Final Results

RNS Number : 3796O

San Leon Energy PLC

29 June 2010

 



San Leon Energy Plc

("San Leon" or the "Company" or "SLE")

Final Results for the year ended 31 December 2009

Highlights:

·      Acquisition of Island Oil & Gas Plc - world class assets on the Atlantic Margin and Celtic Sea

·      Acquisition of Gold Point Energy - greatly enhanced our portfolio and provided access to high potential shale gas concessions in Poland's Baltic basin

·      Farm out agreement and JV with Talisman Energy across the Company's Baltic Basin concessions to drill three and up to six wells to prove the shale gas play.

·      Ongoing relationship with PGS who will provide up to a $50m facility for seismic services.

·      Management team strengthened through addition of Shaun Hennessey, non executive director and John Buggenhagen, Vice President Exploration

Oisin Fanning, Chairman of San Leon Energy, commented:

"San Leon has used its stock market listing and taken advantage of the prevailing industry conditions to make strategic acquisitions.  These acquisitions have enabled us to build a diverse portfolio of assets with exceptional potential.    The development of this portfolio has been driven with the objective of delivering value; aggressively moving from exploration into production.  We are on track to achieve this; minimising the risk to our shareholders and encouraging long term inward investment to enhance the investment proposition."

29 June 2010

For further information contact:

San Leon Energy Plc                                        Tel: + 353 1291 6292

Oisin Fanning, Chairman

Philip Thompson, Chief Executive Officer

Arbuthnot Securities                                      Tel: [phone]

Nick Tulloch

Ben Wells

College Hill Associates                                    Tel: [phone]

Nick Elwes

Qualified Person

Philip Thompson has over twenty five years experience in the oil & gas industry. He has an M.Sc. in Geophysics from Southern Methodist University and a B.Sc. in Geophysics from Texas A&M University.

Chairman's Statement

As part of the dynamic and competitive environment of the global oil and gas exploration industry, I am pleased to report that your Company has made significant progress over the past twelve months.

We have taken advantage of the current market turmoil by using our stock wisely to make strategic acquisitions in Poland, Morocco and Ireland (including the Atlantic Margin and Celtic Sea). This strategy has positioned San Leon for significant growth in the near term, with a high potential asset base in low risk countries.

At our inception, we set out to build a diverse portfolio of assets with a focus on managing risk. Our objective is to aggressively move from exploration to production with a focus on generating wealth for our shareholders. We continue to focus on strong management, financial discipline and technical expertise to minimise risk to our shareholders by encouraging long-term inward investment.

The acquisition of Gold Point Energy (GPE) greatly enhanced our portfolio in 2009 with the addition of significant, high potential shale gas concessions in Poland's Baltic Basin. This has already led to considerable activity, and daily media attention based upon our substantial interests in an area which has been conservatively estimated to have the potential to change the face of gas supply in Europe.

The joint venture farm-out agreement we entered into with Talisman Energy in Poland is a clear example of our focused approach. Acknowledged as one of the world's leading shale gas operators, Talisman, a multibillion dollar organisation, has committed to a significant investment and will drill a minimum of three wells and up to six wells to prove a major shale gas play on our three Baltic Basin concessions. As part of the deal, San Leon will receive a 40% free carry on the 600,000 acres which represents a potentially massive generator of revenue in the future, an arrangement which should be viewed effectively as an investment in our company.

Our ongoing relationship with Petroleum Geo-Services (PGS) will be significant to San Leon in the months and years ahead by increasing the value of our exploration based assets. A world leader in its seismic acquisition, PGS provides us with a $50m facility for seismic services which will cover up to 50% of any seismic activity we need to undertake. This will be paid for through the issuance of SLE stock.

Our acquisition of Island Oil & Gas (IOG) will prove to be another critically important step forward. A grossly undervalued operation with world class exploration assets, IOG gives us increased interests in the Tarfaya and Zag licences in Morocco, and two new offshore Morocco licences, including 5,260sq.

km. of 3D seismic (valued at today's prices at over $50m). Each of these turbidite fans have exciting short-term potential with each estimated to yield up to a half a billion barrels.

The IOG acquisition includes four licences in the Celtic Sea (including interest in the producing Seven Heads gas field with many additional perforation opportunities to extend the field's life). In addition we obtained five exploration licenses on Ireland's Atlantic Margin.

After in-depth evaluation by our newly-appointed Vice-President - Exploration Dr. John Buggenhagen (and his Warsaw subsurface team), the Atlantic Margin licences are considered to have the potential that the North Sea presented 40 years ago.

We have reserves of up to 60m barrels in one licence there, which on its own does not justify a development, but should larger fields be developed in the area it should yield a significant upside. We are particularly excited by the Porcupine C1 prospect which has the potential for over one billion barrels of oil in place.

With Exxon and ENI due to drill in the Atlantic Margin this year, the enormous potential is evident and we will be conducting seismic with PGS over the coming 12 months. When that is complete, we plan to identify farm-in partners to minimise risk to our shareholders.

Morocco also continues to provide exciting potential including our Tarfaya oil shale project which is well underway. The necessary equipment has been purchased and is on its way to Morocco, construction will start on site shortly and our oil shale plant will be operational by early 2011. Through innovative engineering and diligent procurement we have reduced the budget for our pilot plant from $4.6 to $2.0m.

In Italy, our focus is on the Narciso Field offshore Sicily where seismic was scheduled for mid-2010 and drilling to commence by the end of the year. The Louisiana oil disaster in the USA has created difficulties for the 22 operators working offshore Italy, all of whom are discussing the resulting impact. Over the coming months we would hope to work closely with the various Italian government authorities and cooperate fully with protecting the environment.

By comparison with our concessions in Europe and North Africa, our US projects are becoming a distraction to our progress due to their limited potential. With low gas prices in the US, it has been decided not to drill additional wells there in 2010 as the return on investment does not make commercial sense. Instead, the management team is giving serious consideration to packaging the licences and selling them or letting the leases lapse to allow the company concentrate on the licences with real revenue-earning potential.

The management team has been strengthened with the addition of non-executive director Shaun Hennessey and Vice-President of Exploration John Buggenhagen, both of whom bring extensive international oil & gas experience to our company.

The Board continues to be focused, and prudent expenditure has allowed us to expand and create value while the future looks increasingly positive. San Leon Energy is in a very healthy position and looking forward to another year of substantial progress.

Within the investment community, our portfolio is considered one of the most diverse with high potential and wide-ranging mix of geographies, exploration and technology plays. According to leading analysts, our portfolio makes our company attractive to a variety of potential partners and investors

who can see the value in individual or groups of assets.

Our strategy, both in terms of expanding the company and in monetising assets, is viewed by independent observers as being aggressive; traits which they have confirmed as 'admirable' and 'most effective' in what is still a very challenging market for smaller companies. With this expansion and the working capital facility provided to Island Oil & Gas in 2009, we have shown a loss for the year (see later in the report). The development of the portfolio has been driven with value and near term production in mind and the already expressed determination to ensure success. Our development plan is on track and the evidence is shown herein.

It is particularly satisfying to the Board that Stock Market analysts see San Leon Energy as a company with clear strategies, good assets and a proven management team that should prove to be an attractive investment opportunity. That they have confidence in our ability not only to run the business but develop shareholder value is greatly appreciated.

Oisín Fanning

Chairman

18 June 2010

Exploration Licence Areas: Poland

Given the ever increasing need for energy to fuel its growing economy, Poland is regarded as an attractive place for petroleum exploration.

Some two-thirds of its energy is imported from Russia and to avoid such dependence, the Polish Government is actively encouraging foreign investment to tap the potential that exists in various parts of the country.

San Leon is accepted as a significant player in the Polish market, with interests in six licence areas and the potential for substantial revenue generation through the joint venture farm-out agreement with Talisman Energy.

The acquisition of Gold Point Energy (GPE) in 2009 adds valuable shale gas concessions in the Baltic Basin to the SLE portfolio and it is estimated that they have the potential to change the face of gas supply in the future.

Talisman Energy

The joint venture farm-out agreement with Talisman Energy in Poland is recognised by industry analysts as a particularly astute business move.

Talisman is viewed as the leading international shale gas player and has made a significant investment and is committed to drilling a minimum of three wells and up to six wells on the three San Leon concession to prove the shale gas play on our three licences in the Baltic Basin covering some 600,000 acres. San Leon receives a 40% free carry with this arrangement which is effectively an inward investment in the company.

Under the terms of the deal, Talisman will:

-    Pay SLE €1.5M cash

-    (with PGS) pay 100% initial 2D seismic programme (over 450km)

-    Drill one well per concession to earn 30% interest

-    Drill at least one 1,000m horizontal with two optional 500m horizontals proposed

-    Have the option to earn an additional 30% interest, with

     an additional well option per block

Baltic Basin

The Baltic Basin licences comprise 600,000 acres where SLE holds 100% of three concessions including Gdansk-W, Braniewo-S, Szczawno - with a pending application on the Czersk concession.

The work programme in the Baltic Basin  includes 450 km of 2D seismic and three wells (up to 4500m) with a 1000 meter horizontal section on the Braniewo-S concession to be drilled over next two years. The initial drilling is expected Q2/Q3 2011.

Additionally, three optional wells with horizontal sections  will be drilled on concessions after successful first phase of testing.

Initial technical evaluation of the shale gas potential in the Baltic Basin shows the play to have estimated reserves of 4 to 6 TCF of recoverable natural gas across San Leon's acreage. This represents a low risk scenario with excellent commercial gas potential.

Permian Basin South

SLE is currently engaged in a 5 year exploration and development program on its two concessions, Nowa Sol and Wschowa. Both concessions are on trend with prolific Rotliegendes gas and Zechstein oil production. Nowa Sol contains four potentially under developed oil fields which SLE is currently evaluating for potential 3D seismic acquisition in 2010. It is believed that up to 500,000 BBLS of remaining oil can be recovered from these shallow known fields.

Some 3,000 km of 2D seismic and data from 90 wells are being evaluated.

SLE's current technical evaluation also indicates that a significant unconventional gas play exists in the relatively untested Carboniferous section.

Permian Basin North

SLE's Szczecinek interests in the northern Permian Basin is also on trend with Zechstein oil production. SLE has a 50% interest in the 980 km² concession with its operating partner Gas Plus (50%).

The work programme for the concession includes the acquisition of 60km² 3D seismic survey in Q3 2010 with drilling of the Sylvia prospect planned for 2011. Estimated reserves for Sylvia are 11.3 MMBOE.

The existing, unproduced Czarne gas field with estimated reserves of 12.4 BCFE adds additional upside to any development in this area.

Morocco

The long-term revenue-earning potential of San Leon's Moroccan portfolio (covering 13.4 million acres) was further enhanced during the year with the acquisition of Island Oil & Gas (IOG), a deal which gives the Company increased interests in the Tarfaya and Zag licence areas and two new offshore licences - Foum Draa and Sidi Moussa.

In addition to the two oil and gas exploration projects in the two major basins, San Leon also has a third, 6000m² interest in the Tarfaya Oil Shale area, a project which is now well underway. The licence, for a three year work programme, was signed in May 2009.

Tarfaya Oil Shale Project

Following completion of the first technical study at the end of 2008, optimisation and field analysis took place during 2009, with SLE's oil shale plant due to be operational by the end of 2010. Through careful ongoing procurement, the construction budget for the project will be less than half the estimated $4.6M.

Research indicates over 50 billion barrels recoverable (based on 62 litres per tonne) from this source and San Leon will implement an in-situ process for heat transfer to the shale pad at depth, and surface recovery of liberated kerogens and hydrocarbons.

Zag and Tarfaya Licences

The Zag and Tarfaya Basin licences, both 8-year licences, were signed in 2009 and 2008 respectively and the prospects are particularly encouraging, not least because Morocco offers excellent fiscal terms and SLE has established strong working relationships with the relevant authorities there.

The Zag Basin licence represents a 5.4 million acres (21,807m²) area which has seen large gas discoveries to the east and south of the licence, with other major players already active in the area. It is part of a larger basin which contains 43% of the known oil and 84% of the known gas reserves of the entire North African region (some 460Bboe recoverable). Planned export pipelines to the European markets have renewed interest in the previously unexplored Zag-Tindouf Basin.

The work programme in Zag will include the acquisition of 500km² seismic in the second half of 2010 and drilling a well by 2011. Estimated resources in the licence area are 10+ TCF and 500+ MMBO.

In the Tarfaya Basin, SLE plans to add 500km² of 2D seismic to the seismic it already has in its database by the end of 2010, with the intention of drilling the following year. Discoveries in the Cap Juby offshore field and south of the SLE licence represent further encouragement while an NSAI report indicates up to 13.7 billion barrels OIP from 12 leads/prospects.

Foum Draa & Sidi Moussa

SLE's acquisition of Island Oil & Gas (IOG) included two contiguous offshore licences - Foum Draa and Sidi Moussa - amounting to 13,000km² sited in water depths between 100 and 2,000 metres.

3-D seismic had been shot over 3,800km² in Foum Draa and a further 1,460km² on Sidi Moussa, a total of 5260km² 3-D seismic valued at today's prices at $50m. These licences have exciting short-term potential with each estimated to yield half a billion barrels.

Italy

SLE has successfully acquired all five permits it applied for in Italy. Despite two of the permits being top-filed, the Italian Ministry ruled in favour of San Leon Energy SRL in January 2009. The Group was the subject of CIRM due diligence of its technical and financial strength and was successful in a competitive tender process against two established US companies.

The permits include three offshore licenses near Sicily and two onshore licenses in the Po Valley. The applications are published on the Italian BUIG.

Sicily - offshore permits

San Leon has three exclusive offshore permit applications off the coast of Sicily covering 1,821 km² in total (100% held by San Leon).

The Narciso Oil Field off the west coast Sicily was first discovered by AGIP in 1985. Initial tests flow-tested over 3,000 BOPD with a long term test which produced over 800,000 barrels in less than a year. AGIP gained Ministry approval in 1986 to produce oil from Narciso but with the collapse of oil to $10 a barrel at the time, it was no longer economic to develop the field and AGIP abandoned the site in the '90s.

A recent evaluation of the field by Fugro Robertson on San Leon's behalf reported mean reserves of 7.0 MMBO.

The Sicilian permits include:

-          D352 CR-SL, an area comprising 358.5 km², located west     of Sicily in the Canal Zone C, below the Egadi 
         Islands;

-          D353 CR-SL, an area comprising 226.2 km², located southwest of Sicily in the Canal Zone C;

-          D354 CR-SL, an area comprising 482.5 km², located southwest of Sicily and near the coast in the Canal 
         Zone C;

Several exploration prospects, identified on 2D seismic, are on trend with existing fields including Narciso, Norma, Naila, and Nilde. Nine seismic campaigns were executed during the three exploration periods of the original ENI permit. The D353 CR-SL permit resides to the southwest of the Narciso permit and just east of the Norma, Naila, and Nilde oil fields.

SLE plans to acquire at least 20km² 3D seismic over the Narciso Field and drill an appraisal as part of the ongoing work programme.

The Louisiana oil disaster in the USA has undoubtedly created difficulties for the 22 operators working offshore Italy and the Italian Government is understandably concerned with protecting its environment and demanding appropriate safeguards.

The impact to all operators may be increased costs and a longer compliance process to get offshore drilling started in the foreseeable future, even though SLE's licences in Europe and North Africa technically do not pose the environmental risks witnessed this year.

Po Valley - onshore licences

The Po Valley (Pianura Padana) is the main industrial area of Italy and is a mature gas-producing basin with an excellent infrastructure, contributing to Italy's position as the fifth largest gas producer in Europe.

The Po Valley permits are the Sorbola and Sospiro, representing a total area of 753 km²:

•   Sorbolo (302 km²) is located in the Emilia Romagna Region in the Parma-Reggio Province.

•   Sospiro (451 km²) is located in the Lombardia Region in the Brescia-Cremona-Mantova Province.

The Sorbolo permit is adjacent to a number of gas discoveries and producing fields - for example, the Palazetto gas field, drilled by Agip (ENI) in 1982, lies south of the permit and the now depleted Correggio gas field is to the east.

San Leon believes that both permits have strong exploration potential.

SLE began a 5-year work programme during 2009 and plans at least 200 km of 2D seismic and to drill at least one well.

Ireland

As a result of its acquisition of Island Oil & Gas, San Leon has now added 9 offshore Ireland assets, comprising five operated licenses on the Atlantic Margin and four Celtic Sea assets, to its expanding portfolio.

The Celtic Sea assets involve two operated licences, one non-operated petroleum lease and one licence option. They include the Seven Heads gas-producing fields and the Old Head of Kinsale (OHK) and Schull gas field development projects.

The assets are located close to the SW Kinsale gas storage facility, the biggest Irish gas storage project, which utilises the nearby Kinsale field for gas injection and production facilities.  The existing infrastructure nearby suggests the development of OHK and Schull as gas storage facilities is a very real possibility.

SLE's acquired West of Ireland interests are located in a variety of geological basins on the Atlantic Margin and they represent significant opportunities for gas and oil prospects. Indeed, SLE's in-depth evaluation has revealed that the potential of the five Atlantic Margin licences is on a par with what was discovered in the North Sea back in the 1980s.

One licence alone has proven reserves of 150m barrels while the Porcupine C1 prospect is particularly exciting in that it has the potential for over one billion barrels in place. 

SLE plans to conduct a seismic programme with PGS after which it intends to identify farm-in partners to exploit the enormous potential and so minimise risk to our shareholders. At least two major international players are due to drill there during 2010, a clear indication of the area's viability.

Consolidated Statement of Comprehensive Income

	2009 €	2008 €
Administrative expenses	(4,269,008)	(2,16,480)
Operating (loss)	(4,269,008)	(2,16,480)
Finance expenses	(450,574)	(93,138)
Finance income	11,618	1,277
Share based payment cost	(808,314)	(918,477)
(Loss) for the year before tax	(5,516,278)	(3,175,868)
Taxation	(4,448)	-
(Loss) for the year from continuing operations	(5,520,726)	(3,175,868)
Total Comprehensive income attributable to:
Equity holders of the parent	(5,520,726)	(3,175,868)
Earnings per share (cent):
Basic (loss) per ordinary share	(1.92 cent)	(1.28 cent)
Diluted (loss) per ordinary share	(1.73 cent)	(1.25 cent)

Consolidated Statement of Financial Position

Assets	2009 €	2008 €
Non-Current Assets
Intangible assets	36,478,500	30,570,840
Property, plant and equipment	118,650	16,413
Total Non-Current Assets	36,597,150	30,587,253
Current Assets
Trade and other receivables	558,234	6,058,470
Cash and cash equivalents	2,138,088	168,602
	2,696,322	6,227,072
Total Assets	39,293,472	36,814,325
Equity and Liabilities
Capital and Reserves
Called up share capital	16,059,196	13,566,469
Share premium account	23,976,523	18,312,892
Shares to be issued as consideration	-	114,653
Share based payment reserve	2,321,035	1,512,721
Profit and loss account	(9,323,365)	(3,802,639)
Attributable to equity shareholders	33,033,389	29,704,096
	33,033,389	29,704,096
Non-Current Liabilities
Trade and other payables	2,750,000	5,000,000
	2,750,000	5,000,000
Current Liabilities
Trade and other payables	3,510,083	2,110,229
	3,510,083	2,110,229
Total Liabilities	6,260,083	7,110,229
Total Equity and Liabilities	39,293,472	36,814,325

Company Statement of Financial Position

Assets	2009 €	2008 €
Non-Current Assets
Property, plant and equipment	14,201	16,413
Financial assets	27,064,293	25,436,940
Total Non-Current Assets	27,078,494	25,453,353
Current Assets
Trade and other receivables	11,124,747	11,407,031
Cash and other equivalents	1,720,603	5,404
	12,845,350	11,412,435
Total Assets	39,923,844	36,865,788
Equity and Liabilities
Equity
Called up share capital	16,059,196	13,566,469
Share premium account	23,976,523	18,312,892
Shares to be issued as consideration	-	114,653
Share based payment reserve	2,321,035	1,512,721
Profit and loss account	(8,503,494)	(3,793,547)
Attributable to equity shareholders	33,853,260	29,713,188
Non-Current Liabilities
Trade and other payables	2,750,000	5,000,000
	2,750,000	5,000,000
Current Liabilities
Trade and other payables	3,320,584	2,152,600
Total Liabilities	6,070,584	7,152,600
Total Equity and Liabilities	39,923,844	36,865,788

Consolidated Statement of Cash Flows

Cash flows from the operating activities	2009 €	2008 €
Net (loss) for the year before taxation	(5,516,278)	(3,175,868)
Adjustments for:
Depreciation	99,157	3,632
Investment revenue recognised	(11,618)	(1,277)
Movement on share based payment reserve	808,314	1,512,721
Decrease/(increase) in debtors	5,500,236	(5,883,694)
(Decrease)/increase in creditors	(854,594)	6,356,942
Net cash generated by / (used in) operating activities	25,217	(1,007,494)
Cash flows form financing activities
Proceeds from issue of share capital	8,041,705	5,582,953
Cash flows from investing activities
Expenditure on exploration activities	(5,907,660)	(4,406,450)
Purchases of property, plant and equipment	(201,394)	(13,534)
Interest received	11,618	1,227
Net cash generated from financing activities	1,944,269	1,164,196
Net increase in cash and cash equivalents	1,969,486	156,702
Cash and cash equivalents at beginning of year	168,602	11,900
Cash and cash equivalents at end of year	2,138,088	168,602

Consolidated Statement of Changes in Equity

	Share Capital €	Share Premium €	Share to be issued as Consideration €	Share based Payment Reserve €	Retained Earnings €	Total Equity €
Balance at 1st January 2008	11,250,685	15,160,376	-	-	(626,771)	25,784,290
(Loss) for the year	-	-	-	-	(3,175,868)	(3,175,868)
Recognition of share based payments	-	-	-	1,512,721	-	1,512,721
Proceeds from share issue	2,315,784	3,152,516	114,653	-	-	5,582,953
Balance at 31st December 2008	13,566,469	18,312,892	114,653	1,512,721	(3,802,639)	29,704,096
Balance at 1st January 2009	13,566,469	18,312,892	114,653	1,512,721	(3,802,639)	29,704,096
(Loss) for the year	-	-	-	-	(5,520,726)	(5,520,726)
Recognition of share based payment	-	-	-	808,314	-	808,314
Proceeds from share issue	2,492,727	5,663,631	(114,653)	-	-	8,041,705
Balance at 31st December 2009	16,059,196	23,976,523	-	2,321,035	(9,323,365)	33,033,389

Notes to the Financial Statements

General

San Leon Energy Plc ("the Company") is a company incorporated in Ireland. The Group financial statements consolidate those of the Company with those of its subsidiaries (together referred to as "the Group"). These consolidated financial statements were authorised for issue by the Board of Directors on 18 June 2010.

These results are extracted from the full annual report which is available on the Company's website www.sanleonenergy.com  

The audited accounts are being posted to shareholders today and the full audited accounts including all the notes to the accounts are available at the Company's website

The notice of AGM has today been sent to shareholders and has been posted to the Company's website.

Independent Auditors Report

We have audited the consolidated and parent company financial statements of San Leon Energy Plc for the year ended 31 December 2009 which comprise the consolidated Statement of Comprehensive Income, the consolidated and parent company Statement of Financial Position, the consolidated and parent company Statement of Changes in Equity, the consolidated and parent company Cash Flow Statement and the related notes.

This report is made solely to the Company's members as a body in accordance with Section 193 of the Companies Act, 1990. Our audit work has been undertaken so that we might state to the Company's members those matters that we are required to state to them in the audit 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 or the Company's members as a body for our audit work, for this report, or the opinions we have formed.

Respective Responsibilities of Directors and Auditors

The Directors' responsibilities for preparing the Annual Report and the financial statements in accordance with applicable law and International Financial Reporting Standards as adopted by the European Union ("IFRSs") are set out in the Statement of Directors' Responsibilities on page 20 in the Company's report and accounts.

Our responsibility is to audit the financial statement in accordance with relevant legal and regulatory requirements and International Standards on Auditing (UK and Ireland).

We report to you our opinion as to whether the Group financial statements give a true and fair view in accordance with IFRSs as adopted by the European Union and are properly prepared in accordance with the Companies Acts 1963 to 2009. We also report to you whether, in our opinion; proper books of account have been kept by the Company; whether at the balance sheet date, there exists a financial situation requiring the convening of an extraordinary general meeting of the Company; and whether the information given in the Directors' Report is consistent with the financial statements. In addition, we state whether we have obtained all the information and explanations necessary for the purposes of our audit and whether the company's balance sheet is in agreement with the books of account.

We report to the shareholders if, in our opinion, any information specified by law or the listing rules of AIM regarding Directors' remuneration and Directors' transactions is not given and, where practicable, include such information in our report.

We read the other information contained in the Annual Report and consider whether it is consistent with the audited financial statements. This other information comprises only the Directors' Report, Chairman's Review and the Review of Activities. We consider the implications for our audit report if we become aware of any apparent misstatements or material inconsistencies with the financial statements. Our responsibilities do not extend to any other information.

Basis of opinion

We conducted our audit in accordance with International Standards on Auditing (UK and Ireland) issued by the Auditing Practices Board. An audit includes examination, on a test basis, of evidence relevant to the amounts and disclosure in the financial statements. It also includes an assessment of the significant estimates and judgements made by the directors in the preparation of the financial statements, and whether the accounting policies are appropriate to the Group's and Company's circumstances, consistently applied and adequately disclosed.

We planned and performed our audit so as to obtain all the information and explanations which we considered necessary in order to provide us with sufficient evidence to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or other irregularity or error. In forming our opinion we also evaluated the overall adequacy of the presentation of information in the financial statements.

Opinion

In our opinion

-    the consolidated financial statements give a true and fair view, in accordance with IFRSs as adopted by the EU, of the state of the Group's affairs as at 31 December 2009 and of its loss for the year then ended;

-    the parent Company financial statements give a true and fair view, in accordance with the IFRSs as adopted by the EU and as applied in accordance with the provisions of the Companies Act, 1963 to 2009, of the state of the Company's affairs as at 31 December 2009; and

-    the group and parent company financial statements have been properly prepared in accordance with the Companies Acts, 1963 to 2009

We have obtained all the information and explanations we consider necessary for the purposes of our audit. In our opinion proper books of account have been kept by the Company. The balance sheet is in agreement with the book of account.

In our opinion the information given in the Directors' Report is consistent with the financial statements.

The net assets of the Company, as stated in the Company Statement of Financial Position on page 26 in the Company's report and accounts, are more than half of the amount of its called up share capital and, in our opinion, on that basis there did not exist at 31 December 2009 a financial situation which under Section 40(1) of the Companies (Amendment) Act 1983 may require the convening of an extraordinary meeting of the Company.

Emphasis of matter

In forming our opinion, which is not qualified, we have considered the adequacy of disclosures made in Note 9 to the consolidated financial statements, in the Company's report and accounts, in relation to the Directors' assessment of the carrying value of the Group's exploration and evaluation assets amounting to €36,478,500. The realisation of the intangible assets is dependent on the successful development or disposal of oil and gas in the group's licence areas. The financial statements do not include adjustments that would result to the financial statements if the Group could not recover the full carrying value of its exploration and evaluation attests.

Barr Pomeroy

Chartered Accountants

And Registered Auditor

21 Herbert Place

Dublin 2

Ireland

 

END

 

 

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