Final Results
Regal Petroleum PLC
06 June 2003
For Immediate Release Friday 6 June 2003
Regal Petroleum plc
Preliminary Results for the Year ended 31 December 2002
Regal Petroleum plc ('Regal' or 'the Group'), the oil and gas exploration,
development and production company, is pleased to announce its preliminary
results for the year ended 31 December 2002 ('the financial period').
Highlights during the financial period include:
• Successful flotation on AIM in September 2002 raising £10m via a
placing of 16.7m shares at 60p per share
• Successful registration as an oil and gas producer in the Ukraine
allowing Regal to proceed with its export programme
• Commencement of gas production in August 2002 from MEX3, producing
on average 110,000 cubic meters of gas and 2 metric tonnes of
condensate per day
• Drilling of Regal's first new well, GOL 2, was successfully
completed in November 2002 (and commenced production in January 2003)
• Work over rigs installed on GOL 1 and SV10 during the fourth quarter
2002
• Drilling of new wells SV52 and MEX102 commenced in Q4 2002
Highlights post the financial year include:
• 4 wells completed to date and a further 4 wells due to be completed
by the end of 2003
• construction of the 1st phase of Regal's new gas processing plant
completed, providing a capacity of 1,000,000 m3 per day
• export programme progressing well with exports of gas due to
commence in Q3 2003
• acquisition of onshore oil & gas exploration and development license
in North East Romania in February 2003
• appointment of Guenter Nolte as Chief Executive Officer
Commenting on the results, Frank Timis, Chairman of Regal, said:
'2002 was an important year in creating the structure required for Regal to
continue its rapid development. Significant progress has been made in the
Ukraine with exports likely to commence in the next few months. Our strategy
remains to identify other assets with similar potential and believe that we have
the management team, the corporate structure and the necessary cash flow to
deliver a year of considerable growth in 2003.'
JUNE 2003 TRADING UPDATE
Work-Over MEX3. Regal's first well continues production since being brought
into production in August 2002.
New Well GOL2. Regal's second well continues production since being brought
into production at the end of January 2003.
Work-Over GOL1. Regal's third well is now completed and is expected to commence
commercial production by 25 June 2003.
Work-Over SV10. Regal's fourth well is now completed and will be connected for
production once the new second phase gas plant has been completed (refer below).
New Well SV52. Regal's fifth well has been drilled to a depth of 4,674 metres
and is expected to be completed in Q4 2003.
New Well MEX102. Regal's sixth well has been drilled to a depth of 3,829 metres
and is expected to be completed in Q4 2003.
Other Wells. Two other wells have been identified for work-over and are
expected to be completed in Q4 2003 bringing the total number of completed wells
to 8 by the end of the year.
First Phase Gas Plant. During commissioning of GOL2 it became evident that
there were capacity restrictions in the state owned gas processing and treatment
plant and pipelines. Accordingly, the Directors made an immediate decision to
fast track the construction of the Regal owned first phase gas plant and
associated infrastructure. Construction commenced in April 2003 and is now
complete and being commissioned in anticipation of being fully operational by 25
June 2003. This new plant enables production to be increased to 450,000m3 per
day from 25 June 2003 until the construction of the new high capacity pipeline
has been completed to enable maximum flow of gas from completed wells. The
capacity of the plant is 1,000,000m3 per day. The new plant also enables Regal
to have total control over the production of gas and condensate by removing the
reliance on the state owned facilities.
Second Phase Gas Plant. The second phase of the gas plant referred to above is
due to be completed by 31 December 2003. The capacity of the second phase plant
will be 2,000,000m3 per day bringing total plant capacity to 3,000,000m3 per
day. This will include the construction of a 17km high capacity pipeline
connected from the new gas plant to the main gas export trunk pipeline to allow
Regal to utilise current production and allow for future growth potential
generated by drilling/work-over of new wells and by implementing advanced
stimulations technology on existing wells (to optimise flow rates).
Exports. Regal expects to commence exporting gas in the third quarter 2003
which will increase the gas sales price to approximately US$90 per thousand
cubic metres (an increase of over 60% compared with current domestic prices).
Suceava Block, Romania. The geological and geophysical data package is being
prepared to assist the seismic and geochemical program which is due to commence
in 2004.
For further information please contact:
Regal Tel: 020 7647 6622
Frank Timis, Executive Chairman
Glenn Featherby, Finance Director
Buchanan Communications Tel: 020 7466 5000
Bobby Morse / Tim Thompson
CHAIRMAN'S STATEMENT
2002 has been an eventful year for Regal. Our successful £10 million fund
raising through an institutional placing and admission to AIM in September 2002,
together with the commencement of gas production in August 2002, has enabled us
to initiate a more aggressive exploration and development plan, hire and retain
an experienced management team and to investigate other prospects in order to
expand and diversify our operations.
Specifically, the fund raising has allowed us to invest funds towards the
completion of well work-overs, the drilling of new wells and associated capital
infrastructure, as well as raising our corporate profile in the investment
community and the oil and gas industry, particularly in the Ukraine.
FINANCIAL REVIEW
The financial results for the year ended 31 December 2002 reflect the Group's
successful fund raising through the institutional placing and the acceleration
of well development during the fourth quarter of 2002.
Turnover for the year was $583,000 reflecting 4 months of gas and condensate
production from well MEX 3. All production was sold locally at an average rate
of $54 per thousand cubic metres of gas and $186 per metric tonne of condensate.
In order to minimise counterparty risk all sales are for payment in advance.
The operating loss for the year was $4,172,000 which included one-off listing
costs of $1,782,000. The loss before and after tax of $4,492,000 included a
total interest charge for the year of $430,000, representing interest paid on
funds loaned to the Group prior to the fund raising in September 2002. As at 31
December 2002 the Group had no long term external borrowings. Total interest
receivable of $110,000 reflected the Group's successful cash management since
the large cash injection from the Institutional Placing in September 2002.
Net cash outflow from operating activities was $5,281,000 which included
$1,782,000 of one-off listing costs. The capital expenditure and financial
investment outflow of $3,207,000 represented the aggressive investment towards
well development in the fourth quarter of 2002. As at 31 December 2002 the Group
had total cash balances of $8,974,000.
OPERATIONAL REVIEW
To date 18 exploratory wells have been drilled in the gas field. Of these, 12
wells have been flow-tested and demonstrated that commercial gas can be
produced. As at 31 December 2002 there was one well in commercial production,
MEX 3.
MEX 3. The Group completed the work-over of the MEX 3 well and commenced
commercial production in August 2002. MEX 3 is currently producing an average of
110,000 sm3 of gas and 2 tonnes of condensate per day.
GOL 2. The drilling of the Group's first new well, GOL 2, was successfully
completed in November 2002 and, following production testing, was connected via
a newly constructed 10 kilometres, 114mm diameter underground pipeline to
Micherdovka, the existing state owned treatment facility. However, due to severe
weather conditions in December 2002, GOL 2 did not commence commercial
production until January 2003.
GOL 1. A work-over rig was installed on the Group's third well, GOL 1, in the
fourth quarter of 2002. Work-over operations and the construction of associated
infrastructure commenced in late 2002 and a new 11 kilometre underground
pipeline connecting the well to the processing plant was completed in December
2002.
SV 10. A work-over rig was installed and the work-over of well SV 10 was
commenced in late 2002. Cement suspension plugs had been drilled and milled to a
depth of approximately 5,000 meters as at 31 December 2002.
SV 52. The location for Regal's second new well, SV 52, was prepared, the
drilling rig was installed and commissioned and drilling commenced in the third
quarter of 2002.
MEX 102. The location for Regal's third new well, MEX 102, was prepared and the
drilling rig was installed and commissioned in the fourth quarter of 2002.
Other work-over candidates. Several other well work-over candidates were
identified during 2002. These work-over candidates form part of the development
programme for 2003.
Export programme. In September 2002 Regal was officially registered as an oil
and gas producer in Ukraine by Oil and Gas of Ukraine, the State entity
responsible for all matters pertaining to the production, processing and transit
of oil and gas. This registration enables us to proceed with our export
programme and elevates us to a high standing with traders and users within the
Ukraine.
The Group will commence the export of gas once it is able to produce a volume
considered sufficient to satisfy long-term orders from overseas companies.
Discussions with potential buyers throughout Europe have taken place. Regal
expects to commence exporting gas in the third quarter 2003 which will increase
the gas sales price to approximately US$90 per thousand cubic metres (an
increase of over 60% compared with current domestic prices).
Gas processing plant. The gas produced from Regal's wells is pumped via Regal
owned pipelines to a Ukrainian state owned processing and conditioning plant
before being pumped into the state owned main trunk pipeline and ultimately to
customers.
The Group intends to identify means to reduce the operating costs of gas
production and to reduce the Group's exposure to state-owned and managed
utilities. To this end, the Group commenced negotiations in 2002 for the
development of an independent gas processing facility, together with a new
underground pipeline to the main export trunk pipeline, with a view to having a
fully operational plant at the end of 2003.
Future activity. The main emphasis of Regal in 2003 is on the continuation of
the drilling/work-over programme, construction of the new gas processing plant
and associated infrastructure, procurement of a production licence, and the
commencement of export sales.
OUTLOOK FOR 2003
During 2003 we will continue our aggressive development plan in the Ukraine to
achieve our daily gas production target of 1,500,000 sm3 per day by the end of
the year. We also expect to commence the export of gas in the third quarter of
2003 to take advantage of the higher sales prices available. This will
substantially increase our cash flow and enable further acceleration of our
exploration and drilling programme.
We intend to develop Regal into an international oil and gas company with a
clear focus on geographic areas and assets where we can add value. To achieve
this goal and to diversify our operations we intend to examine additional oil
and gas opportunities in 2003. Regal has also been appraising a number of other
oil and gas opportunities in other countries. This is evidenced by the
acquisition of an exclusive exploration, development and production license in
North East Romania in February 2003.
Finally, I am pleased to welcome Guenter Nolte to the Board of Directors. Mr
Nolte has been appointed Chief Executive Officer and brings over 25 years of
experience in the oil and gas industry together with strong business contacts in
Central and Eastern Europe.
V. Frank Timis
Chairman
CONSOLIDATED PROFIT AND LOSS ACCOUNT
FOR THE YEAR ENDED 31 DECEMBER 2002
Note 2002 2001
$'000 $'000
Turnover 2 583 -
Cost of sales (92) -
Gross profit 491 -
Administrative expenses (4,663) (829)
Operating loss (4,172) (829)
Interest receivable 110 -
Interest payable and similar charges (430) (178)
Loss on ordinary activities before and after taxation (4,492) (1,007)
Loss per ordinary share (cents)
Basic 10.1c 2.5c
Diluted 10.1c 2.5c
All amounts relate to continuing activities.
During the period the group carried out a corporate restructuring including the
introduction of a new holding company. The profit and loss account has been
prepared using merger accounting and is presented on a proforma basis as if the
new holding company, Regal Petroleum plc, has been in existence throughout both
the current and prior periods. Further information is given in note 1.
The notes form part of these financial statements.
CONSOLIDATED BALANCE SHEET
AT 31 DECEMBER 2002
Note 2002 2002 2001 2001
$'000 $'000 $'000 $'000
Fixed assets
Tangible assets 5,873 2,586
Investments 54 -
5,927 2,586
Current assets
Debtors 1,652 325
Cash at bank and in hand 8,974 98
10,626 423
Creditors: amounts falling due within one (1,044) (1,943)
year
Net current assets/(liabilities) 9,582 (1,520)
Total assets less current liabilities 15,509 1,066
Provision for liabilities and charges (100) -
Net assets 15,409 1,066
Capital and reserves
Called up share capital 4 4,613 3,219
Share premium 14,754 -
Merger reserve (3,204) (3,204)
Capital contributions 7,477 4,736
Profit and loss account deficit (8,231) (3,685)
Shareholders' funds - equity 15,409 1,066
The financial statements were approved by the Board on 20 May 2003
G R Featherby
Director
The notes form part of these financial statements.
CONSOLIDATED CASH FLOW STATEMENT
FOR THE YEAR ENDED 31 DECEMBER 2002
2002 2002 2001 2001
$'000 $'000 $'000 $'000
Net cash outflow from operating activities (5,281) (899)
Returns on investments and servicing of finance
Interest received 110 -
Interest paid (430) -
Net cash outflow from returns on investments and (320) -
servicing of finance
Capital expenditure and financial investment
Purchase of tangible fixed assets (3,207) (1,314)
Cash outflow before use of liquid resources and (8,808) (2,213)
financing
Financing
Secured loan (1,337) 1,237
Other Loans 186 -
Capital contributions received 2,741 1,077
Issues of ordinary share capital (net of issue 16,094 -
costs)
17,684 2,314
Increase in cash 8,876 101
The notes form part of these financial statements.
NOTES FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2002
1 Corporate restructuring
During the year the group carried out a corporate restructuring including the
introduction of a new holding company, Regal Petroleum plc, incorporated on 17
June 2002.
On 19 September 2002, the company acquired Regal Petroleum (Jersey) Limited, and
the entire issued share capital of Regal Petroleum Corporation Limited was
acquired by Regal Petroleum (Jersey) Limited. Regal Petroleum Corporation
Limited therefore became a wholly owned directly held subsidiary of Regal
Petroleum (Jersey) Limited and a wholly owned indirectly held subsidiary of the
company.
The corporate restructure has been accounted for as a merger in accordance with
FRS6 'Acquisitions and Mergers' (see accounting policies note 2).
2 Turnover and net assets
2002 2001
$'000 $'000
Analysis of turnover by activity:
Gas Sales 550 -
Condensate Sales 26 -
Other 7 -
583 -
The turnover of the group arose wholly within the territory of Ukraine and was
wholly attributable to the group's primary activity.
Analysis of net assets by geographical origin:
2002 2001
$'000 $'000
United Kingdom 9,204 -
Ukraine 6,205 1,066
15,409 1,066
3 Loss for the financial year
The company has taken advantage of the exemption allowed under section 230 of
the Companies Act 1985 and has not presented its own profit and loss account in
these financial statements. The group loss for the period includes a loss after
tax of $2,458,975, for the period 17 June 2002 to 31 December 2002, which is
dealt with in the financial statements of the parent company.
4 Share capital
Authorised
Number $'000
Ordinary shares of 5p each 80,000,000 6,440
(Approximately 8c each)
Allotted,
called up and fully paid
Number $'000
Ordinary shares of 5p each 57,316,667 4,613
(Approximately 8c each)
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