Final Results
Island Oil and Gas PLC
02 November 2007
ISLAND OIL & GAS PLC
PRELIMINARY RESULTS FOR THE YEAR ENDED 31 JULY 2007
Island Oil & Gas plc ('Island' or the 'Company') (LSE:IOG), today announces its
preliminary results for the year ended 31 July 2007. The year under review has
seen the Company operate two further successful Celtic Sea gas wells and acquire
strategic International Assets.
FINANCIAL HIGHLIGHTS:
• Increased turnover of 53% to Stg£1.762 million (year ended 31 July
2006: Stg£1.151 million).
• Gross profit increase of 96% to Stg£860,000 (year ended 31 July
2006: Stg£439,000).
• Loss before tax of Stg£5.183 million, as expected, including a
write-off of Stg£4.537 million for non-commercial projects, in particular the
non-Island operated Inishbeg well (year ended 31 July 2006: loss before tax
Stg£481,000).
• Loss per share Stg£0.0636 (year ended 31 July 2006: loss per share
Stg£0.0086).
OPERATIONAL HIGHLIGHTS:
Year Under Review:
• July 2007 - Share Purchase and Option Agreement for Porcupine
Licence 1/04 with the Bluewater Group.
Gas flowed at 18 million standard cubic feet per day ('mmscf/day') from
the Old Head of Kinsale field, the Company's second successful well on the
Licence.
• May 2007 - Stg£13.7 million raised in an equity placing and a
further Stg£591,000 through the subsequent exercise of warrants.
• April 2007 - Equity in the Old Head of Kinsale and Schull Licenses
farmed out to Valhalla Oil & Gas Limited and EnCore Oil plc ('EnCore').
Atlantic Margin asset swap agreed with OMV whereby 50% equity in Rockall Licence
Frontier Exploration Licence 3/05 is exchanged for 50% equity and operatorship
in the Durresi Block, offshore Albania, which includes an existing gas/
condensate discovery.
Farmout agreement concluded with EnCore for 10% equity in the Amstel oil field
development, offshore Netherlands.
• December 2006 - Award of 20% carried interest in the Zag Basin
Reconnaissance Licence, onshore Morocco. This is one of the few remaining
under-explored basins in North Africa and has geology analogous to some of the
prolific oil and gas basins in Algeria and Libya.
Stg£7.5 million loan facility secured with RMB Resources.
• November 2006 - Awarded 100% equity and operatorship of the Amstel
oil field development, offshore Netherlands.
• August 2006 - Significant gas discovery announced at the Old Head of
Kinsale following well 49/23-1.
Award of the Inishowen and Inishmore Frontier Exploration Licences in the
Atlantic Margin in partnership with Lundin Petroleum AB and Endeavour Energy UK
Limited.
Post Year-End:
• October 2007 - Additional loan facility of Stg£4.5million secured
with RMB Resources.
• September 2007 - Contract awarded to Pegasus International UK
Limited for the Old Head of Kinsale and Schull joint development studies
targeting first gas in 2009.
• August 2007 - Board reorganisation and appointment of Karl
Prenderville as Commercial Director.
Schull appraisal well flows gas at 21 mmscf/day in the Celtic Sea.
Island's Annual Report will be posted during December 2007. It will be sent to
all shareholders whose names appear on the register at the date of posting.
Commenting upon the results, Paul Griffiths, Island's Chief Executive, said:
'The year under review has seen Island make excellent progress in bringing
forward the value of our projects, and in proving our ability to partner with
major industry players, demonstrating the attractiveness of our projects. We
have also delivered upon our stated aim to build a strategic international
portfolio. We have a busy year ahead and will continue with our Atlantic Margin
Farmout programme whilst progressing the near-term development projects with the
aim of generating cashflow from the Netherlands and Celtic Sea by the end of
2009, subject to market conditions.'
Enquiries:
Karl Prenderville
Commercial Director
Island Oil & Gas plc
Tel: +353 1 631 3755
Paul Griffiths
Chief Executive
Island Oil & Gas plc
Tel: +353 1 631 3755
ISLAND OIL & GAS PLC
PRELIMINARY RESULTS FOR THE YEAR ENDED 31 JULY 2007
CHAIRMAN'S STATEMENT
The last 12 months has been an extremely active and operationally successful
time at Island Oil & Gas plc ('Island' or the 'Company'). Island has made
excellent progress in our stated aim of bringing forward the value of our near
term development assets and are continuing with our farmout strategy in the
Atlantic Margin, in order to accelerate drilling activity in this highly
prospective area. Island has also ventured into the International arena for the
first time acquiring both proven oil reserves and high potential exploration
acreage.
Island is pleased with the results from our Celtic Sea drilling programme this
summer when once again Island operated and tested two successful gas wells.
Island believes the results from the Schull and Old Head of Kinsale gas fields
will lead to a Declaration of Commerciality in 2008 with the aim of jointly
developing both fields via the Kinsale infrastructure in 2009. The successful
drilling campaign enhances Island's reputation as a capable operator.
In line with our strategy of developing strategic industry alliances, we
successfully brought OMV and the Bluewater Group ('Bluewater') into our highly
prospective Atlantic Margin acreage. Island was also awarded two new
exploration licences in the Slyne and Donegal basins in partnership with Lundin
Petroleum AB and Endeavour Energy UK Limited. These joint ventures together
with the successful Celtic Sea farmout to Valhalla Oil & Gas Limited and EnCore
Oil plc ('EnCore') during the year further enhance Island's reputation and its
ability to create value from industry peers for its exploration and
near-development assets.
Island has been approved as an operator in the Netherlands and was initially
awarded 100% equity and operatorship of the Amstel oil field development in late
2006. The Dutch State will participate in the development for its full equity
allowance of 40% and a farmout to EnCore for a further 10% is in the process of
being finalised. Island continues to pursue further opportunities in this
prolific oil and gas province and is well-positioned, with approved field
development operator status, to form strategic partnerships to acquire stranded
assets around under-utilised pipeline infrastructure and platform facilities.
During the year Island also acquired interests as operator offshore Albania,
including a gas/condensate discovery, and onshore Morocco. Island intends to
seek industry partners in respect of these interests over the medium term to
enhance the future growth potential of the Company.
BOARD
In October 2006 Island appointed Carl Kindinger as a Non-executive Director.
Carl has considerable international experience and has successfully raised
project finance and initiated a number of IPO's. Post year-end Karl
Prenderville, our existing Financial and Commercial Manager, was appointed
Executive Commercial Director. Karl has worked for over 25 years in the oil
industry and was formerly Finance Director of Enterprise Energy Ireland Limited.
Island welcomes them both to the Board.
In August 2007 Island's New Ventures Director, Philip Beck, left the Board to
pursue other interests. Island thanks Phil for his contribution to the
Company's growth in the formative days and wishes him every success in the
future. Island is actively seeking suitable candidates for Executive and
Non-executive roles with the specialist experience required to support the
Company's increasing level of corporate and financial activity. Those appointed
shall oversee and prioritise the restructuring of Island's portfolio of
exploration and near-development assets to ensure alignment with accessible
funding.
FINANCIAL REVIEW
The Group recorded a loss on ordinary activities before tax of Stg£5,183,000
compared to Stg£481,000 in the year ended 31 July 2006. The loss relates mainly
to the write off of the non-operated well on the Inishbeg prospect in Frontier
Exploration Licence 1/05, which has been deemed non-commercial. The actual cost
of non-commercial projects written off is Stg£4,537,000 compared to Stg£227,000
in the previous year. Frontier Exploration Licence 1/05 has been relinquished.
Gross Revenue from Island's interest in the Seven Heads gas field improved for
the second year in succession with a turnover of Stg£1,762,000 compared to
Stg£1,151,000 in the previous year representing a 53% increase year on year.
Cost of sales at Stg£902,000 compared to Stg£712,000 represents a 27% increase
year on year. Gross profit at Stg£860,000 has improved from Stg£439,000
representing a 96% increase from last year.
The field is continuing to produce at rates in excess of 10 mmscf per day and
turnover next year is expected to exceed this year's figure should the recent
increase in gas prices be maintained and should the Field perform to current
expectations as projected by the Operator, Marathon Seven Heads Limited.
Administration costs at Stg£707,000 compares to Stg£1,040,000 for the previous
year. Island moved to larger premises and has increased staffing to support the
increased activity levels during the period under review. A significant
contribution to Island's overheads is made by the Company's joint venture
partners in our various licences where Island operates. In accordance with FRS20
'Share-based payment' share options awarded during the period to key personnel
have been independently valued. The fair value of share options granted during
the year is Stg£315,000 compared to Stg£70,000 in the previous year and
Stg£270,000 relating to the year ended 31 July 2005.
In December 2006 Island raised Stg£7.5 million through a short term debt
facility with RMB Resources. This has recently been increased to Stg£12
million. The facility is primarily being used to fund the 2007 appraisal well
programme in order to bring forward a potential development and related
realisation of value. In May 2007 Island raised Stg£13.7 million in an equity
placing mainly with institutional shareholders. In July 2007 warrants were
exercised raising a further Stg£591,000. This, together with the Stg£5.5
million received from Platinum Petroleum Limited in August 2006, following
conversion of their convertible loan, resulted in a total of Stg£19.1 million
(net of expenses) raised in equity finance during the year. Island continues to
raise capital through the sale of assets to EnCore and Bluewater. The completion
of these transactions will result in Island receiving Stg£3.75 million.
Completion is pending finalisation of legal documentation at year end. A
further Stg£2.25 million will be due from Bluewater in the first quarter of
2008, should they exercise the option to purchase an additional 10% in Porcupine
Licence FEL 1/04.
OUTLOOK
Island considers that the oil price is likely to remain at a high level for some
time and the uncertainty surrounding the future supply of gas to Europe will
help to underpin gas prices. Although this will ultimately increase the value
of our near term developments, it also means the current high cost and general
shortages of goods and services within the industry will continue.
Next year the Company will further progress the Old Head, Schull and Amstel
field developments with the aim of achieving production and ultimately cash flow
by the end of 2009, subject to market conditions. Island believes that the
diversity of these projects provides a well balanced risk/reward profile, which
will prove attractive to potential lenders. Island's substantial portfolio of
exploration and near-development assets, combined with its relatively high
equity levels in its Licences and ability to operate, gives Island the ability
to rationalise its assets through transactions with industry peers as a means of
seeking sources of additional funding where prudent to do so. A 3D seismic
acquisition programme is planned in Island's Atlantic Margin acreage over the
potentially very large Killala and Slyne structures (gas and oil targets
respectively).
On behalf of the Board of Directors I would like to thank shareholders for their
continued support during the year. We believe our well balanced portfolio,
strong operational capabilities and dedicated team of people will achieve our
main aim of delivering shareholder value over the next few years and into the
future. I look forward to reporting on your Company's progress and strategic
growth in twelve month's time.
CONSOLIDATED PROFIT AND LOSS ACCOUNT
for the year ended 31 July 2007
Year ended Year ended
31-Jul 31-Jul
2007 2006
Stg£'000 Stg£'000
(Restated*)
Turnover 1,762 1,151
Cost of sales (902) (712)
Gross profit 860 439
Administration expenses (707) (1,040)
Costs associated with uncommercial projects (4,537) (227)
Charge for share awards (315) (70)
Other operating income 401 -
Operating loss - continuing operations (4,298) (898)
Interest receivable and similar income 181 446
Interest payable and similar charges (1,037) -
Unwinding of discount on decommissioning provision (29) (29)
Loss on ordinary activities before taxation (5,183) (481)
Taxation on loss on ordinary activities - (8)
Loss for the financial year (5,183) (489)
Loss per share (Stg £) (0.0636) (0.0086)
* As restated for FRS20 'Share-based payment'
CONSOLIDATED STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES
for the year ended 31 July 2007
Year ended Year ended
31-Jul 31-Jul
2007 2006
Stg£'000 Stg£'000
Loss for the financial year (5,183) (489)
Prior year adjustment (340) -
Total recognised gains and losses since last annual report (5,523) (489)
CONSOLIDATED BALANCE SHEET
at 31 July 2007
2007 2006
Stg£'000 Stg£'000
(Restated*)
Fixed assets
Tangible assets 1,761 2,147
Intangible assets 54,911 30,950
56,672 33,097
Current assets
Cash at bank and in hand 11,602 6,071
Debtors 2,612 9,893
14,214 15,964
Creditors: amounts falling due within one year (25,885) (13,311)
Net current (liabilities)/assets (11,671) 2,653
Total assets less current liabilities 45,001 35,750
Provision for liabilities (675) (646)
Net assets 44,326 35,104
Capital and reserves
Called up share capital 762 478
Share premium 48,571 29,712
Shares to be issued - 5,500
Share warrants reserve 447 -
Share option reserve 655 340
Unrealised reserve 47 47
Profit and loss account (6,156) (973)
Shareholders' funds 44,326 35,104
* As restated for FRS20 'Share-based payment'
CONSOLIDATED CASHFLOW STATEMENT
for the year ended 31 July 2007
Year ended Year ended
31-Jul 31-Jul
2007 2006
Stg£'000 Stg£'000
(Restated)*
Net cash inflow/(outflow) from operating activities 1,013 (2,342)
Returns on investments and servicing of finance (409) 446
Corporation tax - 7
Capital expenditure and financial investment (21,716) (16,713)
Net cash (outflow) before financing (21,112) (18,602)
Financing 19,143 16,307
(Decrease) in cash for the year (1,969) (2,295)
* As restated for FRS20 'Share-based payment'
RECONCILIATION OF NET CASHFLOW TO MOVEMENT IN NET DEBT
for the year ended 31 July 2007
Year ended Year ended
31-Jul 31-Jul
2007 2006
Stg£'000 Stg£'000
(Decrease) in cash for the year (1,969) (2,295)
Net funds at beginning of year 6,071 8,366
Net funds at end of year 4,102 6,071
Net funds is analysed as follows:
Cash at bank and in hand 11,602 6,071
Bank loan (7,500) -
4,102 6,071
2 November 2007
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