Interim Results

RNS Number : 3539K

Pan Andean Resources PLC

18 December 2008

 



18th December 2008

Interim Results for the Six Months Ended 30th September 2008

Financial Highlights:

• Increase in operating profits by 33 per cent to £619,000

• Revenue increase by 30 per cent to £1.1m

• Healthy cash balance of £3m, an increase of 41 per cent
  

Successful Farm-Outs to Major International Oil Companies:

• Peruvian Blocks 114 and 131 farm-out agreements with CEPSA of Spain

• Peruvian Block 141 farm-out agreement with Reliance Industries

 

Operating Highlights

• Currently producing from Gulf of Mexico and Bolivia 

• Progress on Antorcha in Colombia

• Seismic survey completed 
• Unrisked resources estimates of 100-300 mmboe
• Data room open for farm-in investment into the block
• Numerous parties interested
• Well to be drilled in 2009

• Award of new licence in Peru: Pan Andean has one of the largest acreages in Peru

• Current global economic situation creates opportunities for growth

 

 

Contacts:

Pan Andean

David Horgan, Managing Director         [phone]

John Teeling, Chairman                      [phone]

College Hill

Paddy Blewer                                    [phone]

Nick Elwes

Blue Oar Securities

Nick Lovering                                     [phone]

Simon Moynagh

www.panandeanresources.com

 Chairman's Statement

Pan Andean is a profitable oil and gas producer in the United States and Bolivia with ongoing exploration in the United States, Peru and Colombia. In the six months under review profits rose by 33 per cent to £619,000, this despite the ravages of Hurricane Ike in September. On the exploration front, gas testing is ongoing on the Vieman No 1 well at Danbury Dome, onshore Texas.

We generate our revenue from royalties in the United States and some production in Bolivia. All of our profits are generated in the United States, mainly from the Gryphon royalty from Block High Island 52 in the Gulf of Mexico. This 1.32 per cent royalty consistently nets Pan Andean over $125,000 a month. On the same block we have a 2.15 per cent royalty from a small gas operation, about 5 million cubic feet of gas a day. The platform for this producer suffered damage from Hurricane Ike and is under repair. Operations are due to restart shortly.

We produce up to 75 barrels of oil per day from Block High Island 30 (Pan Andean 62.91 per cent), where our partner Hunt Oil operates the platform. In Bolivia, we produce oil from the Monteagudo field where we are a 30 per cent partner with Repsol (50 per cent partner and operator) and Petrobras (20 per cent partner). Export demand for Bolivian gas and oil is very strong but necessary investments require improved fiscal terms and greater certainty. Uncertainties over the future Bolivian fiscal and legal regime means that no profits can be reported.

We have been and continue to be an active explorer; drilling in the US, undertaking seismic work in Colombia and geological & geophysical studies in Peru. Pan Andean is now a large acreage holder in Peru, where it has attracted CEPSA as a partner on Blocks 114 and 131 and brought Reliance Industries of India into Block 141. During the recent Peruvian round Pan Andean won Block 161, close to our existing Ucayali interests in the central Peruvian jungle. 

The Vieman No 1 well in Danbury Dome, onshore Texas spudded in September 2008 and was expected to take 45 days to reach the target depth of 13,500 feet. Over 90 days later the rig is still on site. Technical difficulties have delayed operations, particularly below 13,000 feet, where water and gas surges damaged the well and made it impossible to reach target depth. A side track option remains under consideration, while three levels of the well are being tested. Results from the deeper sections are unsatisfactory while testing is ongoing on the 'S' Sands at 12,950 feet. 

Should commercial quantities of gas be discovered, a tie-in to existing pipelines will take 45 days. The well is being drilled on a turnkey basis. Pan Andean got a 20 per cent free carry and bought a further 15 per cent interest for $450,000. Should the well be commercial, there will be a further small cost for completion and tie-in.

In Colombia, we completed a programme of seismic gathering and interpretation on our 100 per cent owned Antorcha Block in the Magdalena Valley. This is a heavy oil play with modelled unrisked resource estimates of 100 to 300 million barrels. Following expressions of interest from a number of potential joint venture partners, we opened a data room in Bogota. Specific indications of interest have been received and early stage discussions commenced. A well must be drilled in 2009.

In Peru, we are one of the largest exploration ground holders with three current blocks, 114, 131 and 141 and an award in July of Block 161. Peru is an attractive investment location geographically, politically and fiscally. The targets are large and exploration costly, so we have partnered Blocks 114 and 131 with CEPSA of Spain and Block 141 with Reliance Industries of India. The agreements are on good terms. We are reviewing Block 161 and in early 2009 will make a decision on how to proceed. 

Bolivia, where Pan Andean has operated since 1988, is problematic. With massive gas reserves and large adjacent markets, there should be rapid development but political and fiscal policies stymie efforts. Pan Andean may dispose of its interest in the gas producing levels of the Monteagudo field while keeping its interest in the deep gas exploration plays. Our big El Dorado (Pan Andean 10 per cent, BP 90 per cent) gas discovery is very well positioned and should see early development.

Future

It may surprise many to learn that in these difficult times, I see a bright future for Pan Andean. In a world in crisis opportunities appear. Our Board of Directors contains people with decades of high level oil experience in South America and our on the ground management in the United States, Peru and Colombia is highly skilled and experienced. With cash, profits, management and technical skills, we are very well positioned to take advantage of emerging opportunities.

John Teeling

Chairman

18th December 2008

Financial Information (Unaudited)
							Six Months Ended				Year Ended
Condensed Consolidated Income Statement							30 Sep 08		30 Sep 07		31 March 08
							unaudited		unaudited		audited
							£'000		£'000		£'000
Revenue							1,145		882		1,670
Cost of Sales							(219)		(155)		(337)
Gross Profit							926		727		1,333
Administrative Costs							(307)		(261)		(400)
Operating Profit							619		466		933
Interest Receivable							13		26		323
Interest Payable							(14)		(41)		(53)
Profit on ordinary activities before taxation							618		451		1,203
Taxation							(185)		(135)		(736)
Profit for the period							433		316		467
Profit per share							.36p		.26p		.39p
Condensed Consolidated Balance Sheet							30 Sep 08		30 Sep 07		31 March 08
							unaudited		unaudited		audited
							£'000		£'000		£'000
Assets
Investments							3		2		2
Intangible Assets							6,525		4,585		5,848
Property, Plant & Equipment							15,019		11,197		13,708
							21,547		15,784		19,558
Current Assets
Receivables and prepayments							1,528		1,033		1,371
Cash and cash equivalents							3,047		2,162		1,880
Total Current Assets							4,575		3,195		3,251
Total Assets							26,122		18,979		22,809
Liabilities
Current Liabilities
Trade and other payables							(5,574)		(2,021)		(5,137)
Net Current (Liabilities)/Assets							(999)		(1,174)		(1,886)
Non-Current Liabilities
Provisions and deferred liabilities							(2,170)		(1,730)		(2,113)
Net Assets							18,378		15,228		15,559
Equity
Share Capital and Reserves							18,378		15,228		15,559
Total Equity							18,378		15,228		15,559

Condensed Consolidated Statement of Changes in Shareholders Equity
					Share based
	Share		Share		Payment		Translation		Retained		Total
	Capital		Premium		Reserves		Reserves		Losses		Equity
	£'000		£'000		£'000		£'000		£'000		£'000
As at 1 April 2007	1,192		20,230		26		(1,466)		(4,470)		15,512
Currency translation adjustments							(600)				(600)
Shares issued											0
Share issue expenses											0
Profit for the period									316		316
As at 30 September 2007	1,192		20,230		26		(2,066)		(4,154)		15,228
Currency translation adjustments							179				179
Shares issued											0
Share issue expenses											0
Profit for the period									152		152
As at 31 March 2008	1,192		20,230		26		(1,887)		(4,002)		15,559
Currency translation adjustments							2,386				2,386
Shares issued											0
Share premium on shares issued											0
Profit for the period									433		433
As at 30 September 2008	1,192		20,230		26		499		(3,569)		18,378
							Six Months Ended				Year Ended
Condensed Consolidated Cash Flow							30 Sep 08		30 Sep 07		31 March 08
							unaudited		unaudited		audited
							£'000		£'000		£'000
Cash flows from operating activities
Operating Profit							619		466		933
Depreciation							132		45		85
Movements in Working Capital							150		(546)		2,670
Exchange Movements							616		(326)		(355)
Net Cash Inflow from Operating Activities							1,517		(361)		3,333
Cash Flow from Investing Activities
Returns on Investments and Servicing of Finance							(1)		(15)		270
Capital Expenditure							(497)		(1,145)		(5,526)
Net Cash used in Investing Activities							(498)		(1,160)		(5,256)
Cash Flow from Financing Activities
Issue of Ordinary Share Capital							0		0		0
Net Increase/(Decrease) in Cash and Cash Equivalents							1,019		(1,521)		(1,923)
Cash and Cash Equivalents at beginning of the period							1,880		3,779		3,779
Effect of foreign rate changes on cash held							148		(96)		24
Cash and Cash Equivalents at end of the period							3,047		2,162		1,880

Notes:

1. Information

The financial information for the six months ended September 30th, 2008 and September 30th, 2007 is unaudited. The financial information above does not constitute full statutory accounts within the meaning of section 240 of the Companies Act 1985.

The interim financial report has been prepared in accordance with IAS 34 Interim Financial Reporting and the accounting policies and methods of computation used in the interim financial statements are consistent with those used in the Group 2008 Annual Report, which is available at www.panandeanresources.com.

The interim financial statements have not been audited or reviewed by the auditors of the Group pursuant to the Auditing Practices board guidance on Review of Interim Financial Information.

2.    No dividend is proposed in respect of the period.

3.    Earnings per share

Basic earnings per share is computed by dividing the profit or loss after taxation for the year available to ordinary shareholders by the sum of the weighted average number of ordinary shares in issue and ranking for dividend during the year. 

Diluted earnings per share is computed by dividing the profit or loss after taxation for the year by the weighted average number of ordinary shares is issue, adjusted for the effect of all dilutive potential ordinary shares that were outstanding during the year.

The following table sets forth the computation for basic and diluted earnings per share (EPS):

	30 Sep 08	30 Sep 07	31 Mar 08
	£	£	£
Numerator
For basic and diluted EPS retained profit	432,732	315,826	467,644
Denominator
For basic EPS	119,227,733	119,227,733	119,227,733
For diluted EPS	128,241,733	128,241,733	128,241,733
Basic EPS Diluted EPS	0.36p 0.34p	0.26p 0.24p	0.39p 0.36p

4.    Property, Plant & Equipment

	Plant & Equipment	Oil & Gas Interest	Total
	£'000	£'000	£'000
Cost
At 1 April 2007	28	14,325	14,353
Exchange adjustments	-	239	239
Additions	-	787	787
	_________	_________	_________
At 30 September 2007	28	15,351	15,379
Exchange adjustments	-	(322)	(322)
Additions	4	3,695	3,699
Disposals	-	(778)	(778)
	_________	_________	_________
At 31 March 2008	32	17,946	17,978
Exchange adjustments	1	1,161	1,162
Additions	-	497	497
	_________	_________	_________
At 30 September 2008	33	19,604	19,637
	_________	_________	_________
Depreciation
At 1 April 2007	15	4,192	4,207
Exchange adjustments		(70)	(70)
Additions	-	45	45
	_________	_________	_________
At 30 September 2007	15	4,167	4,182
Exchange adjustments	2	46	48
Additions	-	40	40
	_________	_________	_________
At 31 March 2008	17	4,253	4,270
Exchange adjustments	-	216	216
Additions	-	132	132
	_________	_________	_________
At 30 September 2008	17	4,601	4,618
	_________	_________	_________
Net Book Value
At 30 September 2008	16	15,003	15,019

5.    Intangible Assets

	30 Sep 08	30 Sep 07	31 Mar 08
Exploration and evaluation assets:	£'000	£'000	£'000
Cost
Opening balance	5,848	4,844	4,844
Exchange adjustments	677	(617)	(36)
Additions	-	358	1,040
	_________	_________	_________
Closing balance	6,525	4,585	5,848

Exploration and evaluation assets relates to expenditure incurred in hydrocarbon exploration and related expenditure in

Bolivia, Colombia and Peru.

All present indications are that exploration projects will have a value in excess of the accumulated costs to date. No

impairment provision has been made in respect of these intangible assets.

The Group’s activities are subject to a number of significant potential risks which are outlined as

follows:

Ø       Price fluctuations;

 

Ø       Uncertainties over development and operational costs;

 

Ø       Political and legal risks, including arrangements with governments for licences, profit sharing and taxation; and

 

Ø       Funding requirements.

The realisation of this intangible asset is dependent on the successful discovery and development of economic

reserves which is affected by these risks. Should this prove unsuccessful the value included in the balance sheet would

be written off to the income statement.

The directors are aware that by its nature there is an inherent uncertainty in such exploration and evaluation

expenditure as to the value of the asset. Having reviewed the exploration and evaluation expenditure at 30 September

2008, the directors are satisfied that the value of the intangible asset is not less than carrying value. 

6.      The Interim Report for the six months to September 30th, 2008 was approved by the Directors on 18th December 2008.

7.      Copies of this announcement will be sent to shareholders and will be available for inspection at the Companies Registered Office at 20-22 Bedford Row, London WC1R 4JS. The Interim Report may also be viewed at Pan Andean Resources plc's website at www.panandeanresources.com.

 

END

 

 

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