Final Results

RNS Number : 7501P

Aminex PLC

31 March 2009

 



AMINEX PLC

("Aminex" or "the Company")

31 March 2009

Preliminary results for the year ended 31 December 2008

Aminex, the oil and gas company listed on the London and Irish Stock Exchanges, today announces its preliminary results for the year ended 31 December 2008.

HIGHLIGHTS

• Major discovery in Tanzania at Kiliwani North

• Major discovery in Texas at Alta Loma now on production

• Oil production volume up 24%

• Gas production volume up 123%

• Drilling success at South Weslaco, Texas

• Loss for the year $9.7 million (2007: loss $3.3 million) after writing down $8.1 million of historic exploration cost

• US reserves value maintained despite lower oil and gas prices

• Award of new licence at West Songo-Songo, Tanzania

• Disposal of interest in Madagascar project

Brian Hall, Chairman of Aminex, said:

"Aminex completed a fruitful drilling campaign in 2008 with discoveries in both Tanzania and the USA.  The Kiliwani North discovery places us amongst the most successful pure explorers on the East African coastal margin in recent years, while a combination of production income and no corporate debt leaves the Company well-placed in these challenging times. Recognising that capital markets are not at the moment  readily available to support frontier exploration, we are seeking to maximise returns from the US while looking for industry solutions to grow our exploration business in the immediate future."

Enquiries:
Aminex PLC	[phone]
Brian Hall - Chairman
Simon Butterfield - Finance Director
Pelham Public Relations	[phone]
Archie Berens
Website	www.aminex-plc.com

  Dear Shareholder,

Below please find Aminex's preliminary financial results and accompanying statement in respect of the year ended 31 December 2008.

OVERVIEW

In a year marked by volatility in the markets and lower commodity prices, Aminex completed a six-well drilling programme in three countries and achieved three successful well results.  

In Tanzania in particular, our Nyuni joint venture, of which we are the operator with a 40% interest and the largest participant, successfully drilled and tested the Kiliwani North-1 well, flowing gas at 40 million cubic feet/day under production test conditions. We have been exploring at Nyuni for several years now and the Kiliwani North discovery vindicates our reasons for being there in the first place and for persevering after earlier setbacks, including the Kiliwani-1 well which was spudded in 2007 and abandoned in early 2008 after failing to encounter commercial hydrocarbons. Nyuni-1, suspended in 2004, is now a possible candidate for re-entry.  

Despite mounting industry activity on the East African coastal margin, Aminex, at the time of writing, remains the most active driller and arguably the most successful pure explorer in this particular area in recent times. No other frontier exploration well in the last twenty five years on the coastal margin has been as successful as Kiliwani North-1. We are now appraising this discovery and expect to shoot further seismic in mid-2009 to define the areal extent of the field. Given the proximity of the Songas pipeline, this will ultimately be the most likely sales route for Kiliwani North gas.

Late in 2009 we anticipate spudding the first well on our Ruvuma Basin PSA in southern Tanzania where we are in 50-50 partnership with Tullow Oil, to which operatorship has been transferred for the drilling phase. Even though oil prices have fallen, contractor prices remain very high in East Africa and we are actively seeking a farm-in partner.

In May we were granted a PSA over the West Songo-Songo area in 50-50 partnership with Key Petroleum Ltd. (operator) where evaluation work is in progress.

In the USA we drilled a step-out well in the South Weslaco Field, Hidalgo County, Texas early in the year which is now delivering gas to market, and subsequently we drilled Sunny Ernst-2, a deep exploration well, at Alta Loma, Galveston County, Texas in the third quarter. Sunny Ernst-2 was the most successful well we have ever drilled in the USA, testing gas at 6 million cubic feet per day and oil at 300 barrels per day from only one of four formations logged. Net revenues from Sunny Ernst-2 should be sufficient on their own to cover our carefully controlled  corporate costs in 2009 provided we experience no further dramatic fall-off in commodity prices nor a material decline in production. Aminex is the largest participant in Sunny Ernst-2 with a 37.5% working interest. The Alta Loma lease is operated by El Paso Corporation.

In Egypt during 2008 we participated in two deep exploration wells on the West esh el Mellahah permit (WEEM-2) in the onshore Gulf of Suez region east of the Red Sea Hills. Neither well encountered commercial hydrocarbons but further drilling is planned for summer 2009. Aminex is free-carried for a 10% interest in this permit through to commercial production. So far, therefore, drilling has been carried out on WEEM-2 at no financial cost to Aminex.

We sold our 50% interest in Amicoh Resources Ltd., which holds a licence for the Manja exploration concession in Madagascar, to our fellow shareholder in summer 2008, primarily due to a failure to agree on a forward plan. This resulted in a write-down of $3.38 million but in view of rising exploration costs, falling markets and, more recently, a state of near civil war in that country, we believe our exit was well-timed. During a period when new capital is scarce, the Madagascar interest would have been a severe ongoing drain on our resources.

In Kenya, we are due to acquire new offshore seismic in summer 2009 on coastal blocks L17 and L18 where we operate with a 25% interest.

In the Democratic Peoples Republic of Korea progress is likely to be limited until the political situation becomes more stable.

FINANCIAL REVIEW

2008 saw total revenues increase by 9% to $10.2 million, of which 54% was attributable to oil and gas sales and 46% to the oilfield services division. Oil and gas sales were 101% higher than in 2007, partly due to increased prices and partly to increased production. Sales to third parties by the oilfield services division were lower overall as a result of a reduction in internal purchasing of oilfield materials by Aminex-operated joint ventures. 

U.S. gas production of 314 million cubic feet was 123% higher than in 2007, due to a combination of production start-up from the Sunny Ernst-2 well at Alta Loma in the second half and increased production from the South Weslaco field during the year. The average gas price achieved was $7.75/mcf, a 21% increase over 2007.

Oil production of 36,000 barrels, mainly from the Somerset and Alta Loma fields, was 24% ahead of 2007. Approximately 58% of 2008 oil production came from the Somerset field. A further 24% came from the Alta Loma Field following commencement of Sunny Ernst-2 production. The average oil price achieved during the period was $86.79/barrel, a 34% increase over 2007.

Cost of sales of $6.49 million was $880,000 less than in 2007 due to a change in the mix between oil and gas production and oilfield service activities. Depletion and decommissioning charge at $760,000 was $310,000 higher than the comparative figure for 2007, mirroring increased oil and gas production.  

Gross profit of $2.93 million was 97% ahead of the 2007 figure of $1.49 million.

Group administrative expenses of $4.45 million were 10% lower than in 2007, mainly due to a reduced current period charge representing the notional cost of the award of share options. The underlying cash expenditure on administrative expenses was $3.65 million for the year 2008.  

The net loss from operating activities before other costs was $1.6 million, a 55% improvement over the 2007 loss.

As reported in the Interim Statement, the Group disposed of its interest in the share capital of Amicoh Resources Ltd which holds the Manja exploration licence in Madagascar, giving rise to a non-cash charge of $3.38 million, representing the write off of past exploration costs previously capitalised, after offsetting the sales proceeds. A further $4.73 million has been charged as an impairment expense representing a write-down of exploration expenditure in East Africa previously capitalised.  

After taking into account net finance income of $46,000 (2007: $299,000) the resulting loss before tax for the year ended 31 December 2008 was $9.66 million (2007: $3.27 million).

Total non-current assets of $41.3 million have increased during the year by $4.3 million. The increase comprises exploration and evaluation assets of $1.67 million and property, plant and equipment of $2.9 million which were offset by a decrease in other investments of $330,000.  

The increase in exploration and evaluation assets consists of (1) drilling and evaluation activities on two Kiliwani wells on the Nyuni licence, (2) pre-drilling expenditures for two well locations on the Ruvuma licence and (3) pre-exploration expenditures on the Kenya and Songo-Songo West licences but (4) offset by the write-off of costs on the Manja licence in Madagascar and earlier exploration costs on the Nyuni licence.  

Net additions to property plant and equipment include the completion cost and tie-in to production of the South Weslaco SWGU-38 well, drilling and completion of the South Weslaco SWGU-39 well, drilling and completion and tie-in to production of the Sunny Ernst-2 well at Alta Loma as well as remedial work carried out on the Shoats Creek field but offset by the depletion and decommissioning charge for the period.  

The reduction in other investments of $330,000 represents a write down of the Group's investments to market value at the period end.

Current assets of $8.4 million have decreased since 2007 by $15.44 million due principally to a fall in cash balances. The cash balances at the beginning of 2008 have been used to fund the acquisition of property, plant and equipment and exploration activities in East Africa. Current liabilities of $5.4 million are $990,000 lower than the 2007 comparative figure. Non-current liabilities have been reduced by $177,000 to $1.37 million, the decrease represented by repayments of US vehicle equipment loans and adjustments to the abandonment provision.

Net cash outflows from operating activities improved by $1.98 million, from a $2.119 million outflow in 2007 to a $142,000 outflow in 2008 reflecting the improved underlying trading performance noted above. Approximately $15 million has been spent on capital expenditures and after subtracting miscellaneous income offset by net debt repayment, the net cash decrease for the year amounted to $14.54 million leaving a 31 December 2008 cash balance of $4.1 million.

OPERATIONS REVIEW

EAST AFRICAN MARGIN

Tanzania - Nyuni PSA Gas Discovery

The Kiliwani North-1 well, located on the southeast end of Songo-Songo Island, was confirmed as a new field gas discovery after production testing gas at 40 MMscfd from a 20 metre perforated interval in excellent reservoir quality Lower Cretaceous sands. The well has been completed and suspended for future production. The KN-1 well is just 3 kms from the Songo-Songo Gas Field processing facilities, owned by Songas, and is therefore very well positioned for a future tie-in. 

Although the production test has provided much important data, the extent of the reserves cannot yet be accurately estimated, as the Kiliwani North structure extends beyond the range of existing seismic data. A programme of field delineation will be required in parallel with plans to commercialise the discovery. The Nyuni Joint Venture applied for and was granted by the Government of Tanzania, a separate appraisal area, comprising the discovery block and several adjoining blocks within the Nyuni Licence area. The remainder of the Licence continues to be held as an exploration area, now in the third period of the PSA, with a further work programme to be undertaken.  

An independent mapping project was completed in the second half of the year, evaluating the remaining exploration potential in the Nyuni Licence. A number of substantial leads have been identified for which additional infill seismic will be required in order to bring them to drillable prospect status. With plans already in place to expand the capacity of the Songas Plant on Songo-Songo Island, with a common user pipeline to shore, there are opportunities for Aminex and its partners to build a significant new gas business should further exploration result in additional gas discoveries on this high potential licence. 

Aminex has 40% of the Nyuni Licence and is the Operator.  

Tanzania - Ruvuma PSA

On 1 January 2008, having earned its farm-in interest and as per agreement, Tullow Oil took over the operatorship of the Ruvuma PSA. The seismic acquired in 2007 formed the basis of a new interpretation of the two Ruvuma Licences (Lindi and Mtwara). A number of very encouraging prospects and leads have been identified along a prominent hinge line in the Ruvuma Basin. We believe these prospects are very well positioned to receive liquid hydrocarbon charge from the underlying source kitchen. The first of two commitment wells is planned to be drilled in 2009, on the Mikindani Prospect. The second well will follow later. The prospective areas in the Ruvuma PSA are located close to the coast with well developed nearby infrastructure in the form of roads and port facilities.

Aminex holds a 50% interest in the Ruvuma PSA.  

Tanzania - West Songo-Songo PSA Award

The West Songo-Songo Production Sharing Agreement was signed on 29 May 2008, covering a 505 km² offshore licence area located between the Tanzanian coast and the Songo-Songo Gas Field and Aminex Nyuni Licence. The initial exploration programme on the block has involved the interpretation of existing seismic data and well data from adjoining areas to develop a prospect and lead portfolio. West Songo-Songo is very favourably positioned in relation to the known producing trend in the Rufiji Basin, including Songo-Songo Gas Field and the Kiliwani North gas discovery. The primary reservoir objectives on the block are the productive Lower Cretaceous sands which are the main reservoirs at the nearby Songo-Songo Field and at Aminex's Kiliwani North gas discovery, with some upside potential in shallower stratigraphic targets. There is a single firm well commitment in the first three year term of the PSA.  

Aminex has a 50% non-operated interest in the licence.

Kenya L17/18 PSC.

These two contiguous blocks form the L17/18 PSC area located along the coastal margin from north of Mombasa to the border with Tanzania. The blocks are predominantly offshore and cover a total area of 5,000 km², over which marine seismic data was acquired in 2005-2006, prior to the signing of the PSC, when the area was held under a Technical Evaluation Agreement. A comprehensive geological and geophysical study has been carried out during 2008, from which a number of leads at multiple stratigraphic levels have been identified. A further phase of seismic acquisition has been planned to focus on the most prospective areas seen from the initial studies. A number of very encouraging leads are located offshore from Mombasa and have the possibility for both gas and oil.  

Aminex has a 25% interest and is the operator.  

EGYPT

Gulf of Suez:

West esh el Mellahah-2 PSC

The West esh el Mellahah-2 (WEEM-2) PSC, covering an area of 1328 km² is a large onshore block on the south-western margins of the Gulf of Suez Basin, near to the coastal town of Hurghada. During the year, two wells were drilled on the block. The Malak-1 recorded high gas readings over a very thick conglomerate section above Basement, but log analysis indicated the shows to be non-commercial. The second well to be drilled was the NW Tanan-1, which was plugged and abandoned after failing to encounter hydrocarbons. Following this initial drilling phase, the well results have been incorporated into a reinterpretation of the seismic data on the block and several further prospects have been delineated for the next phase of drilling.  

Aminex has a 10% interest in this PSC and its share of costs is carried by the other partners until first commercial production has been established.  

U.S.A.

Aminex has interests in four principal producing locations: Alta Loma, South Weslaco, Shoats Creek and Somerset. The results of an updated independent reserves evaluation have been released today and are tabulated as follows:

Asset	Working Interest WI	Net Revenue Interest NRI	Reserves Category	Gross Oil mmb	Gross Gas bcf	Net Oil mmb	Net Gas bcf	Net Oil & Gas mmboe (6:1)	NPV10  (net)  (M$)
Alta Loma	37.5%	28.08%	1P	1.24	31.0	0.35	8.7	1.8	39,932.6
			2P	1.24	31.0	0.35	8.7	1.8	39,932.6
Shoats Creek (op)	100%	75%	1P	0.03	0.27	0.02	0.2	0.05	949.7
			2P	2.32	21.5	1.74	16.7	4.5	95,392.1
S. Weslaco*	25%	16.51%	1P	0.03	17.0	0.004	2.2	0.37	6,754.0
			2P	0.03	20.1	0.004	2.5	0.42	7,552.0
Somerset (op)	100%	69%	0	0	0	0	0	0	-1040.0
Total US			1P	1.3	48.3	0.37	11.1	2.2	46,596.3
			2P	3.6	72.6	2.1	27.9	6.8	141,836.7

Alta Loma:

A deep exploration well, Sunny Ernst-2, was drilled in mid-year on the producing Alta Loma lease which logged oil and gas from five separate formations, the Weiting Sand, the S Sand, the Upper Andrau and the Massive Sand. The original target was the deeper Taquard Sand but this attempt was abandoned after drilling difficulties at depth. The Massive Sand was perforated and flow-tested then plugged off in favour of the Upper Andrau which tested gas at 6 million cubic feet/day and oil at 300 bopd. This well is currently on production from the Upper Andrau and delivering oil and gas to market. At the appropriate time the substantially thicker S Sand will be completed for production and commingled with existing production from the Upper Andrau. Sunny Ernst-2 is the best well ever drilled in the USA by the Aminex Group.                 

South Weslaco:

Aminex and partners are involved in a continuous drilling programme in the South Weslaco Field, Hidalgo County, Texas. SWGU-38 was logged as a gas well in early 2008 and completed for production later in the year, one of four wells now delivering gas to market.  A further well, SWGU-39 has logged a commercial gas interval since the end of 2008. Combined gross production averages 3 million cubic feet/day and Aminex has a 25% working interest.

Shoats Creek:

In 2008 Aminex received the long-awaited results of a 3D seismic survey carried out over its 100% owned Shoats Creek leases in Louisiana. Aminex's exploration team has been working constantly on evaluation and interpretation of these results for several months now and the results to date are proving to be of great interest. Aminex is in the process of offering this project as a farm-out and has received a high initial level of interest. The potential (2P) reserves of this property are more than twice the size of all Aminex's other US properties combined.

Somerset Field:

Stripper oil production at Somerset (San Antonio, Texas) has been maintained at multiple well locations with careful management but has proved sub-economic at the low oil prices achieved towards the end of 2008.  Somerset oil is classified as South Texas Sour and priced at a discount to the US bench mark crude, West Texas Intermediate (WTI). Cost-cutting steps have been taken to mitigate possible losses but recently the price of oil has shown large gains. The profitability of Somerset is kept under constant review.

FAR EAST

North Korea:

In the Democratic People's Republic of Korea we made little progress in 2008 as the political situation there yawed backwards and forwards between improved relations with the outside world and the likelihood of renewed hostilities. Progress is notably slow in all respects in North Korea but our licence there still has fifteen years to run and we remain very enthusiastic about the potential for oil and gas, particularly in the East Sea. However, progress is likely to be limited until the political situation becomes more stable.

SERVICE & SUPPLY ACTIVITIES

AMOSSCO:

Aminex's service company, Aminex Oilfield Service and Supply Company ("AMOSSCO"), traded strongly during 2008, matching its previous record year for third party sales achieved in 2007 but with overall turnover reduced because Aminex's operated joint ventures, which it supports as an-in-house supply and logistics arm, was less active than in 2007 when it was purchasing materials for a 2-well drilling campaign in Tanzania. 

STRATEGY & PROSPECTS

Changing times call for a new and flexible approach. While the greatest potential for the Company's growth is currently in East Africa, we are reacting to difficult markets by focusing on our US production to see the Company through tough times. A combination of production income and no corporate debt puts Aminex in a good position in these challenging times. Recognising that capital markets are not at the moment readily available to support frontier exploration, we are seeking to maximise returns from the US while looking for industry solutions to grow our exploration business in the immediate future. We have a good portfolio of exploration acreage and we will focus on the most promising elements, negotiating easier licence terms where appropriate to the changed commercial environment.

Full credit is due to our small staff which has worked long and hard to see us through an exciting but very challenging year.  

Yours sincerely,

BRIAN HALL

Chairman

  Group Income Statement

for the year ended 31 December 2008

	Notes	2008 US$'000	2008 US$'000	2007 US$'000	2007 US$'000
Revenue	2		10,177		9,304
Cost of sales		(6,486)		(7,363)
Depletion, depreciation and decommissioning of oil and gas assets		(758)		(449)
			(7,244)		(7,812)
Gross profit			2,933		1,492
Administrative expenses		(4,455)		(4,970)
Depreciation of other costs		(79)		(90)
			(4,534)		(5,060)
Loss from operating activities before other costs			(1,601)		(3,568)
Loss on disposal of interest in Manja licence	3		(3,379)		-
Impairment write down of exploration and evaluation assets	3		(4,728)		-
Loss from operating activities			(9,708)		(3,568)
Financing income	4		202		494
Financing costs	5		(156)		(195)
Loss before tax			(9,662)		(3,269)
Income tax expense			-		-
Loss for the financial year attributable to equity holders of the Parent Company	2		(9,662)		(3,269)
Basic and diluted loss per Ordinary Share (in US cents)	6		(3.99)		(1.54)

Group Statement of Recognised Income and Expense

for the year ended 31 December 2008

			2008 US$'000		2007 US$'000
Currency translation differences			(982)		189
Net (loss)/gain recognised directly in equity			(982)		189
Loss for the financial year			(9,662)		(3,269)
Total recognised income and expense for the year attributable to the equity holders of the Parent Company			(10,644)		(3,080)

Group Balance Sheet

 at 31 December 2008

	Notes		2008  US$'000		2007  US$'000
Assets
Exploration and evaluation assets	7		28,708		27,037
Property, plant and equipment	8		12,119		9,196
Other investments			485		813
Total non current assets			41,312		37,046
Inventory			385		98
Trade and other receivables			3,910		5,212
Cash and cash equivalents			4,097		18,642
Total current assets			8,392		23,952
Total assets			49,704		60,998
Liabilities Current liabilities
Loans and borrowings			(60)		(95)
Trade and other payables			(5,267)		(6,138)
Decommissioning provision			(24)		(105)
Total current liabilities			(5,351)		(6,338)
Non current liabilities
Loans and borrowings			(123)		(146)
Decommissioning provision			(1,244)		(1,398)
Total non current liabilities			(1,367)		(1,544)
Total liabilities			(6,718)		(7,882)
Net assets			42,986		53,116
Equity
Issued capital	9		17,844		17,835
Share premium	9		59,768		59,719
Capital conversion reserve fund			234		234
Share option reserve			2,538		2,065
Share warrant reserve			5,665		5,682
Foreign currency translation reserve			(854)		128
Retained earnings			(42,209)		(32,547)
Total equity			42,986		53,116

  Group Statement of Cashflows

for the year ended 31 December 2008

	2008 US$'000		2007 US$'000
Operating activities
Loss for the financial year	(9,662)		(3,269)
Depletion, depreciation and decommissioning	837		539
Provision against exploration and evaluation assets	4,728		-
Other provisions	11		-
Foreign exchange losses	(924)		195
Financing income	(202)		(494)
Financing costs	156		195
Loss on disposal of exploration and evaluation assets	3,379		-
Gain on sale of plant and equipment	-		(2)
Gain on sale of financial investment	(26)		-
Impairment provision against financial investment	328		111
Equity-settled share-based payment charge	473		1,336
Increase in inventory	(287)		(98)
Decrease/(increase) in trade and other receivables	1,268		(4,206)
(Decrease)/increase in trade and other payables	(204)		3,607
Net cash absorbed by operations	(125)		(2,086)
Cost of decommissioning	-		(15)
Interest paid	(17)		(18)
Net cash outflows from operating activities	(142)		(2,119)
Investing activities
Acquisition of property, plant and equipment	(4,292)		(1,355)
Expenditure on exploration and evaluation assets	(10,748)		(8,776)
Acquisition of investment assets	-		(5)
Proceeds from sale of exploration and evaluation assets	250		-
Proceeds from sale of property, plant and equipment	152		288
Proceeds from sale of other financial investments	26		-
Interest received	226		470
Net cash outflows from investing activities	(14,386)		(9,378)
Financing activities
Proceeds from the issue of share capital	44		29,330
Payment of transaction costs	(3)		(2,935)
Loans repaid	(102)		(52)
Loans received	44		148
Net cash (outflows)/inflows from financing activities	(17)		26,491
Net (decrease)/increase in cash and cash equivalents	(14,545)		14,994
Cash and cash equivalents at 1 January	18,642		3,648
Cash and cash equivalents at 31 December	4,097		18,642

  Notes to the Financial Information
for the year ended 31 December 2008

1      Statement of Accounting Polices

The financial information has been prepared in accordance with the recognition and measurement principles of International Financial Reporting Standards (IFRS), including Interpretations issued by the International Accounting Standards Board ("IASB") and its committees and endorsed or expected to be endorsed by the European Commission. 

The accounting policies used are consistent with those set out in the audited Annual Report for the year ended 31 December 2007, which is available on the Company's website, www.aminex-plc.com.

2     Segmental Information

The Group's primary reporting format is geographical segments, being America, Africa, Asia and Europe. The Group's other operations by geographical segment do not currently represent 10% or more of the Group's revenue or assets and have therefore not been separately disclosed. The Group's secondary reporting format is by business segment, being (a) exploration and evaluation, (b) producing oil and gas properties and (c) the provision of oilfield goods and services.

The Group's revenues and profits arise from oil and gas production in the USA and the provision of oilfield equipment and services in Europe.

Segment results, assets and liabilities include items directly attributable to each segment as well as items that can be allocated on a reasonable basis. Inter-segment revenue is not material and has therefore not been disclosed separately below. Net assets before borrowings have been adjusted to eliminate the impact of intercompany financing.

Segment capital expenditure is the total amount of expenditure incurred during the period to acquire segment assets that are expected to be used for more than one period.

Segmental revenue

Continuing operations

	Producing Oil and gas properties				Provision of Oilfield goods and services				Total
	2008 US$'000		2007 US$'000		2008 US$'000		2007 US$'000		2008 US$'000		2007 US$'000
Country of destination
America	5,539		2,759		77		141		5,616		2,900
Africa	-		-		1,704		4,202		1,704		4,202
Asia	-		-		2,773		2,001		2,773		2,001
Europe	-		-		84		201		84		201
Revenue	5,539		2,759		4,638		6,545		10,177		9,304

No revenues arose from exploration activities.

  2    Segmental Information (continued)

	2008 US$'000		2007 US$'000
Segment net profit/(loss) for the year
US - producing assets	1,502		12
Africa and Asia - exploration assets	(8,786)		(545)
Europe - oilfield services and supplies assets	211		361
Europe - group costs	(2,589)		(3,097)
Total Group net loss for the year	(9,662)		(3,269)
Segment assets
US - producing assets	13,552		9,502
Africa and Asia - exploration assets	31,496		33,064
Europe - oilfield services and supplies assets	1,067		1,052
Europe - group assets (*)	3,589		17,380
Total assets	49,704		60,998
* Group assets primarily comprise cash and working capital.
Segment liabilities
US - producing assets	(2,407)		(1,870)
Africa and Asia - exploration assets	(3,414)		(5,132)
Europe - oilfield services and supplies	(425)		(544)
Europe - group activities	(472)		(336)
Total liabilities	(6,718)		(7,882)
Capital expenditure
US - producing assets	4,348		1,271
Africa and Asia - exploration assets	9,758		10,726
Europe - group assets	7		126
Total capital expenditure	14,113		12,123
Other non-cash items:
US: depletion and decommissioning charge	758		449
Africa: impairment charge against exploration and evaluation assets	4,728		-
Europe: depreciation - Group assets	79		90
Europe: impairment charge against other investments held	328		111

3    Other items

In the current period the Directors have presented on the Group Income Statement the disposal of the Group's interests in Madagascar and the impairment write down of exploration expenditure in East Africa separately, as they relate to exploration activities rather than ongoing production and oilfield services activities.

(a)    Disposal of interest in Amicoh Resources Limited

On 19 June 2008, the Group disposed of its 50% interest in Amicoh Resources Limited, which held the Manja licence in Madagascar. The interest was sold to the other 50% shareholder in Amicoh Resources Limited for a cash consideration of US$250,000. The net loss on disposal was US$3,379,000 comprising:

	6 months ended 30 June  2008 $'000
Exploration and evaluation assets	(3,359)
Trade and other receivables	(264)
Cash and cash equivalents	(45)
Trade and other payables	39
	(3,629)
Less: proceeds from disposal of Amicoh Resources Limited	250
	(3,379)

(b)    Impairment of exploration and evaluation assets

An amount of US$4.728 million (2007: US$nil) has been charged as an impairment expense representing a write-down of exploration expenditure in East Africa previously capitalised.

4     Finance income

		2008 US$'000		2007 US$'000
Deposit interest income		202		494

5     Finance costs    

		2008 US$'000		2007 US$'000
Bank loans and overdraft interest		4		1
Other finance charges		13		17
Other finance costs - unwinding of discount rate on decommissioning provision		139		177
		156		195

6    Loss per Ordinary Share

The basic net loss per Ordinary Share is calculated using a numerator of the net loss for the financial year and a denominator of the weighted average number of Ordinary Shares in issue for the financial year. The diluted net loss per Ordinary Share is calculated using a numerator of the net loss for the financial year and a denominator of the weighted average number of Ordinary Shares outstanding and adjusting for the effect of all potentially dilutive shares, including share options, assuming that they had been converted.

The calculations for the basic net loss per share for the years ended 31 December 2008 and 2007 are as follows:

		2008		2007
Net loss for the financial year (US$'000)		(9,662)		(3,269)
Weighted average number of Ordinary Shares ('000)		242,118		206,769
Basic loss per Ordinary Share (US cents)		(3.99)		(1.58)

There is no difference between the net loss per Ordinary Share and the diluted net loss per Ordinary Share for the years 31 December 2008 and 2007 as all potentially dilutive Ordinary Shares outstanding are anti-dilutive. There were 16,021,000 anti-dilutive share options and 36,423,689 anti-dilutive share warrants in issue as at 31 December 2008.

7    Exploration and evaluation assets

	Tanzania US$'000	Kenya US$'000	Madagascar US$'000	Other US$'000		Total US$'000
Cost
At 1 January 2008	22,816	550	3,283	388		27,037
Additions	9,204	60	76	-		9,340
Employment costs capitalised	384	34	-	-		418
Released by disposal	-	-	(3,359)	-		(3,359)
At 31 December 2008	32,404	644	-	388		33,436
Provisions
Impairment write down in year	4,728	-	-	-		4,728
At 31 December 2008	4,728	-	-	-		4,728
Net book value
At 31 December 2008	27,676	644	-	388		28,708
At 31 December 2007	22,816	550	3,283	388		27,037

The Directors have considered the licence, exploration and appraisal costs incurred in respect of its exploration and evaluation assets, which are, with the exception of the partial write down on the Nyuni-1 well in the year, carried at historical cost. These assets have been assessed for impairment and in particular with regard to remaining licence terms, likelihood of renewal, likelihood of further expenditures and ongoing acquired data for each area, as more fully described in the Operations Review.  The Directors are satisfied that there are no further indicators of impairment but recognise that future realisation of these oil and gas assets is dependant on further successful exploration and appraisal activities and the subsequent economic production of hydrocarbon reserves.

8    Property, plant and equipment

	Developed and producing oil and gas properties - USA US$'000	Other assets US$'000		Total US$'000
Cost
At 1 January 2008	12,862	536		13,398
Additions in the year	4,348	7		4,355
Disposals during the year	(262)	(45)		(307)
Decrease in decommissioning provision	(374)	-		(374)
Exchange rate adjustment	-	(144)		(144)
At 31 December 2008	16,574	354		16,928
Depreciation
At 1 January 2008	3,949	253		4,202
Charge for the year	758	79		837
Released by disposals	(125)	(20)		(145)
Exchange rate adjustment	-	(85)		(85)
At 31 December 2008	4,582	227		4,809
Net book value
At 31 December 2008	11,992	127		12,119
At 31 December 2007	8,913	283		9,196

The majority of the Group's property, plant and equipment comprises its producing oil and gas properties which are depleted on a unit of production basis, based on proven and probable reserves at each field. At 31 December 2008, an independent valuation of each producing property was carried out based on estimated future discounted cash flows, as set out in more detail in the Operations Review, and on that basis, no impairment of the property, plant and equipment is considered to have occurred.

9     Issued capital and share premium

		Issued Capital US$'000		Share Premium US$'000
At 1 January 2008		17,835		59,719
Proceeds from exercise of warrants net of issue costs		9		32
Transfer from share warrant reserve on exercise of warrants		-		17
At 31 December 2008		17,844		59,768

10     Going concern

The Directors have given careful consideration to the Group's ability to continue as a going concern. The Directors have concluded that the Group has sufficient ongoing operating cash flows to continue as a going concern. However its ability to continue to make planned capital expenditure, in particular in its areas of interest in Africa, will be dependant on the successful sale of assets, deferral of planned expenditure or an alternative method of raising necessary capital. The Directors have a reasonable expectation that the Group will be able to implement this strategy.

We understand that, as in prior years, the auditors will likely make reference to this in their report.  We understand that their opinion will not be qualified in this respect.  

11    2008 Reports and Accounts

The 2008 Report and Accounts will be posted to shareholders shortly.

12     Statutory information

The financial information set out above does not constitute the Company's statutory accounts for the year ended 31 December 2008 within the meaning of the Companies (Amendment) Act, 1986. The statutory accounts will be finalised on the basis of the financial information presented by the Directors in the preliminary announcement and together with the independent auditor's report thereon will be delivered to the Registrar of Companies following the Company's Annual General Meeting.

13    Estimates, key risks and uncertainties

The preparation of financial statements requires management to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expense. Actual results may differ from these estimates. Key estimates and judgments related to the preparation of these financial statements have been set out in notes 7 (Exploration and evaluation assets), 8 (Property, plant and equipment) and 10 (Going concern) and these were the same as those applied in the most recent published financial statements for the Group. Principal risks and uncertainties affecting the Group relate to exploration and production risk, commodity and currency prices and other political risks particular to the countries in which we operate, as more fully described in the operations review, and in our most recent published financial statements

14    Board approval

The Board of Directors approved the preliminary financial statements for the year ended 31 December 2008 on 30 March 2009.

 

END

 

 

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