Final Results
Enterprise Oil PLC
5 February 2002
ENTERPRISE OIL AUDITED RESULTS FOR THE YEAR 31 DECEMBER 2001
Enterprise Oil today announced its results for the year ended 31 December 2001
and its new strategy.
Results
The main points of the results are:
• Post-tax profit of £297 million, excluding an exceptional item;
• Reserves replacement of 160 per cent excluding acquisitions - net reserves
stand at 1.49 billion barrels of oil equivalent;
• Progress on operated projects in Ireland, Brazil and the US Gulf of
Mexico;
• Expansion of output from the group's Italian assets;
• Plans for the development of further upside from existing assets such as
Pierce and Valhall;
• Drilling success in the UK, Norway, Brazil, and the US Gulf of Mexico;
• Full year dividend of 8.5 pence as against 8.0 pence in 2000.
Strategy
New chief executive Sam Laidlaw also outlined his strategy for the group going
forward. Having completed his strategic review, he announced that in order to
move the business forward and create consistent value for investors, several
actions were being progressed. The company is seeking to:
• Create a much stronger culture of performance, setting challenging but
achievable targets;
• Re-balance its reserves growth model, maintaining a focused high impact
exploration programme at lower cost supplemented with exploitation, field
rehabilitation projects and targeted acquisitions;
• Maximise the value of its existing portfolio by extracting the upside,
whether technical or commercial, from its high quality assets;
• Reshape the portfolio moving forward: increase the presence in low-cost
areas, leverage the exposure to gas, and balance the spread of risk and
return across the business;
• Restructure the organisation along more entrepreneurial lines - move key
skills closer to the opportunities, and strengthen accountabilities;
• Deliver, so that the company's current performance and future potential
translate over time into improved equity ratings and total shareholder
returns.
Action, not words
Mr Laidlaw also announced today that the group had already taken several steps
to take the business forward. These include:
• The purchase of Odebrecht's Brazilian E&P assets for $153 million,
bringing Enterprise's stake in Enterprise's key operated asset
Bijupira-Salema up to 80 per cent and adding three blocks to the group's
exploration portfolio in the country;
• The acquisition of CNRI's interest in the Pierce field to increase
Enterprise's equity in this important operated UK North Sea asset to 92.52
per cent. The group also announced plans for a redevelopment of the field
utilising water injection to significantly increase recovery rates;
• The acquisition of further shares in KMOC to bring the group's interest in
the company, subject to certain pre-emptive rights, up to 46.1 per cent;
• A gas marketing alliance with Innogy plc covering North West Europe.
Commenting on today's announcement, Sir Graham Hearne, Chairman, said: 'On the
financial front Enterprise delivered a strong performance in 2001, recording the
second largest post-tax profits in our history. And on the operational front we
were able to make progress on all our operated developments. Accordingly, I see
a very promising future for Enterprise as an independent. We must set ourselves
challenging targets and demonstrate to investors that we can deliver against
those targets, and that our particular skills and assets can add value right
across the portfolio. I am confident that Sam Laidlaw and his team are equal to
the task.'
Sam Laidlaw, Chief Executive, added: 'I have no doubt that I have inherited a
portfolio containing high quality assets, significant exploration potential and
good people, and I have every confidence that Enterprise can generate a
competitive total shareholder return in a tough marketplace. It is my clear
intention that Enterprise will provide a faster growth prospectus than the
integrated oil majors, and will do so by remaining a pure E&P player. Our
emphasis will be to deliver growth in value terms, not just production volumes.
And we are committed to delivering results, which will be reflected in the
performance-driven culture within Enterprise that I have begun to establish.'
A copy of the Stock Exchange Announcement is attached.
Ends.
Enquiries:
Sam Laidlaw, Chief Executive +44 (0)20 7925 4199
Andrew Shilston, Finance Director +44 (0)20 7925 4476
Patrick d'Ancona, Head of Public Relations +44 (0)20 7925 4160
Peter Reilly, Head of Investor Relations +44 (0)20 7925 4229
ENTERPRISE OIL plc
AUDITED RESULTS FOR THE YEAR ENDED 31 DECEMBER 2001
2001 2000 (restated)
£m £m
Turnover 1,390.2 1,841.2
Profit before tax excluding an exceptional item* 700.7 1,099.5
Profit after tax excluding an exceptional item* 297.4 447.6
Basic earnings per share 57.7p 82.0p
Adjusted basic earnings per share* 62.5p 90.2p
Dividends per share 8.5p 8.0p
Average production (boepd) 242,796£ 280,563
Average realised oil price per bbl £16.63 £19.05
($23.95) ($28.88)
Cost of sales per boe produced* £6.27 £5.85
*excluding an exceptional charge in 2001 for operating costs of £32.9m (£23.0m
after tax) relating to litigation concerning third party claims in respect of
the termination of a rig hire contract by a company acting on behalf of
Enterprise and other
co-venturers and in 2000 for depreciation of £40.2m arising from a reduction in
the estimated reserves of the Garden Banks 161 field in the US Gulf of Mexico.
£ including an indirect contribution of 3,962 bopd attributable to the company's
share in KMOC
Note: amounts for 2000 have been restated to reflect the adoption of FRS 19 '
Deferred Tax' (see note 1 to the accounts)
Enterprise Oil Preliminary Results Announcement
Tuesday, 5 February 2002
Chairman's Statement
2001 proved to be an important year for the company, though understandably
somewhat dominated by events during the closing months of the year.
On the financial front Enterprise delivered a strong performance, recording
post-tax profits of £297 million (excluding an exceptional item), the second
highest in our history. This was achieved against a declining oil price in the
second half such that the realised oil price for 2001 was £16.63, 13 per cent
below the prior year. On the operational front we were able to make progress on
all our operated developments as well as focus much attention on extracting the
upside from our existing fields. Reserves replacement, at 160 per cent,
underlined the quality of our asset base and demonstrated the group's ability to
replenish its resources.
But with the events of 11 September contributing to concerns over the health of
the world's economies and leading inevitably to volatility in the oil price, the
need to establish a portfolio which can ride the price cycle and consistently
deliver superior total shareholder returns was re-inforced as a clear priority.
That is why I and the rest of the board were delighted to announce in October
2001 the appointment of Sam Laidlaw as Chief Executive. Sam brings valuable
experience and vigorous leadership capable of growing the business over the
years ahead.
I see a very promising future for Enterprise as an independent - a conviction
shared passionately by Sam Laidlaw. Independents represent diversity and they
have made, and continue to make, distinctive contributions in such areas as the
North Sea. But there is clearly work to be done in altering sentiment towards
ourselves and our sector and that can only be done by setting ourselves
challenging targets and demonstrating to investors that we can deliver against
those targets, and that our particular skills and assets can add value right
across the portfolio. I am confident that Sam Laidlaw and his team are equal to
the task.
In January the board confirmed that it had received an unsolicited approach from
a third party regarding a possible offer for the company, which had been
rejected, because it wholly failed to deliver to shareholders the inherent value
of the company. I and the rest of the board continue to have full regard to our
responsibilities to shareholders in dealing with any such approach.
We propose to pay a final dividend for 2001 of 5.35 pence, making a full year
dividend of 8.5 pence compared to 8.0 pence in 2000. The record date will be 15
February and payment will be on 31 May.
In closing, I would like to thank the management and staff for their continuing
commitment to the company.
Sir Graham Hearne
Chairman
4 February, 2002
Chief Executive's Review
Strategic Overview
These results are my first as Chief Executive since taking on the role in
November. I am delighted to be leading Enterprise into what I regard as the next
phase in its development. I believe passionately in the role independent E&P
companies have to play within our industry and have every confidence that
Enterprise can generate a competitive total shareholder return in a tough
marketplace. I want to deliver this by building a world class E&P company.
It is my clear intention that Enterprise will provide a faster growth prospectus
than the integrated oil majors, and will do so by remaining a pure E&P player.
Our emphasis will be to deliver growth in value terms, not just production
volumes. And we are committed to delivering results, which will be reflected in
the new performance-driven culture within Enterprise that I have begun to
establish.
This culture will embrace not only investment decisions, and the speed and
purpose with which we will pursue them, but also their execution.
Accountabilities have already been strengthened, and the focus placed firmly on
action, not words.
I have completed a strategic review of the company and I have no doubt that I
have inherited a portfolio containing high quality assets, significant
exploration potential, and good people. However, I also feel that to move the
business forward and create consistent value for investors we need to take
several actions, which are already being progressed:
• Create a much stronger culture of performance, setting challenging but
achievable targets;
• Re-balance our reserves growth model, maintaining a focused high impact
exploration programme at lower cost, supplemented with exploitation, field
rehabilitation projects and targeted acquisitions;
• Maximise the value of our existing portfolio by extracting the upside,
whether technical or commercial, from our high quality assets;
• Reshape the portfolio moving forward: increase the presence in low cost
areas, leverage the exposure to gas, and balance the spread of risk and
return across the business;
• Restructure the organisation along more entrepreneurial lines and maximise
our cost efficiency - we have people with great skills. We will move those
skills closer to the opportunities, and strengthen accountabilities;
• Deliver, so that the company's current performance and future potential
translate over time into improved equity ratings and total shareholder
returns.
We have already taken steps to take the business forward. Today we have
announced the completion of three significant transactions, increasing our
equity in key operated assets Pierce and Bijupira-Salema and adding to our stake
in KMOC in Russia. In addition we have agreed a gas marketing alliance covering
North West Europe with Innogy plc.
Delivering value for our shareholders is our central goal. And we will pursue
value in a variety of ways: through unlocking existing value within the
portfolio; seeking growth in new areas; executing our plans against our targets;
and ultimately providing returns to shareholders.
In measuring our performance against this strategy I believe we must be both
rigorous and realistic, whilst maintaining our ambition. Following the strategic
review, our targets are:
• a return on capital of 13 per cent at $18 per barrel by 2004;
• growth in cashflow per share through the cycle of 7 per cent per annum;
and
• growth in reserves per share through the cycle of 7 per cent per annum.
The combination of these targets is designed to recognise not only our organic
performance but also the short term growth and returns trade-offs which we have
to make in evaluating acquisitions with different return profiles. We will
assess acquisitions primarily on their contribution to our desired balance of
risk and reward, and their ability to deliver returns over time significantly
above our cost of capital.
As to production growth, whilst there is further work to be done, the outlook is
encouraging. We have turned a corner and the existing asset base should deliver
a growth rate of 7 per cent per annum over the 2001 output in the medium term.
We would expect production growth over the next three years to be concentrated
in the second and third years.
I believe successful performance against these metrics provides an attractive
value proposition, distinctive from that of the majors.
2001 Operational Review
In moving the business forward, we are starting from solid foundations. The
group has again delivered a sound financial performance, recording post-tax
profits of £297 million£. The group achieved a realised oil price for 2001 of
£16.63 ($23.95), and ended the year with a strong balance sheet and a debt/
capitalisation ratio of 40 per cent. On the operational front, production in
2001 averaged 242,796* barrels of oil equivalent per day (boepd).
2001 has seen the group continue to enhance what I regard as key positions and
pivotal skills for its future by:
• progressing Enterprise-led projects in Ireland, Brazil and the US and, in
doing so, growing our operational capabilities, engineering skills and
regional presence;
• strengthening our core UK portfolio through the purchase of Petrobras UK's
assets;
• realising the potential of our presence in Italy with the start of
expansion of output from the Val d'Agri assets; and
• continuing to deliver a strong financial performance whilst maintaining
our financial firepower.
£ excluding an exceptional charge for operating costs of £32.9m (£23.0m after
tax) relating to litigation concerning third party claims in respect of the
termination of a rig hire contract by a company acting on behalf of Enterprise
and other co-venturers
*including an indirect contribution of 3,962 bopd attributable to the group's
share in KMOC
Through exploration and appraisal drilling and continually improving technical
understanding of our fields we achieved an impressive reserve replacement ratio
of 160 per cent on a proven and probable basis, and 195 per cent on a proved
basis (as used for US GAAP purposes). The two major contributors to this growth
were the Pierce field in the UK and the Skarv field in Norway where appraisal
drilling has proved up additional reserves. On Pierce, the group has recently
concluded an assessment of a field redevelopment based on water injection to
significantly enhance recoveries from the field, resulting in significant
additional reserve bookings. A project team is in place to implement this
development plan with the start of water injection under the new scheme
scheduled for 2004.
Appraisal drilling on the Llano discovery in the US confirmed reserves, while on
the Howe discovery in the UK near our operated Nelson field a new well has given
us encouragement to plan the development of this small but potentially valuable
tie-back. Reserve additions from exploration extensions and discoveries totalled
50.9 mmboe, while reserve revisions to previous estimates totalled 88.7 mmboe.
Our annual average finding cost was £1.16 per boe whilst on a rolling three-year
basis, a more common measure, it was 82 pence per boe.
Our exploration record in 2001 was not up to the standard to which we aspire and
against which we have historically delivered. We are reshaping the function and
have implemented new processes to ensure that we drill our best prospects,
manage our exposure to deliver maximum returns, and focus our expenditure on the
wells themselves. As to meeting our production targets, we are also sharpening
our production forecasting techniques and will continue to increase the
concentration of resources on the timely delivery of our projects.
Reserves and Production
At 31 December 2001 reserves stood at 1,487 million boe as against 1,412 million
boe twelve months earlier.
Key additions to the reserve base came from Pierce in the UK, the Skarv area in
Norway, Llano in the US Gulf of Mexico and Bijupira-Salema in Brazil.
Production averaged 242,796 boepd in 2001, including an indirect contribution of
3,962 bopd from the group's interest in KMOC, compared with 280,563 the previous
year. As indicated in September's interim results, output was impacted on
several fields by a combination of both operational issues and natural decline
in production levels on certain maturing assets, principally Jotun. However,
much of this is deferred, rather than lost, production, and technical
difficulties on both Pierce and Nelson were successfully resolved during the
year. In addition, the Jotun owners have recently agreed to resume development
drilling on the field to arrest further production decline.
There were several new contributors to the group's worldwide output in 2001. In
the UK, the Skene gas field (Enterprise 15.9 per cent), a satellite to Beryl,
produced first gas in December reaching rates of 120 million cubic feet of gas
per day. Skene is expected to produce up to 165 mmscfd plus 23,000 barrels per
day of associated liquids by April 2002, netting the group 8,200 boepd.
September saw first oil from the East Foinaven field (Enterprise, 10 per cent),
which was acquired in the Petrobras UK purchase, at initial rates of 20,000
bopd, providing the group with its first long-term production from the Atlantic
Margin. In Italy, production from the Val d'Agri oil centre (Enterprise, 29 per
cent) reached levels of up to 54,000 boepd by December.
Developments
The group continued to enhance its operating capabilities as progress was made
on its Corrib project in Ireland, and Bijupira-Salema in Brazil, with both
achieving project sanction in 2001. The group currently has interests in eight
field developments, seven fields where conceptual development studies are
underway and several other potentially commercial projects. Capital investment
in field developments during 2002 is anticipated to be around £575 million
(including the additional interest recently acquired in Bijupira-Salema but
excluding capitalised interest).
On Corrib, the co-venturers completed the drilling and testing of the fifth
appraisal/development well. Enterprise has also agreed key terms with the
trading arm of Bord Gais Eireann for sales of approximately 60 per cent of its
share of Corrib gas, and has received planning permission from Mayo County
Council for the onshore gas processing plant in Bellanaboy. The planning
permission is subject to an appeal which will be heard by An Bord Pleanala, the
Irish Planning Appeals Board in February 2002. All major contracts have been
awarded for the project, and first gas is now scheduled for the beginning of
2004.
The Bijupira-Salema project has also made significant progress. Development
drilling commenced in September, and FPSO conversion work on the ULCC Sahara in
Singapore and process facilities fabrication in the US and Brazil are underway.
The project is now some 30 per cent complete and on schedule to deliver first
production in mid 2003.
In the UK in November, the Clair field received government approval of Phase 1
of the development which is anticipated to recover around 270 million barrels of
oil. It is expected that this will lead to further phases of field development
to unlock Clair's potentially extensive recoverable reserves from the more than
4 billion barrels of oil in place. Also in the UK, the Maclure field was
sanctioned for development via a sub-sea tie-back to the nearby Gryphon FPSO,
with first oil expected in July 2002. Two other small developments, Alba Extreme
South and Caledonia, saw project approval in 2001 and are expected to deliver
production in late 2002.
In Norway the Valhall flank development received government approval in
November. The project comprises two wellhead platforms on the northern and
southern flanks of the field, with the southern expected to start producing in
the first quarter of 2003 and the northern in the third quarter of 2004.
Progress continues on the water flood project, with first injection anticipated
in early 2003.
In Italy, work continues to complete the second phase of the development of the
group's assets in the Val d'Agri, enabling production to rise to over 73,000
boepd by late 2002. It is aimed to achieve approval for the phase three
production facilities early in 2002, as the Cerro Falcone development gains
momentum.
In the US Gulf of Mexico, the Boomvang field will achieve first production in
the second quarter of 2002. The field will produce peak rates of around 30,000
bopd and 160 mmscfd through a spar platform. A development drilling programme
was successfully concluded in mid 2001.
Exploration and Appraisal
In the UK, appraisals of West Wick and Howe were completed and the Howe
discovery is being actively considered for early production across the nearby
Nelson facilities. In Norway, the recently completed Skarv appraisal well
penetrated a full oil bearing section of the Garn reservoir, testing at rates of
5,900 bopd. Together with the results from earlier wells, this successful
appraisal strengthened the potential for the development of the field and
concepts are currently under evaluation. The Svale appraisal well confirmed the
potential of that discovery, made in 2000. Further prospects in the region will
be drilled to determine the possibility of tying-in discoveries to the nearby
Norne field or pursuing a stand-alone development if warranted. The first of
these wells was spudded in December 2001 and is currently drilling.
The remote Goliat find in the Barents Sea was also successfully appraised,
confirming additional reserves, though a development plan has yet to be
progressed by the operator. In preparation for the 17th Round in Norway in April
2002, Enterprise has entered several areas of mutual interest agreements (AMIs)
with major companies on the Norwegian Continental Shelf, most notably with
Statoil and Shell in the deep-waters of the Norwegian Sea.
A small discovery, Stine, was made in Denmark and was sold to Paladin Resources
plc as part of the sale of our non-core assets in that country.
In the US Gulf of Mexico in November, Enterprise successfully completed its
first well on the Llano field as operator. Two high-quality hydrocarbon-bearing
reservoirs were encountered, and the well has been suspended for possible future
production. A review of development concepts is nearing completion with the aim
of achieving project sanction by mid 2002. Drilling work continues on the Deep
Mensa farm-in exploration well and results are anticipated shortly.
In Brazil, the group had early exploration success with its first well in Block
BC2 in 2001 in the Campos Basin, which led to the Curio discovery. A further
exploration well will be drilled close to the Curio find in early 2002.
The Demetra well in Greece continues to drill with results expected shortly.
The group's most extensive seismic survey to date, comprising 2,282 square
kilometres of data, was completed in late 2001 in Morocco on the Cap Draa Haute
Mer permit, and a well is planned there in 2003 or 2004.
Portfolio Management
The group's purchase of Petrobras UK's portfolio in August for $157 million
emphasised its position as an active participant in the industry's North Sea
consolidation. This portfolio included equities in a number of potentially
commercial discoveries close to existing infrastructure in which Enterprise has
an interest, as well as stakes in several producing fields. The company agreed
to sell the non-core Petrobras gas assets to Consort Resources in December, with
the sale of interests in Anglia and Johnston completed in February 2002.
The company has recently acquired, subject to co-venturer and government
approval, an additional 15.6 per cent equity in Pierce. In exchange for
Enterprise's 29.7 per cent interest in the Banff field, plus £23 million cash,
the company will receive CNRI's equity in Pierce, and its interest will now
stand at 92.52 per cent in this important operated field, following this
transaction and its purchase last year of Petrobras UK. The exchange will add
19.6 mmboe in reserves to Enterprise.
In April the group was awarded its first operatorship in Norway and achieved its
best result to date in a Norwegian licensing round, with awards of interests in
three licences. In August the group disposed of its non-core interests in
Denmark through a sale to Paladin Resources.
The company added 10 blocks in the Boomvang area in the US Gulf of Mexico lease
sales in August, developing the group's regional position. In addition,
Enterprise has recently agreed to farm-in to the Tahiti prospect operated by
ChevronTexaco where drilling has already commenced.
In Brazil, the group has this month agreed to purchase, subject to co-venturers'
rights, Odebrecht Oleo e Gas Limitada, the company holding Odebrecht's
exploration and production assets for a gross consideration of $153 million.
This will increase Enterprise's equity in the Bijupuira-Salema development to 80
per cent. It will also provide the group with further access to exploration
acreage in three blocks in the Campos and Santos Basins. In addition, the group
saw success in the 3rd ANP Licensing Round in which it was awarded four
deepwater blocks, one as operator. Two blocks are in the Santos Basin, one in
the Campos Basin and one in the Espirito Santo Basin.
The group added to its Moroccan portfolio in March 2001 when it acquired an
interest in the Azilah Ouezzane and Tissa onshore reconnaissance permits,
covering a combined area of 12,800 square kilometres.
In Russia, the group recently increased its interest in Khanty Mansiysk Oil
Corporation (KMOC) from 27 to 46.1 per cent of undiluted equity as the result of
several transactions, subject to certain pre-emptive rights. KMOC increased
production by 40 per cent in 2001 to an average of 14,517 bopd. Due to KMOC's
status as an associate company, Enterprise booked indirect production of 3,962
bopd for 2001 and reserves at year end of 166 million boe.
In Iran, Enterprise has successfully drilled and tested the first two wells of a
three well appraisal programme on the South Pars 6, 7 & 8 project. Enterprise's
share of the cost of these wells is estimated at $10 million and its maximum
financial commitment to the project, including the cost of the three wells, is
limited to $15 million. Enterprise, together with a major international
operator, has recently presented a technical and commercial evaluation of the
project to the Pars Oil and Gas Company, the National Iranian Oil Company
subsidiary responsible for the South Pars Area. The future of the project
depends on the satisfactory resolution of certain technical and commercial
issues to be discussed with NIOC over the next two months.
In early February the group came to an agreement with Innogy plc for a natural
gas market alliance in North West Europe, which over an initial three-year
period will see Innogy purchase the majority of the group's uncommitted sales
gas from its UK, Irish and Norwegian operations at market prices. The agreement
will allow the two parties to utilise their respective strong positions in the
upstream and downstream gas markets to create further shared value. First
deliveries will commence from the UK later this year.
***
In summary, it is my belief that Enterprise can deliver sustained superior
shareholder returns and offer faster growth than the majors. We must pursue
growth in value, not volume. By focusing on the advantages of being a pure
upstream company, and exploiting our skills in niche areas, Enterprise can
become the world's leading E&P value creator. 2002 will be a busy year for the
group as we implement our new strategy and I look forward to reporting on
progress in September.
Sam Laidlaw
Chief Executive
4 February 2002
Financial Review
2000
2001 (Restated - see below)
£m £m
Turnover 1,390 1,841
Operating profit excluding exceptional item* 694 1,137
Profit before tax excluding exceptional item* 701 1,100
Profit after tax excluding exceptional item* 297 448
Operating cash flow 1,157 1,445
Operating cash flow after tax and finance costs 524 1,051
Average oil price £16.63 £19.05
*An exceptional item is included in the results for each year (see note 3 to the
accounts).
The group's financial performance reflects the effects of both lower realised
oil prices and production in 2001. Turnover decreased by £451.0 million to
£1,390.2 million, and profit before tax, excluding exceptional items, by £399.1
million to £700.7 million. The group made a profit after tax of £297.4 million
in 2001 compared with £447.6 million in 2000 excluding exceptional items.
Adjusted basic earnings per share was 62.5 pence compared with 90.2 pence in
2000 excluding exceptional items. Basic earnings per share was 57.7 pence
compared with 82.0 pence in 2000 including exceptional items.
The results in 2001 include a pre tax exceptional charge of £32.9 million
relating to litigation concerning third party claims in respect of the
termination of a rig hire contract by a company acting on behalf of the group
and other co-venturers. This results in a £9.9 million reduction in the UK
corporation tax charge.
The results in 2000 included an exceptional charge of £40.2 million in respect
of accelerated depreciation arising from a downward revision in reserves of the
Garden Banks 161 field in the US Gulf of Mexico. There was no related taxation.
Production in 2001 declined to 242,796 barrels of oil equivalent per day
(boepd), a decrease of 13 per cent compared with 2000.
Cost of sales per barrel was £6.27 in 2001 an increase of 42 pence per barrel
compared with 2000 excluding exceptional items.
The Return on Average Capital Employed (RoACE) was 20.4 per cent in 2001
compared with 37.6 per cent in 2000 excluding exceptional items.
In 2001, the group generated operating cash flow after tax and finance costs of
£524.3 million compared with £1,050.8 million in 2000. Net debt was £827.4
million at the end of 2001 compared with £431.2 million at the end of 2000.
Gearing was 67 per cent at the end of 2001 compared with 39 per cent at the end
of 2000, as restated (see below).
Restatement of prior periods
In December 2000 the Accounting Standards Board issued Financial Reporting
Standard (FRS) 19 'Deferred Tax' which has been adopted by the group for the
first time in 2001. The impact of this standard is a move from partial to full
provisioning for deferred tax except for exemptions set out in the standard. The
standard allows the optional use of discounting for the calculation of future
provisions; the group has not used this option. The implementation of the
standard has resulted in a prior year adjustment, which has decreased
shareholders' funds and increased provisions of the group by £259.8 million at 1
January 2000. Comparatives have been restated and consequently reserves have
decreased and provisions increased by a further £94.9 million at 31 December
2000, decreasing shareholders' funds and increasing provisions at that date by
£354.7 million. The tax charge for the year ended 31 December 2000 has increased
by £81.4 million (see note 1 to the accounts).
Turnover
Turnover for the year was £1,390.2 million, which represents a decrease of 24
per cent compared with 2000. Of this decrease 37 per cent was due to lower,
sterling oil price realisations. The average realised oil price for the period
was £16.63 ($23.95) per boe compared with £19.05 ($28.88) per boe for the same
period last year. Direct production decreased by 15 per cent (or 41,732 boepd)
in 2001. The decrease results from natural production declines of maturing
fields, as well as, mechanical problems at the Nelson and Pierce fields in the
UK and increased water production from the Jotun field in Norway.
Operating profit
Cost of sales was £580.7 million in 2001 compared with £641.1 million in 2000
including exceptional items. Excluding the exceptional items, cost of sales in
2001 decreased by nine per cent compared with 2000 from £600.9 million to £
547.8 million.
On a per barrel basis, cost of sales was £6.27 per barrel in 2001 compared with
£5.85 in 2000 excluding exceptional items. Depreciation per barrel has increased
12 pence during the year compared with 2000. Operating costs per barrel have
increased by 36 pence reflecting the overall fixed cost level of the group's
fields and maintenance work on several fields mainly in the UK, including
Nelson, Miller and Pierce.
Exploration and appraisal spend for 2001 was £161.6 million (2000: £102.9
million). Exploration and appraisal costs written off as a percentage of
expenditure were 65 per cent in 2001 (2000: 66 per cent). Administrative and
selling expenses were £47.3 million (2000: £36.0 million) reflecting the
increase in portfolio management and other corporate activities across the
group.
The operating result for the period was a profit of £693.5 million compared with
£1,136.5 in 2000 excluding exceptional items.
Profit before tax
Profit before tax was £700.7 million in 2001 compared with £1,099.5 million in
2000 excluding exceptional items.
Net interest and similar income was £6.1 million in 2001 compared with a net
charge of £38.4 million in 2000. The change was caused by increased foreign
exchange gains of £12.2 million, increased interest capitalisation of £26.1
million due mainly to increased development spend, and decreased interest
expense resulting from lower debt levels.
Taxation
The tax charge for the period was £393.4 million, a decrease of £258.5 million
compared with 2000. The UK petroleum revenue tax ('PRT') charge was £62.5
million (2000: £111.2 million). The provision for PRT is calculated for each
discrete period, based on the average oil prices for those periods and the
number of barrels produced for each PRT paying field. Consequently the lower
average oil price and lower production on fields, such as Nelson, in 2001
compared with that in 2000 has resulted in a lower charge. UK corporation tax
has decreased by £63.0 million to £92.9 million, reflecting the lower level of
income in 2001. The overseas tax charge for the period has decreased by £146.8
million to £238.0 million. The lower level of overseas tax arises primarily from
the lower earnings generated by Norway in 2001.
The effective tax rate in 2001 was approximately 58 per cent compared with 59
per cent in 2000 excluding exceptional items. The impact of the FRS 19 'Deferred
Tax' restatement as a prior year adjustment was to increase the effective tax
rate in 2000 by eight percentage points.
Profit after tax
Profit after tax was £274.4 million in 2001 compared with £407.4 million in 2000
including exceptional items. Excluding the exceptional items, profit after tax
was £297.4 million in 2001 (2000: £447.6 million).
Return on Average Capital Employed
RoACE was 20.4 per cent for the period compared with 37.6 per cent in 2000.
2001 2000
Return on average capital employed (RoACE) calculation £m £m
Profit after taxation excluding exceptional item* 297.4 447.6
Add back:
Net interest (6.1) 38.4
Depreciation of capitalised interest 23.9 29.3
315.2 515.3
Average capital employed: shareholders' funds, add net debt, exclude
capitalised interest 1,546.7 1,372.1
RoACE calculation 20.4% 37.6%
*An exceptional item is included in the results for each year (see note 3 to the
accounts).
Capital expenditure
Capital expenditure including capitalised interest and acquisitions was £878.3
million (2000: £479.4 million). Exploration and appraisal expenditure, including
new ventures and excluding acquisitions, was £161.6 million (2000: £102.9
million). This increase is primarily due to spend in the US Gulf of Mexico and
Brazil. Production and development expenditure, including capitalised interest
but excluding acquisitions, was £566.3 million (2000: £284.2 million). This
increase is due to the development spend on a number of projects including
Boomvang in the US Gulf of Mexico, Skarv in Norway, Bijupira-Salema in Brazil
and Corrib in Ireland.
Exploration and appraisal expenditure, including new ventures, is expected to be
£100 million in 2002. Production and development expenditure in 2002, excluding
capitalised interest and acquisitions is expected to be approximately £575
million. This level of expenditure will give rise to a three year average spend
of £443 million compared with a three year average of £344 million at the end of
2001. The development projects planned in 2002 include: the Corrib gas field in
Ireland, the Bijupira-Salema field in Brazil and the Llano field in the US Gulf
of Mexico.
Cash flow and financing
Operating cash flow after tax and finance costs was £524.3 million compared with
£1,050.8 million in 2000. The decrease partially reflects the lower sterling oil
price realisations and decreased production but also reflects significantly
higher cash taxes paid, mainly in Norway. The second instalment of the Norwegian
tax liability for 2000 was paid in 2001, representing the balance of the 2000
liability, based on high oil prices in the second half of 2000. The second
instalment of the 1999 liability, paid in 2000, was based on much lower 1999
earnings in Norway.
Interest cover for finance costs was 8.0 times compared with 15.7 times for
2000.
Net cash payments on capital items, excluding acquisitions of £111.9 million in
2001 and £84.1 million in 2000, increased by 63 per cent compared with 2000 due
to the higher level of development spend in 2001. Net debt at the end of 2001
was £827.4 million compared with £431.2 million at the end of 2000. Gearing (net
debt:equity) was 67 per cent at the end of 2001 (2000: 39 per cent). The impact
of the FRS 19 'Deferred Tax' restatement as a prior year adjustment was to
increase gearing at the end of 2000 by nine percentage points.
The group had available funds, including committed facilities, of £648.5 million
at 31 December 2001. The group's credit ratings from Standard and Poor's and
Moody's are unchanged at BBB+ and Baa1, respectively.
During the year, with shareholders' authority, the Board implemented a share
repurchase scheme under which 18.5 million ordinary shares of 25 pence each were
purchased, and subsequently cancelled, for £100.8 million (including costs of
£0.8 million). The nominal value of the cancelled shares was £4.6 million
resulting in a premium of £95.4 million being returned to shareholders. The
programme was completed in November 2001.
Consolidated Profit and Loss Account
For the year ended 31 December 2001
2000
2001 (Restated)
Notes £m £m
Turnover 2 1,390.2 1,841.2
Cost of sales 3 (580.7) (641.1)
Gross profit 809.5 1,200.1
Exploration costs 6 (105.3) (68.0)
Administrative and selling expenses (47.3) (36.0)
Group operating profit 656.9 1,096.1
Share of operating profit of associate 3.7 0.2
Total operating profit 660.6 1,096.3
Income from fixed asset investments 0.3 0.7
Gain on sales of oil and gas assets 0.8 0.7
Interest receivable and similar income 55.4 42.1
Interest payable and similar charges (49.3) (80.5)
Profit on ordinary activities before taxation 667.8 1,059.3
Tax on profit on ordinary activities 4 (393.4) (651.9)
Profit on ordinary activities after taxation 10 274.4 407.4
Dividends - preference shares (non equity) 10 - (6.0)
Dividends - ordinary shares 10 (39.6) (38.9)
Preference share redemption costs - (1.8)
Retained profit for the financial year 234.8 360.7
Basic earnings per ordinary share 5 57.7p 82.0p
Diluted earnings per ordinary share 5 56.7p 81.1p
Adjusted basic earnings per ordinary share 5 62.5p 90.2p
Dividends per ordinary share 8.5p 8.0p
Turnover and operating profit in 2001 includes £8.4 million and £1.5 million respectively, relating to Petrobras UK Ltd
which was acquired during the year (see note 11).
The results for 2001 include an exceptional charge in cost of sales of £32.9 million relating to litigation (see notes
3 and 13). This results in a £9.9 million reduction of the UK corporation tax charge.
The results for 2000 included an exceptional charge in cost of sales of £40.2 million relating to a ceiling test
write-down (see note 3).
The results for 2000 have been restated to reflect the adoption of FRS 19 'Deferred Tax' (see note 1).
Consolidated Balance Sheet
As at 31 December 2001
2000
2001 (Restated)
Notes £m £m
Fixed assets
Intangible assets 6 189.3 206.5
Tangible assets 7 2,715.6 2,232.8
Investments:
Investment in associate 39.1 34.7
Other investments 71.3 51.3
Total investments 110.4 86.0
3,015.3 2,525.3
Current assets
Stocks 18.4 15.9
Debtors 273.7 252.9
Investments (liquid resources) 329.2 690.6
Cash at bank and in hand 94.9 142.7
716.2 1,102.1
Creditors: amounts falling due within one year (577.8) (720.1)
Net current assets 138.4 382.0
Total assets less current liabilities 3,153.7 2,907.3
Creditors: amounts falling due after more than one year (1,131.5) (1,106.0)
Provisions for liabilities and charges 8 (779.2) (703.2)
Net assets 1,243.0 1,098.1
Capital and reserves
Called up share capital 10 120.2 124.7
Share premium account 10 105.7 103.0
Capital redemption reserve 10 196.3 191.7
Other reserves 10 179.7 179.7
Profit and loss account 10 641.1 499.0
Shareholders' funds 1,243.0 1,098.1
Consolidated Cash Flow Statement
For the year ended 31 December 2001
2001 2000
Notes £m £m
Cash flow from operating activities 12 (i) 1,156.7 1,445.3
Returns on investments and servicing of finance 12 (ii) (65.7) (76.5)
Taxation 12 (ii) (566.7) (318.0)
Operating cash flow after tax and finance costs 524.3 1,050.8
Capital expenditure and financial investment:
- capital expenditure (including asset acquisitions) 12 (ii) (642.6) (409.9)
- financial investment (27.8) (17.1)
Acquisitions and disposals 12 (ii) (57.6) (17.7)
Equity dividends paid (39.2) (37.1)
Cash (outflow) inflow before management of liquid resources and financing (242.9) 569.0
Management of liquid resources 12 (ii) 368.0 (383.9)
Financing - issue of shares 12 (ii) 2.8 2.6
- decrease in debt 12 (ii) (73.6) (29.1)
- repurchase of ordinary share capital 12 (ii) (100.8) -
- redemption of preference shares - (89.7)
(Decrease) increase in cash in the year (46.5) 68.9
2001 2000
Reconciliation of net cash flow to movement in net debt Notes £m £m
(Decrease) increase in cash in the year (46.5) 68.9
Cash outflow from movement in debt and lease financing 73.6 29.1
Cash (inflow) outflow from movement in liquid resources (368.0) 383.9
Change in net debt resulting from cash flows 12 (iii) (340.9) 481.9
Debt acquired with purchase of subsidiary 11 (31.3) -
Translation differences 12 (iii) (22.7) (51.2)
Other movements 12 (iii) (1.3) (1.2)
Movement in net debt in the year (396.2) 429.5
Net debt at 1 January 12 (iii) (431.2) (860.7)
Net debt at 31 December 12 (iii) (827.4) (431.2)
Consolidated Statement of Total Recognised Gains and Losses
For the year ended 31 December 2001
2000
2001 (Restated)
Notes £m £m
Profit on ordinary activities after taxation 274.4 407.4
Currency translation differences on overseas net investments 10 8.1 (8.9)
Total recognised gains and losses relating to the year 282.5 398.5
Prior year adjustment (354.7) -
Total recognised gains and losses since the last financial statements (72.2) 398.5
The currency translation differences shown above are the net result of retranslation to sterling of overseas investments
and certain foreign currency borrowings which provide a partial hedge against the impact of currency movements on those
investments (see note 10).
The prior year adjustment and the restatement of amounts for 2000 reflect the adoption in 2001 of FRS 19 'Deferred Tax'
(see note 1).
1. ACCOUNTING POLICIES
The financial statements have been prepared under the historical cost convention and in accordance with applicable
United Kingdom accounting standards. During the year the group adopted FRS 18 'Accounting Policies' and FRS 19 'Deferred
Tax'. This year the group has also adopted the disclosure requirements of FRS 17 'Retirement Benefits' as set out in the
transition rules of this standard. There was no effect on the group's net assets and results for the year arising from
the adoption of FRS 18 or from the partial adoption of FRS 17. The group's financial statements fall within the scope of
the UK Oil Industry Accounting Committee's Statement of Recommended Practice (SORP), 'Accounting for Oil and Gas
Exploration, Development, Production and Decommissioning Activities' and have been prepared in accordance with the
provisions thereof except where explained the Group's Statement of Accounting Policies which is set out in the Group
Annual Report and Accounts.
FRS 19 'Deferred Tax' affects the way the group accounts for deferred tax and has been adopted for the first time in
2001. In adopting FRS 19 the group has decided not to use the option of discounting, as allowed by the standard. FRS 19
requires the full, rather than partial, provision of future corporate tax liabilities deferred by timing differences
except for exemptions set out in the standard. This has resulted in a prior year adjustment which has decreased
shareholders' funds and increased provisions of the group by £259.8 million at 1 January 2000. Comparative amounts have
been restated and consequently reserves have decreased and provisions increased by a further £94.9 million at 31
December 2000. The tax charge for the year ended 31 December 2000 has increased by £81.4 million.
2. TURNOVER BY LOCATION OF PRODUCTION
UK Norway Italy Gulf of Total
Mexico
2001 £m £m £m £m £m
Oil 663.5 525.5 29.3 7.9 1,226.2
Gas 80.1 30.5 4.7 5.4 120.7
Natural gas liquids 24.4 4.8 - - 29.2
768.0 560.8 34.0 13.3 1,376.1
Other operating income, including tariff income 10.9 1.4 (0.1) 1.9 14.1
778.9 562.2 33.9 15.2 1,390.2
UK Norway Italy Gulf of Total
Mexico
2000 £m £m £m £m £m
Oil 927.3 700.3 25.1 21.7 1,674.4
Gas 83.3 17.8 2.1 8.5 111.7
Natural gas liquids 38.4 3.9 - - 42.3
1,049.0 722.0 27.2 30.2 1,828.4
Other operating income, including tariff income 9.6 1.4 - 1.8 12.8
1,058.6 723.4 27.2 32.0 1,841.2
Other operating income also includes the net profit from crude oil trading and transportation. Gross sales and cost of
sales related to these activities were £372.1 million and £368.8 million, respectively, in 2001 and £286.8 million and
£286.7 million, respectively, in 2000.
3. COST OF SALES
2001 2000
£m £m
Depreciation of development costs 284.8 362.7
Operating costs 278.6 253.5
Research and development 1.5 1.5
Royalties 15.8 23.4
580.7 641.1
Operating costs in 2001 include an exceptional charge of £32.9 million, relating to litigation concerning third party
claims in respect of the termination of a rig hire contract by a company acting on behalf of the group and other
co-venturers. This results in a £9.9 million reduction of the UK corporation tax charge. Of the total charge, £17.7
million has been paid in 2001.
Depreciation of development costs in 2000 included an exceptional charge for depreciation of £40.2 million arising from
a reduction in the estimated reserves of the Garden Banks 161 field in the US Gulf of Mexico (see note 7). There was no
related taxation.
4. TAX ON PROFIT ON ORDINARY ACTIVITIES
2000
2001 (Restated)
£m £m
UK petroleum revenue tax charge (credit):
current 48.5 115.0
deferred 14.0 (3.8)
Norwegian petroleum tax charge (credit):
current 43.0 0.4
deferred (13.8) 40.0
UK corporation tax charge (credit):
current at 30% (2000: 30%) 96.0 162.4
deferred (3.1) (6.5)
Overseas corporate tax charge (credit), principally Norwegian taxes:
current 213.9 313.4
deferred (5.2) 30.9
Share of associate's tax 0.1 0.1
393.4 651.9
The UK corporation tax charge before and after double taxation relief, principally relating to Norwegian corporate
taxes, is £187.7 million (2000: £339.2 million) and £96.0 million (2000: £162.4 million) respectively.
5. EARNINGS PER SHARE
The calculation of basic earnings per share is based upon the profit attributable to ordinary shareholders for 2001 of
£274.4 million (2000 restated: £399.6 million) and the adjusted weighted average of 475.8 million ordinary shares
outstanding during the year (2000: 487.5 million ordinary shares). Profit attributable to ordinary shareholders in 2000
is arrived at by deducting preference share dividends together with the premium attributable to the redemption of the
preference shares from profit on ordinary activities after taxation. The weighted average number of ordinary shares
outstanding excludes 15.8 million shares (2000: 11.1 million) held by employee share schemes.
Diluted earnings per share differs from basic earnings per share in that the weighted average number of ordinary shares
includes potential shares, being any financial instrument or right that may entitle its holder to ordinary shares, such
as share options. The weighted average number of ordinary shares used to calculate diluted earnings per share is 484.2
million in 2001 (2000: 493.0 million). The total number of dilutive potential shares is 8.4 million (2000: 5.5 million),
comprising 2.9 million (2000: 1.9 million) in respect of the Senior Executive Share Option Schemes, 5.0 million (2000:
3.1 million), in respect of the Long Term Performance Related Share Schemes and 0.5 million (2000: 0.5 million) in
respect of the Savings Related Share Option Schemes.
Adjusted earnings per share differs from basic earnings per share in that the profit attributable to ordinary
shareholders for 2001 and 2000 excludes exceptional items (see note 3). This measure, when compared to previous
reporting periods, more accurately reflects the ongoing group performance.
6. INTANGIBLE FIXED ASSETS - EXPLORATION AND APPRAISAL EXPENDITURE
At Reduction in Foreign At
1 deferred exchange 31
January December
2001 Acquisitions Additions Written-off Transfers consideration adjustments 2001
£m £m £m £m £m £m £m £m
Licence acquisitions 55.5 24.1 - (18.9) (23.2) (17.5) 1.9 21.9
Exploration and
appraisal 151.0 1.3 161.6 (86.4) (63.3) - 3.2 167.4
206.5 25.4 161.6 (105.3) (86.5) (17.5) 5.1 189.3
7. TANGIBLE FIXED ASSETS
At Foreign At
1 January exchange 31
December
2001 Acquisitions Additions Disposals Transfers adjustments 2001
£m £m £m £m £m £m £m
Cost:
Development - fields in 3,594.2 66.4 188.1 (77.1) 283.6 32.1 4,087.3
costs production
- fields under 431.5 49.0 324.0 1.2 (167.2) 14.4 652.9
development
- fields awaiting 195.4 - 54.2 - (29.9) (7.3) 212.4
development
4,221.1 115.4 566.3 (75.9) 86.5 39.2 4,952.6
Other fixed assets 83.7 - 9.6 (0.1) - 0.3 93.5
4,304.8 115.4 575.9 (76.0) 86.5 39.5 5,046.1
Depreciation:
Development costs (2,007.3) - (284.8) 47.2 - (14.5) (2,259.4)
Other fixed assets (64.7) - (6.3) 0.1 - (0.2) (71.1)
(2,072.0) - (291.1) 47.3 - (14.7) (2,330.5)
Net book value 2,232.8 115.4 284.8 (28.7) 86.5 24.8 2,715.6
Ceiling tests were conducted in accordance with Group Accounting Policies. Tests were performed on a field-by-field
basis other than in the case of shared facilities where groups of fields were considered.
The following assumptions were used in performing the ceiling tests:
2001 2000
Oil price
2002 Onwards $20 $18 flat
Foreign exchange rate $1.5:£1 2001 $1.55:£1. Thereafter $1.6:£1
Cost inflation per annum - -
Discount rate (real) 10% 10%
In 2000 there was a deficiency totalling £40.2 million on the Garden Banks 161 field in the US Gulf of Mexico and,
accordingly, accelerated depreciation was provided within cost of sales (see note 3).
8. PROVISIONS FOR LIABILITIES AND CHARGES
Deferred
Deferred Deferred overseas Norwegian
corporation petroleum corporate petroleum
tax taxes
(Restated) revenue (Restated) tax Decommissioning Total
tax
£m £m £m £m £m £m
At 31 December 2000 (as previously 99.4 71.4 13.7 39.3 124.7 348.5
reported)
Prior year adjustment 69.2 - 285.5 - - 354.7
At 31 December 2000 (as restated) 168.6 71.4 299.2 39.3 124.7 703.2
Charged (credited) to profit and loss (3.0) 14.0 19.0 (13.7) - 16.3
account
Asset disposals - - (0.2) - (0.7) (0.9)
Acquisitions (2.7) (13.3) - - 37.2 21.2
Additions - - - - 23.3 23.3
Unwinding of discount - - - - 7.4 7.4
Foreign exchange adjustments - - 7.3 1.1 0.3 8.7
At 31 December 2001 162.9 72.1 325.3 26.7 192.2 779.2
9. SHARE REPURCHASE
During 2001 a share repurchase programme was undertaken and 18.5 million ordinary shares of 25 pence were repurchased
and cancelled for a total of £100.8 million (including costs of £0.8 million). The nominal value of the shares cancelled
was £4.6 million and repurchase prices ranged from 478.2 pence to 618.7 pence, resulting in a premium of £95.4 million
being returned to shareholders.
10. SHAREHOLDERS' FUNDS
2000
2001 (Restated)
(i) Reconciliation of movements in shareholders' funds £m £m
Profit for the financial year 274.4 407.4
Dividends (39.6) (44.9)
Redemption of preference shares - (89.7)
Share repurchase (see note 9) (100.8) -
Other recognised gains and losses relating to the 8.1 4.7
year
New equity share capital subscribed 2.8 2.6
Net increase in shareholders' funds 144.9 280.1
Shareholders' funds at 1 January 1,098.1 818.0
Shareholders' funds at 31 December 1,243.0 1,098.1
Capital Profit
Share Share redemption Other and loss
capital premium reserve reserves account Total
(ii) Analysis of movements in share capital and £m £m £m £m £m £m
reserves
At 31 December 2000 (as previously reported) 124.7 103.0 191.7 179.7 853.7 1,452.8
Prior year adjustment - - - - (354.7) (354.7)
At 31 December 2000 (as restated) 124.7 103.0 191.7 179.7 499.0 1,098.1
Issues of new shares 0.1 2.7 - - - 2.8
Share repurchase (see note 9) (4.6) - 4.6 - (100.8) (100.8)
Profit for year - - - - 234.8 234.8
Currency translation differences - - - - 8.1 8.1
At 31 December 2001 120.2 105.7 196.3 179.7 641.1 1,243.0
The currency retranslation differences, on borrowings and preference shares that provide a partial hedge against
overseas investments, transferred to reserves during the year amount to a loss of £22.9 million (2000: loss of £69.9
million). The tax effect of the currency translation differences is a credit of £5.8 million (2000: credit of £5.8
million).
11. ACQUISITIONS AND DISPOSALS
(i) Acquisition of Petrobras UK Limited
The group acquired Petrobras UK Limited (Petrobras UK) on 1 August 2001. This has been accounted for using the
acquisition method of accounting. The North Sea assets acquired include eight potential developments, four of which are
operated, as well as fields in production and exploration acreage. The purchase price was £87.7 million and has been
allocated to the assets and liabilities acquired. Certain of Petrobras UK's southern North Sea assets held for resale
were sold to Consort Resources Limited for £30.2 million in 2002.
The assets and liabilities of Petrobras UK and the fair value adjustments as at 1 August 2001 are set out below. The
fair value adjustments have been determined on a provisional basis for the year ended 31 December 2001 due to the
disposal of assets held for resale being completed in 2002.
Fair value adjustments
Book Accounting
value on policy
acquisition alignment Revaluations Fair value
£m £m £m £m
Intangible fixed assets 1.3 - 24.1 25.4
Tangible fixed assets 57.9 - 22.8 80.7
Assets held for sale 20.2 - 10.0 30.2
Current assets (excluding cash) 5.9 - - 5.9
Cash at bank and in hand 6.2 - - 6.2
Finance debt (31.3) - - (31.3)
Other creditor (8.2) - - (8.2)
Deferred taxation - 2.7 13.3 16.0
Other provisions (28.9) - (8.3) (37.2)
Net assets acquired 23.1 2.7 61.9 87.7
Consideration 87.7
The consideration paid by the group for Petrobras UK was comprised of cash of £87.7 million. Reorganisation and
restructuring costs associated with the acquisition were £0.3 million.
2001
Impact on group operating profit £m
Turnover 8.4
Cost of sales (6.6)
Gross profit 1.8
Exploration costs (0.3)
Administrative and selling expenses -
Operating profit 1.5
(ii) Disposal of Enterprise Oil Denmark Limited
In September 2001 the group sold its wholly-owned subsidiary, Enterprise Oil Denmark Limited (EODL), to Paladin
Resources plc for £23.9 million. EODL holds interests in the Siri oil field and nearby Stine discovery. The book value
of the net assets disposed of was £23.9 million and the net proceeds received were £23.9 million resulting in no gain or
loss.
12. CASH FLOW STATEMENT
2001 2000
(i) Reconciliation of operating profit to operating cash flow £m £m
Operating profit 656.9 1,096.1
Depreciation charges 291.1 367.6
Exploration costs 105.3 68.0
Movements in stocks (2.5) (0.8)
Movements in operating debtors (32.1) (59.8)
Movements in operating current liabilities 138.0 (23.0)
Other deferrals and accruals of operating cash flows - (2.8)
Net cash inflow from operating activities 1,156.7 1,445.3
(ii) Analysis of cash flow captions
Returns on investments and servicing of
finance:
Interest received and similar income 40.3 38.1
Interest paid (105.8) (108.3)
Interest element of finance lease rentals (0.2) (0.3)
paid
Preference dividends paid - (6.0)
Net cash outflow for returns on investments and servicing of finance (65.7) (76.5)
Taxation:
UK petroleum revenue tax (79.3) (112.9)
UK corporate taxes (147.0) (64.8)
Overseas tax (340.4) (140.3)
Net cash outflow for tax paid (566.7) (318.0)
Capital expenditure and financial
investment:
Development (430.2) (237.7)
Exploration and appraisal (198.8) (82.2)
Sale of licence interests (4.3) 13.2
Purchase of licence interests - (96.2)
Purchase of other fixed assets (9.3) (7.0)
Net cash outflow for capital expenditure (642.6) (409.9)
Acquisitions and disposals:
Investment in associates - (17.7)
Purchase of subsidiary (87.7) -
Cash acquired with subsidiary 6.2 -
Disposal of subsidiary 23.9 -
Net cash outflow from acquisitions and disposals (57.6) (17.7)
Management of liquid resources:
Purchase of investments (1,167.4) (2,406.8)
Sales of investments 1,535.4 2,022.9
Net cash inflow (outflow) from management of liquid 368.0 (383.9)
resources
Financing:
Issue of ordinary share capital 2.8 2.6
Debt repaid (134.5) (13.3)
Revolving credit facility repaid (4.5) (45.0)
Revolving credit facility drawdown 34.5 30.5
Debt acquired with purchase of subsidiary 31.3 -
Debt issue costs - (1.0)
Capital element of finance lease rental payments (0.4) (0.3)
Repurchase of ordinary share capital (100.8) -
Redemption of preference shares - (89.7)
Net cash outflow from financing (171.6) (116.2)
At Other At
1 January Exchange non-cash 31 December
2001 Acquisitions Cash flow movement changes 2001
(iii) Analysis of net debt £m £m £m £m £m £m
Cash at bank and in hand 142.7 - (41.3) (6.5) - 94.9
Overdrafts (0.9) - (5.2) - - (6.1)
141.8 - (46.5) (6.5) - 88.8
Current asset investments (liquid 690.6 - (368.0) 6.6 - 329.2
resources)
Debt due within one year (157.7) (31.3) 87.9 (3.6) (8.9) (113.6)
Debt due after one year (1,101.3) - (14.7) (19.2) 7.6 (1,127.6)
Finance leases (4.6) - 0.4 - - (4.2)
(431.2) (31.3) (340.9) (22.7) (1.3) (827.4)
13. CONTINGENCIES
Claims made by a third party in the English courts against a company acting on behalf of a joint venture including the
group, and in the Texas courts against the group and its co-venturers, in respect of termination of a rig hire contract
resulted in a £32.9 million exceptional charge in 2001 (see note 3). An insurance claim has been made but no amount has
been recognised in the accounts.
14. STATUS OF FINANCIAL INFORMATION
The information contained herein does not constitute the company's statutory accounts for the years ended 31 December
2001 or 2000 but is derived from those accounts. Statutory accounts for 2000 have been delivered to the Registrar of
Companies and those for 2001 will be delivered following the company's annual general meeting. The auditor has reported
on those accounts; its reports were unqualified and did not contain statements under section 237 (2) or (3) of the
Companies Act 1985.
Proven and probable oil and gas reserves
Crude oil Gas Gas Total
Proven and probable oil and gas reserves (mmbbls) (bcf) (mmboe) (mmboe)
Net proven and probable oil and gas 1,045.7 2,125.6 366.5 1,412.2
reserves at 1 January 2001
Changes during year:
Revisions of previous estimates 90.7 (12.0) (2.1) 88.7
Purchase, exchange of reserves 27.3 15.7 2.7 30.0
Discoveries, extensions and other additions 39.7 64.9 11.2 50.9
Disposals, exchange of reserves (7.2) - - (7.2)
Production (76.2) (63.8) (11.0) (87.2)
Net proven and probable reserves at 31 December 2001 1,120.0 2,130.4 367.3 1,487.4
Of which:
Fields in production 734.0 885.1 152.6 886.6
Fields under development 252.5 597.1 103.0 355.4
Fields awaiting development 133.6 648.1 111.7 245.4
1,120.0 2,130.4 367.3 1,487.4
Crude oil includes natural gas liquids and condensate; 'mmbbls' means million barrels; 'mmboe' means million barrels of
oil equivalent. Gas reserves are converted to barrels of oil equivalent at the rate of 5,800 cubic feet of gas per
barrel.
Totals may differ from the sum of the components due to rounding effects.
Group share of associate reserves
Undiluted Fully
diluted
equity equity
(mmbbls) (mmbbls)
Proven and probable oil reserves at 31 December 2001 242.6 165.8
Proved oil reserves at 31 December 2001 77.5 53.6
Proved oil reserves for the associate, KMOC, are from the volumetric reserve report by independent consultant Ryder
Scott as of 31 December 2000, adjusted for movements during the year.
Group share of proved developed and proved undeveloped (US GAAP) reserves
Oil and gas reserve quantities recorded in accordance with US GAAP comprise proved developed and undeveloped reserves,
rather than the definition of proven and probable reserves used by the group. The group's total proved developed and
undeveloped reserves at 31 December 2001 were 1,010.1 million barrels of oil equivalent compared with 915.7 million
barrels of oil equivalent at 31 December 2000.
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