Half Yearly Report

RNS Number : 2656E

Pan Andean Resources PLC

17 December 2009

 



Interim Results for the Six Months Ended 30th September 2009

As I write this, Pan Andean is subject to an offer which, if successful, will result in the Company delisting from AIM. Let me remind shareholders of the terms of the offer.

Petrominerales, a Canadian listed oil and gas producer, focused on South America, is offering:

●	15p cash for each Pan Andean share, plus
●	One Hydrocarbon Exploration Co Ltd share for every one Pan Andean share.

Hydrocarbon Exploration is currently owned 100% by Pan Andean and holds the Company's Bolivian and American assets. It will be spun off to existing shareholders on a one for one basis.  

In effect, existing Pan Andean shareholders are being offered 15p a share cash for the Peruvian and Colombian exploration assets; whilst retaining the same percentage in Hydrocarbon Exploration as they currently own in Pan Andean. Shareholders will continue to have the exposure to the potential upside in the US and Bolivian assets.   

In recent years, the directors of Pan Andean have found it difficult to persuade investors of the value in our assets. Our share price lacked the advances made by a peer group. With a large shareholder base of over 6,000 shareholders, many of whom invested years ago at higher prices, there was always a seller. In recent years, we have been one of the few profitable cash generative junior oil companies on the AIM. We assembled a top class ground portfolio in Peru, which we farmed out on good terms; despite this our share price still lagged.  

We had high hopes for our heavy oil block in Antorcha, Colombia, yet we failed to get a satisfactory farm out. The option of drilling ourselves was mooted strongly by some, but while we could have drilled one hole from our existing resources, a five hole programme would cost in the region of US$10 million. This would have required a deeply discounted funding, diluting existing holders. The final straw was a collapse in the US gas prices, which saw a dramatic drop in our income. As you will see from the accompanying financials, we report a small loss for the past six months - the Company's first loss in a decade.  

With great reluctance and considerable discussion among top management, we expect to sell off our prime exploration properties in Peru and Colombia, and return cash to shareholders. The remaining assets in Bolivia and in the US generate cash flow, but have their own problems; nationalisation in Bolivia and litigation on Block High Island 30 in the Gulf, where there is a dispute over a decision to clean up capped wells.

Turnover in the six months to the 30^th September 2009 was £468,000, a drop of over 60% on the equivalent period in 2008. This was due almost entirely to a fall in US gas prices. Costs were strictly controlled, particularly administrative charges, which were reduced by £40,000. The overall result was a loss of £37,000.

We believe that there remains great potential in our US and Bolivian assets. Once the Petrominerales deal closes in early 2010, we will focus on extracting value from these assets.  

Over the 20 year life of Pan Andean, we raised approximately £20 million. We drilled high risk holes in the Bolivian jungle and deep holes in Texas. They were unsuccessful. By selling our Peruvian and Colombian portfolio, we are able to hand back £18 million to investors, while there is significant potential value in the remaining assets. As David Horgan, the long time Managing Director commented using football parlance, "We got a draw". In the high risk world of oil exploration, and in the current economic climate, that is a result.  

John Teeling

Chairman

 

17th December 2009

Pan Andean Resources plc
Financial Information (Unaudited)
Condensed Consolidated Income Statement							Six Months Ended				Year Ended
							30 Sep 09		30 Sep 08		31 March 09
							unaudited		unaudited		audited
							£'000		£'000		£'000
REVENUE							468		1,145		1,848
Cost of sales							(224)		(219)		(371)
GROSS PROFIT							244		926		1,477
Administrative expenses							(263)		(307)		(477)
OPERATING PROFIT							(19)		619		1,000
Investment revenue							0		13		18
Finance costs							(18)		(14)		(38)
PROFIT/(LOSS) BEFORE TAXATION							(37)		618		980
Taxation							0		(185)		(294)
PROFIT/(LOSS) AFTER TAXATION							(37)		433		686
Earnings per share - basic							(0.03p)		0.36p		0.58p
Earnings per share - diluted							(0.03p)		0.34p		0.53p
Condensed Consolidated Balance Sheet							30 Sep 09		30 Sep 08		31 March 09
							unaudited		unaudited		audited
							£'000		£'000		£'000
ASSETS:
NON CURRENT ASSETS
Investments							3		3		3
Intangible assets							9,409		6,525		10,027
Property, plant & equipment							16,817		15,019		17,963
							26,229		21,547		27,993
CURRENT ASSETS
Receivables and prepayments							1,318		1,528		1,973
Cash and cash equivalents							1,466		3,047		2,231
							2,784		4,575		4,204
TOTAL ASSETS							29,013		26,122		32,197
LIABILITIES:
CURRENT LIABILITIES
Trade and other payables							(6,048)		(5,574)		(6,936)
NET CURRENT LIABILITIES							(3,264)		(999)		(2,732)
NON CURRENT LIABILITIES
Provisions and deferred liabilities							(3,161)		(2,170)		(3,282)
NET ASSETS							19,804		18,378		21,979
EQUITY:
Share capital							21,422		21,422		21,422
Reserves							(1,618)		(3,044)		557
TOTAL EQUITY							19,804		18,378		21,979
Condensed Consolidated Statement of Changes in Shareholders Equity
					Share based
	Share		Share		Payment		Translation		Retained		Total
	Capital		Premium		Reserves		Reserves		Losses		Equity
	£'000		£'000		£'000		£'000		£'000		£'000
As at 1 April 2008	1,192		20,230		26		(1,887)		(4,002)		15,559
Currency translation adjustments							2,386				2,386
Profit for the period									433		433
As at 30 September 2008	1,192		20,230		26		499		(3,569)		18,378
Currency translation adjustments							3,349				3,349
Profit for the period									252		252
As at 31 March 2009	1,192		20,230		26		3,848		(3,317)		21,979
Currency translation adjustments							(2,138)				(2,138)
Profit for the period									(37)		(37)
As at 30 September 2009	1,192		20,230		26		1,710		(3,354)		19,804
Condensed Consolidated Cash Flow							Six Months Ended				Year Ended
							30 Sep 09		30 Sep 08		31 March 09
							unaudited		unaudited		audited
							£'000		£'000		£'000
CASH FLOW FROM OPERATING ACTIVITIES
Profit before tax							(37)		618		980
Depreciation							87		132		110
Finance cost							18		14		38
Investment revenue							0		(13)		(18)
Exchange Movements							668		616		(251)
							736		1,367		859
MOVEMENTS IN WORKING CAPITAL
Increase/(Decrease) in trade and other payable							(888)		308		49
(Increase)/Decrease in trade and other receivables							655		(158)		(603)
CASH USED BY OPERATIONS							503		1,517		305
Finance cost							(1)		(14)		(1)
Investment revenue							0		13		18
NET CASH GENERATED IN OPERATING ACTIVITIES							502		1,516		322
CASH FLOW FROM INVESTING ACTIVITIES
Payment for intangible assets							(531)		-		(1,895)
Payment for property, plant & equipment							(437)		(497)		(659)
Re-imbursements of payments							0		0		1,930
NET CASH USED IN INVESTING ACTIVITIES							(968)		(497)		(624)
NET DECREASE IN CASH AND CASH EQUIVALENTS							(466)		1,019		(302)
Cash and cash equivalents at beginning of the period							2,231		1,880		1,880
Effect of foreign rate changes on cash held							(299)		148		653
CASH AND CASH EQUIVALENT AT END OF THE PERIOD							1,466		3,047		2,231

Notes:
1	INFORMATION
	The financial information for the six months ended September 30th, 2009 and the comparative amounts for the six months ended September 30th, 2008 are unaudited. The financial information above does not constitute full statutory accounts within the meaning of section 240 of the Companies Act 1985.
	The Interim Financial Report has been prepared in accordance with IAS 34 Interim Financial Reporting as adopted by the European Union. The accounting policies and methods of computation used in the preparation of the Interim Financial Report are consistent with those used in the Group 2009 Annual Report, which is available at www.panandeanresources.com.
	The interim financial statements have not been audited or reviewed by the auditors of the Group pursuant to the Auditing Practices board guidance on Review of Interim Financial Information.
2	No dividend is proposed in respect of the period.
3	Earnings per share
	Basic earnings or loss per share is computed by dividing the net profit or loss after taxation for the year available to ordinary shareholders by the sum of the weighted average number of ordinary shares in issue and ranking for dividend during the year.
	Diluted earnings or loss per share is computed by dividing the net profit or loss after taxation for the year by the weighted average number of ordinary shares in issue, adjusted for the effect of all dilutive potential ordinary shares that were outstanding during the year.
	The following table sets forth the computation for basic and diluted earnings per share (EPS):

		30 Sep 09		30 Sep 08		31 Mar 09
		£		£		£
	Net profit/(loss) for the period	(36,994)		432,732		685,881
	Weighted average number of ordinary shares
	For basic EPS	119,227,733		119,227,733		119,227,733
	For diluted EPS	119,227,733		128,244,733		128,244,733
	Basic EPS Diluted EPS	(0.03p) (0.03p)		0.36p 0.34p		0.58p 0.53p

	Basic and diluted loss per share as at 30 September 2009 is the same as the effect of the outstanding share options are anti-dilutive and is therefore excluded.
	There have been no other transactions involving ordinary shares or potential ordinary shares between the reporting date and the date of completion of these financial statements.

4	Intangible Assets
		30 Sep 09	30 Sep 08			31 Mar 09
	Exploration and evaluation assets:	£'000		£'000		£'000
	Cost
	Opening balance	10,027		5,848		5,848
	Exchange adjustments	(1,149)		677		2,037
	Additions	531		-		4,072
	Re-imbursements received under farm-out agreement	-		-		(1,930)
	Closing balance	9,409		6,525		10,027
	The directors are aware that by its nature there is an inherent uncertainty in exploration and evaluation, and therefore inherent uncertainty in relation to the carrying value of capitalised exploration and evaluation assets.
	There were no facts or circumstances indicating that the carrying amount of intangible assets, other than those relating to Bolivia, may exceed their recoverable amount, and thus no impairment review was deemed necessary by the Directors.
	The realisation of these intangible assets is dependent on the successful discovery and development of economic oil and gas reserves and is subject to a number of significant potential risks including:

●	Price fluctuations;
●	Uncertainties over development and operational costs;
●	Political and legal risks, including arrangements with governments for licences, profit sharing and taxation; and
●	Funding requirements.

	There are a number of fundamental uncertainties relating to exploration and evaluation assets in Bolivia. As these uncertainties indicate that the carrying value of assets in Bolivia may exceed their recoverable amount, an impairment review has been carried out by the Board
	The recoverable amount is the higher of the asset's fair value less costs to sell and value-in-use. Given the nature of the Group's current activities in Bolivia, the recoverable amount was based on its value-in-use.
	The value-in-use is determined at the cash generating unit level, in this case being geographical segments. A risk-based valuation is used which combines an assessment of the expected chance of commercial success and likely development cost, and discounting the expected cash flows estimated by the directors over the life of the project.
	The key assumptions for its calculation are as follows:

	-	Likely production reserves
	-	Cash Costs
	-	Oil & Gas prices
	-	Years until production can commence

	Likely production reserves are based on the best data available to management from seismic analysis carried out to date. Oil and gas prices are based on management's best estimate using current and future industry trends. Discount rates are calculated considering management's estimate of the risk attached to the projects. The years until production can commence is determined by management.
	The directors believe that any likely change in any of these assumptions would not cause the recoverable amount to exceed carrying value.
	Having reviewed exploration and evaluation assets relating to Bolivia at 30 September 2009, the directors are satisfied that the value-in-use of the intangible assets is not less than carrying value. The realisation of the exploration and evaluation assets in Bolivia is dependent on the successful discovery and development of economic reserves which is affected by the risks outlined. Should this prove unsuccessful the value included in the balance sheet would be written off to the income statement.

5	Property, Plant & Equipment
		Plant & Equipment		Oil & Gas Interest		Total
		£'000		£'000		£'000
	Cost
	At 1 April 2008	32		17,946		17,978
	Exchange adjustments	1		1,161		1,162
	Additions	-		497		497
	At 30 September 2008	33		19,604		19,637
	Exchange adjustments	7		3,266		3,273
	Additions	2		160		162
	At 31 March 2009	42		23,030		23,072
	Exchange adjustments	(3)		(1,789)		(1,792)
	Additions	-		437		437
	At 30 September 2009	39		21,678		21,717
	Depreciation
	At 1 April 2008	17		4,253		4,270
	Exchange adjustments	-		216		216
	Additions	-		132		132
	At 30 September 2008	17		4,601		4,618
	Exchange adjustments	6		506		512
	Additions	-		(21)		(21)
	At 31 March 2009	23		5,086		5,109
	Exchange adjustments	(2)		(294)		(296)
	Additions	-		87		87
	At 30 September 2009	21		4,879		4,900
	Net Book Value
	At 30 September 2009	18		16,799		16,817
	Included within oil and gas interests is £3,957,876 in relation to Danbury Dome which is in the development stage. The realization of the carrying amount is dependent on the successful development of economic reserves and the Group's ability to raise sufficient finance to develop the project.
6	The Interim Report for the six months to 30th September 2009 was approved by the Directors on 17th December 2009.
7	Copies of this announcement will be sent to shareholders and will be available for inspection at the Companies Registered Office at 20-22 Bedford Row, London WC1R 4JS. The Interim Report may also be viewed at Pan Andean Resources plc's website at www.panandeanresources.com.

 

END

 

 

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