1 Jul 2010 07:00
1st July 2010
AMERISUR RESOURCES PLC ("Amerisur", "the Company" or "the Group")
Preliminary Results for the year ended 31st March 2010
Amerisur Resources PLC, the oil and gas explorer and developer focused on South America announces results for the year ended 31st March 2010.
Results highlights:
·; Achieved commerciality & became 100% owner of Platanillo contract:
- Assumed further 40% interest to become sole operator
- Alea-1 and Platanillo-2 commenced commercial production in October 2009
- Application made to ANH to extend the Exploitation Area
·; Drilled new exploration wells in Fénix block:
- Drilled Iguasa-1 and Isabel-1 which identified independent oil accumulations with joint potential contingent resources of more than 10 mmbbl
- Plans include a long term flow test of the two wells and the drilling of two offset wells on each discovery
- Management potential estimates of over 300 mmbbl of unrisked prospective resources
·; Significant progress achieved in Paraguay:
- Single largest UK investor in the country during the year
- Conducted two geochemical surveys - encouraging results
- Planning to shoot approximately 180 km of 2D seismic in 2010
Post period end highlights:
·; As at 31st May 2010 producing 498 BOPD from Alea-1 and Platanillo-2
·; Raised £13.7 million (before expenses) enabling the Company to accelerate developments by funding:
- Ongoing appraisal and exploration activities in the Platanillo and Fénix blocks in Colombia; and
- A 2D seismic programme on the San Pedro block in Paraguay to mature the prospect inventory
·; Post-fundraising current cash position £17.6m
Giles Clarke, Chairman of Amerisur Resources said:
"This has been a great year of developments for Amerisur. We delivered commerciality in our Platanillo contract, now have 100% ownership of all of our blocks, discovered oil in the Fénix Block and invested time and efforts in our Paraguay blocks which we believe will be worthwhile.
"Post period end we raised funds to accelerate these efforts. We remain excited about the future growth opportunities as we explore, appraise and produce to deliver value. We look forward to this year with confidence."
For further information please contact:
| Billy Clegg/Caroline Stewart Financial Dynamics
| Tel: +44 (0)207 831 3113
|
| Martin Eales RBC Capital Markets
| Tel: +44 (0) 20 7029 7881 |
Chairman's statement
This has been a great year for Amerisur, in which we have delivered commerciality in Platanillo, taken over full ownership of the field and enhanced its production while controlling costs. Additionally we have had impressive success with the drill bit, drilling two new exploration wells on our Fenix block, both of which have tested crude oil, one of which is about to enter Long Term Testing ("LTT") and one which, after some treatment I am confident will also contribute production volumes to the Group. Our current production, through careful planning and control of costs renders the Group operationally cash flow positive, covering all General and Administrative expenses together with making an important contribution to our cash reserves.
These are very significant advances and reflect the validity of our initial strategy and our tenacity in pursuing it.
During the year I again spent considerable time in South America with our teams in Colombia and Paraguay to ensure that our strategy continues to evolve in a manner appropriate to our challenges, successes and opportunities. In particular I have been encouraged to observe our efficient Health, Safety, Environment and Quality (HSEQ) and Community Affairs programmes in action. Our dedication to the highest standards of operational safety is key to our business success in what are inherently risk laden activities, and I was impressed and reassured by the capability and professionalism of our team, who demonstrated their expertise in the safe and efficient delivery of the Iguasa and Isabel wells, both technically challenging exercises.
The attainment of 100% ownership of the Platanillo contract in Colombia was an important step forward. We believe our faith in the productive value of this field has been vindicated by recent results and production increases. Our plans to further develop the opportunities here are well in hand, and we look forward to delivering significant value from this field. We have also applied to the ANH to extend the Platanillo Exploitation Area to the south, as allowed under certain circumstances, which will also prove to be an important addition to our asset base, allowing direct technical comparison with our neighbouring producing field.
The exploration success in the Fénix block supported our understanding of the potential of this area. We are working to get those wells on stream in both the deep and shallow zones, and are planning the continuation of that drilling programme, which is likely to include further analogue wells.
Our work to advance the prospectivity of the Paraguayan assets also bore fruit, with the results of the surface geochemical programme, which, in concert with a comprehensive geological and geophysical data reinterpretation programme has confirmed the potential of the area. We plan to upgrade our leads to drillable prospects with some focussed seismic acquisition during 2010.
Post period end we performed a small fund raising exercise, adding approximately £13.7 millionto cash reserves before costs, with a view to adding flexibility to our operations and in some cases accelerating developments which otherwise would be constrained by cash flow considerations. As such we remain well funded with £5.3m of cash on the balance sheet at the year end in addition to the funds raised post year-end, and are excited about our existing prospects and opportunities.
I would like to take this opportunity to thank our stakeholders and colleagues in UK, Colombia and Paraguay for another year of progress and congratulate them on their success in developing Amerisur into a growing and opportunity-rich company.
The current financial year will be busy from an operational perspective and your Board looks to the future with confidence. I look forward to updating our shareholders as our programme develops in the months ahead.
Giles Clarke
Chairman
30 June 2010
CEO's Review
The Group has achieved remarkable progress this year, attaining 100% interest and commerciality in our Platanillo field and drilling two new exploration wells in our Fenix Block, both of which indicated production potential. Important new data was also acquired in Paraguay, which has helped us to enhance and focus our understanding of this area, while giving encouragement for future exploration work in this high impact asset.
Colombia
Our management team in Colombia has worked hard to create significant progress in our Colombian assets, which for the moment remain the prime focus of our investment and the source of our production revenue.
Platanillo Block
The Group, which is the Operator, made a declaration of commerciality and shortly after that assumed the 40% interest of Ecopetrol S.A. in the block. As required by contract, the Group proposed the extent of the Exploitation Area, and this was subsequently approved by the Agencia Nacional de Hidrocarburos ("ANH"). The Exploitation Area with its protection zone extends over 10,341 hectares, is for a period of 24 years, is extendable to end of economic field life, and includes the entire structure mapped within the block. This change of contractual status means that phased exploration commitments no longer apply, and are replaced by an Exploitation Plan which the Group is required to update annually. The current Exploitation Plan approved by the ANH includes the production from the existing wells at a selection of pump rates and observation of field behaviour.
The Company has also applied to ANH to extend the Exploitation Area to the south, which would increase the area under contract by approximately 900 hectares. The application for this extension was based upon the Group's analysis that the field structure extended beyond the original block area. This extension is important, since it brings the last section of structure into the portfolio - the section which immediately conjoins the Victor Hugo Ruales field in Ecuador. This area is likely to contribute further reserves and drilling opportunities and, if approved, will be included in the design of the 3D seismic acquisition programme currently under review.
Alea-1 and Platanillo-2 have been in production since mid October 2009, using a hydraulic lift production system in both wells. We have continued to optimise production levels, with production increasing from 188 barrels of oil per day ("BOPD") in November 2009 to 498 BOPD as at 31st May 2010.
During the period we also focussed on the tight control of lifting costs, which are currently running at approximately $17/barrel ("bbl"), which is extremely competitive for the area and the volume level. Owing to previous capital investments, the majority of those costs are fixed; hence our plans for production enhancement will yield immediate economic benefits. The first part of the enhancement plan was implemented post period end, and involved an acid wash and inhibition in Alea-1R. This was successful, and as expected has increased production there while reducing water cut and reducing normal decline rates. At current production rates and oil prices net revenues are of the order of US$900,000/month.
We plan to apply further enhancement techniques over the coming months, with a view to fully exploiting the potential of these two wells. This work includes perforating new, previously untested zones, which have indicated oil potential. These operations are not without some risk, but are essential for complete understanding and may contribute important new hydrocarbon volumes.
An integrated study of the Oriente (Ecuador) and Putumayo basins (which are part of the same geological unit), with particular focus on the Platanillo Exploitation Area has created a deeper understanding of the factors that control the accumulation of hydrocarbons in the area, thus shedding light on the prospective interval and in particular on the requirements to locate high value wells. It has been noted that wells which are located in the sweet spot of channel sand development in certain formations can exhibit very high initial production rates, in excess of 4,000 BOPD. Such wells are obviously an optimal way of rapidly developing both reserves and early cash flow from a development. The Group believes that a 3D seismic survey, utilising the latest Multi-Component acquisition technology would allow the potential locations of such wells to be defined and is currently performing technical studies for that survey. Depending upon the eventual decision and results of the seismic work, the Group is considering an accelerated development plan for the area, including up to six new wells over the next 18 months, which will be funded from internal resources and cashflow generated from existing and new wells.
Fénix Block
The drilling rig Petrex-22 was used to drill our first new well in the Fénix block, on the re-interpreted La Tigra play. Iguasa-1 reached its final planned depth ("Total Depth" or "TD") in November 2009 at 6,220 ft measured depth, 5,834ft true vertical depth. The well was deviated to 46 degrees from the vertical. TD was reached in Cretaceous formations. Given the design of the well, the application of Logging While Drilling systems had been planned, and those logs were acquired successfully. Throughout the drilling of the lower section, strong manifestations of oil and gas were observed and those intervals correlated in the main with potential reservoir sands identified in the logs. The resistivity data suggested that those zones had sufficient oil saturation to produce hydrocarbons. The high levels of gas and free oil encountered during drilling necessitated the use of high density drilling fluids to ensure that Group operational and safety standards were observed with respect to well control.
These heavy muds of necessity contain Barite, a mineral which is known to affect the near wellbore permeability in these reservoirs, an effect known as "formation damage". A fluids and pressure test was performed on the deepest identified interval, 5,327 to 5,336ft using drill stem test equipment. This test included three short flow tests and pressure build up periods. Light oil was recovered at surface, together with associated gas. The oil had 0.3% base sediment and water ("BS&W"), and subsequent laboratory analysis indicated an API gravity of 34.2˚ at standard conditions. Given the extent of testing envisaged for this deeper section, the drilling rig was released and replaced by the Latco-02 workover rig in February 2010. During that testing programme a total of 187ft of reservoir was perforated, however the flow response was poor, indicating that significant formation damage had occurred.
These problems are common in the Middle Magdalena Valley basin, and established techniques exist to deal with them. This is a step-wise process, used to evaluate the particular application of various techniques. The first phase of this work was completed, a process named PURE, by which the application of a negative pressure pulse attempts to mobilise the particles blocking the pore spaces. This procedure was partially successful, and established higher quantities of oil in the well and more rapid pressure recovery. However the reservoir remains with a high skin factor and the Group is proceeding with step two of the plan, which will include acid washes and potentially explosive bypass fracturing of the reservoir rock. This programme requires patience in its application, however I am confident that the Group will be able to demonstrate the full potential of this trap.
In addition to the potential reservoir sections encountered in the lowest part of the well, the Group also encountered substantial sands, with an apparent net thickness of approximately 205ft beneath the first thrust fault from 980 to 1,295 ft in Iguasa-1. These sands were subsequently explored with the Isabel-1 well, which was spudded in March 2010 using the Latco-2, a workover rig adapted to drill this well. Isabel-1 was located approximately 25ft from the wellhead of Iguasa-1, and was drilled vertically to 1,365 ft in order to plot the position of the shallow thrust and sands with precision. It was then plugged back and deviated, achieving a final TD of 1,854ft at 44 degrees of inclination in a direction approximately opposite to the azimuth of Iguasa-1. This design was intended to maximise the exposure to potentially oil bearing sands. The logs acquired in this well indicated an apparent net pay of 144ft, in two main units, from 960 to 1,040ft and 1,121 to 1,164ft.
Drill stem test-1 was performed over the deeper interval. This zone was identified from logs as having high hydrocarbon saturation but relatively poor reservoir characteristics. The zone flowed oil but could not be flowed consistently to surface. However a down hole sample of fluid returned dry oil (0% BS&W) at 34.5 degrees API. This section was subsequently isolated in order to test the upper zone. DST-2 was performed over the upper interval. The zone, which demonstrated excellent reservoir properties on logs, produced light oil to surface under natural flow (32.5 degrees API) through various choke sizes at rates from approximately 150 to 350 BOPD. After this test the isolation plug between the zones was removed and the well was completed as a producer with access to both zones, using a mechanical pumping system. At the time of writing the location is being prepared to begin the Long Term Testing programme approved by the Ministry of Mines and Energy.
This contract is currently in the third exploration phase, whose 14 month period ends during April 2011. The drilling of the Isabel-1 well completed the exploration commitment for this phase. The subsequent phase, which has a duration of 14 months has an exploration commitment of 50km of 2D seismic.
Paraguay
Paraguay offers shareholders exposure to a high risk but potentially high reward project with the potential to transform the value of the business, with unrisked prospective resources of in excess of 700 million Barrels of Oil Equivalent (BOE). Paraguay is one of the few unexplored regions in the world with large basins that share geology which is productive in neighbouring countries and very low rates of exploration to date. The region is technically demanding, has little to no oil infrastructure but has the potential to contain very large fields. The government of Paraguay, with whom we have met several times at the highest level during the period, has opened the country to the oil industry and is offering best in class contractual terms. In 2009, Amerisur Resources was the biggest single UK direct investor into Paraguay.
The Group holds a 100% interest in the San Pedro Block in the Parana basin, which covers a geographic area of some 8,000 sq km. During the period Amerisur conducted two separate but conjoined geochemical surveys, the results of which were encouraging and confirmed hydrocarbon anomalies, strengthening the possibility of hydrocarbon generation and migration. In addition reinterpretation of seismic data has indicated some very large potential structures, which are overlain by the geochemical anomalies detected. This work has hence allowed us to define a number of potential prospects.
During the current year, the Group has been reviewing the design of a 2D seismic acquisition programme of approximately 180km. This is designed to further de-risk the principal closures observed in existing data and subject to service company availability, may be acquired during 2010.
The 100% owned Curupayty block remains under technical review, and further activity there will probably be driven by the results in San Pedro.
Financial Review
Revenue for the year increased to £1,725,000 (2009: £348,000). The profit for the year after tax was £511,000 (2009: £47,000).
At period end the Group had cash of £5,293,000 (2009: £9,171,000), representing increased income from operations and good cost management.
The Directors recommended that no final dividend would be paid.
Outlook
Our strategy is to secure majority or complete holdings in areas where we consider we have a technical and commercial edge, whether through geotechnical understanding, management abilities, local knowledge or first mover advantage.
In Colombia, we have 100% interests in two blocks which both have oil discoveries and future potential which has been significantly de-risked and which offer shareholders significant value potential both from production and from further exploration. In Paraguay, we will continue to de-risk the large, high potential exploration acreage we hold.
We are financially strong, with £5.3m of cash on the balance sheet at the year end date, a further £13.7m before costs raised post year-end from a placing, and cash flows ramping up going forward. We have an ambitious forward programme to fund a 3D seismic programme and up to six new wells on the Platanillo block; two offset wells and two further exploration wells on the Iguasa and Isabel trends on the Fénix block; and a 2D seismic programme on San Pedro block in Paraguay to mature the prospect inventory. This is a step change in activity for the Group, a product of the foundation work over the past few years and reflects the richness of our opportunities going forward. I am confident we have the abilities, the resources and the will to deliver exceptional results.
John Wardle
Chief Executive Officer
30 June 2010
| Consolidated income statement |
|
|
|
|
|
| Year ended 31 March | Year ended 31 March |
|
|
| 2010 | 2009 |
|
|
| £'000 | £'000 |
|
|
|
|
|
|
|
|
|
|
| Revenue |
| 1,725 | 348 |
| Cost of sales |
| (931) | (681) |
|
|
|
|
|
| Gross profit/(loss) |
| 794 | (333) |
|
|
|
|
|
| Loss on disposal of Bohemian subsidiary |
| - | (74) |
| Other administrative expenses |
| (1,426) | (1,341) |
| Share option charge |
| (1,153) | (332) |
|
|
|
|
|
| Total administrative expenses |
| (2,579) | (1,747) |
|
|
|
|
|
| Operating loss |
| (1,785) | (2,080) |
|
|
|
|
|
| Finance income |
| 555 | 2,129 |
|
|
|
|
|
| (Loss)/profit before tax |
| (1,230) | 49 |
| Taxation |
| 1,741 | (2) |
|
|
|
|
|
| Profit attributable to equity holders of the parent |
| 511 | 47 |
|
|
|
|
|
|
|
|
|
|
| Earnings per share |
|
|
|
| Basic (pence per share) |
| 0.06 | - |
| Diluted (pence per share) |
| 0.06 | - |
|
|
|
|
|
| Consolidated statement of comprehensive income |
|
|
|
|
|
| Year ended 31 March | Year ended 31 March |
|
|
| 2010 | 2009 |
|
|
| £'000 | £'000 |
|
|
|
|
|
| Profit attributable to equity holders of the parent |
| 511 | 47 |
|
|
|
|
|
| Other comprehensive income: |
|
|
|
| Foreign exchange differences |
| 2,556 | 95 |
|
|
|
|
|
| Total other comprehensive income |
| 2,556 | 95 |
|
|
|
|
|
| Total comprehensive income for the year |
| 3,067 | 142 |
|
|
|
|
|
| Consolidated balance sheet |
|
|
|
|
|
| 31 March | 31 March |
|
|
| 2010 | 2009 |
|
|
| £'000 | £'000 |
|
|
|
|
|
|
|
|
|
|
| Assets |
|
|
|
| Non-current assets |
|
|
|
| Goodwill |
| 341 | 341 |
| Intangible assets |
| 20,810 | 15,354 |
| Property, plant and equipment |
| 420 | 390 |
| Deferred tax asset |
| 1,752 | - |
|
|
|
|
|
| Total non-current assets |
| 23,323 | 16,085 |
|
|
|
|
|
| Current assets |
|
|
|
| Trade and other receivables |
| 1,128 | 172 |
| Inventory (crude oil) |
| 67 | - |
| Cash and cash equivalents |
| 5,293 | 9,171 |
|
|
|
|
|
| Total current assets |
| 6,488 | 9,343 |
|
|
|
|
|
| Total assets |
| 29,811 | 25,428 |
|
|
|
|
|
| Equity and liabilities |
|
|
|
| Equity |
|
|
|
| Issued capital |
| 830 | 829 |
| Share premium |
| 28,832 | 28,797 |
| Other reserve |
| 2,939 | 1,786 |
| Foreign exchange reserve |
| 3,831 | 1,275 |
| Retained earnings |
| (7,541) | (8,052) |
|
|
|
|
|
| Total equity |
| 28,891 | 24,635 |
|
|
|
|
|
| Current liabilities |
|
|
|
| Trade and other payables |
| 920 | 793 |
|
|
|
|
|
| Total current liabilities |
| 920 | 793 |
|
|
|
|
|
| Total liabilities |
| 920 | 793 |
|
|
|
|
|
| Total equity and liabilities |
| 29,811 | 25,428 |
|
|
|
|
|
The financial statements were approved by the Board of Directors on 30 June 2010.
N. Harrison
Director
Company number: 4030166
Consolidated statement of changes in equity
|
| Share capital | Shares to be issued | Share premium | Other reserve | Foreign exchange reserve | Retained earnings | Total equity |
|
| £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 |
|
|
|
|
|
|
|
|
|
| At 1 April 2008 | 829 | 150 | 28,797 | 1,454 | 1,180 | (8,099) | 24,311 |
|
|
|
|
|
|
|
|
|
| Write off of shares to be issued | - | (150) | - | - | - | - | (150) |
| Equity settled share options | - | - | - | 332 | - | - | 332 |
|
|
|
|
|
|
|
|
|
| Total transactions with owners | - | (150) | - | 332 | - | - | 182 |
|
|
|
|
|
|
|
|
|
| Profit for the year | - | - | - | - | - | 47 | 47 |
| Other comprehensive income | - | - | - | - | 95 | - | 95 |
| Total comprehensive income | - | - | - | - | 95 | 47 | 142 |
|
|
|
|
|
|
|
|
|
| At 31 March 2009 | 829 | - | 28,797 | 1,786 | 1,275 | (8,052) | 24,635 |
|
|
|
|
|
|
|
|
|
| Share options exercised | 1 | - | 35 | - | - | - | 36 |
| Equity settled share options | - | - | - | 1,153 | - | - | 1,153 |
|
|
|
|
|
|
|
|
|
| Transactions with owners | 1 | - | 35 | 1,153 | - | - | 1,189 |
|
|
|
|
|
|
|
|
|
| Profit for the year | - | - | - | - | - | 511 | 511 |
| Other comprehensive income | - | - | - | - | 2,556 | - | 2,556 |
| Total comprehensive income | - | - | - | - | 2,556 | 511 | 3,067 |
|
|
|
|
|
|
|
|
|
| At 31 March 2010 | 830 | - | 28,832 | 2,939 | 3,831 | (7,541) | 28,891 |
|
|
|
|
|
|
|
|
|
The exercise of shares was made from a pool of shares not valued under IFRS 2 'Share based payments' as they were granted prior to 7 November 2002 and fall outside the scope of the standard. Therefore no transfer of value between the 'Other reserve' and 'Retained earnings' has been made.
| Consolidated cash flow statement |
|
|
|
|
|
| Year ended 31 March | Year ended 31 March |
|
|
| 2010 | 2009 |
|
|
| £'000 | £'000 |
|
|
|
|
|
|
|
|
|
|
| Cash flows from operating activities |
|
|
|
|
|
|
|
|
| Profit for the year |
| 511 | 47 |
|
|
|
|
|
| Adjustments for: |
|
|
|
| Finance income in the income statement |
| (555) | (2,129) |
| Tax in the income statement |
| (1,741) | 2 |
| Depreciation |
| 83 | 33 |
| Amortisation |
| 194 | - |
| Share option charge |
| 1,153 | 332 |
| Loss on disposal of Bohemia subsidiary |
| - | 46 |
| Disposal of intangibles |
| - | 4 |
| Increase in inventory |
| (67) | - |
| (Increase) / decrease in trade and other receivables |
| (956) | 206 |
| Increase in trade and other payables |
| 127 | 546 |
|
|
|
|
|
| Net cash used in operations |
| (1,251) | (913) |
|
|
|
|
|
| Tax paid |
| (11) | (2) |
|
|
|
|
|
| Net cash used in operating activities |
| (1,262) | (915) |
|
|
|
|
|
| Cash flows from investing activities |
|
|
|
| Interest received |
| 555 | 347 |
| Payments for property, plant and equipment |
| (113) | (365) |
| Payments for intangible assets |
| (2,900) | (2,859) |
|
|
|
|
|
| Net cash used in investing activities |
| (2,458) | (2,877) |
|
|
|
|
|
| Cash flows from financing activities |
|
|
|
| Proceeds from issue of equity shares |
| 36 | - |
| Issue costs |
| - | - |
|
|
|
|
|
| Net cash generated by financing activities |
| 36 | - |
|
|
|
|
|
| Net decrease in cash and cash equivalents |
| (3,684) | (3,792) |
| Foreign exchange differences |
| (194) | 1,882 |
| Cash and cash equivalents at the start of the year |
| 9,171 | 11,081 |
|
|
|
|
|
| Cash and cash equivalents at the end of the year |
| 5,293 | 9,171 |
Notes to the preliminary announcement
1 Basis of preparation
The summary accounts do not constitute statutory accounts as defined in section 435 of the Companies Act 2006, but has been extracted from the statutory accounts for the year ended 31 March 2010 on which an unqualified audit report has been issued. The statutory financial statements for the year ended 31 March 2010 were approved by the directors on 30 June 2010, but have not yet been delivered to the Registrar of Companies. The financial statements have been prepared in accordance with applicable International Financial Reporting Standards (IFRS) and International Financial Reporting Interpretation Committee (IFRIC) interpretations as adopted by the EU. The Group financial statements consolidate those of the company and of its subsidiary companies drawn up to 31 March 2010. Intra-group transactions are eliminated on consolidation and all figures relate to external transactions only. Acquisitions of subsidiaries are dealt with by the acquisition method of accounting except for those qualifying as group reconstructions where merger accounting is used. The results of newly acquired companies are consolidated from the date that control passed.
2 Posting of accounts
The Annual Report and Accounts for the year ended 31 March 2010 will shortly be available on the Company's website and will be sent to registered shareholders who have elected to receive paper communications by post in due course.