Final Results

Kern River PLC
6 February 2001


PRELIMINARY STATEMENT OF RESULTS FOR THE YEAR ENDED 30 SEPTEMBER 2000

 
CHAIRMAN'S STATEMENT
 
I am pleased to be able to report that the Company has made substantial
progress in recent months.
 
As most shareholders will be aware, the prevailing oil prices in 1998 and
1999 forced the Group to adopt a minimal overhead, survival strategy. During
the course of last year oil prices firmed very substantially, enabling a
profit to be made in the period to 30 September 2000 in spite of the low
level of production available. More importantly, the improved outlook for
average oil prices provided the background to propose active development of
the Company's proven asset base. Following the end of the financial year we
completed a Placing and Open Offer which raised £2.7m net, enabling us to
remove our historic debt burden and finance a substantial production
enhancement programme at the Starks Field.
 
We are now also in a position to consider ways to unlock the substantial
value at our Nukern Lease and to quantify natural gas prospects at Starks.
Kern River has been re-activated and we are ambitious to build shareholder
value rapidly by exploiting the existing assets by selective acquisitions.
 
In the year ended 30 September 2000 the Group achieved gross production of
63,510 barrels (1999: 61,000 barrels) nearly all of which arose at the Starks
Field. Production at the Nukern Lease remained at a minimal level. Turnover
was £685,441 (1999: £340,147) and profit on ordinary activities before tax
was £117,784 (1999: loss £195,903).
 
During the period oil prices recovered from the low levels of the previous
years. Production at Starks Field realised an average price of $22.37 per
barrel for the year (1999: $12.03) and the price per barrel was $27.50 at 30
September 2000. Since the year end prices have fluctuated and were $27.50 at
5 February 2001, the latest practicable date prior to printing this report.
We expect that oil prices will continue to fluctuate but believe that the
improved prospects for average oil prices provides clear support for our
development programme at the Starks Field.
 
The Group's independent petroleum engineers have reviewed its oil reserves at
30 September 2000 and have assessed the proven reserves at 5.3 million
barrels (1999: 5.3 million barrels) with a net present value to the Group of
$55 million (£37 million) at a discount rate of 10 per cent. and assuming
constant oil prices of $27.50 per barrel at Starks and $25.75 per barrel at
Nukern.
 
The development programme at the Starks Field covers a three year period and
is planned to increase production at the field from 185 barrels per day in
the first half of September 2000 to a peak of approximately 585 barrels per
day. I am pleased to report that the development programme commenced in
December 2000.
 
We intend to seek opportunities to build the Group through the acquisition of
additional businesses and assets. In addition to considering producing oil
assets in the United States where such can be secured on attractive terms, we
also intend to consider other energy related businesses and other
opportunities which present the potential for substantial growth in
shareholder value.
 
I was appointed Chairman at the time of the Placing and Open Offer in
November last year. I would like to give credit to my predecessor, Neville A.
Brown, to Anthony Carroll, and to the other directors for their steadfast and
prudent management of the Group, particularly in the very difficult trading
conditions of previous periods. I would also like to take this opportunity to
thank shareholders for their support of Kern River during the past year and
all who supported the placing and open offer which provides the platform for
the Company's rapid development.
 
I expect to be able to report positive progress during the coming year.
 
Stuart Bickerstaff
 
 
Chairman
 
6 February 2001
 
 
KERN RIVER PLC
CONSOLIDATED PROFIT AND LOSS ACCOUNT               
Year ended 30 September 2000
                                                                              
                                                            2000        1999
                                                Note           £           £
TURNOVER                                                  685,441    340,147
Cost of sales                                             534,850    475,227  

GROSS PROFIT/(LOSS)                                       150,591   (135,080)
Administrative expenses                           4         9,584     60,901  
 
OPERATING PROFIT/(LOSS)                                   141,007   (195,981)
Interest receivable                                         6,826      4,083  
  
Interest payable                                          (30,049)    (4,005) 
 
PROFIT/(LOSS) ON ORDINARY ACTIVITIES                                        
  BEFORE TAXATION                                         117,784   (195,903) 
Tax on profit/(loss) on ordinary activities       2        (1,950)    (3,818) 
 
PROFIT/(LOSS) FOR THE YEAR                                115,834   (199,721) 

EARNINGS/(LOSS) PER SHARE - basic and diluted     5         1.01p      (1.74)p
  
All disclosures relate only to continuing operations.                         
         
CONSOLIDATED STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES 
                        
                                                             2000        1999
                                                                £           £
Profit/(Loss) for financial year                          115,834    (199,721)

Currency translation differences                          450,938     126,445 
 
Total recognised gains and losses of the year             566,772     (73,276)
 
 
KERN RIVER PLC
CONSOLIDATED BALANCE SHEET
As at 30 September 2000
                                                                              
                                               2000                     1999
FIXED ASSETS                       £              £         £              £
Tangible assets                           7,351,374                6,373,538
CURRENT ASSETS                                                              
Debtors                      123,611                    62,403
Cash at bank and in hand     240,460                    96,797                
                                                    
                             364,071                   159,200                
CREDITORS - amounts falling 
due within one year         (248,469)                 (165,482)               
                                                                      
NET CURRENT ASSETS/(LIABILITIES)            115,602                   (6,282) 
   
TOTAL ASSETS LESS CURRENT LIABILITIES     7,466,976                6,367,256  

CREDITORS - amounts falling
  due after more than one year           (2,190,952)              (1,658,004) 
                                                       
                                          5,276,024                4,709,252  
CAPITAL AND RESERVES                                                        
Called up share capital                   2,875,000                2,875,000 
Share premium                               381,325                  381,325  
Merger reserve                            2,197,944                2,197,944  
Exchange equalisation reserve               225,601                 (225,337) 
Profit and loss account                    (403,846)                (519,680)

EQUITY SHAREHOLDERS' FUNDS                5,276,024                4,709,252  



KERN RIVER PLC
CONSOLIDATED CASHFLOW STATEMENT
Year ended 30 September 2000
                                                    2000               1999   
    
                                             Note      £                  £   
       
NET CASH INFLOW/(OUTFLOW) FROM OPERATING                                    
 ACTIVITIES                                   6   158,054           (17,530)
  
RETURNS ON INVESTMENTS AND                                                  
  SERVICING OF FINANCE                        7     6,826             4,078
   
TAX PAID                                           (1,950)           (3,818)  
  
CAPITAL EXPENDITURE AND 
 FINANCIAL INVESTMENT                         7  (364,700)         (230,141)
   
NET CASH OUTFLOW BEFORE FINANCING                (201,770)         (247,411)
   
FINANCING                                     7   360,049           140,000
 
INCREASE/(DECREASE) IN CASH                       158,279          (107,411)  

 
RECONCILIATION OF NET CASHFLOW TO MOVEMENT 
  IN NET DEBT                                 8                              
  
INCREASE/(DECREASE) IN CASH IN YEAR               158,279          (107,411)
CASH INFLOW FROM INCREASE IN NET DEBT            (360,049)         (140,000)
TRANSLATION DIFFERENCES                          (187,515)          (45,608)  
  
MOVEMENT IN NET DEBT IN THE YEAR                 (389,285)         (293,019)
NET DEBT AT 1 OCTOBER 1999                     (1,561,207)       (1,268,188)

NET DEBT AT 30 SEPTEMBER 2000                  (1,950,492)       (1,561,207)


NOTES TO THE PRELIMINARY STATEMENT
 
1.  NATURE OF THE FINANCIAL INFORMATION
 
The financial information set out above does not constitute full accounts for
the purposes of section 240 of the Companies Act 1985. The financial
information has been extracted from the Company's accounts for the year ended
30 September 2000 on which the auditors, BDO Stoy Hayward, have given an
unqualified report.

2. TAX ON PROFIT/(LOSS) ON ORDINARY ACTIVITIES                  
                                                             2000    1999
                                                                £       £
Overseas tax                                                1,950   3,818

No liability to UK corporation tax arises on the results for the year. The  
Company has tax losses available for offset against future taxable profits  
in the UK.                                                                  
 
 
3.  DIVIDENDS

No dividend is proposed.

4.  FOREIGN CURRENCIES
 
The results of subsidiary undertakings reporting in foreign currencies are
translated at the average rate ruling in the accounting period (US$1.55: £1;
1999 US$1.63: £1) and the assets and liabilities at the rate ruling at the
balance sheet date (US$1.48: £1; 1999 US$1.65: £1). Administrative charges
include exchange gains of £116,484 (1999: £25,339).
 
5.  EARNINGS/(LOSS) PER SHARE 
                                                                              
The calculation of earnings per share and the diluted earnings per share is 
based on the profit for the year of £115,834 and on the weighted average    
number of ordinary shares in issue of 11,500,000. (1999: Loss of £199,721,  
shares in issue 11,500,000). In November 2000 the number of ordinary shares 
in issue was increased to 23,000,000.                                       
                                                                              
The figures for basic and diluted earnings per share are the same as there  
are no dilutive potential ordinary shares.                                  
 
 
6.  RECONCILIATION OF OPERATING PROFIT/(LOSS)TO NET CASH OUTFLOW FROM
OPERATING ACTIVITIES                          
                                                       2000        1999      
                                                          £           £       
Operating profit/(loss)                             141,007    (195,981) 
Depreciation and depletion charges                  111,752     102,766   
Exchange gain                                      (116,484)    (25,339)  
(Increase)/decrease in debtors                      (61,208)      8,466     
Increase in creditors                                82,987      92,558    
  
Net cash inflow/(outflow) from operating activities 158,054     (17,530)  
 
7.  ANALYSIS OF CHANGES IN CASHFLOWS  DURING THE YEAR
                                                       2000        1999  
                                                          £           £     
RETURNS ON INVESTMENTS AND SERVICING OF FINANCE                 

Interest received                                     6,826       4,083 
Interest paid                                            -           (5)   
                                               
                                                      6,826       4,078  
CAPITAL EXPENDITURE AND FINANCIAL INVESTMENT 

Purchase of tangible fixed assets                  (364,700)   (230,141) 
           
FINANCING                                                 
Increase in working capital loan                    140,000     360,049       
       
8.  ANALYSIS OF CHANGES IN NET DEBT                                  
                                                                        
                                   1                                     30
                             October       Cash     Translation   September   
                                1999       Flow      Difference        2000
                                   £          £               £           £

Cash at bank and in hand      96,797    158,279         (14,616)    240,460   
 
Debt due after one year   (1,658,004)  (360,049)       (172,899) (2,190,952) 
                                                                              
                          (1,561,207)  (201,770)       (187,515) (1,950,492) 


9.  POST BALANCE SHEET EVENTS 
                                                                              
On 18 October 2000 the Company announced that it was raising £2.7 million   
net of expenses by way of a placing and open offer to repay its borrowings  
and to finance a development programme at the Starks Field in order to      
increase production substantially. Under the placing and open offer the     
Company issued 11,500,000 new ordinary shares at 25p per share. The placing 
and open offer was described in the prospectus issued on 18 October 2000,   
and was approved by shareholders at an extraordinary general meeting held   
on 14 November 2000. The placing and open offer was completed on 15         
November 2000 with the result that the Group has settled all of its         
borrowings, which were from Ultrasis plc, a founder shareholder. Settlement 
was in the form of £1.5million cash and the issue of a $1million production 
note. Repayment of the production note is to commence at the later of 1     
January 2004 or the date at which C.S.V. Holdings, Inc. has received        
$6million in profit from Starks Field. Payments will then be made quarterly 
equal to 20% of the net production revenue in the period, up to the value   
of $1million plus accrued interest charged at the rate of 5.84% per annum.  
  
At the extraordinary general meeting on 14 November 2000 shareholders also  
approved, subject to Court confirmation, the reduction of the share premium 
account by £241,810 to create a reserve against which the deficit on the    
profit and loss account as at 31 March 2000 of the same amount may be set   
off. The application to the Court is in progress at this time and it is     
expected that the order of the Court confirming the reduction of share      
premium account will be made in the middle of February 2001.                
 
 
Copies of the report and accounts of the Company for the year ended 30
September 2000 are being sent to shareholders.
 
For further information please contact:
 
Start Bickerstaff
(via Marshall Securities Limited)         020 7490 3788
 
Garry Butterfield                         01902 456767