the period (1,978,126) (691,732)
Exchange differences on retranslation (12,275) -
of net assets of foreign currency operations
Total recognised losses relating to the period (1,990,401) (691,732)
Prior year adjustment (note 12) (290,600)
Total recognised losses since the last annual report 2,281,001
CONSOLIDATED BALANCE SHEET AS AT 31 DECEMBER 2006
30 June 2005
Notes 31 December 2006 (Restated)
Unaudited Audited
Fixed Assets
£ £ £ £
Intangible assets: 5
- exploration costs 4,807,400 70,000
- rehabilitation costs 5 110,794 -
- goodwill 5 (863,369) 94,973
Tangible assets 6 198,215 -
4,253,040 164,973
Current assets
Current asset investments 7 855,786 987,629
Consumable stocks 450,773 -
Debtors 2,097,688 57,418
Cash at bank and in hand 1,941,044 3,673,353
5,345,291 4,718,400
Creditors: amounts falling due
within one year (2,196,385) (54,984)
Net current assets 3,148,906 4,663,416
Total assets less current
liabilities 7,401,946 4,828,389
Creditors: amounts falling due
after one year (917,722) -
6,484,224 4,828,389
Provision for liabilities and charges 8 (194,995) -
Minority interest 30,309 (369)
Net assets 6,319,538 4,828,020
Capital and reserves
Called up share capital 10 264,825 208,518
Share premium account 12 7,943,786 5,020,634
Share based payment reserve 12 793,060 290,600
Profit and loss account 12 (2,682,133) (691,732)
Shareholders' funds 13 6,319,538 4,828,020
CONSOLIDATED CASH FLOW STATEMENT
FOR THE 18 MONTH PERIOD ENDED 31 DECEMBER 2006
18 months ended 9 months ended 30
31 December 2006 June 2005
Unaudited Audited
Notes £ £
Net cash outflow from operating 14 (1,334,509) (410,447)
activities
Returns on investments and
servicing of finance
Interest received 129,117 15,594
Interest paid (11,514) -
Net cash inflow from returns on 117,603 15,594
investment and servicing of
finance
Capital expenditure
Funds used for investing in exploration (3,120,155) (70,000)
Acquisitions and disposals
Acquisitions of current asset investments (855,786) (387,629)
Proceeds from sale of current asset 987,629 -
investments
Acquisition of subsidiaries (158,144) -
Cash acquired with subsidiaries 77,533 1,683
Net cash inflow/(outflow) from 51,232 (385,946)
acquisitions and disposals
Financing
New loans received 1,346,620 -
Cash proceeds from issue of 1,282,515 4,838,410
shares
Share issue costs (75,615) (314,258)
Net cash inflow from financing 2,553,520 4,524,152
(Decrease)/increase in cash 16 (1,732,309) 3,673,353
NOTES TO THE UNAUDITED FINANCIAL INFORMATION
FOR THE 18 MONTH PERIOD ENDED 31 DECEMBER 2006
1. Basis of preparation
The financial information has been prepared in accordance with the historical cost convention and in
accordance with applicable accounting standards and the Statement of Recommended Practice 'Accounting for
Oil and Gas Exploration, Development, Production and Decommissioning Activities'.
The financial information contained in this report does not constitute full statutory accounts within the
meaning of Section 240 of the Companies Act 1985. The figures are extracted from the unaudited financial
statements for the period ended 31 December 2006 which will be filed with the Registrar of Companies
following formal completion of the audit.
2. Administrative expenses
Period ended 31 December 2006 Continuing Acquisitions Total
£ £ £
Normal administrative expenses 1,153,085 499,641 1,652,726
Share based payments 576,380 - 576,380
Impairment of intangible fixed assets - 242,708 242,708
Amortisation of goodwill 15,830 (157,901) (142,071)
1,745,295 584,448 2,329,743
Period ended 30 June 2005 (Restated) Continuing Acquisitions Total
£ £ £
Normal administrative expenses 407,487 - 407,487
Share based payments 290,600 - 290,600
Impairment of intangible fixed assets - - -
Amortisation of goodwill 10,553 - 10,553
708,640 - 708,640
3. Other operating income
18 months ended 9 months ended 30
31 December 2006 June 2005
£ £
Fees for technical services 62,112 -
Profit on sale of investments 57,858 -
Revaluation of quoted 19,210 -
investments
139,180 -
NOTES TO THE UNAUDITED FINANCIAL INFORMATION
FOR THE 18 MONTH PERIOD ENDED 31 DECEMBER 2006
4. Loss per share
The basic and diluted loss per share have been calculated using the loss for the 18 months ended 31 December
2006 of £1,978,126 (9 months ended 30 June 2005 - £691,732 loss). The basic loss per share was calculated
using a weighted average number of shares in issue of 244,747,623 (2005 - 127,879,476). The diluted loss per
share has been calculated using a weighted average number of shares in issue and to be issued of 250,964,854
(2005 - 127,879,476). The diluted loss per share has been kept the same as the basic loss per share as the
conversion of share warrants decreases the basic loss per share, thus being anti-dilutive.
5. Intangible assets
Decommissioning and exploration costs
Decommissioning costs represents an estimate of a provision for liability for the removal of production
facilities and site restoration at the end of the production life of a field. Exploration costs represent the
cost of investment in oil and gas projects where it is too early to make a decision regarding the existence or
otherwise of commercial reserves.
Decommissioning Exploration costs Total
Costs Italy Hungary Europe Exploration
costs
£ £ £ £ £
Group
Cost
At 1 July 2005 - 70,000 - - 70,000
Decommissioning costs - Spain 121,075 - - - -
Investing in exploration - 1,873,632 1,246,523 - 3,120,155
costs
Acquired with subsidiaries - 1,729,832 - 130,121 1,859,953
121,075 3,673,464 1,246,523 130,121 5,050,108
At 31 December 2006
Amortisation & impairment
At 1 July 2005 - - - - -
Charged for the period 10,281 - 242,708 - 242,708
10,281 - 242,708 - 242,708
At 31 December 2006
Net Book Value
At 31 December 2006 110,794 3,673,464 1,003,815 130,121 4,807,400
At 1 July 2005 - 70,000 - - 70,000
NOTES TO THE UNAUDITED FINANCIAL INFORMATION
FOR THE 18 MONTH PERIOD ENDED 31 DECEMBER 2006
5. Intangible assets (continued)
In accordance with the accounting policies, the Directors have reviewed the oil and gas exploration costs for
possible impairment. As a result, a decision was made to provide for all the costs of £242,708 of the FGY-2
well in Hungary. The FGY-2 well, with total depth of 1100m, targeted Pannonian clastics, the same formations
which were successfully tested in the PEN-104 well. The testing of the primary target, however, demonstrated
the presence of a good quality reservoir interval in which the mobile phase was water instead of gas. No other
provision was considered necessary against the remaining exploration costs incurred on the oil and gas fields
under exploration at 31 December 2006.
Goodwill
Positive goodwill Negative goodwill
Borona PEOS AG Ascent Italia Teredo Oils Total
£ £ £ £ £
Group
Cost
At 1 July 2005 105,526 - - - 105,526
Additions - 59,229 (853,478) (306,164) (1,100,413)
105,526 59,229 (853,478) (306,164) (994,887)
At 31 December 2006
Amortisation and impairment
At 1 July 2005 10,553 - - - 10,553
Charge/(release) for the 15,830 8,391 (128,022) (38,270) (142,071)
period
26,383 8,391 (128,022) (38,270) (131,518)
At 31 December 2006
Net book value
At 31 December 2006 79,143 50,838 (725,456) (267,894) (863,369)
94,973 - - - 94,973
At 1 July 2005
The full names of the companies listed above are as follows:
Borona - Borona Holdings Limited
PEOS AG - PEOS AG
Ascent Italia - Ascent Resources Italia srl
Teredo Oils - Teredo Oils Limited
These purchases have been accounted for using acquisition accounting principals.
Goodwill is being amortised over the Directors' estimate of its useful economic life of ten years or on
commencement of production over the estimated life of the commercial reserves of the underlying exploration and
appraisal assets of the subsidiary acquired, or on an unit-of-production basis.
NOTES TO THE UNAUDITED FINANCIAL INFORMATION
FOR THE 18 MONTH PERIOD ENDED 31 DECEMBER 2006
5. Intangible assets (continued)
Details of additions to goodwill are set out below:
Ascent Italia PEOS AG Teredo Oil Total
Date of acquisition 1 July 2005 22 July 2005 30 September
2005
£ £ £ £
Fair values acquired
Exploration and appraisal 1,729,832 - 130,121 1,859,953
assets
Fixed assets - - 224,325 224,325
Debtors 653,670 2,220 422,008 1,077,898
Cash at bank 41,561 35,972 - 77,533
Creditors (7,782) (38,665) (162,146) (208,593)
2,417,281 (473) 614,308 3,031,116
Net assets/(liabilities)
acquired (853,478) 59,229 (306,164) (1,100,413)
Goodwill arising on
acquisition 1,563,803 58,756 308,144 1,930,703
Total consideration of acquisition
Satisfied by:
Cash consideration paid - - 158,144 158,144
Shares issued as consideration 1,563,803 58,756 150,000 1,772,559
1,563,803 58,756 308,144 1,930,703
Ascent Resources Italia srl's principal assets are 70% of the Frosinone Licence, 50% of the Strangolagalli
licence, 40% of the Fiume Arrone Licence, and 100% of the Cento Bastiglia Licence.
Teredo Oils Limited's principal assets are 30% in the Lalora licence which also includes the producing
Ayoluengo field disclosed as tangible assets.
NOTES TO THE UNAUDITED FINANCIAL INFORMATION
FOR THE 18 MONTH PERIOD ENDED 31 DECEMBER 2006
6. Tangible assets
Developed Oil and Gas Assets
- Spain
Group £
Cost
At 1 July 2005 -
Acquired with subsidiaries 224,325
224,325
At 31 December 2006
Amortisation
At 1 July 2005 -
Charge for the period 26,110
26,110
At 31 December 2006
Net book value
At 31 December 2006 198,215
At 1 July 2005 -
The carrying value of the developed oil and gas assets relate to a 30% interest in the oil producing
Ayoluengo field in Northern Spain owned by the Company's wholly owned subsidiary, Teredo Oils Limited.
7. Current asset investments
31 December 2006 30 June 2005
Group Companies: £ £
Gabon Investments (Iris Marin) Pty Limited - 507,882
Gabon Investments (Themis Marin) Pty Limited - 479,747
Millennium International Resources Corporation Limited 657,087 -
Northern Petroleum Exploration Limited ('NPEL') 148,217 -
Quoted Investments at market value:
Afren Plc 50,482 -
855,786 987,629
Although the above group of companies are subsidiaries of the Company at the year end, they have been
excluded from consolidation, because interests in these undertakings are held exclusively with a view to
subsequent resale. These undertakings are recorded in the financial information as current asset investments
at the lower of cost and net realisable value in accordance with Financial Reporting Standard 2 'Accounting
for subsidiary undertakings'. Millennium International Resources Corporation Limited was sold after the year
end for €2,000,000. The Company is proposing to sell its shares in NPEL to Gold Oil plc (a third party) in
the current financial year. Prior to the sale the oil and gas licenses held by NPEL will be transferred to
the Company's wholly owned Spanish subsidiary, Compania Petrolifera de Sedano.
NOTES TO THE UNAUDITED FINANCIAL INFORMATION
FOR THE 18 MONTH PERIOD ENDED 31 DECEMBER 2006
8. Provision for liabilities and charges
31 December 2006 30 June 2005
£ £
Group
At 1 July 2005 - -
Decommissioning provision 121,075
-
National insurance on share-based payments 73,920 -
At 31 December 2006 194,995 -
The amount provided for decommissioning represents the Group's share of decommissioning liabilities in
respect of the producing Ayoluengo field acquired in October 2005. The most recent estimate is that the
provision will become payable in 2008/9.
The charge for national insurance on share-based payments has been calculated by reference to the difference
between the market value of the underlying shares at the balance sheet date and the exercise price of the
warrants, as required by Urgent Issues Task Force ('UITF') 25.
9. Exploration expenditure commitments
In order to maintain an interest in the oil and gas permits in which the Group is involved, the Group is
committed to meet the conditions under which the permits were granted and the obligations of any joint
operating agreements. The timing and the amount of exploration expenditure commitments and obligations of
the Group are subject to the work programme required as per the permit commitments. This may vary
significantly from the forecast programmes based upon the results of the work performed. Drilling results in
any of the projects may also result in variation of the forecast programmes and resultant expenditure. Such
activity may lead to accelerated or decreased expenditure. It is the Group's policy to seek joint operating
partners at an early stage to reduce its commitments.
The Group had the following exploration and expenditure commitments.
31 December 2006 30 June 2005
£ £
3,386,000 280,000
Not more than one year
Between one and two years 1,000,000 -
4,386,000 280,000
NOTES TO THE UNAUDITED FINANCIAL INFORMATION
FOR THE 18 MONTH PERIOD ENDED 31 DECEMBER 2006
10. Share capital
31 December 2006 30 June 2005
£ £
Authorised 10,000,000 10,000,000
10,000,000,000 ordinary shares of 0.1p each
Allotted, called up and fully paid 264,825 208,518
264,824,686 (2005 - 208,518,168) ordinary shares of 0.1p each:
At 1 July 2005 208,518 -
Shares issued during the period 56,307 208,518
At 31 December 2006 264,825 208,518
The movements in the share capital and the warrants are summarised Number of shares Number of warrants
below:
As at 1 July 2005 208,518,168 61,692,418
Shares issued in lieu of services provided 1,011,816 -
Shares issued on acquisition of PEOS AG 1,175,100 -
Shares issued on acquiring 50% of Northern Petroleum Exploration 370,370 -
Shares issued on acquisition of Teredo Oils Limited 1,500,000 -
Shares issued in acquisition of Millennium International Resources 678,906 -
Shares issued for cash 100,000 -
Shares issued to GTO Limited Joint Venture for funding exploration 814,941 -
Shares issued for acquisition of 25% interest of La Lora field by 562,967 -
NPEL
Exercise of warrants for cash 50,092,418 (50,092,418)
Warrants issued - 25,973,106
At 31 December 2006 264,824,686 37,573,106
NOTES TO THE UNAUDITED FINANCIAL INFORMATION
FOR THE 18 MONTH PERIOD ENDED 31 DECEMBER 2006
10. Share capital (continued)
2006
£
The share premiums arising as a result of the above share transactions were as follows:
Shares issued in lieu of services provided 61,701
Shares issued on acquisition of PEOS AG 57,580
Shares issued on acquiring of 50% of Northern Petroleum Exploration Limited 46,852
Shares issued on acquisition of Teredo Oils Limited 148,500
Shares issued on acquisition of Millennium International Resources Corporation Limited 57,028
Shares issued for cash 10,400
Shares issued to GTO Limited Joint Venture for funding exploration 95,185
Shares issued for acquisition of 25% interest of La Lora field by NPEL 66,993
Exercise of warrants for cash 2,454,528
2,998,767
The details of the warrants outstanding at 31 December 2006 are as follows:
Number of warrants Warrant price Exercisable between
10,000,000 5p 10/04/2006 - 10/04/2010
1,600,000 5p 28/06/2006 - 28/06/2010
5,450,000 15p 23/03/2006 - 23/09/2008
4,500,000 40p 23/09/2006 - 23/09/2009
1,690,000 12.5p 02/10/2006 - 22/12/2007
500,000 11.5p 09/11/2006 - 09/11/2010
10,833,106 12p Up to 22/12/2007
1,000,000 10.5p 28/12/2006 - 28/12/2010
500,000 10.5p Up to 01/01/2008
500,000 11.5p 15/05/2007 - 15/05/2011
500,000 9.5p 28/06/2007 - 28/06/2011
500,000 12.5p 01/10/2007 - 01/10/2011
37,573,106
NOTES TO THE UNAUDITED FINANCIAL INFORMATION
FOR THE 18 MONTH PERIOD ENDED 31 DECEMBER 2006
11. Share based payments
2006 2005
(Restated)
The Group recognised the following charge in the profit and loss £ £
accounts in respect of its share based payment plans:
As required by Financial Reporting Standards ('FRS') 20 502,460 290,600
As required by UITF 25 (note 8) 73,920 -
576,380 290,600
These are based on the requirements of FRS 20 and UITF 25 on share based payments. For this purpose, the
weighted average estimated fair value for the share warrants granted was calculated using a Black-Scholes
option pricing model in respect of warrants. The volatility measured at the standard deviation of expected
share price return is based on statistical analysis of the share price over the 18 month period to 31
December 2006 and this has been calculated at 49.2%. The risk free rate has been taken as 5%. The estimated
fair values and other details which have been processed into the model are as follows:
Number of warrants Grant date Warrant price Fair value Expected exercise date
10,000,000 10/04/2005 5p 2.5p 10/04/2010
1,600,000 28/06/2005 5p 2.9p 28/06/2010
5,450,000 23/09/2005 15p 4.6p 23/09/2008
4,500,000 23/09/2005 40p 1.9p 23/09/2009
1,690,000 02/10/2005 12.5p 4.1p 22/12/2007
500,000 09/11/2005 11.5p 5.3p 09/11/2010
10,833,106 22/12/2005 12p 2.3p 22/12/2007
1,000,000 28/12/2005 10.5p 4.7p 28/12/2010
500,000 28/12/2005 10.5p 2.8p 01/01/2008
500,000 15/05/2005 11.5p 5p 15/05/2011
500,000 28/06/2006 9.5p 5.4p 28/06/2011
500,000 01/10/2006 12.5p 5.8p 01/10/2011
NOTES TO THE UNAUDITED FINANCIAL INFORMATION
FOR THE 18 MONTH PERIOD ENDED 31 DECEMBER 2006
12. Statement of movement on reserves
The movements in the Group reserves during the 18 months ended 31 December 2006 were as follows:
Share-based payment Share premium Profit and loss
reserve reserve
£ £ £
At 1 July 2005 :
- as previously reported - 5,020,634 (401,132)
- prior year adjustments 290,600 - (290,600)
- as restated 290,600 5,020,634 (691,732)
Issue of shares in the period 2,998,767 -
Share issue costs - (75,615) -
Cost of share-based payments (note 11) 502,460 - -
Retained losses - - (1,978,126)
Currency translation differences on foreign - - (12,275)
currency operations
At 31 December 2006 793,060 7,943,786 (2,682,133)
The prior year adjustments arise from the adoption of FRS 20 with regard to share-based payments. The warrants
issued prior to 30 June 2005, which have been exercised soon thereafter, have not been considered for the
purposes of this adjustment as these warrants have been issued to institutional investors.
13. Reconciliation of movements in shareholders' funds - equity only
31 December 2006 30 June 2005
£ £
Loss for the period (1,978,126) (691,732)
Dividends - -
(1,978,126) (691,732)
Shares issued less costs 2,979,459 5,229,152
Currency translation differences on foreign currency operations (12,275) -
Cost of share based payments 502,460 290,600
Opening shareholders' funds 4,828,020 -
6,319,538 4,828,020
NOTES TO THE UNAUDITED FINANCIAL INFORMATION
FOR THE 18 MONTH PERIOD ENDED 31 DECEMBER 2006
14. Reconciliation of operating loss to net cash outflow from operating activities
18 months ended 31 9 months ended
December 2006
30 June 2005
£ £
Group operating loss (2,126,407) (708,640)
Depreciation 26,110 -
Impairment of exploration expenditure 242,708 -
Amortisation of decommissioning costs 10,281 -
Release of negative goodwill / amortisation of goodwill (142,071) 10,553
Share-based payments charge 576,379 290,600
Increase in debtors (962,372) (57,418)
Increase in consumable stocks (450,773) -
Increase in creditors 1,503,911 54,458
Effect of foreign exchange rates (12,275) -
Net cash outflow from operating activities (1,334,509) (410,447)
15. Analysis of changes in net funds
30 June 2005 Cash flows Cash acquired with 31 December 2006
excluding subsidiaries
acquisitions
£ £ £ £
Cash at bank and in hand 3,673,353 (1,809,862) 77,553 1,941,044
Bank loan - (1,346,620) - (1,346,620)
Net funds 3,673,353 (3,156,482) 77,553 594,424
16. Reconciliation of net cash flow to movement in net funds
31 December 2006 30 June 2005
£ £
(Decrease)/increase in cash (1,732,309) 3,673,353
Cash inflow from increase in debt (1,346,620) -
Movement in net funds (3,078,929) 3,673,353
Net funds at 1 July 2005 3,673,353 -
Net funds at 31 December 2006 594,424 3,673,353
NOTES TO THE UNAUDITED FINANCIAL INFORMATION
FOR THE 18 MONTH PERIOD ENDED 31 DECEMBER 2006
17. Post balance sheet events
On 8 January 2007, the Company entered into an agreement to sell its wholly owned subsidiary, Millennium International
Resources Corporation Limited ('Millennium'), to Aurelian Oil & Gas PLC for a cash consideration of €2,000,000. The
operating assets of Millennium are a 5% non-operated interest in three concessions in Romania. The proceeds of the sale
will be used to further develop the Group's European exploration and production portfolio.
On 26 February 2007, the Company acquired the entire share capital of Nemmoco Solvenia Corporation ('NSC') for an
initial consideration of €150,000 payable by the issue of new shares by the Company. NSC's operating assets include a
45% interest and operatorship of the Joint Venture that owns the development rights to the Petisovci Dolina ('P-D') oil
and gasfields and 15.75% interest and operatorship of the joint venture that owns the development rights to the
underlying Petisovci Globoki ('P-G') gasfield. The fields are in eastern Slovenia near Lendava, close to the borders of
Solvenia, Austria, Hungary and Croatia.
This information is provided by RNS
The company news service from the London Stock Exchange
Friday, 22nd November 2024
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