Final Results

Tullow Oil PLC 02 April 2003 2 April 2003 Tullow Oil plc ('Tullow') or ('the Group') Preliminary Results to 31 December 2002 Tullow Oil plc, is an independent oil and gas exploration, development and production company with interests in the UK North Sea, Onshore UK, Cote d'Ivoire, Cameroon, Gabon, Pakistan, Bangladesh, India, Romania and Algeria. Highlights Record Results •Turnover up 47% to £112.6m (2001: £76.6m) •Operating Profit Before Exploration Costs up 27% to £33.3m (2001: £26.3m) •Pre-Tax Profit up 41% to £22.5 m (2001: £16.0m) •UK Southern North Sea ('SNS') assets contribute more than 80% of total turnover Strong Performance from UK SNS Assets •CMS III project came on stream in September •Total gas sales volumes from the UK SNS of 37.2 bcf (102 mmscfd) •Average prices realised from contracted gas were 23.6p (60% of total production) and 20.1p for un-contracted gas •Seven blocks secured in 20th UK Licensing Round •Two wells on CMS III project and one prospect in Thames-Hewett area to be drilled in the remainder of 2003 Significant International Developments Cote d'Ivoire •First oil from Espoir field in February, first gas in August •Average Price achieved of $26.60/barrel •Production target of 25,000 boepd in second quarter of 2003 •Drilling of Acajou, the largest prospect in the area, to commence shortly Cameroon and Gabon •Exciting concessions signed in Cameroon and Gabon, both with oil discoveries on the blocks Bangladesh •Seismic programme completed on highly prospective Block 9 •Drilling to commence later in 2003 Placing and Bank facility •£14.3m, before expenses, raised through recent placing •New $100m acquisition debt facility agreed with three leading international banks •A number of potential acquisition opportunities identified in Northern Europe and West Africa Dividend Policy •Commitment to pay 1p/share as dividend during 2003, subject to Court and other approvals. Commenting on the results, Chairman, Pat Plunkett, said: 'This was a year of significant achievement and progress for Tullow. Two high profile development projects, in the UK and Cote d'Ivoire, are now successfully on production. These projects, the ongoing exploration programmes and the acquisition opportunities currently under consideration leave the Group well positioned for 2003.' Enquiries: Tullow Oil plc Tel:020 7333 6800 Aidan Heavey, Managing Director Tom Hickey, Finance Director Binns & Co PR Ltd Tel: 020 7786 9600 Judith Parry/ Emma McCaffrey Chairman's Statement I am pleased to report that 2002 was a year of solid achievement and progress for Tullow. The strong increase in sales and profits reflects both a full year contribution from the UK SNS assets acquired in 2001 and the initial contribution from two development projects that were successfully brought on production in the UK and in the Cote d'Ivoire. 2002 was a year of significant investment for the group with over £61 million invested in exploration and development. Further investment in development projects, together with an active exploration programme, is anticipated in 2003. Tullow is also actively considering acquisition opportunities and seeking to increase returns and capital efficiency through selective disposals and farmouts. Tullow is well positioned for further growth during 2003. Financial Results Tullow's financial results for 2002 benefited from the strong performance of the Group's UK SNS assets, acquired in 2001. These are the core of the Group's production, contributing over 80 % of total Turnover of £112.6 million (2001 - £76.6 million), an increase of 47% over the corresponding figure for 2001. This increase in turnover was reflected in record Operating Profit Before Exploration Costs of £33.3 million (2001 - £26.3million). Pretax profits also showed strong growth, increasing by 41% to £22.5million. This rate of growth would have been higher but for delays in the production build up from the Espoir field, weaker gas prices and lower Pakistani output caused in part by a well workover programme that is now complete. The Group's North Sea assets performed in line with expectations at an operational level in 2002 and while gas prices were generally weaker than budgeted, an active forward gas sales and hedging strategy helped offset some of this impact. The average prices realised were 23.6 p/therm for contracted gas (60% of total production) and 20.1p/therm for uncontracted gas. Total production amounted to 37.2 bcf (102 mmscfd). CMS III contributed to production and reserves in the last quarter of the year. The 2002 revenue performance from the Espoir field reflects the decision to delay bringing the main production zone on stream until the second quarter of 2003 as part of a reserve recovery optimisation programme. Performance has benefited somewhat from higher than expected oil prices despite a weakening US dollar in the period. During 2002 The Chancellor of the Exchequer increased the rate of Corporation Tax applying to UKCS profits from 30% to 40%. While this has limited cash impact on Tullow due to the availability of accelerated capital allowances, we believe that it may discourage new entrants and creates an unwelcome element of fiscal uncertainty in the UK, especially at a time when many of the major companies are seeking to divest of assets, or exit the province. Dividend Policy Tullow has achieved very significant growth in turnover, cashflow and profitability in recent years and is now in a strong position to continue this growth. In recognition of this the Board has decided to commence dividend payments during 2003 at an initial level of 1p/share. This payment will, however, be subject to the approval by the High Court of Ireland of an application to write off the accumulated deficit on the Profit and Loss Account of our Irish subsidiary against that Company's share premium account and the completion of related accounting work. This application is expected to be heard in May 2003 and further details in relation to the record date, shareholder approval and payment timing of the dividend will be circulated in due course. Operational Activity In the UK, Tullow's SNS strategy is to develop and expand its exploration and development portfolio while maximising revenue from producing fields. The major success in 2002 was the CMS III project which produced first gas in September and continues to produce ahead of expectations from the Hawksley and Murdoch K wells. The third producing well, McAdam, will further supplement this production upon its completion this month. In addition, Tullow's success in the 20th Licensing Round of securing seven attractive blocks within the greater Caister-Murdoch area, should help secure the production profile of this region for several years to come. Tullow also intends to participate in the recently announced 21st Licensing Round. Encouraging advances were also made in the Thames-Hewett area, most notably in reducing abandonment cost estimates and identifying a number of exploration prospects. One of these prospects, Gawain South East, will be drilled during 2003. Tullow has also recently participated in the Squirrel exploration well in the Outer Moray Firth that was unsuccessful despite encountering good reservoir sands. Within our international asset base, the most significant event was the production of first oil from the Espoir field in Cote d'Ivoire in February 2002. While production levels were lower than expected, the operator has commenced a programme of perforating an additional, more prolific, zone in a number of the producing wells with a view to reaching a target production level of 25,000 boepd during the second quarter of 2003. There are a number of exploration prospects within the license and although the Emien well, drilled in late 2002, proved a disappointment, drilling of the Acajou well, the largest prospect in the area, will start this month. During 2002 Tullow commenced operations on Block 9 in Bangladesh, and undertook the first exploration 3D seismic survey in onshore Bangladesh. The results of this survey have been used to determine optimal drilling locations and we look forward to the commencement of drilling in this highly prospective area later in 2003. Strategy, Current Opportunities and Outlook Business development and the acquisition of new interests have always been central to Tullow's growth strategy. The year under review was one of major change in the international oil and gas industry and we believe this will lead to an attractive range of acquisition opportunities for Tullow in 2003. To position the Group to take advantage of these opportunities, Tullow recently undertook a Placing to raise £14.3 million and agreed the principal commercial terms of a new acquisition banking facility of $100 million jointly arranged by Bank of Scotland, BNP Paribas and Royal Bank of Scotland. This facility may be increased to up to $250 million in certain circumstances. While our primary focus will be on Northern European assets, where a number of opportunities are under consideration, we also believe that West Africa offers a wide range of opportunities for independent companies. In December 2002, we announced the signature of the Ngosso area licence in Cameroon (Tullow 40%) and in March 2003 signed the Kiarsseny Marin licence in Gabon (Tullow 100%). In each case Tullow's focus during 2003 will be on evaluating development options for existing discoveries on the blocks. Exploration and development drilling is planned for all our main areas during 2003. A number of these prospects have the potential to add materially to the Group's existing reserve base. The recent, higher risk wells, in India and Algeria have produced disappointing results, however we remain hopeful for a favourable outcome on the remaining projects. Within the Group's development assets, two more wells are scheduled for the CMS III project, while the first phase of the Espoir development should conclude in mid 2003. Corporate Initiatives Since the acquisition of the SNS assets, Tullow focused on developing an experienced and cohesive UK team in London with the objective of maximising value and ensuring continued reserve and production growth. On the International side of the business, a new Managing Director, Brian O'Cathain, was appointed to head the team, which moved to a new modern office in Dublin. During 2002 we paid particular attention to developing, improving and benchmarking our Environmental Health and Safety performance throughout our worldwide operations. Tullow's Lost Time Incident Frequency Rate reduced dramatically and I commend all Tullow staff for their professionalism and commitment to this vital aspect of our operations. Corporate Governance Developments Tullow has studied with interest the proposals for the reform of Corporate Governance put forward by the Higgs and Smith Reports, published in January 2003. Upon finalisation of the proposals and guidelines the Board will take steps to ensure early compliance, or to identify any specific areas where immediate compliance may not be appropriate for Tullow. Duilio Ciriani 2002 brought great sadness through the untimely death of Duilio Ciriani in July. Duilio joined Tullow in 1987 as Exploration Manager. He was instrumental in bringing the Group to prominent positions in areas as diverse as Europe, the Middle East, Africa and South Asia and many of these ventures form the cornerstone of our current activities throughout the world. Duilio always had a great appreciation for the people and cultures he encountered, and over the last 15 years forged many long-standing friendships all over the world. We are justly proud of his many achievements. Conclusion The past year was one of solid performance for Tullow and I would like to thank management and staff for their efforts and commitment during the year. The group is well positioned to continue to grow within its core areas through a combination of exploration, development and acquisition. 2003 is expected to present good opportunities for asset acquisition and Tullow will seek to avail of these opportunities as they arise. I look forward to an exciting and successful year and would like to thank shareholders for their continued support. Pat Plunkett Chairman 2 April 2003 FINANCIAL REVIEW OVERVIEW Tullow recorded significant increases in turnover, profitability and cashflow during 2002, driven principally by continued strong production from the UK SNS assets and supplemented by the commencement of production from the Espoir Field, offshore Cote d'Ivoire. TURNOVER Turnover for the year increased by 47% to £112.6 million. The UK SNS Assets accounted for over 80% of this, contributing £81.9 million in gas sales based on production of 37.2 bcf of gas (102 mmscfd) and £9.7 million of tariff income. Contracted gas accounted for 60% of gas sales at an average price of 23.6p/therm while uncontracted gas realised an average price of 20.1 pence/therm. Realised gas prices during 2002 were negatively impacted by a combination of relatively warm weather, most notably in the final quarter, somewhat offset by the Group's active hedging strategy. Following termination of certain of the life of field gas sales contracts we now anticipate that uncontracted gas will represent up to 75% of total UK production in 2003, providing the Group with greater flexibility and influence over the timing of production. The Espoir Field commenced production in February 2002 and accounted for turnover of £14.5 million based on an average rate of production of approximately 2,000 bopd net to Tullow during 2002. The average price received of $26.6/barrel was substantially ahead of budget and reflected the strong oil price environment experienced during 2002. We look forward to further increases in Espoir turnover during 2003 as full production is attained over the coming months. Elsewhere, production continued from the Sara and Suri Fields in Pakistan at an average rate net to Tullow of 10 mmscfd (2000-12.2 mmscfd). Production from the fields was somewhat below expectations due both to a workover programme that temporarily limited deliverability and to seasonal demand fluctuations. OPERATING PROFIT Operating Profit Before Exploration Costs of £33.3 million (2001 - £26.3 million) was slightly lower than anticipated, driven mainly by the factors outlined above above, plus substantially fixed Cote d'Ivoire Operating Costs and Thames compressor downtime in the fourth quarter. SNS Operating Costs, including tariff costs, totalled £28.6 million (£0.79 /mcf), while Depreciation, Depletion and Amortisation charges associated with the SNS Assets totalled £36.0 million (£0.97 mcf). In recent months, encouraging advances have been made following a review of decommissioning obligations associated with certain of the UK SNS assets by the joint venture partners, most notably in relation to Hewett and Thames, which has led to reductions in decommissioning estimates for those fields Cote d'Ivoire Operating Costs principally reflect the FPSO lease obligations, which are substantially fixed. The current production enhancement initiative in Cote d'Ivoire should consequently be reflected in lower unit operating costs during 2003 as full production is achieved. Tullow employs the 'successful efforts' basis of accounting and under FRS 3, is also obliged to show costs associated with unsuccessful exploration or New Ventures work as an operating cost. During 2002 these costs totalled £3.3 million (2001 - £3.9 million), net of farm-out of £0.9 million, principally reflecting the costs associated with UK and International New Ventures and the unsuccessful North Abu Rudeis well in Egypt. INTEREST CHARGE The net interest charge for the period was £7.6 million, of which 43% represented non-cash costs associated with the amortisation of financing charges (£0.7m) and unwinding of discount associated with decommissioning cost estimates (£2.6m). Interest capitalised during the period amounted to £ 0.9 million and was principally associated with the Cote d'Ivoire and CMS III Development projects. TAXATION The tax charge of £9.7 million comprises £7.0 million in respect of current and deferred corporation tax and £2.7 million of current and deferred Petroleum Revenue Tax on the Murdoch Assets. On 1st January 2002 the Group implemented FRS 19 Deferred Taxation. Adoption of the new standard had no effect on amounts reported in the current or in previous years. A full provision of £1.3m has been made in relation to timing differences associated with accelerated claims of capital allowances on UK SNS assets which are expected to reverse in future periods. FRS 19 also requires the recognition of deferred tax assets where it is more likely than not that future taxes will be materially reduced. Tullow has therefore recognised a deferred tax asset of £0.9 million in relation to that portion of its accumulated exploration costs in Pakistan which was certified by the authorities as available to shelter future profits during 2002. A tax charge of £2 million, reflecting tax levied on Espoir profits but deemed under the Espoir Production Sharing Contract to be settled out of the value of profit oil accruing to the Cote d'Ivoire authorities, has also been included. During 2002, the Chancellor of the Exchequer imposed an additional 10% Supplementary Corporation Tax charge on taxable profits arising from Oil and Gas activities in the North Sea. Tullow's cash exposure to this supplementary tax has been mitigated by the high level of exploration and development activities undertaken during 2002, which we anticipate will continue into 2003. PROFIT AFTER TAX The profit after tax for 2002 was £12.8 million, representing a 38% increase on 2001's figure of £9.3million. CASH FLOW During 2002, Tullow generated a total of £69.8million in operating cash flow (2001 - £48.4 million) before working capital related movements and farmouts. This cashflow was principally reinvested in the company's development activities, which included Espoir and CMS III (£28.8 million), in making final payments to BP in connection with the SNS acquisition (£12.6 million) and in advancing exploration and development projects in both the UK and internationally (£16.6 million). The Group also set aside approximately £11.9 million pursuant to decommissioning funding obligations. The outlook for 2003 is for a slightly lower level of development expenditures, reflecting the completion of both CMS III and the current phase of the Espoir Project. However, this will be offset by a significantly higher level of exploration activity associated with the Acajou well, completion of seismic and drilling in Block 9, Bangladesh, seismic and preliminary development work in Cameroon and UK exploration including the Squirrel, Gawain South East and Monroe wells. At 31 December 2002 the group had total cash balances of £45 million, of which £25.1 million was held as security for decommissioning. BALANCE SHEET Tullow operates a successful efforts accounting policy in relation to its oil and gas exploration and development activities. The Group fully applies the requirements of the Statement of Recommended Practice 'Accounting for Oil and Gas Exploration, Development, Production and Decommissioning Activities'. Under this policy, exploration and related costs associated with projects where commerciality has not yet been determined are initially capitalised as Intangible Fixed Assets. Additions to Intangible Fixed Assets during 2002 reflect the Group's ongoing exploration activities in the SNS, Algeria, Bangladesh, Cote d'Ivoire, Cameroon and Romania. Tangible fixed assets represent the accumulated value of the Group's existing commercial production and development assets. Reductions in tangible fixed assets during the period reflect the inclusion of lower decommissioning cost estimates in respect of the Hewett and Thames Assets; these are offset by a corresponding adjustment to the provision for decommissioning costs. DEBT MANAGEMENT Net Debt increased during 2002, as spending on new development projects reached a peak during the year. At 31 December Tullow had a total of £80.6 million outstanding under its SNS Borrowing Base facility. Repayments under the UK banking facility are determined bi-annually based on the net present values of the included assets. During 2002, total repayments of c.£5 million were made under this facility while approximately £4 million has also been repaid since year-end. Wherever possible, Tullow seeks to protect banking availability through its gas hedging strategy. International facilities principally comprise a $15 million project finance facility covering the Espoir project and a revolving corporate facility. The Espoir Project facility is covered by political risk insurance and, upon the satisfaction of certain production conditions will become fully non-recourse. FINANCIAL RISK Tullow's core strategy is to maximise the value of the Group through the discovery and commercial development of oil and gas reserves. This activity may be supplemented from time to time by acquisitions, however in each case Tullow seeks to manage its exposure to resource price fluctuations. All hedging and forward sales activity is undertaken to satisfy this objective. It is not Group policy to maintain open-ended or speculative derivative exposures. 2002 was a year of significant resource price volatility, particularly in UK gas where prices varied from 5p/therm to over 35p/therm. During 2002, approximately 60% of Tullow's UK gas was sold under long-term contracts and thus substantially protected from near term price movements. Tullow operates an active gas marketing strategy in respect of the remaining uncontracted portion of its production; this was particularly successful during 2002, resulting in an average realised price of 20.2p/therm against an average spot price of approx 15.2p/therm during the year. During the fourth quarter of 2002, the gas sales contracts in relation to both the Murdoch and Boulton fields were terminated, while Tullow's uncontracted gas production was also increased by the commencement of production from the CMS III project. In recognition of this, Tullow has intensified its forward sales and hedging activities and at 31 March 2003 had approximately 80% of 2003 uncontracted gas production covered at a minimum price of c.20p/therm. Due to the restricted production to date from the Espoir project, no hedging has been undertaken. Upon completion of the current production enhancement initiatives it is Tullow's intention to seek to protect revenues through hedging wherever possible. Tullow has hedged approximately 50% of its total Sterling interest exposure through a mixture of swaps, collars and interest rate caps. TULLOW OIL PLC PRELIMINARY RESULTS FOR YEAR ENDED 31ST DECEMBER 2002 CONSOLIDATED PROFIT AND LOSS ACCOUNT 2002 2001 NOTE £'000 £'000 Turnover 112,624 76,633 --------- --------- Cost of Sales Operating Costs (35,982) (20,607) Depletion and Amortisation (39,368) (25,873) --------- --------- (75,350) (46,480) --------- --------- Gross Profit 37,274 30,153 --------- --------- Administrative Expenses (3,610) (3,673) Depreciation (315) (186) --------- --------- (3,925) (3,859) --------- --------- Operating Profit Before Exploration Costs 33,349 26,294 Profit on Farm Out of Licence Interests 914 - Exploration Costs Written Off (4,169) (3,945) --------- --------- Operating Profit 30,094 22,349 Interest Receivable and Similar Income 1,409 1,371 Interest Payable and Similar Charges (9,044) (7,708) --------- --------- Profit on Ordinary Activities Before Taxation 22,459 16,012 --------- --------- Taxation on Profit on Ordinary Activities Current and Deferred Petroleum Revenue Taxation (2,696) (2,740) Current Corporation Taxation (6,589) (2,526) Deferred Corporation Taxation (378) (1,436) --------- --------- (9,663) (6,702) --------- --------- Profit for the Financial Year 12,796 9,310 --------- --------- EARNINGS PER ORDINARY SHARE 3 Stg p Stg p - Basic 3.56 2.61 - Diluted 3.51 2.56 ======== ======= TULLOW OIL PLC PRELIMINARY RESULTS FOR YEAR ENDED 31ST DECEMBER 2002 STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES 2002 2001 £'000 £'000 Profit for the Financial Year 12,796 9,310 Currency Translation Adjustments (5,122) 712 -------- -------- Total Recognised Gains 7,674 10,022 ======== ======== RECONCILIATION OF MOVEMENT IN SHAREHOLDERS' FUNDS 2002 2001 £'000 £'000 Profit for the Financial Year 12,796 9,310 Currency Translation Adjustments (5,122) 712 Shares Issued 626 2,593 -------- -------- Net Increase in Shareholders' Funds 8,300 12,615 Shareholders' Funds at 1st January 92,000 79,385 -------- -------- Shareholders' Funds at 31st December 100,300 92,000 ======== ======== TULLOW OIL PLC PRELIMINARY RESULTS FOR YEAR ENDED 31ST DECEMBER 2002 CONSOLIDATED BALANCE SHEET AS AT 31ST DECEMBER 2002 2002 2001 NOTE £'000 £'000 Fixed Assets Intangible Assets 34,498 32,505 Tangible Assets 161,089 174,855 Investments 299 299 --------- --------- 195,886 207,659 --------- --------- Current Assets Debtors 24,535 21,837 Cash at Bank and in Hand 44,778 45,468 --------- --------- 69,313 67,305 --------- --------- Creditors - Amounts falling due within one year Bank Loans and Overdrafts (27,078) (16,942) Trade and Other Creditors (26,464) (41,678) --------- --------- (53,542) (58,620) --------- --------- Net Current Assets 15,771 8,685 --------- --------- Total Assets Less Current Liabilities 211,657 216,344 Creditors - Amounts falling due after more than one year Bank Loans (74,923) (83,152) Provision for Liabilities and Charges Decommissioning Costs (32,826) (37,438) Deferred Taxation (3,608) (3,754) --------- --------- Net Assets 100,300 92,000 ========= ========= Capital and Reserves Called Up Share Capital 35,981 35,847 Share Premium Account 2,485 1,993 Merger Reserve 69,213 69,213 Profit and Loss Account 4 (7,379) (15,053) --------- --------- Equity Shareholders' Funds 100,300 92,000 ========= ========= TULLOW OIL PLC PRELIMINARY RESULTS FOR YEAR ENDED 31ST DECEMBER 2002 CONSOLIDATED CASH FLOW STATEMENT 2002 2001 NOTES £'000 £'000 Net Cash Inflow from Operating Activities 5 62,929 52,904 Returns on Investments and Servicing of Finance 6 (4,070) (5,404) Taxation (5,679) (1,397) Capital Expenditure and Financial Investment 7 (56,251) (129,317) --------- --------- Net Cash Outflow before Management of Liquid (3,071) (83,214) Resources and Financing Management of Liquid Resources - Term Deposits (896) 12,426 Financing 8 (16,179) 76,868 --------- --------- (Decrease)/Increase in Cash (20,146) 6,080 ========= ========= Reconciliation of Net Cash Flow to Movement in Net (Debt)/Funds (Decrease)/Increase in Cash for the Year (20,146) 6,080 Cash Inflow from Increase in Debt (3,011) (92,850) Cash Outflow/(Inflow) from Increase/(Decrease) in 896 (12,426) Liquid Resources --------- --------- Change in Net Debt resulting from Cashflows (22,261) (99,196) Translation Difference 694 602 Net (Debt)/Funds at 1st January (73,832) 24,762 --------- --------- Net Debt at 31st December (95,399) (73,832) ========= ========= Analysis of Changes in Net Debt 01.01.02 CashFlow Exchange 31.12.02 £'000 £'000 £'000 £'000 Cash at Bank and in Hand 24,188 (20,232) (234) 3,722 Overdrafts (708) 86 (43) (665) --------- --------- --------- --------- 23,480 (20,146) (277) 3,057 --------- --------- --------- --------- Debt due within one year (16,234) (10,178) - (26,412) Debt due after one year (86,670) 7,167 1,516 (77,987) --------- --------- --------- --------- (102,904) (3,011) 1,516 (104,399) --------- --------- --------- --------- Term Deposits 5,592 896 (545) 5,943 --------- --------- --------- --------- Net Debt (73,832) (22,261) 694 (95,399) ========= ========= ========= ========= Note - Cash at Bank and in Hand at 31st December 2002 per the Group Balance Sheet includes £ 3,722,075 of Cash at Bank and in Hand, £5,942,657 of Fixed Term Deposits, £25,093,268 on Fixed Deposit in support of future decommissioning costs and £10,020,172 on Deposit in support of the Borrowing Base. Bank Loans are stated in the Balance Sheet net of unamortised related Arrangement Fees. TULLOW OIL PLC PRELIMINARY RESULTS FOR YEAR ENDED 31ST DECEMBER 2002 NOTES TO THE PRELIMINARY ACCOUNTS Note 1. Basis of Accounting The preliminary accounts have been prepared under the historical cost convention and in accordance with the accounting policies set out on pages 39 to 41 of the Annual Report and Accounts for the year ended 31st December 2001. The Group adopted FRS 19 'Deferred Tax' on 1st January 2002. There was no effect on the Group's results and net assets for the year or comparative amounts on the adoption of this accounting standard. Note 2. Basis of Preparation The financial information presented above does not constitute statutory accounts within the meaning of section 240 of the Companies Act 1985. An audit report has not yet been issued on the accounts for the year ended 31st December 2002, nor have they been delivered to the Registrar of Companies. The comparative financial information for the year ended 31st December 2001 has been derived from the statutory accounts for that year. Those statutory accounts, upon which the auditors have issued an unqualified opinion, have been filed with the Registrar of Companies. Note 3. Earnings Per Ordinary Share The calculation of basic earnings per share is based on the profit for the year after taxation of £12,795,601 (2001 - £9,309,789) and 359,324,277 (2001 - 356,284,421) ordinary shares, being the weighted average number of shares in issue for the year. The calculation of diluted earnings per share is based on the profit for the year after taxation as for basic earnings per share. The number of shares outstanding however, is adjusted to show the potential dilution if employee and other share options are converted into ordinary shares. The weighted average number of ordinary shares is increased by 4,881,762 (2001 - 6,954,952) in respect of the share option scheme, resulting in a diluted weighted average number of shares of 364,060,039 (2001 - 363,239,373). Note 4. Profit and Loss Account 2002 2001 £'000 £'000 At 1st January (15,053) (25,075) Profit for the Financial Year 12,796 9,310 Currency Translation Adjustments (5,122) 712 -------- -------- At 31st December (7,379) (15,053) ======== ======== Note 5. Net Cash Inflow from Operating Activities 2002 2001 £'000 £'000 Operating Profit for the Year 30,094 22,349 Depletion and Amortisation 39,368 25,873 Depreciation of Other Fixed Assets 315 186 Exploration Costs & Farm Out 3,255 3,945 Taxation Paid in Kind (2,014) - Increase in Operating Debtors (1,947) (16,613) (Decrease)/Increase in Operating Creditors (5,806) 17,164 Translation Adjustment (336) - -------- --------- 62,929 52,904 Net Cash Inflow from Operating Activities ======== ======== Note 6. Returns on Investments and Servicing of Finance 2002 2001 £'000 £'000 Interest Received 1,621 1,351 Interest Paid (4,603) (4,320) Finance Fees Paid (1,088) (2,435) -------- -------- Net Cash Outflow from Returns on Investment & Servicing of (4,070) (5,404) Finance ======== ======== Note 7. Capital Expenditure and Financial Investment 2002 2001 £'000 £'000 Purchase of Tangible & Intangible Exploration Assets (60,798) (130,171) Purchase of Tangible Fixed Assets - Other (327) (653) Disposal of Tangible Fixed Assets - Other - 14 Farm Out of Intangible Exploration Assets 4,874 1,792 Purchase of Investments - (299) --------- --------- Net Cash Outflow from Investing Activities (56,251) (129,317) ========= ========= Note 8. Financing 2002 2001 £'000 £'000 Issues of Ordinary Shares 626 2,604 Costs of Share Issues - (12) Repayment of Loans (5,222) (4,466) Drawdown of Loans 8,174 97,118 Transfers to Restricted Funds Deposit Account (19,425) (15,688) Debt Arrangement Fees (332) (2,688) --------- --------- (16,179) 76,868 ========= ========= Note 9. Proven and Probable Reserves Summary EUROPE AFRICA ASIA TOTAL ------------- ------------- ------------- ---------------------------- Oil Gas Oil Gas Oil Gas Oil Gas Petroleum mmbbl bcf mmbbl bcf mmbbl Bcf Mmbbl Bcf Mmboe 1st Jan 0.04 201.15 19.84 40.74 - 157.48 19.88 399.37 86.44 2002 Revisions 0.04 7.32 0.24 9.88 - (14.70) 0.28 2.50 0.69 Production (0.02) (37.79) (0.73) (0.17) - (4.04) (0.75) (42.00) (7.75) ------------- ------------- ------------- ---------------------------- 31st Dec 0.06 170.68 19.35 50.45 - 138.74 19.41 359.87 79.38 2002 ------------- ------------- ------------- ---------------------------- Note 10. Dividends No dividend is proposed in respect of 2002 (2001 - Nil) however the Company intends to propose and pay a 2003 dividend of 1p per ordinary share subject to the approval by the High Court of Ireland of an application to write off the accumulated deficit on the Profit and Loss Account of our Irish subsidiary against that Company's share premium account and the completion of related accounting work. Note 11. 2002 Annual Report and Accounts The Annual Report and Accounts will be posted to all shareholders in due course. This information is provided by RNS The company news service from the London Stock Exchange

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