Preliminary Results

RNS Number : 8033X

Petroneft Resources PLC

30 June 2008

 



PetroNeft Resources plc

Preliminary Results for the Year Ended 31st December 2007

PetroNeft Resources plc ('the Company', or together with its subsidiaries, 'the Group'), the oil exploration and production company with assets in Tomsk Oblast, Western Siberia, is pleased to report its preliminary results for the year ended 31st of December 2007.

Operational Highlights

• 5 wells drilled from March 2007 to June 2008

• All oil bearing

• 81% increase in 2P reserves up to 31 December 2007

• Further increase in 2P reserves to following 2 successes in 2008

• Board sanction of development in June 2008

• Production due to commence second half 2009

Financial Highlights

• July 2007 equity placing US$15.4 million

• Capital Expenditure US$18 million

• Discussions with International Banks at an advanced stage

• Appointment of KBC Peel Hunt as joint broker with Davy

• Expanding Institutional shareholder base

For further information, contact:

Dennis Francis, CEO, PetroNeft Resources plc,

[phone]

Paul Dowling, CFO, PetroNeft Resources plc

[phone]

Desmond Burke, Director Investor Relations, PetroNeft Resources plc

[phone]

John Frain/Brian Garrahy, Davy

[phone]

Jonathan Marren/Matt Goode, KBC Peel Hunt

[phone]

Nick Elwes/Paddy Blewer, College Hill

[phone]

Forward Looking Statements

This announcement contains forward-looking statements. These statements relate to the Company's future prospects, developments and business strategies. Forward-looking statements are identified by their use of terms and phrases such as 'believe', 'could', 'envisage', 'potential', 'estimate', 'expect', 'may', 'will' or the negative of those, variations or comparable expressions, including references to assumptions.

The forward-looking statements in this announcement are based on current expectations and are subject to risks and uncertainties that could cause actual results to differ materially from those expressed or implied by those statements. These forward-looking statements speak only as at the date of this announcement.

Chairman's Statement

A year of major progress

2007 was an important and busy year for PetroNeft, as it continued to deliver on its objectives for both exploration and first oil production from Licence 61 in the Tomsk Oblast of Western Siberia. It was also a difficult year in that the winter season was short, limiting the time frame within which winter roads could be used to move heavy equipment and maintain planned work schedules. However, due to the dedication of the Group's management and staff, it was a very successful year. 

Exploration success and reserve upgrade

On the exploration front, the Group's 2P oil reserves were increased by over 81% to 60.6 mmbo, all of which is high quality oil. This was achieved through the drilling of three wells during the 2006/07 season. Two of these were delineation wells, one on the Lineynoye oil field and one on the Tungolskoye oil field, both of which intersected the reservoir horizons and encountered oil as planned. The third well was the West Lineynoye Prospect exploration well where oil was also discovered, moving considerable reserves from the P3 category into 2P reserve. Mechanical problems were encountered in testing the Tungolskoye No. 4 well and, as the Tungolskoye oil field is not now scheduled to come into production until 2012, this test has been postponed until we have a full production and fraccing crew in the area and can carry out this test more economically.  

The first two wells in the 2007/2008 season have also added to the discovery success. At our Korchegskaya Prospect, (K-1 well) the well tested at an inflow rate calculated at 125 barrels of oil per day ('bopd'). The delineation well on the West Lineynoye oil field has also flowed oil at an inflow rate calculated at 120 bopd. An exploration well on the West Korchegskaya Prospect will commence in July 2008 as planned. 

540 line km of seismic were also completed during the 2006/2007 season, defining additional prospects for future drilling. This seismic data and the current 3 well drilling programme will complete all the seismic acquisition and exploration drilling programme requirements of the Russian Government in respect of Licence 61 for the full 25 year term. The primary remaining requirement is to commence production within two years from the approval of commercial reserves by the State Reserve Committee. This is the current focus of the Company.

Development planning advanced

To begin the transition to a producer, pilot production of oil commenced and first oil sales were achieved in early 2008 as part of reservoir test programmes on Lineynoye and West Lineynoye oil fields. The Group was added to the official list of Russian oil producing companies and was approved for connection to the Transneft pipeline system. A major advance was the conclusion of a deal, with Russian company Bashneft, to transport oil, via the Khanty Mansiysk Oblast thereby significantly reducing the capital cost of development. 

 A Development Plan for the Lineynoye and West Lineynoye oil fields has recently been completed and submitted to the Russian authorities. Initial production will be from the Lineynoye oil field, with pipeline construction expected to commence towards the end of 2008 and production drilling commencing in early 2009. First pipeline production is expected in the second half of 2009, with initial rates of approximately 4,000 bopd, rising to 14,000 bopd in 2012.

Successful equity financing

On the financial front, the Group successfully raised US$15.4m during 2007 to fund its ongoing programmes. Mr. Paul Dowling was appointed as Chief Financial Officer of the Group in October 2007 and to the Board of the Company in April 2008. He has been a major addition to the Group management team and has been expanding the relationships between the Group and the financial markets. The current crisis in the financial markets, both banking and equity, provides a significant challenge to the development of the Group's assets but the Board is confident that this challenge can be overcome and the development and reserve expansion program can be kept on schedule. 

Planning for the future

Separately from Licence 61, the Group has been very active in its search for new asset acquisitions, both exploration and producing. It has also been active in seeking ways to manage its current assets to maximise shareholder value. Within the context of the current difficult markets this is an increasingly important focus in developing a broader portfolio of assets for the Group. It is hoped that these efforts will be brought to fruition in the coming year.

While major progress has been made, to achieve the goal of oil production in 2009 is still a considerable ambition. I am confident that the Group's staff and management will continue to meet all the challenges and bring the assets of Licence 61 to production on schedule.

Finally, I am sure that I speak for all the management and staff of PetroNeft in thanking our shareholders, both old and new, for your confidence and support to date. 

David Golder

Non-Executive Chairman

The financial information presented in this report does not represent full statutory accounts. Full statutory accounts for the year ended 31 December 2007 prepared in accordance with IFRS as adopted by the European Union, upon which the Auditors have given an unqualified opinion with an emphasis of matter on the Group's ability to continue as a going concern and the recoverability of the carrying value of the Group's exploration and evaluation assets, have not yet been filed with the Registrar of Companies.

The full annual report and accounts is available on the Company's website, www.petroneft.com, and will be posted to shareholders on 30 June 2008.

Consolidated Income Statement
For the year ended 31 December 2007
				As Restated
		2007		2006
		US$		US$
Revenue		-		-
Administrative expenses    − normal		(2,600,561)		(632,790)
− exceptional		(815,827)		-
Operating loss		(3,416,388)		(632,790)
Finance revenue		465,395		66,249
Finance costs		-		(13,904)
Gain on derivative financial instruments		-		76,000
Loss for the year for continuing operations before taxation		(2,950,993)		(504,445)
Income tax expense		(252,269)		(145,895)
Loss for the year attributable to equity holders of the parent		(3,203,262)		(650,340)
Loss per share attributable to ordinary equity holders of the parent:
Basic and diluted- US dollar cent		(1.74)		(0.49)

Consolidated Balance Sheet
as at 31 December 2007
				As Restated
		2007		2006
		US$		US$
Assets
Non-current Assets
Property, plant and equipment		1,591,324		334,708
Exploration and evaluation assets		29,415,286		11,139,043
Leasehold land payments		181,896		-
		31,188,506		11,473,751
Current Assets
Trade and other receivables		3,542,741		4,014,892
Cash and cash equivalents		8,304,295		12,872,316
Leasehold land payments		4,214		-
		11,851,250		16,887,208
Total Assets		43,039,756		28,360,959
Equity and Liabilities
Capital and Reserves
Called up share capital		2,343,864		2,132,436
Share premium account		40,252,836		25,777,394
Share based payments reserve		1,177,665		219,197
Retained loss		(4,368,883)		(1,165,621)
Currency translation reserve		1,466,092		269,861
Other reserves		336,000		336,000
Equity attributable to equity holders of the parent		41,207,574		27,569,267
Non-current Liabilities
Provisions		131,243		-
Deferred tax liability		372,708		226,767
		503,951		226,767
Current Liabilities
Trade and other payables		851,147		564,925
Provisions		477,084		-
		1,328,231		564,925
Total Liabilities		1,832,182		791,692
Total Equity and Liabilities		43,039,756		28,360,959

Consolidated Statement of Changes in Equity
For the year ended 31 December 2007
	Share Capital		Share Premium		Other reserve		Translation reserve		Retained Losses		Total
	US$		US$		US$		US$		US$		US$
			As Restated		As Restated		As Restated		As Restated		As Restated
At 1 January 2006 (as previously stated)	1,052,260		4,861,880		-		-		(260,414)		5,653,726
Effect of prior year adjustment	-		-		-		813		(254,867)		(254,054)
Restated balance	1,052,260		4,861,880		-		813		(515,281)		5,399,672
Loss for the year	-		-		-		-		(650,340)		(650,340)
Currency translation adjustments	-		-		-		269,048		-		269,048
Total recognised income and expense	-		-		-		269,048		(650,340)		(381,292)
New share capital subscribed	1,080,176		22,454,187		-		-		-		23,534,363
Transaction costs on issue of share capital	-		(1,126,673)		-		-		-		(1,126,673)
Derivative financial instrument	-		(412,000)		336,000		-		-		(76,000)
Share based payments expense	-		-		219,197		-		-		219,197
At 31 December 2006	2,132,436		25,777,394		555,197		269,861		(1,165,621)		27,569,267
At 1 January 2007 (as previously stated)	2,132,436		26,048,130		219,197		-		(1,253,757)		27,146,006
Effect of prior year adjustment	-		(270,736)		336,000		269,861		88,136		423,261
Restated balance	2,132,436		25,777,394		555,197		269,861		(1,165,621)		27,569,267
Loss for the year	-		-		-		-		(3,203,262)		(3,203,262)
Currency translation adjustments	-		-		-		1,196,231		-		1,196,231
Total recognised income and expense	-		-		-		1,196,231		(3,203,262)		(2,007,031)
New share capital subscribed	209,493		15,216,010		-		-		-		15,425,503
Transaction costs on issue of share capital	-		(795,720)		-		-		-		(795,720)
Share options exercised	1,935		55,152		-		-		-		57,087
Share based payments expense	-		-		958,468		-		-		958,468
As at 31 December 2007	2,343,864		40,252,836		1,513,665		1,466,092		(4,368,883)		41,207,574

 

END

 

 

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