AMER.L Regulatory News (AMER)

21 Dec 2006 07:01

Chaco Resources PLC21 December 2006 21 December 2006 AIM: CHP CHACO RESOURCES PLC ("Chaco" or "the Company") Interim Results for the Six Months ended 30 September 2006 Chaco Resources PLC announces its unaudited results for the six months ended 30September 2006. Highlights of the period • The Primavera Exploration & Production Contract was signed by the Operator, Gran Tierra Energy Inc (formerly Argosy Energy International) • The Company raised £4,000,000 (before expenses) through the placing of 26,666,667 new ordinary shares at 15p per share • Cash balance at period end in excess of £2m • The appointment of Ms Nicola Brookes as Finance Director of the Company Post-Period End Events • Secured a change in the eastern boundary of its Puerto Lopez Oeste Block (PLO) in the Llanos Basin of Colombia which will result in the inclusion of the majority of the large Metica South lead • Approved the second phase of the Exploration programme for Puerto Lopez Oeste • Completed seismic reprocessing at Primavera • Secured, through its subsidiary, Bohemia S.A. ("Bohemia") an evaluation permit over an area of 1,798,000 hectares in the Parana basin, known as the Alto Parana block (formerly Canindeyu) • Appointed Dr. John Wardle as Chaco's Resident Manager in Colombia, based in Bogota Jon Pither, Chairman of Chaco Resources, said: "Approaching three years ago weembarked on a project to refocus your company and become a petroleum producer.We are now within sight of achieving that objective. It has been a busy sixmonths. The next six promise to be even busier. If we achieve what we expectduring 2007 then we will have made the important transition from Explorer toProducer." Further details on the Company and its projects are available on the Company'swebsite: www.chacoplc.com For further information contact: Chaco Resources plc Daniel Stewart & Company plc Parkgreen CommunicationsNicola Brookes Lindsay Mair Simon Robinson /Finance Director Ana RibeiroTel: 01494 431195 Tel No: 0207 776 6550 Tel: 020 7851 7480 CHAIRMAN'S STATEMENT Dear Shareholder Approaching three years ago we embarked on a project to refocus your Company andbecome a petroleum producer. We are now within sight of achieving thatobjective. There is a busy program of work continuing in our three areas of interest inColombia at Platanillo (Chaco 25%), Primavera (Chaco 55%) and Puerto Lopez Oeste(Chaco 54%). We expect to be drilling wells in all three blocks during thefirst half of 2007 but at the time of writing there are still a number ofuncertainties over timing. These uncertainties are due to unique logistical difficulties in certain areasof Colombia combined with a rig shortage and are further complicated by onerousenvironmental and social welfare laws. In Platanillo, where the government controlled oil company, Ecopetrol, is theOperator, further delays are caused by the fact that all public sector companiesmust comply with a time consuming tendering and operating procedure whichprivate companies are not subject to. I must also emphasise that although wehave control over our investments, we are not the Operator on any of them. Thisdoes make a significant difference to our ability to control the timing ofevents. However, the recent appointment of Dr. John Wardle as Chaco's Resident Managerin Colombia has already had a positive influence in ensuring that all of ourareas of interest are drilled as soon as practicable. To be more specific, atPrimavera the Operator has advised that a rig contract is due to be executedshortly. This will enable a spud date late in the first quarter of 2007 for thefirst of two wells in this block. A well will be drilled on each of thepromising Capibara and Cachapa prospects in the north of the block. At Puerto Lopez Oeste, we announced recently that we will be entering the secondphase of the exploration programme. However, timing of drilling cannot befinalised until we can view the results of the interpretation of our recentseismic survey and can be sure of an exact drilling location. At Platanillo the Operator has advised that an application was submitted to ANH(The National Hydrocarbon Agency) to amalgamate Years 1 & 2 of the Contract.This would allow much more efficient logistics planning of the forthcomingprogramme and would alleviate the need to consider very expensive helicopterbased operations to meet current deadlines. The request for amalgamation hasbeen favourably received and formal approval is expected very shortly. Anyupdate on dates for commencement of operations must await this approval. Our overall plan to grow the business remains unchanged. Although execution todate has been slower than we had hoped, we remain confident that we will have abusy and successful 2007, starting quite probably with Primavera. As soon as thedrilling schedule gets underway, there should be a regular flow of news. In Paraguay, we continue to make progress in a country which is being re-ratedby the world petroleum industry. We have excellent exposure to two basins andhave been undertaking detailed analysis of seismic data while reviewing ourstrategic options. We are particularly pleased to have also been awarded the Alto Parana Block inNovember. This large block, formerly known as the Canindeyu Block, comprises1.8 million hectares and is situated in the Parana Basin adjacent to theBrazilian border. The scientific rationale behind the confidence of our technical experts isoutlined elsewhere in this report and is available on our website where anupdate on our work in Colombia and Paraguay has been posted. It has been a busy six months. The next six promise to be even busier. If weachieve what we expect during 2007 then we will have made the importanttransition from Explorer to Producer. Jon Pither Chairman 21 December 2006 DIRECTORS' REPORT FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2006 The directors present their report on the results for the six months ended 30September 2006. PRINCIPAL ACTIVITIES The principal activity of the Company is investing in oil and gas explorationand extraction in South America, principally in Paraguay and Colombia. SIGNIFICANT EVENTS DURING THE PERIOD Colombia - Primavera E&P Contract On 9 May 2006 the Primavera E&P Contract was signed by the Operator, ArgosyEnergy International, which has since been acquired by Gran Tierra Energy Inc.("Gran Tierra") Placing of Shares On 18 May 2006 the Company raised £4,000,000 (before expenses) through theplacing of 26,666,667 new ordinary shares at 15p per share. The placing wasmade to institutional investors and to provide the Company with further workingcapital for its ongoing operations in South America. Appointment of Director On 8 June 2006 Ms Nicola Brookes was appointed a Director of the Company and hasreplaced Mr Groak as the Finance Director. Mr. Groak remains on the Board in anon-executive capacity and as Chairman of the Audit Committee. EVENTS SUBSEQUENT TO BALANCE SHEET DATE Colombia - Puerto Lopez Oeste Block On 3 October 2006 the Company announced that it had secured a change in theeastern boundary of its Puerto Lopez Oeste Block (PLO) in the Llanos Basin ofColombia. The governmental hydrocarbons agency of Colombia, the ANH, hasnotified formally the Company of its approval of a modification to the boundaryof the PLO block which will result in the inclusion of the majority of the largeMetica South lead. On 14 December 2006 the Company announced that it would be entering the secondphase of the exploration programme. The decision followed the processing andinterpretation of seismic data obtained so far and would lead to drilling of atleast one well at the earliest opportunity. Exercise of Options On 5 October 2006 the Company issued and allotted 1,300,000 new ordinary sharesin the capital of the Company as a result of 1,300,000 options over ordinaryshares being exercised at a price of 2.16 pence per share. Colombia - Primavera Block On 10 October 2006 the Company announced that the seismic reprocessing andinterpretation of the Primavera Block had been completed. DIRECTORS' REPORT FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2006 (continued) Colombia - Platanillo Block On 10 October 2006 the Company announced that Ecopetrol, the Operator of thePlatanillo Block, had advised that it was investigating actively other rigoptions to the very expensive helicopter-supported operation that would benecessary to commence the re-entry and drilling programme before January 2007. EVENTS SUBSEQUENT TO BALANCE SHEET DATE (continued) Paraguay - Alto Parana Block On 2 November 2006 the Company announced that its subsidiary, Bohemia S.A. ("Bohemia"), had received approval of its hydrocarbon application. Bohemia hasbeen granted an evaluation permit over an area of 1,798,000 hectares in theParana Basin, known as the Alto Parana block (formerly Canindeyu). Theevaluation permit gives the Company the right to initiate the evaluation of thearea for a period of one year. This work will comprise the gathering andreprocessing of the historical data related to the block and the environmentallicensing required for the fieldwork after which the Company will enter theexploration period that covers the following four years. The next stage is for the Government to execute an Exploration and Productioncontract with the Company and then ratify the contract in Congress. Thecompletion of these two processes will trigger the issuing of a total of 9.1million shares to the vendors of Bohemia in accordance with the share saleagreement dated 27 September 2004. Appointment of Resident Manager in Colombia On 29 November 2006 Chaco announced the appointment of Dr. John Wardle asChaco's Resident Manager in Colombia, based in Bogota. Dr Wardle holds a B.Sc.in Mining Engineering and a Ph.D. in Rock Mechanics and Geophysics. Sincegraduation in 1985 he has worked as a drilling engineer with a number ofinternational companies and more recently, he has held a number of seniormanagement positions with oil exploration companies both in Colombia andelsewhere. International Financial Reporting Standards (IFRS) The Group is required to issue its March 2008 financial statements in accordancewith IFRS, including the September 2007 interims. The Directors have started toconsider the implications of these requirements, and in particular which areasof the Group's Balance Sheet and Results would be significantly affected by theadoption of IFRS. This process has not been completed to date, but the keyareas where differences in treatment between UK GAAP and IFRS may arise include: IFRS 3 - Intangible assets IAS 31 - Interests in joint ventures IAS 36 - Impairment of assets IAS 21 - The effects of changes in foreign exchange rates IFRS 6 - Exploration for and evaluation of mineral resources The Directors have considered the requirements of IFRS 2 (FRS 20 in UK GAAP) andhave concluded that no adjustment is required to comply with this standard, asall options had vested prior to 1 April 2006 (the transition date). A furtherupdate on IFRS matters will be provided to shareholders in due course, once theimpact of the change can be quantified in a sufficiently reliable manner. DIRECTORS' REPORT FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2006 (continued) BOARD COMPOSITION The composition of the Board as at 21 December 2006 is: Jon Pither - Chairman - Non-executive John Morris - Chief Executive Officer Graeme Stephens - Executive Technical Director Victor Valdovinos - Executive - Regional Director, South America Nicola Brookes - Executive - Finance Martin Groak - Non-executive - Finance Doug Jendry - Non-executive - Operations Signed on behalf of the Board in accordance with a resolution of the Directors. Nicola Brookes Director 21 December 2006 REVIEW OF OPERATIONS The detailed geology of the three project areas in Paraguay and the threeproject areas in Colombia were given in the Annual Report and are not repeatedhere; however any updates, such as new structural interpretations are describedbelow. 1. PARAGUAY (A) Curupayty Block - Curupayty Basin This large block of 10,056 sq.km was reduced to 8,000 sq.km on 4 December 2006,in compliance with Paraguayan regulations and the terms of the concession. During the period, the Company has re-processed and re-interpreted the seismicdata and commissioned a geological review of the limited area that was coveredby this pre-existing seismic data to establish the exploration potential of thearea. This review is now available and has allowed the Company to decide on which areato drop in this block. Subsequent to this reduction, the Company now has todecide whether to proceed with further seismic or to offer the block forfarm-in. (B) San Pedro Block - Parana Basin This very large block of 13,179 sq.km was reduced to 8,000 sq.km on 4 December2006, in compliance with Paraguayan regulations and the terms of the concession. During the period and after an intensive effort the Company finally located theold seismic tapes for the previous seismic survey and re-processing of this datahas commenced in Bogota, Colombia, after which the data will be interpreted inPerth, Australia and a geological review will be made of the seismicinterpretation. After this review, the Company will decide whether to fund thenext phase of exploration or to offer the block for farm-in. (C) Alto Parana Block - Parana Basin (formerly referred to as CanindeyuBlock) On 2 November 2006 the Company announced that this 1.8 million hectareexploration block had been awarded to the Company's subsidiary company, BohemiaS.A. The exploration permit gives the Company the right to initiate thegathering of historical data and reprocessing of seismic data, after which theCompany will enter the four year exploration period. The Company will make a decision regarding an ongoing work program in the Blockafter assessment of the re-processed seismic data is completed in the first halfof 2007. 2. COLOMBIA (A) Platanillo Block (Alea Field) - Putumayo Basin The first year program in this block is to: (i) re-enter and test the Lower U Sand and the Upper U Sand inthe Alea #1 well. (ii) Drill and test a step-out well, Platanillo #1, locatedclose to the P50 contour of the structure in order to establish possiblereserves of the field. (iii) Construct an access road eastwards into both of the abovelocations. It was the original intention of the Operator, Ecopetrol, to finish this roadand secure a land rig to re-enter Alea before the end of 2006. A major changein the Colombian laws covering environmental licences became effective in thethird quarter of 2006 which meant that construction of the new road would haveto be delayed until first quarter 2007. As this would result in the year 1commitments not being completed by the licence year end, the Operator requestedan amalgamation of Years 1 & 2 of the Contract from ANH, the government bodywhich administers the E&P Contracts in Colombia. At the time of writing thisrequest was still pending ratification from the Minister, which is expected tobe given very shortly. REVIEW OF OPERATIONS (continued) The Company will advise as soon as the Operator finalises a rig and updatesprogramme timing. (B) Puerto Lopez Oeste During the period, the seismic data was re-processed and re-interpreted and newstructural maps were prepared by the Operator. These maps indicated twopotential leads known as Metica (now renamed Santaya) and Metica South. Both ofthese leads needed further seismic to mature them into potential drillingtargets and the shooting of 100km of new seismic commenced in late October 2006. Preliminary results of the new seismic are now available and indicate that theSantaya lead is of limited potential. Final mapping is now being completed onthe Metica South lead. As soon as a drilling target is selected from the latest mapping, a timetablewill be established and a rig contract finalised to drill the well as soon aspossible thereafter. (C) Primavera During the period the seismic data was re-processed and re-interpreted andstructural maps were prepared by the Operator. Four structural leads weremapped and were named the Cachapa, Sayona, Tonino and Capibara leads and theirlocations are shown on the Chaco website presentation. The two largest and most interesting leads are Cachapa and Capibara and 20km ofnew seismic shooting was programmed with the objective of maturing these twoleads into viable drilling prospects. This seismic survey comprises 10km oneach of the named leads and was commenced in late October. This new seismic wasinterpreted in November and two drilling targets selected for drilling with anestimated spud date of the first well in the first quarter of 2007. TheOperator is now close to signing a rig contract for a rig to undertake thiswork. The results of these wells will determine whether the joint venture elects toenter Year 2 of the Primavera Contract in May 2007 which carries an obligationto drill one further exploration well in the Primavera E&P Contract block. Competent person Technical information in this interim statement has been reviewed by Mr GraemeStephens, the Company's Technical Director. He is a qualified geologist and hasbeen a member of the American Association of Petroleum Geologists since 1970. CONSOLIDATED PROFIT AND LOSS ACCOUNT - 6 MONTHS TO 30 SEPTEMBER 2006 6 months to 6 months to 12 months to 30 September 30 September 31 March Notes 2006 2005 2006 £000 £000 £000 (unaudited) (unaudited) (audited)Turnover - - -Administrative expenses (638) (388) (939)Operating loss (638) (388) (939) Net interest receivable and 48 8 128similar income Loss on ordinary activities (590) (380) (811)before taxation Tax on loss on ordinary 8 - - -activities Loss for the financial period 7 (590) (380) (811) Loss per share (pence) - basic 10 (0.11) (0.10) (0.18)Loss per share (pence) - fully (0.11) (0.10) (0.18)diluted The accompanying notes form part of these interim financial statements. CONSOLIDATED BALANCE SHEETS AS AT 30 SEPTEMBER 2006 30 September 30 September 31 March 2006 2006 2005 £000 Notes £000 £000 (audited) (unaudited) (unaudited) FIXED ASSETS Intangible assets 2 877 681 739 Tangible assets 4 2 3 Investments 3 7,049 - 604 7,930 683 1,346 CURRENT ASSETS Debtors 4 45 24 22 Cash at bank and in hand 2,194 317 5,565 2,239 341 5,587 Creditors: amounts falling due within 5 (193) (98) (140) one year NET CURRENT ASSETS 2,046 243 5,447 TOTAL ASSETS LESS CURRENT LIABILITIES 9,976 926 6,793 CAPITAL AND RESERVES Called up share capital 6 534 408 507 Shares to be issued 7 167 167 167 Other reserves 7 11,637 1,690 7,891 Profit and loss account 7 (2,362) (1,339) (1,772) Total Equity Shareholders' Funds 9,976 926 6,793 The accompanying notes form part of these interim financial statements. These interim financial statements were approved by a committee of the Board ofDirectors on 21 December 2006 and were signed on its behalf by: Nicola Brookes Director CONSOLIDATED CASH FLOW STATEMENT - 6 MONTHS ENDED 30 SEPTEMBER 2006 30 September 30 September 31 March 2006 2005 2006 £000 £000 £000 (unaudited) (unaudited) (audited)NET CASH OUTFLOW FROM OPERATING ACTIVITIES (596) (289) (780) RETURNS ON INVESTMENTS AND SERVICING OF FINANCEInterest received and similar income 48 8 128 TAXATION - - - CAPITAL EXPENDITURE AND FINANCIAL INVESTMENTPurchase of tangible fixed assets (1) - (1)Purchase of intangible fixed assets (152) (44) (47)Acquisition of investments (6,445) - (604) NET CASH OUTFLOW FROM CAPITAL EXPENDITURE AND FINANCIALINVESTMENT (6,598) (44) (652) NET CASH OUTFLOW BEFORE FINANCING (7,146) (325) (1,304) FINANCINGIssue of shares 4,000 - 6,581Expenses and commission paid in connection with share (225) - (354)issues NET CASH INFLOW FROM FINANCING 3,775 - 6,227 (DECREASE)/INCREASE IN CASH (3,371) (325) 4,923 The accompanying notes form part of these interim financial statements. NOTES TO THE UNAUDITED INTERIM FINANCIAL STATEMENTS FOR THE 6 MONTHS TO 30SEPTEMBER 2006 1. PRINCIPAL ACCOUNTING POLICIES Basis of preparation These accounts have been prepared in accordance with the terms of section 226and Schedule 4 of the Companies Act 1985. The interim financial statementsrepresent the consolidated accounts of Chaco Resources plc, including itssubsidiary companies in: • Paraguay: Amerisur S.A. and Bohemia S.A. and E-Plus S.A. (sub-subsidiary undertaking) • British Virgin Islands: Chaco Exploracion (Colombia) Limited The statements, which are unaudited, have been prepared on the basis of theaccounting policies published in the statutory accounts for the year ended 31March 2006. The financial information set out in this interim report does notconstitute statutory accounts as defined in section 240 of the Companies Act1985. The figures for the year ended 31 March 2006 have been extracted from thestatutory accounts that have been filed with the Registrar of Companies. Theauditors' report to these financial statements was unqualified and did notcontain a statement under section 237(2) of the Companies Act 1985. 2. INTANGIBLE ASSETS Goodwill Other on intangible Total acquisition assets £000 £000 £000Cost: At 1 April 2006 578 202 780Additions - 152 152At 30 September 2006 578 354 932 Amortisation:At 1 April 2006 41 - 41Charge for the period 14 - 14At 30 September 2006 55 - 55 Net book amount at 30 September 2006 523 354 877 Net book amount at 31 March 2006 537 202 739 Additions to other intangible assets include £70,000 in respect of historicalseismic data acquisition and processing pertaining to the Curupayty region inParaguay. The balance of £82,000 represents the money paid to the ParaguayanGovernment under Legislative Law Number 779 in respect of securing thecontinuing exploration of the Curupayty and San Pedro regions in Paraguay. 3. INVESTMENTS £000Cost:At 1 April 2006 604 Additions in year 6,445 At 30 September 2006 7,049 Net book value at 30 September 2006 7,049 Net book value at 31 March 2006 604 NOTES TO THE UNAUDITED INTERIM FINANCIAL STATEMENTS FOR THE 6 MONTHS TO 30SEPTEMBER 2006 (continued) At 31 March 2006, the Company had deposited US$7,400,000 (£4,270,000) withCitibank N.A. These funds were provided for the first phase of the explorationwork programme of the Platanillo block in the Putumayo basin of South Colombia.At 31 March 2006, these funds were held in an Escrow account and since they wereunder the control of the Company were disclosed as cash. Since 31 March 2006,this Escrow account is no longer under the sole control of the Company and inaccordance with the Group's accounting policy these funds have been reclassifiedas a "Joint Investment which is not an Entity" ("JANE"). The Company is earningan interest of 25% in the net profits of that arrangement. During the period under review, the Company placed US$4,045,000 (£2,175,000) inan Escrow Account as a fiduciary deposit for the Company's commitments inrespect of the Primavera block in the Llanos basin of Eastern Colombia. As theEscrow account is not under the sole control of the Company, this Escrow accounthas been treated as a JANE. The Company is committed to fund 100% of the year 1programme and is earning an interest of 55% in the net profits of thatarrangement. 4. DEBTORS 30 September 30 September 31 March 2006 2005 2006 £000 £000 £000Amounts receivable within one year:Prepayments and sundry debtors 45 24 22 45 24 22 5. CREDITORS 30 September 30 September 31 March 2006 2005 2006 £000 £000 £000Amounts falling due within one year:Trade creditors 13 - 31Amounts owed to Directors 11 22 22Other creditors and accruals 169 76 87 193 98 140 6. SHARE CAPITAL Authorised Allotted, called up and fully paid Number £000 Number £000Ordinary shares of 0.1 pence eachAt 31 March 2006 700,000,000 700 507,467,887 507 Ordinary shares of 0.1 pence eachAt 30 September 2006 700,000,000 700 534,134,554 534 NOTES TO THE UNAUDITED INTERIM FINANCIAL STATEMENTS FOR THE 6 MONTHS TO 30SEPTEMBER 2006 (continued) Shares issued in period • On 18 May 2006 the Company raised £4,000,000 (before expenses) throughthe placing of 26,666,667 new ordinary shares at 15p per share. The placing wasmade to institutional investors and to provide the Company with further workingcapital for its ongoing operations in South America. Post balance sheet events • On 5 October 2006 the Company issued and allotted 1,300,000 new ordinary shares in the capital of the Company as a result of 1,300,000 options over ordinary shares being exercised at a price of 2.16 pence per share. The Chairman, Mr Jon Pither, exercised 1,000,000 of these options. 7. RESERVES Shares Share Currency Profit and loss translation to be premium reserve account issued £000 £000 £000 £000At 1 April 2006 167 7,888 3 (1,772)Shares issued in period (note 6) - 3,748 - -Retained loss for the period - - - (590)Foreign exchange movement on reserves - - (2) -At 30 September 2006 167 11,636 1 (2,362) 8. TAX No tax is payable as a result of the loss for the period. Unrelieved tax lossesremain available to offset against future taxable profits. These losses havenot been recognised within the interim financial statements as they do not meetthe conditions required in accordance with FRS 19. 9. DIVIDEND The directors do not recommend the payment of an interim dividend. 10. LOSS PER SHARE The basic loss per share has been calculated on the basis of the net loss aftertaxation for the 6 months to 30 September 2006 of £590,000 (6 months to 30September 2005: £380,000; year to 31 March 2006: £811,000) and the weightedaverage number of shares in issue in the period ended 30 September 2006 of527,101,587 (6 months to 30 September 2005: 395,957,798; year to 31 March 2006of 440,153,140). The loss attributable to ordinary shareholders and the weighted average numberof ordinary shares for the purpose of calculating the diluted earnings per shareare identical to those used for the basic loss per share. This is because theexercise of share options would have the effect of reducing the loss perordinary share and is therefore not dilutive under the terms of FRS 22. This information is provided by RNS The company news service from the London Stock Exchange