AMER.L Regulatory News (AMER)

23 Dec 2005 07:00

Chaco Resources PLC23 December 2005 CHACO RESOURCES PLC (Company Number: 4030166) Interim Financial Statements 6 MONTHS TO 30 SEPTEMBER 2005 Unaudited Chaco Resources Plc Prestige Travel Suite 81-83 Victoria Road Surbiton KT6 4NSUK Tel / Fax : +44 (0) 20 8399 3879 E-mail: info@chacoplc.com Web: www.chacoplc.com CHAIRMAN'S STATEMENT Dear Shareholder It is gratifying to report that your Company has continued to make excellentprogress in its evolution as a South American focused oil and gas producer.Since we embarked on this process we have successfully established ourcredentials and secured a number of exploration and production concessions inParaguay and Colombia. We continue to investigate promising opportunities asthey are presented to us. As you can see in this report, and from the posting on our website of anexcellent presentation by our new technical director, Graeme Stephens, ChacoResources is exposed to a number of potentially high-impact exploration anddevelopment programs scheduled for the year ahead. Our position in Colombialooks particularly encouraging, and events are starting to move quite rapidly.Significant developments to note are: • A farm-in agreement covering the Alea oilfield with Ecopetrol, the Colombian national oil company, and Repsol YPF, one of the major oil companies active in the region. Drilling is expected to start in 2006, with the potential for a fast start on production. Chaco is earning 25% in this project by funding the first phase at a capped cost of US$7.4 million. • The awarding of the Puerto Lopez Oeste exploration and production (E&P) contract in which we can earn a 54% interest with a first year expenditure commitment of just over US$1 million. • An application for a third Colombian E&P contract in which we could earn a 55% interest. The Ecopetrol / Repsol agreement involves the appraisal and development of theAlea oil field in the Platanillo (formerly Guara) Block, located in the PutumayoBasin in the south of Colombia. This area includes a discovery well which flowed533 barrels of oil a day in 1988. We are funding the cost of re-working existing seismic data, re-entering and testing the discovery well, and the drilling of astep-out well to determine the lateral extent of the field. In exchange for thisprogram of work, capped at a cost of US$7.4 million over the first year, we willearn a 25% interest. As with all forms of exploration there are risks involved,though it is worth noting that seismic analysis, plus what was previously knownabout the discovery well, indicated recoverable reserves estimated by Repsolranging from 21 million to 38 million barrels of oil. Therefore our work isdefined as appraisal and development rather than exploration. Work in the 35,700 hectare Puerto Lopez Oeste Block in the Llanos Basin to theeast of Colombia's capital, Bogota, calls for Chaco to fund a US$1 millionseismic program and pay for the first exploration well. The objective is to finda "look-alike" structure to the Valdivia oilfield which lies immediately to thesouth. Valdivia contains an estimated 9.79 million barrels of oil in place, andis currently producing over 3,000 barrels a day. Existing seismic data is beingre-processed, and the first phase of the program includes acquiring anadditional 100 kilometres of new seismic data. The Primavera application area - our third - is also in the Llanos Basin, and weare currently waiting to hear whether our application, which includes a workcommitment of US$1.25 million, has been successful. Among other developments which have added to our enthusiasm for investing inColombian assets is an announcement from the Colombian Government that itintends to cut the rate of corporation tax from 38.5% to 28.5%, a reduction ofmore than one-third. This action is subject to ratification during 2006, but itis a significant sign of the Government's desire to encourage new investment. In Paraguay, work is continuing on the two exploration and productionconcessions we have been granted in the San Pedro and Curupayty areas, coveringa total of 2.3 million hectares. We now have a solid ground position in anunder-explored, but promising South American country. Our work in Paraguaycurrently involves re-processing seismic data using modern computers andanalytical programs. Once this is complete we will review our strategic positionin terms of undertaking further seismic and/or initiating a drilling program,preferably with a farm-in partner. CHAIRMAN'S STATEMENT (continued) Other recent developments of significance include the successful privateplacement of shares which raised sufficient cash to ensure that we can developour oil and gas assets, and the appointment of Graeme Stephens to the Company'sboard. Mr Stephens brings considerable technical skills with him after a 45 yearcareer in the oil and gas industry, including three years as head of Lasmo inColombia. I should also like to take this opportunity to express once again the Board'sthanks to Tom Elder and Lee Graber who stood down as Directors on 30 September2005. They gave the Board consistent professional support over nearly threeyears and made an enormous contribution during our recent period of transition. At the risk of becoming overly enthusiastic I believe that Chaco is extremelywell positioned. We have assembled a team with excellent technical andcommercial skills who have secured and are extending attractive tenementpositions in some of South America's most prolific oil producing regions. Chacois well poised to reap the rewards of exceptionally strong oil and gas markets. Jon PitherChairman23 December 2005 DIRECTORS' REPORT FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2005 The directors present their report on the results for the six months ended 30September 2005. Principal Activities The principal activity of the Company is investing in oil and gas explorationand extraction in South America, principally in Paraguay and Colombia. PARAGUAY Amerisur SA - Concession Contracts executed in Paraguay The Company announced on 26 April 2005 that two Concession Contracts had beenexecuted by the relevant Paraguayan Government Authorities with respect toapplications by its Paraguayan subsidiary, Amerisur S.A., for hydrocarbonexploration and exploitation concessions in the Curupayty and San Pedro blocks.Issuing of share capital In accordance with the Share Sale Agreement set out in Part IX of the Company'sAIM Admission document dated 20 October 2004, 910,747 new Ordinary Shares wereallotted to the Vendors of Amerisur S.A. with respect to each ConcessionContract being so executed. Therefore a total of 1,821,494 new Ordinary Shareswere allotted and admitted to AIM on 29 April 2005. Amerisur SA - Granted Exploration and Production Concessions On 9 August 2005, the Company announced that the Congress of Paraguay had passedtwo Acts approving the granting of two Exploration and Production Concessions toChaco's subsidiary, Amerisur S.A. ('Amerisur'). These Acts were the final steps in obtaining hydrocarbon exploration andexploitation rights over the Curupayty and San Pedro Blocks. Issuing of Share Capital In accordance with the Share Sale Agreement, the vendors of Amerisur wereallotted a total of 16,393,442 new Ordinary Shares, being 8,196,721 new OrdinaryShares in respect of each Concession passing into law. The shares were admittedto AIM on 12 August 2005. COLOMBIA Extraordinary General Meeting An Extraordinary General Meeting ("EGM") of the Company was held on 18 July2005, at which shareholders granted the Board the authority to place up to125,177,500 new shares of 0.1p (£125,177.50 nominal value) for cash. The purposeof this authority was to allow the Board the flexibility to raise funds at shortnotice in the event that the Company and / or joint ventures in which it wasparticipating were granted one or more Exploration and Production (E&P)contracts that it was seeking to acquire in Colombia. That authority was subsequently renewed via the passing of a Special Resolutionat the Company's Annual General Meeting held on 5 October 2005. Increase of Authorised Share Capital At the EGM held on 18 July 2005 a resolution was also passed to increase theCompany's authorised share capital from 600,000,000 to 700,000,000 OrdinaryShares of 0.1p. DIRECTORS' REPORT FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2005 (continued) Post Balance Sheet Events Farm-in Agreement The Company announced on 3 October 2005 that it had entered into a farm-inagreement to earn a 25% interest in the Alea Field in Colombia's Putumayo Basinfrom Repsol YPF SA ("Repsol") by funding certain appraisal operations. On 8December 2005, the Company announced that Ecopetrol S.A., the Colombian nationaloil company, and the operator of the Platanillo (formerly Guara) blockcontaining the Alea field, had joined Repsol as a party to the farm-outagreement. The Company's financial commitment required to earn the 25% interest is cappedat US$7.4 million for the first phase of development of the Alea Field. Chacohas agreed to fund the cost of re-working existing seismic coverage, re-enteringand testing an existing discovery well, which flowed oil at 533 bbls/day in1988, and drilling a new step-out well to determine the possible lateral extentof the field. Private Placing The Company announced on 27 October 2005 that it had placed 84,680,667 newOrdinary 0.1p Shares at a price of 6 pence per share, pursuant to which it hasraised £5,080,840 gross (approximately £4,785,000 net of expenses). The new shares were admitted to trade on AIM on 4 November 2005. Consideration Shares Issued As at 19 December 2005, the Company issued 1,000,000 ordinary shares of 0.1pence to Expet S.A. as consideration for introduction services in Colombiarendered to the Company. Board Composition On 30 September 2005 both Dr.Thomas Elder and Mr.Lee Graber resigned from theBoard. On the same date, Graeme Stephens joined the board as Technical Director. The composition of the Board as at 23 December 2005 is therefore: Jon Pither Chairman - Non ExecutiveJohn Morris Executive DirectorGraeme Stephens Executive Technical DirectorVictor Valdovinos Executive - Regional Director, South AmericaMartin Groak Non Executive - FinanceDoug Jendry Non Executive - Operations As a result of the changes, the members of both the Remuneration Committee andthe Audit Committee are Jon Pither and Martin Groak. Signed on behalf of the Board in accordance with a resolution of the Directors. Martin GroakDirector23 December 2005 REVIEW OF OPERATIONS PARAGUAY Since the last Annual Report the Company has been awarded the Curupayty Permitconcession in the Curupayty Basin and the San Pedro Permit concession in theParana Basin, both for exploration and production. The application for the Canindeyu Permit, also in the Parana basin, is currentlybeing processed by the relevant Paraguayan authorities, and the Company isconfident that it will be reviewed for subsequent approval by Congress withinthe first half of 2006. Technical work on all three blocks in the period has consisted of an exhaustivedata gathering process in which all of the existing raw seismic data wascollected, sorted and reviewed. It was then taken to Argentina to bere-formatted and copied onto modern media. Subsequently, it was brought to theUK where it is being re-processed under the supervision of Dr. Philip Linsley(the author of the expert's report in the Admission Document issued when theDirectors sought shareholder approval to acquire the Paraguayan assets). Dr. Linsley has requested additional survey log data to complete the work and itis now expected to be finished in early 2006. The next step will be to interpret the re-processed data and produce regionalstructural maps on the key seismic horizons. At the same time the data from thefew existing wells will also be reviewed and correlated into the seismicinterpretation. Once this process is complete, decisions will be made as towhether further seismic shooting is required to define possible drillingtargets. This process will take up most of 2006, after which the Company will bein a position to assess fully the prospectivity of the various permits and seekjoint venture partners for future exploration drilling. COLOMBIA Since the last Annual Report the Company has acquired interests in onedevelopment project and one exploration project in Colombia, with a third(exploration) application still pending. Details of these three projects aregiven below: (a) Alea Development Project: This project is a farm-in by Chaco to an appraisal and development programme toexploit an undeveloped oil field held by Ecopetrol and Repsol in the Platanillo(formerly Guara) Block located in the Putumayo Basin on the border with Ecuador.The discovery well for the field was the Alea No 1 well, drilled by Ecopetrol in1988. The well tested 533 barrels of oil per day with no water from the "Lower USand" in the Cretaceous Villeta Formation. The "Upper U Sand" in the sameformation was never tested, but electric log analysis carried out by Repsolindicates that this upper sand is also likely to be oil bearing.The appraisal programme being funded by Chaco includes reworking of existingseismic and re-entry of the Alea 1 well for long term testing of the Lower USand, and perforation and testing of the Upper U Sand. Repsol reserve analysis using petrophysical parameters obtained from thediscovery well and a reasonable degree of oil fill gives a recoverable reserveof 20.8 million barrels of oil for the Lower U Sand, and if the Upper U Sand is tested and found to be oil bearing, an additional 17.3 million barrels of recoverable oil for that sand. In addition to this re-entry project, Chaco will fund the cost of a step-outwell to help define the lateral extent of the field and the extent of oil fillof the whole Alea structure. Chaco's commitment to fund the above programme to earn a 25% working interesthas been capped at US$7.4m. Ecopetrol will operate the programme and it is expected that the re-entry ofAlea 1 will commence during the first quarter of 2006. REVIEW OF OPERATIONS (continued) (b) Puerto Lopez Oeste Exploration Contract Chaco will retain a 54% working interest in a joint venture which has beenawarded the Puerto Lopez Oeste block in the Llanos Basin of Colombia. Otherparticipants in the block are Consultoria Colombiana S.A. (CCSA) and Expet SA(Expet), both local Colombian companies, and the block will be operated by Expetand CCSA. The block lies immediately north of the Valdivia Oil Field, which is astratigraphic trap caused by the onlap of the Eocene Mirador sandstone reservoiron to a large basement high. This basement high continues northwestwards intothe Puerto Lopez Oeste Block and seismic lines show that the same Mirador onlapthat controls the Valdivia Field is present in Puerto Lopez Oeste. The Valdivia Field was discovered in 1988. It is reported to have in place oilreserves of over 9 million barrels and is currently producing from three wellsat a combined rate of over 3,000 barrels per day. Although Puerto Lopez Oeste is still an exploration play and has explorationrisk, the existence of a field immediately south and "on-trend" substantiallyreduces this risk. The 2006 programme in the Puerto Lopez Oeste Block is to re-interpret existingseismic to high grade areas in which to shoot 100 km of new infill seismic todefine possible Valdivia look-alikes. This seismic will commence shooting in thefirst quarter of 2006. (c) Primavera Exploration Application Chaco will retain a 55% working interest in a joint venture which has appliedfor a block known as the Primavera Block in the Llanos Basin. Joint participantswith Chaco are Expet and Argosy Energy International, both local Colombiancompanies. This block was unsuccessfully explored in the 1980's and contained a number ofwells which obtained oil shows and minor oil recoveries from the MiradorSandstone, the main producing unit of the Llanos Basin, but the companyconsiders that the block has remaining untested potential. The result of the application should be known before the end of 2005. If theapplication is successful, Chaco will bear 100% of the cost of the first phaseprogramme. The total financial commitment of this first phase programme isUS$1.25 million. CONSOLIDATED PROFIT & LOSS ACCOUNT FOR THE 6 MONTHS ENDED 30 SEPTEMBER 2005 Notes 6 months to 6 months to 12 months to 30 September 30 September 31 March 2005 2004 2005 £000 £000 £000 (unaudited) (unaudited) (audited) Turnover - - -Administration expenses (388) (135) (672) -------------------------------------------Operating loss (388) (135) (672)Exceptional item - writeoff of debtor from formergroup undertaking - (318) (318)Interest receivable 8 - 19 -------------------------------------------Loss on ordinary activitiesbefore taxation (380) (453) (971)Tax on loss on ordinaryactivities 7 - - - ------------------------------------------- Retained loss attributable to 6 (380) (453) (971)shareholders =========================================== Loss per share (basic &diluted) 9 (0.10) pence (0.13) pence (0.27) pence =========================================== The accompanying notes form part of these interim financial statements. CONSOLIDATED BALANCE SHEET AS AT 30 SEPTEMBER 2005 Notes 30 September 30 September 31 March 2005 2004 2005 £000 £000 £000 (unaudited) (unaudited) (audited) Fixed assetsIntangible assets 2 681 85 651Tangible assets 2 - 2 --------------------------------------- 683 85 653 --------------------------------------- Current assetsDebtors: amounts fallingdue within one year 3 24 42 58Cash at bank and in hand 317 651 642 --------------------------------------- 341 693 700 Creditors: amountsfalling due within oneyear 4 (98) (157) (49) --------------------------------------- Net current assets 243 536 651 ---------------------------------------Total assets less currentliabilities 926 621 1,304 =======================================Capital and reservesCalled up share capital 5 408 353 390Shares to be issued 167 - 500Share premium 6 1,690 711 1,375Profit and loss account 6 (1,339) (443) (961) ---------------------------------------Total EquityShareholders' Funds 926 621 1,304 ======================================= The accompanying notes form part of these interim financial statements. These interim financial statements were approved by a committee of the Board ofDirectors on 23 December 2005 and were signed on its behalf by: Martin GroakDirector CONSOLIDATED CASH FLOW STATEMENT FOR THE 6 MONTHS ENDED 30 SEPTEMBER 2005 6 months to 6 months to 12 months to 30 September 30 September 31 March 2005 2004 2005 £000 £000 £000 (unaudited) (unaudited) (audited) Net cash outflow from operatingactivities (289) (110) (703) ------------------------------------------- Returns on investments andservicing of financeInterest received 8 - 19 Taxation - - - Capital expenditure and financialinvestmentPurchase of tangible fixed assets - - (2)Purchase of intangible fixed assets (44) (30) (85) -------------------------------------------Net cash outflow from capitalexpenditure and financial (44) (30) (87)investment ------------------------------------------- AcquisitionsNet cash from purchase ofsubsidiary - - 10undertakingsProfessional costs incurred inpurchase of subsidiary undertakings - - (89) -------------------------------------------Net cash outflow from acquisitions - - (79) ------------------------------------------- Net cash outflow before financing (325) (140) (850) ------------------------------------------- FinancingIssue of shares - 790 1,491 -------------------------------------------Net cash inflow from financing - 790 1,491 ------------------------------------------- (Decrease)/increase in cash (325) 650 641 =========================================== The accompanying notes form part of these interim financial statements. NOTES TO THE UNAUDITED INTERIM FINANCIAL STATEMENTS - 30 SEPTEMBER 2005 1. PRINCIPAL ACCOUNTING POLICIES Basis of preparationThese accounts have been properly prepared, in accordance with the terms ofsection 226 and Schedule 4 of the Companies Act 1985. The interim financialstatements represent the consolidated accounts of Chaco Resources plc, includingits subsidiary companies in Paraguay: Amerisur S.A. and Bohemia S.A. The statements, which are unaudited, have been prepared on the basis of theaccounting policies published in the statutory accounts for the year ended 31March 2005. 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 2005 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 acquisition assets Total £000 £000 £000Cost:At 30 September 2004 - 85 85Additions at cost 578 - 578 ------------------------------------------- At 1 April 2005 578 85 663Additions at cost - 44 44 ------------------------------------------- At 30 September 2005 578 129 707 ===========================================Amortisation:At 1 October 2004 - - -Amortisation for theperiod 12 - 12 ------------------------------------------- At 1 April 2005 12 - 12Amortisation for theperiod 14 - 14 -------------------------------------------At 30 September 2005 26 - 26 =========================================== Net book amount at30 September 2005 552 129 681 =========================================== Net book amount at31 March 2005 566 85 651 ===========================================Net book amount at30 September 2004 - 85 85 =========================================== The other intangible asset represents the cost of acquiring historical seismicdata (the "Data") pertaining to various locations in Paraguay, along with thecapitalisation of expert and professional fees in connection with theacquisition of the Data. The additions in the period represent costs incurred inrespect of copying the original Data onto modern media. As at 30 September 2005, the reinterpretation of the Data had not beenconcluded, and therefore the Directors are of the view that it would beinappropriate to charge amortisation at this time. The Directors have considered the carrying value of the goodwill relating to theParaguayan subsidiaries, in the light of operating losses incurred in Paraguayin the period. The Directors are of the opinion that the intrinsic value ofAmerisur and Bohemia is at least equivalent to the carrying value of thegoodwill, in consideration of the fact that full exploration and productionconcessions have been issued over the Curupayty and San Pedro Blocks. NOTES TO THE UNAUDITED INTERIM FINANCIAL STATEMENTS - 30 SEPTEMBER 2005(continued) 3. DEBTORS 30 September 30 September 31 March 2005 2004 2005 £000 £000 £000 Amounts receivable within one year:Prepayments and sundry debtors 24 42 58 ---------------------------------------- 24 42 58 ======================================== 4. CREDITORS 30 September 30 September 31 March 2005 2004 2005 £000 £000 £000 Amounts falling due within one year:Trade creditors - 29 1Amounts owed to Directors 22 61 20Other creditors and accruals 76 67 28 ---------------------------------------- 98 157 49 ======================================== 5. SHARE CAPITAL Authorised Allotted, called up and fully paid Number £000 Number £000 ==============================================Ordinary shares of 0.1 pence eachAt 30 September 2004 600,000,000 600 353,350,555 353 ==============================================Ordinary shares of 0.1 pence each At 31 March 2005 600,000,000 600 389,935,920 390 ==============================================Ordinary shares of 0.1 pence each At 30 September 2005 700,000,000 700 408,150,856 408 ============================================== Shares issued in period In accordance with the Share Sale Agreement set out in Part IX of the Company'sAIM Admission document dated 20 October, 2004, 910,747 new Ordinary Shares wereallotted to the Vendors of Amerisur S.A. with respect to each ConcessionContract being so executed. Therefore a total of 1,821,494 new Ordinary Shareswere allotted and admitted to AIM on 29 April 2005. In accordance with the Share Sale Agreement, the vendors of Amerisur wereallotted a total of 16,393,442 new Ordinary Shares, being 8,196,721 new OrdinaryShares in respect of each Concession passing into law. The shares were admittedto AIM on 12 August 2005. Increase in Authorised Share Capital At an EGM held on 18 July 2005 a resolution was passed to increase the Company'sauthorised share capital from 600,000,000 to 700,000,000 Ordinary Shares of0.1p. NOTES TO THE UNAUDITED INTERIM FINANCIAL STATEMENTS - 30 SEPTEMBER 2005(continued) 5. SHARE CAPITAL (continued) Post balance sheet events The Company announced on 27 October 2005 that it had placed 84,680,667 newOrdinary 0.1p Shares at a price of 6 pence per share, pursuant to which it hasraised £5,080,840 gross (approximately £4,785,000 net of expenses). The newshares were admitted to trade on AIM on 4 November 2005. Consideration Shares Issued As at 19 December 2005, the Company issued 1,000,000 ordinary shares of 0.1pence to Expet S.A. as consideration for introduction services in Colombiarendered to the Company. Share Profit and loss premium account6. reserves £000 £000 At 1 April 2005 1,375 (961)Shares issued in the period (note 5) 315 -Retained loss for the period - (380)Foreign exchange movement on reserves - 2 -------------------------------At 30 September 2005 1,690 (1,339) =============================== 7. 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 have notbeen recognised within the interim financial statements as they do not meet theconditions required in accordance with FRS 19. 8. DIVIDEND The directors do not recommend the payment of an interim dividend. 9. EARNINGS 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 2005 of £380,000 (6 months to 30September 2004: £453,000, year to 31 March 2005: £971,000) and the weightedaverage number of shares in issue in the period ended 30 September 2005 of395,957,798 (30 September 2004: 341,263,123; 31 March 2005: 360,705,650). 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 earnings per share. This is becausethe exercise of share options would have the effect of reducing the loss perordinary share and is therefore not dilutive under the terms of FRS 14. This information is provided by RNS The company news service from the London Stock Exchange