Half-yearly Report

Europa Oil & Gas (Holdings) plc (`Europa') Production doubled in '06 with much to drill in `07 Interim results for the six months ended 31 January 2007 Europa Oil & Gas (Holdings) plc, (AIM:EOG), the independent oil & gas exploration and production group with projects in the UK, Romania, Ukraine, France, Egypt and Western Sahara today announces its interim results for the six months ended 31 January 2007. Financial * Turnover of Â£1.652m (6 months to 31 January 2006 Â£1.447m) * Operating profit of Â£0.385m (6 months to 31 January 2006 Â£0.490m) * Profit after tax of Â£0.125m (6 months to 31 January 2006 Â£0.398m) * Earnings per share of 0.20p (0.65p at 31 January 2006) * Cash of Â£0.353 million (Â£1.034m at 31 January 2006) * Net assets of Â£8.448 million (Â£9.033m at 31 January 2006) * 958,919 ordinary shares issued for net proceeds of Â£190,000 Operational * Ended the period at approximately 600 barrels of oil equivalent per day (boepd). * Acquired 100% of the Crosby Warren Oilfield * Production levels at Crosby Warren up by 100%, based on 6-monthly averages pre- and post-acquisition date * Commissioned the Bilca Field production facilities and commenced gas sales * Acquired further seismic south of Bilca, identifying two prospects for drilling Recent Events UK * Awarded Blocks 109/5 and 112/30 in the UK 24th Round of Licensing * Completed seismic acquisition on PEDL150 licence * Conducted essential maintenance on the West Firsby facilities * Submitted Planning Applications for Holmwood-1 and Crosby Warren-2Z Romania * Spudded Radauti East-1, the first of five exploration wells scheduled for 2007 * Modified plans for Costisa-1Z re-entry to drill a replacement well, designated Costisa-2 France * Obtained final award of BÃ©arn des Gaves licence on 23rd March. General Corporate * Recruited finance manager. New Ventures * Received government approval for West Darag PSA, Egypt Further information: Paul Barrett Managing Director, Europa Oil & Gas (Holdings) plc +33 5 63 33 18 97 Jonathan Wright / Parimal Kumar Seymour Pierce Limited +44 20 7107 8000 Chairman's Statement The six months to 31 January 2007 have seen the start-up of gas production from the Bilca Field complex in Romania, and the acquisition of Crosby Warren, its third producing property in the East Midlands. Europa ended the six month period with production of approximately 600 barrels of oil equivalent per day which underpins our assertion that Europa is better placed than many of its AIM peers to grow into a significant European oil and gas company. The commissioning of the Bilca facilities in Romania was a culmination of over five years of exploration and development activity on the EIII-1 licence. This has resulted in production net to Europa of approximately 300 boepd. It is a significant achievement to have taken these assets from exploration play to production, in a country where private sector energy production is in its infancy. The Crosby Warren Oilfield, situated in the East Midlands Oil Province, was producing an average of 35 boepd for the six months prior to the acquisition date. Subsequently, on acquisition Europa instigated a production optimisation programme. The first phase of this programme has resulted in production levels at an average 70 boepd for the six months following acquisition. Additional work is being planned in the short term to further increase production from the field. Compared with the same period last year, Turnover has increased by 14% to Â£ 1.652 million, whereas Operating Profit has declined by 21% to Â£0.385 million. The increase in Turnover is starting to show the effect of the Romania gas production which came onstream in late 2006, but has been offset somewhat by lower crude oil revenues than in the previous period. The lower crude oil revenues are due to the adverse movement in the Â£ to $ exchange rate. Operating costs in the Company rose as a result of a significant uplift in the number of active projects with the addition of Bilca and Crosby Warren. The lower Operating Profit is principally due to the reduction in realised Â£ sterling value of crude sales. Earnings per share were 0.20p. Europa is set to embark on a strong drilling programme in Romania in 2007 and spudded the first well of this campaign, Radauti East-1, on 17 April 2007. The Romanian programme consists of three further exploration wells and the drilling of the Costisa-2 well. In the UK, Europa has lodged a planning application for an exploration well at Holmwood in the Weald Basin of southern England. In the East Midlands, a seismic programme has been completed in the PEDL150 licence, where a further exploration well is anticipated to follow. In addition to the Company's strong exploration acreage portfolio that has been developed over the years, the UK government has recently awarded Europa a further licence in the East Irish Sea, where a large drillable prospect has been identified. Europa currently has production from four fields and has ambitious drilling plans for 2007, including a full re-appraisal of the Costisa-1 well. With 5 new exploration wells planned in Romania alone in 2007, we are confident that Europa's historical record in exploration success will continue and we look forward to reporting the outcome of these activities in the year ahead. Operations Review UK Production from the group's two onshore oil interests: West Firsby and Whisby, was augmented by the acquisition, in November 2006, of a 100% interest in the DL001 licence, containing the Crosby Warren Oilfield. Net oil production rates at the end of 2006 were 106 bopd from West Firsby, 89 bopd from Whisby and 70 boepd from Crosby Warren. Production at Whisby continued strongly and the well is anticipated to continue to deliver significant cashflow for several years. Production at West Firsby held steady throughout the period, whilst Crosby Warren production was doubled from historical levels due to more rigorous production operations initiated from the effective date of the acquisition. Work continued on the preparation of a full Environmental Impact Study to support the planning application for the drilling of the Holmwood-1 exploration well on the PEDL143 licence in Surrey. On the Company's P1131 `Quad 41 ` licence, work continued to identify development options for the gas discoveries, including offshore electricity generation, onshore gas treatment and gas storage. Romania The main development in Romania during the period was the commissioning of the Bilca production facilities, which takes gas production from two Bilca wells and the Fratauti-1 well. Production commenced 27th September 2006 and stabilised at a rate of some 180,000 m3 per day (approx. 1,050 boepd). During 2006, further seismic data was acquired over the Brodina Block, covering a large area to the south of the Bilca development and over the large Voitinel lead in the west of the licence. Two prospects were identified for drilling in the eastern part of the block: Arbore and East Radauti. These are relatively shallow gas sand targets and will be drilled in 2007. The seismic data over Voitinel confirmed a large structure which it is anticipated will be drilled in late 2007, following further work to define a drilling location. Planning work continued on the re-drill of the Costisa-1 well, which encountered strong gas shows in a sandstone at 1,000 metres depth. After an assessment of the sidetrack logistics, it was decided to re-drill the well from a nearby location, designated Costisa-2. Ukraine During 2006, as a result of a Presidential Decree, all state-produced gas was to be sold at a heavily discounted price to offset the effect of higher Gazprom import prices. However, NaftoGaz Ukriany, the gas regulator, interpreted this that all gas produced with state partners would be subject to this lower price. To avoid this, Europa produced into gas storage and sought clarification on this matter. The courts have since ruled in Europa's favour. As Ukraine accounts for only 3% of Europa's overall production volumes, the diversion of gas into storage has not materially affected turnover. Recent Events and Current Outlook UK The Company lodged a planning application with Surrey County Council for the Holmwood-1well. . A seismic acquisition programme of 50km of 2D data has been completed on the PEDL150 licence, surrounding the Whisby Field to the west of Lincoln. These data were designed to mature a number of exploration leads to drillable prospect status and it is hoped one of these can be drilled later in 2007. The West Firsby Field was shut-in during April 2007 for essential maintenance, following increases in H2S levels. During this shut-down, the opportunity was taken to undertake reservoir pressure measurements, anticipated to lead to a re-design of the artificial lift systems to increase pump efficiency. The Company was awarded two blocks in the UK 24th round of offshore licensing, 109/5 and 112/30. These blocks, situated in the East Irish Sea, some 25 km west of the Morecambe Field, contain a large undrilled structure at Carboniferous level with potential for up to 1.5 tcf (2.5 billion boe) of reserves. Romania Drilling commenced on the Radauti East-1 well on the 17 April 2007. This is the start of a five well campaign in Romania, the first two of which result from the 2006 seismic campaign. The Arbore-1 well will follow on directly after Radauti East-1. Europa now plans to drill the Costisa-2 well as a replacement for Costisa-1Z, some 200m from the original location. Plans are at an advanced stage for a June spud. Later in 2007, the Boistea-1 and Schineni-1 wells are expected to be drilled in the EIII-3 Cuejdiu and EIII-4 Bacau blocks, respectively. Ukraine After seeking court clarification on the gas sales issue described above, the Court of Appeal on 11 April 2007 upheld the original decision in favour of Europa to allow it to sell at market prices. The Company is therefore now seeking to sell the gas currently held in storage and recommence gas sales. New Ventures The Company was informed in March 2007 that the West Darag Production Sharing Agreement had been approved by the People's Assembly in Egypt. consequently, this large licence, situated along the northwestern margin of the Gulf of Suez, is anticipated to be signed in May 2007. On 26 March 2007, the Company was informed by the French Ministry of Industry that the award had been made of the BÃ©arn des Gaves permit, situated adjacent to the Lacq and Meillon fields in the Aquitaine Basin of southwest France. Conclusion At the time of writing, Europa is passing into an extremely exciting phase - that of drilling several prospects on which the team have been working for several years. The directors are confident that success this year with the drillbit will flow through to increased shareholder value. Sir Michael Oliver Chairman CONSOLIDATED PROFIT AND LOSS ACCOUNT For the six month period ended 31 January 2007 Continuing Acquired 6 6 12 Operations Operations Months Months Months Ended 31 Ended 31 Ended 31 January January July 2007 2006 2006 Â£ Â£ Â£ Â£ Â£ Turnover 1,529,401 122,944 1,652,345 1,447,086 2,825,075 Cost of sales * Operating costs (432,265) (64,176) (496,441) (348,878) (623,800) * Exploration & - - - - (137,947) appraisal write-off * Depletion and (576,764) (18,209) (594,973) (417,033) (626,385) amortisation (1,009,029) (82,385) (1,091,414) (765,911) (1,388,132) Gross profit 520,372 40,559 560,931 681,175 1,436,943 Administrative expenses (175,631) - (175,631) (190,813) (387,346) Operating profit 344,741 40,559 385,300 490,362 1,049,597 Interest receivable and 87,212 33,131 130,259 similar income Interest payable and (127,578) (124,770) (305,810) similar charges Profit on ordinary 344,934 398,723 874,046 activities before taxation Tax on profit on ordinary (220,134) - (1,483,842) activities Retained profit/(loss) 124,800 398,723 (609,796) for the financial period Basic earnings/(loss) per 0.20p 0.65p (1.00)p share Diluted earnings/(loss) 0.20p 0.65p (1.00)p per share RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS For the six month period ended 31 January 2007 6 6 12 Months Months Months Ended 31 Ended 31 Ended 31 January January July 2007 2006 2006 Â£ Â£ Â£ Retained profit/ (loss) for the financial 124,800 398,723 (609,796) period Currency translation difference on foreign 15,473 - 49,972 currency net investment Issue of shares 200,000 - - Costs relating to share incentive plans 12,870 20,215 40,430 Net increase/ (decrease) is shareholders' 353,143 418,938 (519,394) funds Opening shareholders' funds 8,094,932 8,614,326 8,614,326 Closing shareholders' funds 8,448,075 9,033,264 8,094,932 CONSOLIDATED BALANCE SHEET as at 31 January 2007 6 6 12 Months Ended Months Ended Months 31 January 31 January Ended 31 July 2007 2006 2006 Â£ Â£ Â£ Fixed assets Intangible assets 5,303,762 4,249,761 4,833,698 Tangible assets 5,758,016 4,829,551 5,401,211 11,061,778 9,079,312 10,234,909 Current assets Stock 57,768 38,654 45,383 Debtors 753,138 485,016 519,024 Cash at bank and in hand 353,632 1,034,063 148,488 1,164,538 1,557,733 712,895 Creditors: amounts falling due within one (1,185,966) (448,568) (837,016) year Net current (liabilities)/assets (21,428) 1,109,165 (124,121) Total assets less current liabilities 11,040,350 10,188,477 10,110,788 Creditors: amounts falling due after more (629,713) (879,337) (651,583) than one year Provision for liabilities and charges (1,962,562) (275,876) (1,364,273) Net assets 8,448,075 9,033,264 8,094,932 Capital and reserves Called up share capital 620,240 610,650 610,650 Share premium 4,596,970 4,406,560 4,406,560 Merger reserve 2,868,033 2,868,033 2,868,033 Profit and loss account 362,832 1,148,021 209,689 Shareholders' funds 8,448,075 9,033,264 8,094,932 CONSOLIDATED CASH FLOW STATEMENT For the period ended 31 January 2007 6 6 12 Months Ended 31 Months Months July Ended 31 Ended 31 January January 2006 2007 2006 Â£ Â£ Â£ Net cash inflow from operating activities 929,158 964,758 1,783,172 (a) Returns on investments and servicing of finance Interest received 4,419 30,157 46,250 Interest paid (55,162) (103,108) (151,990) Net cash outflow from returns on (50,743) (72,951) (105,740) investments and servicing of finance Taxation Tax paid - - (1,653) Net cash outflow from taxation - - (1,653) Capital expenditure Purchase of fixed assets (939,908) (1,716,267) (3,241,873) Net cash outflow from capital expenditure (939,908) (1,716,267) (3,241,873) and financial investment Net cash outflow before financing (61,493) (824,460) (1,566,094) Financing Loans received 459,721 - - Loans redeemed (393,084) (118,594) (220,035) Issue of share capital 200,000 - - Underwriting & due diligence fee - - (42,500) Net cash inflow/(outflow) from financing 266,637 (118,594) (262,535) Increase/(decrease) in cash in the period/ 205,144 (943,054) (1,828,629) year (b) NOTES TO THE CONSOLIDATED CASH FLOW STATEMENT For the period ended 31 January 2007 (a) Reconciliation of operating profit to net cash inflow from operating activities 6 6 12 Months Months Months Ended 31 Ended 31 Ended 31 January January July 2007 2006 2006 Â£ Â£ Â£ Operating 385,300 490,362 1,049,597 profit Non cash 12,870 20,215 40,430 items Depreciation 594,973 417,766 764,332 including exploration & appraisal write-off (Increase)/ (12,385) 12,777 6,048 decrease in stock (Increase)/ (94,064) 39,099 (31,066) decrease in debtors Increase/ 42,464 (15,461) (46,169) (decrease) in creditors Net cash 929,158 964,758 1,783,172 inflow from operating activities (b) Analysis of changes in At 31 July Cash Translation At 31 net debt January 2006 Flow Differences 2007 Â£ Â£ Â£ Â£ Cash at bank and in hand 148,488 205,144 - 353,632 148,488 205,144 - 353,632 Loans due within one (194,847) (66,637) 4,100 (257,384) year Loans due after one year (651,583) - 21,870 (629,713) (846,430) (66,637) 25,970 (887,097) Net (debt)/ funds (697,942) 138,507 25,970 (533,465) (b) Analysis of changes in At 31 July Cash Non Cash At 31 net debt January 2005 Flow Movement 2006 Â£ Â£ Â£ Â£ Cash at bank and in hand 1,977,117 (943,054) - 1,034,063 1,977,117 (943,054) - 1,034,063 Loans due within one (238,696) 121,593 - (117,103) year Loans due after one year (883,906) 4,569 - (879,337) (1,122,602) 126,162 - (996,440) Net funds/(debt) 854,515 (816,892) - 37,623 NOTES TO THE CONSOLIDATED CASH FLOW STATEMENT For the period ended 31 January 2007 (b) Analysis of changes At 31 July Cash Flow Non Cash Translation At 31 in net debt 2005 movement differences July 2006 Â£ Â£ Â£ Â£ Â£ Cash at bank and in 1,977,117 (1,828,629) - - 148,488 hand 1,977,117 (1,828,629) - - 148,488 Loans due within one (238,696) 220,035 (194,847) 18,661 (194,847) year Loans due after one (883,906) - 194,847 37,476 (651,583) year (1,122,602) 220,035 - 56,137 (846,430) Net funds/(debt) 854,515 (1,608,594) - 56,137 (697,942) (c) Reconciliation of net cash flow to movement in net (debt) /funds 6 6 12 Months Months Months Ended 31 Ended 31 Ended 31 January July January 2006 2006 2007 Â£ Â£ Â£ Increase/ (decrease) increase in cash in 205,144 (943,054) (1,828,629) the period Cash (inflow)/outflow from changes in (66,637) 126,162 220,035 debt Change in net funds resulting from cash 138,507 (816,892) (1,608,594) flows Non cash movement - - - Translation differences 25,970 - 56,137 Net (debt)/ funds at start of the (697,942) 854,515 854,515 financial period Net (debt)/ funds at end of financial (533,465) 37,623 (697,942) period NOTES TO THE ACCOUNTS For the period ended 31 January 2007 1. The results for the period are all derived from continuing operations. 2. The accounting standard FRS20 `Share based payment' has been adopted for the first time during the six month period to the 31st January 2007. In order to provide comparative information a prior period adjustment has been made to the results for the 12 month period ended 31st July 2006 and the 6 month period ended 31st January 2006. 3. Other than the adoption of the accounting standard FRS20 the unaudited results have been prepared on the basis of the accounting policies adopted in the annual accounts for the 12 month period ended 31 July 2006. 4. The interim report for the six months to 31 January 2007 was approved by the Directors on the 30th April 2007. 5. The calculation of basic earnings per share is based on the weighted average shares in issue throughout the six month period. The diluted earnings per share include employee share options. 6. The interim results are unaudited and do not constitute statutory financial statements as defined in section 240 of the Companies Act 1985.

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