Final Results

Hunting PLC 04 March 2004 4 March 2004 HUNTING PLC Preliminary results For the year ended 31 December 2003 Hunting PLC ('Hunting', the 'Group' or the 'Company'), the international energy services Company, today announces its preliminary results for the year ended 31 December 2003. â€¢ Turnover Â£1,195m (2002: Â£951m) +25.6% â€¢ Total operating profit Â£25.2m (2002: Â£24.4m) +3.3% â€¢ Pre-tax profit Â£21.1m (2002: Â£19.1m) +10.5% â€¢ Basic earnings per share 6.4p per share (2002: 4.1p) +56.1% â€¢ Ordinary dividend per share 3.50p (2002: 3.0p) +16.7% Commenting on the outlook for the Group, Dennis Proctor, Hunting's Chief Executive, said: 'While we expect to meet or exceed the prior year result, we accept that currency fluctuations and a renewed customer focus on production growth will have a significant bearing on our performance. The US and certain world economies are improving, oil prices seem likely to remain at high levels, strong natural gas pricing appears sustainable throughout the year and oil and gas supply demand balance is calling for more production and drilling. We welcome 2004 and the opportunities for value creation from our assets and skilled personnel.' For further information, please contact: Hunting PLC 020 7321 0123 Dennis Proctor, Chief Executive Dennis Clark, Finance Director Hogarth Partnership Limited 020 7357 9477 Andrew Jaques Edward Westropp Notes to Editors: Hunting PLC is an international oil services Company providing support solutions to the world's largest oil and gas companies. Chairman's Statement Profit before taxation for the year to 31 December 2003 was Â£21.1m, a 10% increase on the previous year. 2003 was a year when unusual market conditions prevailed. Despite high commodity prices, volume demand for oilfield products and services did not occur as oil and gas companies focused on return on capital rather than production growth. Accordingly, parts of the Group did not grow or experienced lower year on year results. Gibson Energy's strong position in western Canadian midstream activities in liquid hydrocarbons, developed over more than fifty years, helped its marketing operation have a very satisfactory year. A long held strategic aim to acquire the outstanding minority shareholding in the company was finally achieved, which should give a good increase in future earnings attributable to ordinary shareholders. Due to natural gas prices exceeding the 10-year average by 105% and the oil price exceeding its 10-year average by 44%, our Texas based Tenkay Resources had exceptional results from exploration and production activities. Rig activity in the US exceeded the 10-year average by 31%, however the increase was not in Hunting Energy's market of deepwater, complex completion wells in the Gulf of Mexico. Its international operations were further impacted by the below normal rig count in the North Sea. Demand for oil continued to rise particularly in China and oil tanker activity provided better than anticipated results for Gibson Shipbrokers. We continue to keep the dividend policy under review in the light of current results and shareholders expectations and the future capital requirements of Hunting. Therefore we are recommending a final dividend of 2.25p per share, giving a total of 3.5p for the year, an increase of 17% over 2002. The long-term fundamentals of the industries we serve are looking more positive than for some time and we continue to work hard to take full advantage of these trends. I wish to record my appreciation of the outstanding efforts made by our staff throughout the world. Richard Hunting Chairman Chief Executive's Review INTRODUCTION In 2003 we benefited from our broad business mix and capitalised on higher oil and gas prices and improved activity in Canada and onshore USA, which helped us to offset continued challenges in the North Sea and the deepwater Gulf of Mexico. The global oil and gas companies, our primary customers, enjoyed the high commodity prices, yet continued in their mind-set of 'wait and see' before investing in large projects. The industry we serve continues to focus on short-term production activities for improved - in some cases, record - returns. However, at year-end, global inventories of crude oil were at near record lows while at the same time industrialised economies are recovering from the 2001-2002 economic slowdown. Natural gas well completions in North America were up 12% yet industry experts believe a 2-3% production decline occurred. As with many oil and gas service companies, we provide products and services that are often proprietary, high-margin, technically oriented and directed towards complex applications. Much of the activity increases were in low cost, shallow and quickly drilled wells. Many heavy oil projects in Canada were delayed due to high capital requirements and time considerations. Conversely, our Canadian acquisition strategy in Propane distribution delivered record volumes and profits during the year. Expanded marketing activities in Canada delivered, once again, exceptional results. With the average oil price in 2003 at a 20-year high and gas prices at historical high levels, management expected better performance from certain divisions. However, with deepwater drilling in the Gulf of Mexico continuing to decline and the North Sea transition from major, integrated operators to independent exploration and production companies taking longer, significant assets were underutilised and inventories were slow to reduce. Conversely, our oil and gas production, tanker brokering, oil marketing and natural gas liquids distribution experienced much improved results. We accept the conflicting challenges of our industry including high commodity prices, lower exploration budgets, reduced reserves and climatic and geopolitical influences. We have experienced management, strategic and proprietary assets, a global footprint and skilled employees to deliver our quality products and services. BUSINESS DEVELOPMENT Close to our year-end, an agreement was reached with ChevronTexaco to acquire their minority shareholding in Gibson Energy for Â£43.7m. This earnings-enhancing transaction will enable the Group to better control its direction and growth. In late December 2003, Gibson Energy completed the sale of the Rainbow Lake gas plant and its ownership interest in the Pouce Coupe gas plant for cash proceeds of Â£6.9m. We determined that the mid-stream gas business was non core for Gibson and that resources would be better focused on growing the Group's core businesses where higher returns are achievable. In the fourth quarter of 2003, Hunting Energy Services sold its ownership interest in Hunting Petrotube de Venezuela to its minority partner for net proceeds of Â£0.8m. The Venezuelan market continues to be geopolitically influenced, at most times, to the detriment of foreign owners. HEALTH, SAFETY AND ENVIRONMENT Management's commitment to health and safety and quality products gained further results in 2003. Gibson Energy's 54 facilities reported 45 with no lost time accidents. Its truck transportation group met the 15 August deadline for upgrading highway tankers to the Canadian B-620 standard for hauling dangerous goods. Four of the six of Hunting Energy's North American manufacturing facilities reported zero lost time accidents. The Aberdeen facility received the British Safety Council 5 Star Award for the sixth year in succession as well as its prestigious Sword of Honour, a distinction offered to only 38 companies worldwide. Simply put, the company's Health, Safety and Environmental goals are - No accidents, No harm to people and No damage to the environment. OPERATIONAL REVIEW Turnover for the year increased to Â£1,195m from Â£951m with operating profit of Â£25.2m compared with Â£24.4m in 2002. Pre-tax profit increased to Â£21.1m from Â£19.1m and earnings per share increased by 56% to 6.4p per share (2002 - 4.1p). GIBSON ENERGY 2003 2002 Â£m Â£m Turnover 939.6 638.1 Operating Profit 13.6 11.7 Robust commodity prices, along with high activity levels in the Canadian oil and gas industry, contributed good results for Calgary, Alberta, based Gibson Energy. The recovery of drilling activity in Canada was at a record pace and focused on natural gas with new heavy oil completions in the second half. Conventional oil production volumes declined slightly in some areas but were offset by bitumen volumes from Athabasca and additional heavy oil production. Marketing which accounted for 41% of Gibson's operating profit, performed exceptionally well throughout the year with a significant growth in turnover. Operating profits grew 47% to Â£5.6m in 2003 from Â£3.8m in 2002. Strong crude oil prices sustained inventory values during the year and encouraged higher activity levels in many areas. Blending economics experienced a volatile movement as the price of Canadian crude dropped steadily due to the strength of the Canadian dollar. A higher value of diluent challenged the value of heavy oil reflected by current and future high demand requirements. Truck Transportation recorded operating profits of Â£1.3m versus Â£2.5m in 2002. The recovery of activity which often lags industry drilling by six months did not occur until late fourth quarter. This profit deterioration was compounded by higher maintenance costs to upgrade truck trailers to meet regulatory changes for energy transport tanks. Oil and Gas Operations contributed operating profits of Â£3.9m in 2003 compared to Â£3.1m in 2002, as volumes were steady throughout the year at both Hardisty and Edmonton. Towards year-end, the production of heavy oil Athabasca diluent/ bitumen and synthetic blend increased at Hardisty. This trend is expected to continue into 2004. The results of gas operations were disappointing. All the gas-processing assets were sold when a strategic decision was made to redeploy capital into higher performing assets within the Group. Canwest and Natural Gas Liquids (NGL) contributed Â£2.3m of operating profit for 2003 which was higher than the Â£1.7m in 2002 as Canwest Propane recorded their largest volumes to date with excellent margins. Volumes gained from the expansion and acquisition of business in British Columbia; both Vancouver Island and the lower mainland and interior regions, grew the business to new levels. NGL Marketing and the Hardisty Fractionation Plant were down from 2002 as the differential value for butane/condensate narrowed dramatically compared to historical averages. Moose Jaw Asphalt incurred major capital expenditures for winterisation and year-round operations, which is expected to increase results in 2004. The volumes for the 2003 asphalt season were lower due to early seasonal weather and lower demand in northern US regions. This could not be made up before year-end 2003. Higher values for tops distillate and light oil offset some of the asphalt sales shortfall. Operating profit for 2003 was Â£0.5m versus Â£0.6m in 2002. The continuation of high commodity prices into 2004 is expected to sustain current activity and market optimism. Capital redeployed from under performing areas should support strategies for future growth. The Canadian energy industry is forecast to be strong in the future and Gibson is positioned to capture midstream opportunities and sustain premium service. HUNTING ENERGY SERVICES 2003 2002 Â£m Â£m Turnover 168.6 233.9 Operating Profit 5.4 8.3 Hunting Energy Services, based in Houston, Texas, has a global, balanced mix of tubulars and ancillary components for supplies and services to the upstream oil and gas companies worldwide. With the exception of the deep water Gulf of Mexico and the North Sea, many operations had year on year improvement. The Gulf of Mexico average rig count in 2003 was 104, a 5% decline from 2002 and the lowest activity level since 1996. North Sea activity in the same period declined to an all time low primarily as a result of the transition from major oil companies to independent operators in the region. Historically, these two regions have represented a significant part of Hunting Energy's overall profitability and the under performance was not offset by other facilities and operations. In North America, rig activities continued to improve throughout the year, primarily focused on natural gas drilling and shallow well completions. While operators are enjoying record profits, the service and supply industry continues to seek the momentum of improved pricing for its products and services. For Hunting Energy as well as many other operators in the industry, the non-linear impact of increased commodity prices on deep water drilling and hence on revenues and profits remains an issue. In response to these challenges, Hunting Energy has cut costs, improved productivity and entered new markets through expanded product lines and increased geographical presence. Tubular Products had a difficult year in 2003 caused by over supply, weak prices, increased levels of imports and low demand for seamless, high alloy products due to the slow deep water Gulf of Mexico and North Sea markets. Accordingly, revenues declined 33% reflecting lower activity and therefore lower sales of products used in high temperature, complex and deep completions. Operating profits were Â£0.3m compared to Â£0.9m in 2002. Toward year-end, prices improved driven by increases in raw material and energy costs coupled with increased prices from the steel mills. The declining value of the US dollar, coupled with the rising costs for scrap and shipping are starting to have an impact on the import penetration into North America for business planned in 2004. This projected decline should assist North American manufacturers. The business continues to capture multi-year contracts with both major and independent operators. Proprietary connections within the tubular portfolio had an exceptional year due to new proprietary products introduced in 2002. Efforts continue in research and development to provide those products that are unique to Hunting Energy to yield significant cost savings to the operator. Manufacturing operations benefited greatly from the 35% improvement in rig activity year on year and in the fourth quarter had the best performance since 2001. Operating profits were Â£3.4m versus Â£2.2m in 2002. Plant efficiencies and quality levels continue to improve with overall productivity increasing 10.3% over the prior year when measured in revenue per man-hour. The Trenchless Tubular division experienced a significant improvement year on year as much of North America's telecom industry regains its strength and financial commitment to fibre optic installations and last mile intra-city connections. During the past two years, many competitors chose to exit the industry leaving the company with an increased market share in an improving market. The mud motor business for overall oil and gas drilling had an exceptional performance during the year increasing its US market share to 35%. With significant increases in gas drilling within the Rocky Mountain regions, the mud motor division expects continued improvements. International operations of Hunting Energy were impacted primarily by the slow activity in the North Sea. Operating profits declined to Â£1.7m from Â£5.2m in 2002. With exploration drilling having dropped to one-tenth of its 1990 peak and discoveries now averaging between 30-40 million barrels of oil equivalent, the transition from major oil and gas companies to major and minor independents is being influenced by capital availability and production expectations. At the same time, many potential new entrants to the UK are waiting to see how the early ventures perform. The North Sea is expected to have as many reserves remaining as have already been taken out, so it is certainly a viable region for future oil service activity. In Southeast Asia, Hunting Energy's tubular joint venture with Tianjin Steel in China continues to improve as major contracts were awarded for products not only destined for China and Southeast Asia, but shipped to the Middle East. Expectations are for Southeast Asia to continue to grow as China is now the second largest importer of oil behind the US. Liquid Natural Gas projects continue to expand and Hunting Energy's manufacturing facilities in these regions are expected to benefit. TENKAY RESOURCES 2003 2002 Â£m Â£m Turnover 10.4 6.9 Operating Profit 4.3 2.1 Increased levels of oil and natural gas production, in conjunction with very favourable product prices throughout the year, contributed to an outstanding 2003 for Texas based Tenkay Resources. On a Net Equivalent Barrel ('NEB') basis, production was up 9% over 2002 as a result of successful drilling in the shallow waters of the Gulf of Mexico. Tenkay Resources participated in the drilling of 22 wells offshore Louisiana and Texas with 19 successes. A record level of oil and gas 517,000 bbls was produced over the twelve-month period, and at year-end, the reserves of oil and gas on an SEC basis were 2.1m NEB compared with 2.34m NEB at the end of the previous year. Several of the new offshore discoveries require platform and pipeline facilities that are scheduled to be completed in the first half of 2004. E. A. GIBSON SHIPBROKERS 2003 2002 Â£m Â£m Turnover 14.9 11.8 Operating Profit 1.8 0.9 Strong first and fourth quarters in the oil sectors were complimented by record-breaking returns in dry cargo during the second half of the year for London based E. A. Gibson. Sale and Purchase prospered with increased activity which was bolstered by an extensive re-entry into new ship building contracts in China and Korea. E. A. Gibson's expansion continued in a joint venture with a Dubai based shipbroker now renamed 'Gibson AGB'. Also, the acquisition of B. E. Moors gives the company an entry into the growing chemical and 'veg' oil tanker sectors of the market. HUNTING ENERGY FRANCE 2003 2002 Â£m Â£m Turnover 11.4 9.9 Operating Profit 0.7 0.4 Hunting Energy France had an operating profit improvement of 75% in 2003 over 2002. The Roforge acquisition continued to exceed expectations and confirmed the importance of this 2002 acquisition. The result in 2003 also benefited from management reorganisation in its key division. OTHER 2003 2002 Â£m Â£m Turnover 50.5 50.7 Operating Profit (0.6) 1.0 Hunting Industrial Coatings results declined in overall activity for 2003, but its pipeline rehabilitation operation continues to show significant growth opportunities in the ageing pipeline infrastructures throughout the US and Europe. It was burdened with the loss of a major account for coatings in the UK and has yet to replace that important customer activity. Aero Sekur in Italy exceeded expectations and was profitable for the year 2003. The excellent turnaround performed by the management over the last two years is a result of restructuring and improvement in the product range and the Italian Ministry of Defence requirements. Field Aviation in Canada experienced a 50% increase in operating profits in 2003 due to a strong performance in its parts manufacturing, military contract services and specialised aircraft modifications. It had its best year since 1997, even though the general air transport industry continues to be depressed. The company's diversity and focus on each market has allowed it to remain profitable and expand its offering of products and services throughout the aircraft industry. OUTLOOK The early industry consensus is for a modest 5% overall improvement in activity for 2004. Oil and gas prices have clearly shown continued strength while supplies of both products remain at historical lows in an environment of increasing demand. The current weakness of the US and Canadian dollars against sterling will impact the Group results. However, Hunting Energy in the North Sea should show modest improvements while the Gulf of Mexico is expected to complete upwards of 10% more wells in 2004. Southeast Asia and China have enjoyed seven-year highs in terms of rig activity with continued strength expected in 2004. Canada, having reached its peak of gas production in 2002 should see continued strength for natural gas exploration. Gibson Energy will continue to focus on its marketing and transportation expertise, as certainly oil and gas pricing will remain volatile. Year-end crude oil hauling contracts continue into 2004. Exploration and production activities in Tenkay Resources will see the benefits from a very successful drilling program last year with expectations for sustained pricing and completion successes. The Company's strategy of harvesting its existing assets, minimising capital expenditure and maximising free cash flow thereby reducing debt will be at the forefront of management objectives. In some areas, we recognise the historical relationship between oil and gas prices and service company activity has broken down. Management will continue to allocate resources and personnel toward those activities expected to provide better returns while lowering costs and providing greater utilisation of assets. In summary, while we expect to meet or exceed the prior year result, we accept that currency fluctuations and a renewed customer focus on production growth will have a significant bearing on our performance. The US and certain world economies are improving, oil prices seem likely to remain at high levels, strong natural gas pricing appears sustainable throughout the year and oil and gas supply demand balance is calling for more production and drilling. We welcome 2004 and the opportunities for value creation from our assets and skilled personnel. Dennis Proctor Chief Executive Finance Director's Review The market conditions in which Group companies operated and their trading performance during the year ended 31 December 2003 are described in the Chairman's Statement and the Chief Executive's Review. Although Oil and Gas prices were higher than during 2002, lower levels of activity for Hunting Energy Services restricted the growth in the Group's pre-tax profit to 10%. In the first six months of 2003 operating profit was Â£10.9m compared with Â£10.8m with pre-tax profits of Â£8.4m compared with Â£8.1m in the corresponding period of 2002. Following an improvement in trading in the second half of the year operating profit increased to Â£25.2m for the full year (2002 - Â£24.4m) with a pre-tax profit of Â£21.1m compared to Â£19.1m in 2002. On 19 December 2003 the 36% of Gibson Energy not owned was purchased for Â£43.7m. This acquisition will be earnings enhancing in future years. Earnings Per Share Basic Earnings Per Share increased to 6.4p (2002 - 4.1p) on an average of 101.0 million shares in issue during the year. Exchange Rates Whilst the US Dollar weakened during the year, particularly in the later months, the Canadian Dollar strengthened compared with 2002. For the year the US Dollar averaged 1.64 (2002 - 1.50) and the Canadian Dollar 2.29 (2002 - 2.36). Year-end rates for the US Dollar and Canadian Dollar were 1.78 (2002 - 1.60) and 2.30 (2002 - 2.53) respectively. Taxation The taxation charge for the year was Â£7.3m giving an effective rate of 34.6% (2002 - 38.7%). The majority of this charge is deferred tax relating to Gibson Energy resulting from the deferral of current tax on its profits. The reduction in the effective rate is largely due to the effect in Canada of the change in corporate structure together with decreasing rates of taxation. Equity Minority Interests Equity minority interests reduced to Â£3.2m (2002 - Â£40.5m) of which Â£27.5m was attributable to the purchase of the minority interest in Gibson Energy. Financing and Risk Management The Group's centralised Treasury is a service centre with policies and procedures approved by the Board. These cover funding, banking relationships, foreign currency and interest rate exposures and investment of surplus cash. The policies and procedures covering oil and gas price exposure managed by Gibson Energy are approved by the Board. There are strict controls on these policies and procedures. New committed multi-currency borrowing facilities, totalling Â£41.5m, were arranged in 2003 with the Group's core relationship banks. Of these facilities Â£11.5m mature in September 2004 and Â£30m mature in October 2006. These together with other committed facilities of Â£120m, Private Placement Notes of US$50m, and other borrowing lines provide total facilities of Â£233m, Â£190m of which are committed. At 31 December 2003 Â£142m were drawn. The aggregate facilities provide the Group with sufficient liquidity to meet anticipated future requirements. Currency Options are used to reduce currency risk movements on the Group's results, by hedging approximately 50% of each year's budgeted Canadian and US Dollar earnings into Sterling. Currency exposure on the balance sheet is, where practical, reduced by financing assets with borrowings in the same currency. Forward foreign exchange contracts are used to cover the net exposure of purchases and sales in non-domestic currencies. Fluctuations in the selling price of crude oil inventories are managed by using futures, swaps and options. Interest expense is hedged by using interest rate swaps, interest rate caps, forward rate agreements and currency swaps. These instruments protect against adverse movements in interest rates. At the year-end interest rate swaps and caps covered 50.4% of net borrowings. Net interest payable was Â£4.1m (2002: Â£5.3m) which was 6.1 times covered. Surplus short-term cash is invested with approved banks or in AAA rated Money Market Funds. Information on the Group's use of derivatives and other financial instruments is provided in note 24 in the 2003 Annual Report. Dividends An interim dividend of 1.25p per share (2002 : 1.0p) was paid on 25 November 2003. A final dividend of 2.25p per share payable on 29 June 2004 to shareholders on the Register at 11 June 2004 is now proposed giving a total of 3.50p for the year. Cash Flow Free cash flow that is cash flow before capital expenditure, acquisitions and ordinary dividends, increased to Â£38.6m compared to Â£21.4m in 2002. Working capital reduced by Â£1.3m following a decrease in creditors of Â£10.2m being more than offset by a decrease in inventories and debtors of Â£11.5m. Capital expenditure was below the previous year at Â£28.2m (2002 - Â£32.5m). Â£12.2m was in Gibson Energy, Â£6.8m in Tenkay Resources and Â£7.0m in Hunting Energy Services. In total Â£17.2m was replacement capital and Â£11.0m new business expenditure. Net debt increased during the year to Â£126.6m from Â£97.6m following the acquisition of the Gibson Energy minority shareholding for Â£43.7m. Gearing, defined as net debt as a percentage of shareholders' funds and minority interest, increased to 77% from 50%. Pensions The Group continues to account for pensions under SSAP 24 'Accounting for Pension Costs'. The additional pensions disclosure required by the transitional arrangements of FRS 17 'Retirement Benefits' is given in note 36 in the 2003 Annual Report. A review of the financial position of the Group's UK Defined Benefit Scheme ('the Scheme') as at 5 April 2003 was undertaken and details of the assumptions and the results are shown in note 36 in the 2003 Annual Report. Included in the Consolidated Balance Sheet at 31 December 2003 is Â£21.7m representing the pension prepayment on a SSAP 24 basis (Â£15.2m net of deferred tax). The funding position of the UK Defined Benefit Scheme under FRS 17 principles shows that at 31 December 2003 assets exceeded liabilities by Â£18.5m. The Scheme remains funded on both a SSAP 24 and a FRS 17 basis. On 31 December 2002 the Scheme was closed to new UK employees who are now offered membership of a defined contribution scheme. International Financial Reporting Standards ('IFRS') The Group is preparing for the adoption of IFRS in 2005. This includes a detailed comparison of the Group's existing accounting policies with IFRS and an evaluation of the impact on the financial statements in terms of presentation and reported performance. Going Concern The Directors, after making enquiries and on the basis of current financial projections and the facilities available, believe that the Company and the Group have adequate financial resources to continue in operation for the foreseeable future. For this reason, they continue to adopt the going concern basis in preparing the financial statements. Dennis Clark Finance Director Consolidated Profit and Loss Account For the Year ended 31 December 2003 2003 2002 Â£m Â£m Turnover 1,195.4 951.3 Cost of sales (1,112.9) (872.1) ---------- ---------- Gross profit 82.5 79.2 Net operating expenses (57.0) (54.9) ---------- ---------- Group operating profit 25.5 24.3 Share of operating (loss) profit in joint venture and associated undertakings (0.3) 0.1 ---------- ---------- Total operating profit 25.2 24.4 Interest receivable and similar income 1.3 2.1 Interest payable and similar charges (5.4) (7.4) ---------- ---------- Profit on ordinary activities before taxation 21.1 19.1 Taxation on profit on ordinary activities (7.3) (7.4) ---------- ---------- Profit on ordinary activities after taxation 13.8 11.7 Equity minority interests (3.4) (3.6) ---------- ---------- Profit for the financial year 10.4 8.1 Dividends (including non-equity) (7.5) (7.0) ---------- ---------- Retained profit for the year 2.9 1.1 ========== ========== Basic earnings per 25p ordinary share 6.4p 4.1p ========== ========== Diluted earnings per 25p ordinary share 6.4p 4.1p ========== ========== There are no material differences between the results disclosed above and the results on an unmodified historical cost basis. The profit for the year arises from the Group's continuing operations. Consolidated Statement of Total Recognised Gains and Losses For the Year ended 31 December 2003 2003 2002 Â£m Â£m Profit for the financial year 10.4 8.1 Revaluation of fixed assets - 2.3 Currency translation differences on foreign currency net investments 2.5 (8.2) ---------- ---------- Total recognised gains and losses for the year 12.9 2.2 ========== ========== Consolidated Balance Sheet At 31 December 2003 2003 2002 Â£m Â£m Fixed assets Intangible assets 49.1 35.6 Tangible assets 160.5 155.9 Investment in joint venture and associated undertakings 13.0 1.7 Other investments 5.6 5.7 ---------- ---------- 228.2 198.9 ---------- ---------- Current assets Stocks 93.2 98.3 Debtors : amounts falling due within one year 135.3 154.8 : amounts falling due after more than one year 23.1 20.9 Investments 0.4 4.3 Cash at bank and in hand 15.3 10.0 ---------- ---------- 267.3 288.3 Creditors: amounts falling due within one year (147.0) (159.4) ---------- ---------- Net current assets 120.3 128.9 ---------- ---------- Total assets less current liabilities 348.5 327.8 Creditors: amounts falling due after more than one year (136.5) (107.7) Provisions for liabilities and charges (47.2) (23.4) ---------- ---------- 164.8 196.7 ========== ========== Capital and reserves Called up share capital 73.2 73.2 Share premium 41.5 41.5 Revaluation reserve 17.8 15.5 Profit and loss account 29.2 26.1 Treasury shares (0.1) (0.1) Shareholders' funds ---------- ---------- Equity interests 113.7 108.3 Non-equity interests 47.9 47.9 ---------- ---------- 161.6 156.2 Equity minority interests 3.2 40.5 ---------- ---------- 164.8 196.7 ========== ========== Reconciliation of Movements in Consolidated Shareholders' Funds For the Year ended 31 December 2003 2003 2002 Â£m Â£m Profit for the financial year 10.4 8.1 Dividends (7.5) (7.0) ---------- ---------- Retained profit for the year 2.9 1.1 Currency translation differences on foreign currency net investments 2.5 (8.2) Revaluation of fixed assets - 2.3 Share capital issued - 0.4 Disposal of treasury shares - 0.6 ---------- ---------- Net addition (reduction) to shareholders' funds 5.4 (3.8) Opening shareholders' funds 156.2 160.0 ---------- ---------- Closing shareholders' funds 161.6 156.2 ========== ========== Consolidated Cash Flow Statement For the Year ended 31 December 2003 2003 2002 Â£m Â£m Net cash inflow from operating activities 48.5 38.4 ---------- ---------- Returns on investments and servicing of finance Interest received 1.3 1.7 Interest paid (5.2) (6.6) Preference dividends paid (3.9) (3.9) Dividends paid to minorities (0.4) (2.2) ---------- ---------- Net cash (outflow) from returns on investments and servicing of finance (8.2) (11.0) ---------- ---------- Taxation paid (1.7) (6.0) ---------- ---------- Capital expenditure and financial investment Purchase of tangible fixed assets (28.2) (32.5) Sale of tangible fixed assets 10.9 2.1 Purchase of trade investments (0.2) (0.1) Loans advanced to associated undertakings (0.1) - ---------- ---------- Net cash (outflow) from capital expenditure and financial investment (17.6) (30.5) ---------- ---------- Acquisitions and disposals Purchase of minority interest in subsidiary undertaking (43.7) - Purchase of subsidiary undertakings and businesses (0.5) (20.8) Net cash acquired with subsidiary undertakings - 1.8 Purchase of joint venture and associated undertakings (0.4) (0.8) Net proceeds from disposal of subsidiary undertakings 1.1 0.3 Net cash disposed of with subsidiary undertakings (0.4) - Net proceeds from disposal of joint venture and associated undertakings - 0.1 Proceeds from disposal of other investments - 0.5 ---------- ---------- Net cash (outflow) from acquisitions and disposals (43.9) (18.9) ---------- ---------- Equity dividends paid (3.3) (5.0) ---------- ---------- Net cash (outflow) before use of liquid resources and financing (26.2) (33.0) ---------- ---------- Management of liquid resources Net movement in short term money market deposits 1.4 1.8 ---------- ---------- Financing Ordinary share capital issued - 0.4 Increase (decrease) in borrowings due within one year 0.1 (5.4) Increase in borrowings due beyond one year 32.1 26.6 Capital element of finance leases (0.1) (0.1) ---------- ---------- Net cash inflow from financing 32.1 21.5 ---------- ---------- Increase (decrease) in cash 7.3 (9.7) ========== ========== Notes to the Financial Statements 1. SEGMENTAL ANALYSIS Turnover and operating profit, including joint venture and associated undertakings but before net interest costs, exceptional items and taxation, are shown below. 2003 2003 2003 2002 2002 2002 Turnover Operating Net assets Turnover Operating Net assets profit (liabilities) profit (liabilities) (loss) (loss) Â£m Â£m Â£m Â£m Â£m Â£m ACTIVITY Oil and gas marketing and distribution 939.6 13.6 137.7 638.1 11.7 109.1 Oilfield services and tubular products 168.6 5.4 114.6 233.9 8.3 123.1 Share of associated undertakings - - 1.2 - - 0.8 Exploration and other activities 87.2 6.5 42.6 79.3 4.3 41.4 Share of joint venture and associated - (0.3) 11.8 - 0.1 0.9 undertakings ---------- ---------- ---------- ---------- ---------- ---------- 1,195.4 25.2 307.9 951.3 24.4 275.3 ========== ========== ========== ========== Net funding (126.6) (97.6) Pension fund prepayment (net) 15.2 12.7 Central (liabilities) assets (31.7) 6.3 ---------- ---------- 164.8 196.7 ========== ========== AREA OF OPERATION Europe - UK 42.4 (1.3) 13.1 63.0 4.4 4.3 Europe - Continent 27.7 0.8 7.8 26.2 1.3 18.3 Canada 989.8 19.2 165.7 690.0 12.9 132.1 US 132.6 6.5 96.9 169.1 6.0 117.4 Share of joint venture - UK - 0.1 0.8 - 0.1 0.9 Share of associates - UK - (0.4) 11.0 - - - Share of associates - Other - - 1.2 - - 0.8 Other 2.9 0.3 11.4 3.0 (0.3) 1.5 ---------- ---------- ---------- ---------- ---------- ---------- 1,195.4 25.2 307.9 951.3 24.4 275.3 ========== ========== ========== ========== Net funding (126.6) (97.6) Pension fund prepayments (net) 15.2 12.7 Central (liabilities) assets (31.7) 6.3 ---------- ---------- 164.8 196.7 ========== ========== Inter-divisional turnover is not material and turnover by destination is not materially different to the area of operation. Segmental analysis is provided at operating profit level as most of the Group's financing is arranged centrally and interest is not specifically attributable to individual activities or geographic areas. All of the Group's activities are from continuing operations. This information is provided by RNS The company news service from the London Stock Exchange

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