Interim Results
Soco International PLC
04 September 2007
SOCO International plc
('SOCO' or 'the Company')
Interim Results For The Six Months Ended 30 June 2007
SOCO is an international oil and gas exploration and production company,
headquartered in London, traded on the London Stock Exchange and a constituent
of the FTSE 250 Index. The Company has interests in Vietnam, Yemen, Thailand,
the Republic of Congo (Brazzaville), the Democratic Republic of Congo (Kinshasa)
and Angola with production operations in Yemen.
The Company today announces its Interim Results for the six months ended 30 June
2007.
Key Highlights
Continued Value Creation Through Exploration
• Early indications on TGD-1X well in Vietnam indicate largest discovery
in SOCO's history
o Testing to be carried out in second half of 2007
o 30 metres of net pay to be tested; further 300 metres of sediment to be
drilled
• West Africa exploration portfolio expanded with addition of interest in
Cabinda North Block, Angola
• Extremely active exploration and development campaigns continue, with
three rigs in Yemen and two rigs in Vietnam drilling back to back wells for
the remainder of 2007
Production Profile Set To Be Transformed
• CNV development on Block 9-2, Vietnam, on track to come on stream in
first half of 2008 at rate of 20,000 barrels of oil per day (SOCO Vietnam
interest: 25%)
• Three successful field extension wells on Kharir field in Yemen point
to additional reserve growth
• Yemen production capabilities being expanded to allow production to reach
record levels
Strong Financial Results
• After tax profits increase to $17.0 million (H1 2006: $15.1 million)
• Basic Earnings Per Share of 24.1 cents (H1 2006: 21.5 cents)
• Revenue increased by 30% to $50.4 million (H1 2006: $38.8 million)
Ed Story, Chief Executive Officer, commented:
'SOCO's strategy has always been to create shareholder value and build its
reserve base through exploration. The initial results from the TGD-1X well
support this approach as it appears the discovery could be the largest in the
Company's history. Testing will be carried out in the second half of 2007 to
quantify the size and nature of the discovery.
'In addition the Company has a number of other exploration prospects to drill
before the end of the year on Block 16-1, whilst the CNV development on Block
9-2 remains on track to start production in the first half of 2008 and transform
SOCO's production profile. This demonstrates the Company's ability to drive
projects from discovery to production.'
4 September 2007
Enquiries:
SOCO International plc Tel : 020 7747 2000
Roger Cagle
Executive VP, Deputy CEO and Chief Financial Officer
Pelham PR Tel: 020 7743 6676
James Henderson
Alisdair Haythornthwaite
CHAIRMAN'S AND CHIEF EXECUTIVE'S STATEMENT
The first half of 2007 was highlighted by what may be the largest discovery in
the Company's history; although unforeseen operating challenges due to the size
and nature of the discovery have deferred confirmation of the significance of
the discovery. SOCO moves toward the development phase on both Blocks in
Vietnam and enters the very active conclusion to the exploration drilling phase
on Block 16-1. The Company continues to progress its portfolio in the high
potential Congo Basin and to build in this core area with the addition of an
interest in the Cabinda North Block, onshore Angola. In addition the Kharir
field looks set for further reserve upgrades, capping off a successful first
half of the year.
The manifestation of recent drilling success in Vietnam has the potential to
exceed that at any time in the Company's history and the early indication of
success on the Te Giac Den 1X (TGD-1X) well, even without the additional
potential, is hugely promising.
The Kharir field in Yemen, which has already had several reserve upgrades,
appears to be on the verge of additional growth with the successful completion
of three field extension wells in the first half of 2007. Production
attributable to the Group's working interest in Yemen was down slightly for the
period at 6,341 barrels of oil per day (BOPD) as compared to the equivalent
period last year (6,407 BOPD) due to scheduled downtime required to expand the
production capability to anticipated record production levels. Even with
realised average crude oil prices and production marginally lower, after tax
profits for the period increased to $17.0 million from $15.1 million in the
first half of 2006.
In summary, SOCO is in the midst of a very active five year drilling campaign of
exploration and appraisal wells, across Vietnam, West Africa and Yemen, with two
new field developments expected on-stream within the next 36 months,
transforming the Company's production profile. This year is shaping up to be
another milestone for the Company as it targets significant further reserves
expansion and prepares for first production from Vietnam next year.
OPERATIONS
Exploration/Development
Vietnam
SOCO holds its interests in Vietnam, all in the Cuu Long Basin offshore, through
its 80% owned subsidiary SOCO Vietnam Ltd (SOCO Vietnam) and through its 100%
ownership of OPECO, Inc. SOCO Vietnam holds a 25% working interest in Block 9-2,
which is operated by the Hoan Vu Joint Operating Company and holds a 28.5%
working interest in Block 16-1, which is operated by the Hoang Long Joint
Operating Company. OPECO, Inc. holds a 2% working interest in Block 16-1.
Development drilling is imminent on the Ca Nu Vang field on Block 9-2 with first
oil expected in the second quarter of 2008. Exploration drilling continues on
Block 16-1 where the declaration of commerciality by Petrovietnam on the Te Giac
Trang field discovery is expected in the second half of 2007.
Block 16-1
Operational issues experienced in drilling the first two wells in the multi-well
drilling programme along with mixed results meant drilling got off to a slow
start in 2007. In May, the Te Giac Cam 1X (TGC-1X) well on Prospect 'S' was
plugged and abandoned after reaching a total depth of 4,196 metres. While the
reservoir in the primary target, the Lower Bach Ho 5.2 (LBH 5.2) interval, was
not developed, the well had encountered oil shows in the Oligocene and the well
was deepened to further evaluate this section.
While drilling in the Oligocene, the well encountered unexpected high pressure,
with associated oil and gas shows, and had to be cased using a seven inch liner
prior to drilling to total depth. Examination of the well and logging data
indicated that, despite the hydrocarbon influx, it was not sufficiently
encouraging for the well to be tested. The high pressures did, however, support
the concept of porosity preservation at depth due to early migration of
hydrocarbons, the basis for the deep play on the Block, confirming the Company's
exploration strategy.
After the drilling of the TGC-1X well, the Trident 9 rig completed its contract
and was released. The Petrovietnam Drilling and Well Services (PDWS) newly
commissioned drilling rig, the PVD-1 began its two year contract by spudding the
TGD-1X well on Prospect 'E' on 5 April 2007 to test the deep potential in the
basin. This was the first well for the new rig retained primarily to drill
development wells on the Ca Ngu Vang field on Block 9-2.
The well encountered the first high pressure zone higher than prognosis and had
to be plugged back to sidetrack and case the hole. After setting casing, the
PVD-1 rig, was taken off line due to a series of control system failures, which
potentially could have compromised safe continuation of drilling operations.
Following advice from PDWS and the control system supplier, drilling operations
were suspended for approximately 18 days while the control system problems were
diagnosed. The problems were corrected and the control system amended leading to
re-commissioning of the rig.
The TGD-1X well was then drilled ahead before being temporarily suspended at
4,625 metres after penetrating a gas and oil zone with pressure in excess of
12,000 pounds per square inch, which was beyond the safe operating capacity of
the drilling rig.
The well encountered hydrocarbons in two Oligocene clastic sequences, which were
separated by a volcanic layer. Well logs over the upper sequence indicated
approximately 30 metres of net pay. After drilling through the volcanics, the
well encountered a lower clastic sequence with oil and gas shows. However, the
mud weight required to control the pressure and gas indicated downhole pressures
at the upper limit of the safe operating capability of the drilling rig.
Consequently, drilling had to be halted after only 22 metres of the sequence had
been penetrated. High pressure and temperature also meant that the section could
not be logged. The current seismic interpretation shows another 300 metres of
sediment remain to be drilled above Basement.
The well was plugged back to isolate the lower high pressure zone from the upper
sequence. The Upper Oligocene clastic sequence, which is also overpressured,
requires specialised testing equipment and a higher capacity blow out preventer
(BOP) for the rig. This equipment is currently being sourced and the Company is
confident testing will be carried out in the second half of 2007. The higher
capacity BOP will also be required to drill deeper on TGD and to test an
adjacent prospect. The Adriatic XI rig, which is currently drilling shallow
prospects, will be refitted for testing and deep drilling as soon as the
equipment is available.
The Adriatic XI drilling rig began its two year contract in July when it was
mobilised to drill the Te Giac Hong exploration well to evaluate the 'L' North
prospect. The well was drilled to evaluate the Miocene and Upper Oligocene
sections that are productive in the Te Giac Trang discoveries. The well was
plugged and abandoned after reaching a total depth of 3,685 metres. The well
evaluated the LBH 5.2 and the Oligocene 'C' formations. The LBH 5.2 sands were
poorly developed and had no oil shows. There were sands with oil shows in the
Oligocene 'C'; however, log evaluation showed the sands to have poor
permeability and they were not tested.
The Adriatic XI rig was then moved to drill the Te Giac Lam 1X well to test the
Miocene and Upper Oligocene at the 'O' prospect. This well spudded on 13 August,
had approximately 70 metres of good oil shows as indicated by mud logs in the
Upper Oligocene and was deviated to intersect a deeper Oligocene stratigraphic
trap, a new play in the basin, formed by the pinch out of the Oligocene against
a Basement high. We are preparing to test and the final results of the well are
expected later in September.
Block 9-2
Development
The first half of 2007 was primarily focused on the letting of all major
contracts associated with the Pilot Development Plan on the Ca Ngu Vang field
(CNV), which was officially approved in December 2006 by Petrovietnam.
Subsequent to this approval, Petrovietnam became a full paying participant in
its 50% interest in Block 9-2.
At this time work has begun on the fabrication of both the unmanned offshore
platform and the pipeline that will transport gas and liquids to Bach Ho for
processing and transportation to market. The PVD-1 has moved from Block 16-1,
where it drilled the TGD-1X exploration well as its shakedown project to
commence drilling the development and injector wells on CNV. First oil is on
track to commence in the second quarter of 2008.
Since becoming a participant in the World Trade Organisation, Vietnam has
accelerated the privatisation of much of the previously state owned enterprises,
including divisions of Petrovietnam. Consequently, certain aspects of the
development programme, particularly a gas sales agreement, are as yet not
finalised. However, discussions on the sales agreement for the associated gas
produced from the CNV field have continued.
The PVD-1 drilling rig moved on location to begin the development drilling
programme on the CNV field on 21 August, after experiencing some weather delays.
As this report was published the CNV-1P well had not yet spudded due to
further analysis and repairs on the rig's control system.
Exploration
The exploration phase of work on Block 9-2 was concluded in 2007 when the Ca Ong
Doi 2X (COD-2X) well was drilled during the first quarter on the COD structure
to evaluate the possibility that the clastics play on Block 16-1 extended into
this Block. This well encountered Lower Miocene sands however they were not
charged with hydrocarbons possibly indicating that the structure was developed
after migration.
Sands were also encountered in both the Oligocene 'C' and 'E' sequences.
Although the Oligocene 'C' had good shows, the sands were thinner than expected
and, following evaluation of the electric logs, it was decided not to flow test
this horizon. In the Oligocene 'E' the shows encountered were of residual oil
indicating that the reservoir had been breached.
Yemen
Drilling activity with three rigs continued throughout the first half of 2007 as
the East Shabwa Block 10 Consortium continued the programme of appraisal and
development of the Kharir Basement.
Appraisal work was focused on testing the areal extents of the Basement interval
in the Kharir field. Two Basement producers, KHA-1-25 and KHA-1-27, aimed at
appraising and developing the southern to south-western flank area of the field,
have been drilled. The results to date of these two wells are very encouraging,
indicating greater fracturing and hence greater performance in this area of the
field. The KHA-1-25 well has been tested and produced at over 5,500 BOPD from an
area of the field generally expected to have low productivity. The KHA-1-27 well
also encountered hydrocarbons in sandstones overlying the Basement and tested at
500 BOPD. The results of this well are being evaluated ahead of potential
selection of appraisal locations.
Further development has centered around drilling wells into the overlying Biyad
horizon to provide water for the Basement injection schemes and drilling
Basement water injectors. Injection wells include the KHA-2-18 well in the
northern part of the field, the KHA-1-23 and KHA-1-19 wells in the east and the
KHA-1-24 well in the west. The KHA-1-22, KHA-1-26 and KHA-2-19 wells have been
drilled to source the water. Albeit drilled as an injection well, the KHA-2-18
well came in some 300 metres higher than predicted and indicates additional
potential in the northern area of the field. Evaluation of the impact of this
well is ongoing.
An additional Biyad producer, the KHA-1-20, has been drilled to improve sweep
efficiency and recovery from this horizon.
At the time of publication, the three rigs are active on the Kharir Basement
structure drilling the water injector wells KHA-1-28 in the south of the field
and KHA-1-29 in the east, and the KHA-1-30 oil producer well in the centre of
the field.
Production from the field has been purposely limited below the average level
experienced in 2006. This limitation is a direct result of delays in installing
water injection equipment associated with the reservoir pressure maintenance
project and issues with water filtration equipment. Although the operator is
maximizing efforts to accelerate all elements of the equipment purchase,
delivery and installation cycle, delays are common issues for the oil industry
at this time.
Both water injection and gas reinjection into Basement is at current capacity
with average injection rates at 13,000 barrels of water per day and 4 million
cubic feet per day respectively over the last two months. These will increase as
the injection capacity is increased. Gas reinjection is but a part of the
consortium's efforts to reduce gas flaring. Detailed reviews of other gas
utilisation projects, in conjunction with the Yemeni authorities, are ongoing.
In addition, there is significant activity ongoing in increasing the production
handling capacity of the process equipment. Alongside the addition of new
process equipment, the existing equipment is undergoing debottlenecking to
maximise throughput.
Later this year the consortium expects to initiate an exploration programme in
the southeastern part of the Block.
The East Shabwa Block 10 Consortium comprises Comeco Petroleum, Inc. (28.57%
interest), in which SOCO holds a 58.75% interest, TOTAL Yemen, S.A. (28.57%
interest and operator), Occidental Yemen Ltd. (28.57% interest) and Kuwait
Foreign Petroleum Exploration Co. (14.29% interest).
Republic of Congo (Brazzaville)
SOCO Exploration and Production Congo (SOCO EPC), the Company's 85% owned
subsidiary holds a 37.5% interest in, and is the designated operator of, the
Marine XI Block, offshore the Republic of Congo (Brazzaville).
A 1,200 square kilometre 3D seismic acquisition programme was completed over the
shallow water Block located in the Lower Congo Basin, in the fourth quarter of
2006. Initial processing has been completed and Pre Stack Depth Migration of the
data is underway to allow better imaging of the pre-salt structure.
Interpretation is on schedule and SOCO EPC expects to tender for a multi-well
drilling programme later this year.
Democratic Republic of Congo (Kinshasa)
In August 2007 the Company's 85% owned subsidiary, SOCO DRC Limited (SOCO DRC),
received Cabinet approval of its Production Sharing Contract on the 800 square
kilometre Nganzi Block, onshore the Democratic Republic of Congo (Kinshasa).
Final approval is pending a Presidential Decree.
A geochemical survey was conducted in August to evaluate the potential of
several leads previously identified by an aeromagnetic and gravity survey
conducted by the Company. The results will be used to help lay out a 2D seismic
grid. Seismic acquisition is scheduled to begin later this year.
SOCO DRC is the designated operator with an 85% working interest in the Block.
Cohydro, the state owned oil company, holds the remaining interest.
Angola
The Company was notified In August 2007 that the Executive Decree outlining SOCO
Cabinda Limited's (SOCO Cabinda) 17% participating interest in the Production
Sharing Agreement (PSA) for the Onshore Cabinda North Block (Block A) became
effective in July. SOCO holds 80% of the interest in SOCO Cabinda. SONANGOL,
the Angolan state owned oil company, holds a 51% interest in the PSA and is
operator, with Teikoku Oil Co. Limited (17%) and Angola E&P Company (15%)
holding the remaining interests.
An airborne gravity and magnetic survey was conducted over the Block in June and
processing completed in August. Interpretation of the survey has begun. A
contract for the acquisition of a 1,200 kilometre 2D seismic survey, based on
the results of the gravity and magnetic survey, has been awarded to Grant
Geophysical and acquisition is expected to begin in September 2007.
Thailand
The farm-in party, GFI Oil and Gas Thailand, Inc. (GFI), to the Bualuang field
whose rights were previously held by SOCO Exploration (Thailand) Co. Ltd. (SOCO
Thai), acquired the interests of the minority farm-in party early in the year
making them the sole Farmee. GFI subsequently concluded a high resolution 100
kilometre 2D seismic programme during the second quarter of 2007. Construction
has begun on a 12 slot wellhead platform for the field and is scheduled to be
completed in the fourth quarter of this year, with first production expected in
the first half of 2008.
With the seismic acquisition GFI needs only to complete the drilling of a single
well in the Bualuang field to earn its initial 20% interest as provided in the
agreement signed by the parties. The Farmee has expressed its intent to enter
Phase II and earn a further 40% working interest by installing a platform,
drilling up to eight additional wells and taking the project to first oil.
During Phase II, SOCO Thai would fund 8% of the cost. If the earn-in terms of
the agreement are fulfilled, SOCO Thai would retain a 40% working interest in
the field.
After the end of the Phase II Period, the Farmee shall be designated the
operator of the project, subject to approval of the appropriate regulatory
authorities of the Government of Thailand, and shall engage an independent
reservoir engineer to perform an analysis of the proven reserves contained in
the Bualuang field. The Farmee shall pay SOCO Thai an amount equal to one
dollar ($1.00) for each barrel of proven reserves over ten million four hundred
thousand barrels.
RESULTS
With average crude oil prices remaining at a consistently high level and
production from the Group's Yemen project steady, after tax profits for the
period increased to $17.0 million from $15.1 million in the first half of 2006.
This translates into basic and diluted earnings per share from continuing
operations of 24.1 cents and 21.5 cents, respectively, as compared to 21.5 cents
and 19.2 cents in the equivalent period last year.
Income statement
Operating results
Despite marginally lower production attributable to the Group's working
interest, 6,341 BOPD for the first half of 2007 as compared to 6,407 BOPD for
the same period last year, and slightly lower average realised crude oil prices,
$62.38 per barrel for the first six months of this year compared to $63.15 per
barrel for the first half of last year, Group oil and gas revenues were up.
Revenue in the first half of 2007 increased by 30% to $50.4 million from $38.8
million in the first half of 2006. Most of this increase was due to higher
entitlement volumes in the first six months of 2007 owing to increased cost
recovery primarily arising from capital expenditure associated with development
of the Basement reserves in Yemen ($8.9 million) and adjustments of lifting
imbalances arising in prior periods ($3.5 million).
Cost of sales during the first half of 2007 were $17.0 million against $11.0
million in the first half of 2006 with the $3.5 million variance on lifting
imbalances increasing cost of sales in the current period compared to the first
half of 2006. Ignoring lifting imbalances, the underlying increase in cost of
sales has arisen mainly due to higher depreciation, depletion and
decommissioning costs (DD&A).
On a per barrel basis, excluding lifting imbalances and inventory effects,
operating costs attributable to the Group's sole producing asset in Yemen were
flat at approximately $6.50 per barrel in the periods to 30 June 2006 and 2007.
DD&A increased by $1.8 million compared to the same period last year due
primarily to higher development costs associated with extracting additional
Basement reserves and higher entitlement production. On a working interest per
barrel basis DD&A increased to approximately $5.00 per barrel during the period
to 30 June 2007 from approximately $3.60 per barrel during the equivalent period
last year.
Administrative costs for the first six months increased from $3.5 million in
2006 to $4.0 million in 2007. This increase is primarily associated with the
weakening of the US dollar versus the GB pound.
Other operating expenses, which comprise pre-licence exploration expenses,
decreased by $0.2 million in the reporting period compared to the equivalent
prior period.
The aforementioned effects led to a 23% increase in operating profit. Operating
profit was $29.5 million in the period ending 30 June 2007 rising from $24.0
million in the first six months of 2006.
Non-operating results
Following the issue of convertible bonds in May 2006, the Group had a
significantly higher average cash and cash equivalents balance during the
current six month reporting period, leading to investment income increasing from
$2.8 million in the period to 30 June 2006 to $3.9 million in the current
reporting period.
The decrease in other gains and losses from $0.3 million in the first half of
2006 to $0.1 million in the first half of 2007 is primarily due to a lower gain
in the period on the change in fair value of the financial asset (associated
with the subsequent payment amount tied to future oil production from the
Group's divested Mongolia interest) mainly due to revision of the risk free
interest rate.
Finance costs increased from $2.0 million in the first half of 2006 to $4.6
million for the current reporting period due to interest expense on the
liability component of the convertible bonds issued in May 2006 being charged
for a full six months in 2007.
The tax charge increased from $10.0 million during the six months to 30 June
2006 to $11.8 million in the current period consistent with the increase in
operating profit.
Cash
SOCO's cash and cash equivalents decreased from the 30 June 2006 position of
$251.5 million, not long after the issue of the convertible bonds in May 2006,
to $140.6 million as at 30 June 2007. This decrease is associated with the
continuing investment in capital projects.
Capital expenditure
Capital expenditure of $78.9 million in the first half of 2007 compared to $50.4
million for the first half of 2006 (which included $22.0 million paid by the
Group to acquire an additional 2% working interest in Block 16-1 offshore
Vietnam) mainly reflects the Group's continued increased drilling activity in
Vietnam.
Production
The Group's production was sourced entirely from its interest in the East Shabwa
Development Area, Yemen. Production net to the Group's working interest at
6,341 BOPD was marginally lower to production in the equivalent period last year
(6,407 BOPD) despite planned curtailment of production for safety and production
management reasons.
Outlook
There is still a lot of work to be done in following up on apparent drilling
successes earlier this year, but SOCO is very well placed for continued future
growth following operational success during the last year and a very active
drilling programme going forward on an extremely high potential project
portfolio.
However, success brings a new set of challenges. SOCO must evolve from
primarily focusing on exploration to grow shareholder value to managing
relatively large development projects. As the Company derisks exploration
drilling in Vietnam, it also enters into exploration drilling in the Congo Basin
of Africa, which may have a higher risk profile than previous exploration areas
but has the potential to be hugely rewarding. Being in the midst of a
multi-year, highly active drilling programme means that the capital budget will
continue to be relatively robust and financial capability a priority.
We believe that the disciplined managerial approach and technical diligence that
has been the hallmark of our past successes allows us to be well prepared for
the future challenges. Furthermore, we think that SOCO has continued to build
a balanced portfolio with assets in all stages of the E&P value chain creating
more improved near term opportunities to build for future success.
We appreciate our stakeholders' continued confidence in the SOCO team and look
forward to rewarding your future trust in us.
Rui de Sousa Ed Story
Chairman President and Chief Executive
3 September 2007
Independent review report to SOCO International plc
Introduction
We have been instructed by the Company to review the financial information for
the six months ended 30 June 2007 which comprise the consolidated income
statement, consolidated statement of recognised income and expense, consolidated
balance sheet, consolidated cash flow statement and related notes 1 to 6. We
have read the other information contained in the interim report and considered
whether it contains any apparent misstatements or material inconsistencies with
the financial information.
This report is made solely to the Company in accordance with Bulletin 1999/4
issued by the Auditing Practices Board. Our work has been undertaken so that we
might state to the Company those matters we are required to state to them in an
independent review report and for no other purpose. To the fullest extent
permitted by law, we do not accept or assume responsibility to anyone other than
the Company, for our review work, for this report, or for the conclusions we
have formed.
Directors' responsibilities
The interim report, including the financial information contained therein, is
the responsibility of, and has been approved by, the Directors. The Directors
are responsible for preparing the interim report in accordance with the Listing
Rules of the Financial Services Authority which require that the accounting
policies and presentation applied to the interim figures are consistent with
those applied in preparing the preceding annual accounts except where any
changes, and the reasons for them, are disclosed.
Review work performed
We conducted our review in accordance with the guidance contained in Bulletin
1999/4 issued by the Auditing Practices Board for use in the United Kingdom. A
review consists principally of making enquiries of group management and applying
analytical procedures to the financial information and underlying financial data
and, based thereon, assessing whether the accounting policies and presentation
have been consistently applied unless otherwise disclosed. A review excludes
audit procedures such as tests of controls and verification of assets,
liabilities and transactions. It is substantially less in scope than an audit
performed in accordance with International Standards on Auditing (UK and
Ireland) and therefore provides a lower level of assurance than an audit.
Accordingly, we do not express an audit opinion on the financial information.
Review conclusion
On the basis of our review we are not aware of any material modifications that
should be made to the financial information as presented for the six months
ended 30 June 2007.
Deloitte & Touche LLP
Chartered Accountants
London
United Kingdom
3 September 2007
Consolidated income statement
(unaudited)
(unaudited) six months
six months ended ended year ended
30 Jun 07 30 Jun 06 31 Dec 06
Notes $000's $000's $000's
Revenue 3 50,442 38,755 76,476
Cost of sales (16,952) (10,977) (21,162)
Gross profit 33,490 27,778 55,314
Administrative expenses (4,030) (3,545) (8,772)
Other operating expenses (5) (204) (231)
Operating profit 3 29,455 24,029 46,311
Investment revenue 3,945 2,759 9,292
Other gains and losses 62 342 690
Finance costs (4,604) (1,993) (8,136)
Profit before tax 28,858 25,137 48,157
Tax 4 (11,824) (10,039) (19,094)
Profit for the period 17,034 15,098 29,063
Earnings per share (cents) 5
Basic 24.1 21.5 41.3
Diluted 21.5 19.2 36.9
The results are from continuing activities only.
Consolidated balance sheet
(unaudited) (unaudited)
30 Jun 07 30 Jun 06 31 Dec 06
$000's $000's $000's
Non-current assets
Intangible assets 189,161 187,494 146,954
Property, plant and equipment 182,772 41,748 159,472
Financial asset 32,621 32,169 32,571
Deferred tax assets 1,459 3,452 1,530
406,013 264,863 340,527
Current assets
Inventories 19 71 88
Trade and other receivables 18,045 17,027 26,670
Tax receivables 459 211 2,299
Cash and cash equivalents 140,611 251,496 187,791
159,134 268,805 216,848
Total assets 565,147 533,668 557,375
Current liabilities
Trade and other payables (20,903) (28,479) (35,029)
Tax payables (2,774) (2,297) (134)
(23,677) (30,776) (35,163)
Non-current liabilities
Convertible bonds (222,128) (218,558) (220,233)
Longterm provisions (6,109) (2,732) (6,187)
(228,237) (221,290) (226,420)
Total liabilities (251,914) (252,066) (261,583)
Net assets 313,233 281,602 295,792
Equity
Share capital 23,532 23,532 23,532
Share premium account 68,326 68,325 68,325
Other reserves 54,785 54,235 54,406
Retained earnings 166,590 135,510 149,529
Total equity 313,233 281,602 295,792
Consolidated cash flow statement
(unaudited)
(unaudited) six months
six months ended ended year ended
30 Jun 07 30 Jun 06 31 Dec 06
Note $000's $000's $000's
Net cash from operating activities 6 21,749 21,370 33,230
Investing activities
Purchase of intangible assets, net (53,280) (38,286) (82,148)
Purchase of property, plant and equipment (25,668) (12,079) (32,191)
Purchase of own shares into treasury - (13,634) (13,634)
Proceeds of prior period sale 10,000 - -
Net cash used in investing activities (68,948) (63,999) (127,973)
Financing activities
Share-based payments - - (11,372)
Proceeds on issue of convertible bonds - 243,150 242,966
Proceeds on issue of ordinary share capital 1 - -
Net cash from (used in) financing activities 1 243,150 231,594
Net (decrease) increase in cash and cash equivalents (47,198) 200,521 136,851
Cash and cash equivalents at beginning of period 187,791 50,967 50,967
Effect of foreign exchange rate changes 18 8 (27)
Cash and cash equivalents at end of period 140,611 251,496 187,791
Consolidated statement of recognised income and expense
(unaudited) (unaudited)
six months ended six months year ended
ended
30 Jun 07 30 Jun 06 31 Dec 06
$000's $000's $000's
Profit for the period 17,034 15,098 29,063
Unrealised currency translation differences
27 132 186
Total recognised income for the period 17,061 15,230 29,249
Notes to the consolidated financial statements
1 General information
The information for the year ended 31 December 2006 does not constitute statutory accounts as defined in
section 240 of the Companies Act 1985 (the Act). A copy of the statutory accounts for that year has been
delivered to the Registrar of Companies. The auditors' report on those accounts was not qualified and did
not contain statements under section 237(2) or (3) of the Act.
The interim financial report is presented in US dollars because that is the currency of the primary
economic environment in which the Group operates.
The Directors do not recommend the payment of a dividend.
The interim financial report for the six months ended 30 June 2007 was approved by the Directors on 3
September 2007.
2 Significant accounting policies
The interim financial report, which is unaudited, has been prepared in accordance with the recognition and
measurement criteria of International Financial Reporting Standards and the disclosure requirements of the
Listing Rules and using the same accounting policies and methods of computation as published by the Company
in its 2006 Annual Report and Accounts for the year ended 31 December 2006.
3 Segment information
Geographical segments
The Group's operations are located in Southeast Asia, West Africa and the Middle East and form the basis on
which the Group reports its primary segment information. Segment results, which arise from locations with
production operations, are presented below.
Six months ended 30 June 2007 (unaudited)
Middle East Unallocated Group
$000's $000's $000's
Oil sales 50,442 - 50,442
Operating profit 33,372 (3,917) 29,455
Six months ended 30 June 2006 (unaudited)
Oil sales 38,755 - 38,755
Operating profit 27,656 (3,627) 24,029
Year ended 31 December 2006
Oil sales 76,476 - 76,476
Operating profit 55,113 (8,802) 46,311
Business segment
The Group has one principal business activity being oil and gas exploration and production. Revenue by
destination does not materially differ from revenue by origin. There are no inter-segment sales.
4 Tax
(unaudited) (unaudited)
six months ended six months ended year ended
30 Jun 07 30 Jun 06 31 Dec 06
$000's $000's $000's
Current tax 11,753 10,900 18,033
Deferred tax 71 (861) 1,061
11,824 10,039 19,094
UK corporation tax is calculated at 30% of the estimated assessable profit for each period. Taxation in other
jurisdictions is calculated at the rates prevailing in the respective jurisdictions. During each period both
current and deferred taxation have arisen in overseas jurisdictions only.
5 Earnings per share
The calculation of the basic and diluted earnings per share is based on the following data:
(unaudited) (unaudited)
six months ended six months ended year ended
30 Jun 07 30 Jun 06 31 Dec 06
$000's $000's $000's
Earnings 17,034 15,098 29,063
Number of shares
(unaudited) (unaudited)
six months ended six months ended year ended
30 Jun 07 30 Jun 06 31 Dec 06
Weighted average number of ordinary shares for the purpose 70,598,815 70,146,241 70,338,272
of basic earnings per share
Effect of dilutive potential ordinary shares:
Share options and warrants 6,367,527 5,961,649 6,021,356
Ordinary shares of the Company held by the Group 2,300,800 2,446,946 2,300,800
Weighted average number of ordinary shares for the purpose 79,267,142 78,554,836 78,660,428
of diluted earnings per share
At 30 June 2007 up to 6,238,000 potential ordinary shares in the Company that are underlying the Company's
convertible bonds and that may dilute earnings per share in the future have not been included in the calculation
of diluted earnings per share because they are antidilutive for the period to 30 June 2007 (period to 30 June
2006 - 6,238,000 and year ended 31 December 2006 - 6,238,000).
6 Reconciliation of operating profit to operating cash flows
(unaudited) (unaudited)
six months ended six months ended year ended
30 Jun 07 30 Jun 06 31 Dec 06
$000's $000's $000's
Operating profit 29,455 24,029 46,311
Share-based payments 411 277 560
Depreciation, depletion and amortisation 6,086 4,329 9,526
Operating cash flows before movements in working
capital 35,952 28,635 56,397
Decrease in inventories 69 239 221
(Increase) decrease in receivables (4,392) 753 (1,395)
Increase (decrease) in payables 1,000 (720) (2,269)
Cash generated by operations 32,629 28,907 52,954
Interest received 2,862 1,356 4,944
Interest paid (5,713) (149) (5,925)
Income taxes paid (8,029) (8,744) (18,743)
Net cash from operating activities 21,749 21,370 33,230
Cash and cash equivalents (which are presented as a single class of asset on the balance sheet) comprise
cash at bank and other short term highly liquid investments that are readily convertible to a known amount
of cash and which are subject to an insignificant risk of change in value.
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