8 Jun 2011 07:00
Embargoed for release: 0700 on 8 June 2011
Northern Petroleum Plc ("Northern", "the Group", or "the Company") Audited Results for the Year Ended 31 December 2010
Northern Petroleum Plc, an independent oil and gas exploration, development andproduction company announces its audited results for the year ended 31 December2010.HIGHLIGHTS:Operational:
* Average production for the year increased to 1,195 barrels of oil
equivalent per day ("boepd") compared to a 2009 average of 365 boepd;
* At 31 December 2010 the Group had 89.4 million barrels of oil equivalent
("boe") of net proven and probable reserves (approximately 89.2 million boe
of which is independently assessed by RPS Energy and Blackwatch Petroleum);
* Two further gas fields placed on production in the Netherlands in 2010, bringing total fields in production to six; * Completion of 1,520 km2 3D seismic survey, and processing and
interpretation thereof, over four permits in partnership with Shell Italia
covering the Thrust and Fold Belt offshore Sicily;
* Shell Italia appointed as "Rappresentante Unico" (the sole representative
with respect to the Italian authorities), while Northern remains Operator,
allowing Shell Italia toadvance discussion with the Italian authorities
concerning future activitieson the Thrust and Fold Belt permits;
* New partner, Azimuth Limited, in southern Adriatic permits containing 53.2
million barrels of probable reserves; * Farmout to Orca Exploration Group Inc.of La Tosca prospect in the Po Valley; and * Oil discovery announced at Markwells Wood, soon to be tested.
Financial:
* The Group achieved record revenues of €15 million; * Northern made a pre tax loss of €0.02 million for the year, as a consequence of additional non cash depletion and impairment charges of approximately €3 million;
* The Group made capital investments of €13.7 million to develop its reserves
and resources; and
* At the end of 2010 Northern had €21.4 million of cash, plus €2.4 million of
working capital; and
* As at 3 June 2011 Northern had €23 million of cash.
OUTLOOK:
* The forecasted range for 2011 Group production is 1,550 to 1,650 boepd,
given the assumption of approximately three months of downtime to allow for
remedial action at Wijk en Aalburg;
* As 2012 production depends on outcome of Wijk en Aalburg remedial action
and future testing and drilling operations, Northern is planning on providing guidance later in 2011; * One 2D and two 3D seismic surveys planned in 2011 on Southern Adriatic permits, allowing for the progression of Rovesti and Giove discoveries alongside our new partner Azimuth;
* Northern is planning the Papekop-2 and Geesbrug-2 wells for drilling late
2011 / early 2012;
* Long term testing of Ottoland and Markwells Wood discoveries in planning
for summer 2011; * Result from Tullow operated Guyane well likely in August; * Drilling of the La Tosca prospect in late 2011; and
* Ongoing investigation of considerable potential for oil shales identified
in southwest of The Netherlands.
RESULTS SUMMARY Year ended Year ended 31 December 31 December 2010 2009 €'000 €'000 Revenue 14,968 5,084 Gross profit 6,697 1,482 EBITDA (i) 5,083 (2,231) Adjusted EBITDA (ii) 6,475 (174) Loss for the year (1,155) (2,151) Basic loss per share on result for the (1.3) € cents (2.9) € centsyearCapital expenditure 13,688 29,707 Cash and cash equivalents 21,430 15,002 Other working capital 2,466 3,476 Net assets 85,371 73,764 Total Group distributable reserves 54,039 54,769 Production (million boe) 0.44 0.13
Average revenue, in currency of receipt,
per boe: Gas €32.69 €33.45 Oil $73.58 $56.43
Unaudited Net Commercial Oil & Gas Reserve Quantities
- Proven and Probable reserves (million 89.45
102.88
boe)
(i) Earnings before interest (and other finance income and costs), tax,
depreciation, depletion, amortisation and write offs of oil and gas assets.
(ii) In addition to the above, is calculated before share based payments and
pre-licence costs. Richard Latham commented:"I report a year of progress. We have moved forward delivering on our strategyin Italy to develop two oil discoveries and progress the drilling of oursubstantial high impact exploration wells without further recourse to dilutionof shareholders equity. In the UK we have made an oil discovery at MarkwellsWood which is soon to be tested, and are alongside Tullow, Shell and Totaldrilling the first well in a potential new petroleum province offshore Guyane."We have delivered increased gas production and since January 2011 have apositive cash flow, our Group cash increasing to €23 million at 3 June 2011from €21.4 million at the end of 2010. Recently you have been advised that weare revising our 2011 production forecasts and have made changes to reservesestimates in The Netherlands that were first reported upon by RPS Energy in2006 and reviewed by them in February 2010. This 2011 revision amounts to areduction of 13% in previously reported Group proven and probable reserves to89 million barrels of oil equivalent, which is approximately one barrel pershare at 31 December 2010, after production of 0.44 million barrels of oilequivalent during 2010."In the year there was a significant increase in revenue to €15 million (2009:€5.1 million). As a consequence of the additional non cash depletion andimpairment charges of approximately €3 million arising from the reservesrevision, I report a small pre tax loss of €0.02 million (2009: €3.12 millionloss)."At the end of 2010 the cash position was €21.4 million (2009: €15 million),the increase year on year arising from increased cash flow from recordproduction, as well as a €11.5 million equity fund raising in June 2010, morethan offsetting capital investment of €13.7 million during the year. Gas pricesreceived during 2010 averaged €32.69 per barrel of oil equivalent (2009: €33.45per barrel of oil equivalent), and have increased by approximately 13% over thefirst four months of 2011. The Group has no external debt but has theproduction and reserve base to obtain debt and the Board is highly likely toseek to make use of this capacity in due course."To date we have placed into production four of the six planned oil and gasfield developments following our contract with NAM in 2005. With Waalwijk andP12 included, we now generate production from six fields. Average productionfor the first four months of 2011 has been just over 1,900 barrels oilequivalent per day. However following the reserves revisions, our forecastedrange for Group production for 2011 is now 1,550 to 1,650 barrels of oilequivalent per day."The revisions to reserves follow an ongoing economic and technical evaluation.Reprocessing of the 3D seismic data over Geesbrug and Wijk en Aalburg fields,plus much of the rest of the Netherlands acreage has been underway for sometime. When it has been received and interpreted, the static and dynamic fieldmodels will be updated with the production data later this year, it will thenbe possible to make a further assessment of the reserves."The overall plan remains to sustain and increase production from the existingone well fields in The Netherlands through undertaking new drilling andcompletions on the larger fields, the first of which will be the Papekop-2 andGeesbrug-2 wells, once the current reprocessing of the 3D seismic data andmapping has been concluded. Currently we are moving forward on the productiontesting of the Markwells Wood and Ottoland oil discoveries."The exciting and higher potential activities will, however, be in Italy, as wecontinue in discussion with existing and potential future new partners toexplore and drill our large licence position containing significant prospectswith highly material potential, as well as moving forward the developments ofthe Rovesti and Giove oil fields with 53 million barrels of proven and probableoil reserves. Even allowing for new partners providing the required finance ourinterests in these projects should remain substantial."Together with our partner, Shell Italia, we have mapped and interpreted our2010 3D seismic survey on four permits in the Thrust and Fold Belt offshoreSicily. This is clearly an area with substantial potential. Drilling successcould establish a new oil or gas province. Northern continues to be theOperator of the joint-venture. In April 2011 Northern assigned to Shell Italiathe role of "Rappresentante Unico" (the sole representative with respect to theItalian authorities of those permits) to advance discussion with the Italianauthorities concerning future activities."Azimuth Limited joined us in the southern Adriatic Sea on the two permitscontaining the Giove and Rovesti oil discoveries and the large Cygnus prospect.Adjustments to the booked reserves in Italy of approximately 8 million barrelsof oil equivalent should be expected during 2011 to reflect this welcomedarrival of Azimuth as a new 15% partner in our moves to further explore thesepermits, as well as to drill and develop the Rovesti and Giove oil discoveries.Subject to governmental consents, we will be acquiring one 2D and two 3Dseismic surveys in 2011."With the advantage of 3D seismic coverage, we will be better placed to attractadditional partners for the drilling of larger exploration targets, and to makeprogress towards the development of the two oil fields. Our interest in theRovesti and Giove oil discoveries has been highlighted by the 2007 report ofBlackwatch Petroleum Services, which assigned a Net Present Value (NPV@10%) of£610 million after tax assuming a $70 oil price and initial production rates of9,000 and 20,000 barrels of oil per day from Rovesti and Giove respectively.That report assumed that two new build Floating Production and StorageOffloading vessels ("FPSO") would be purchased rather than leased. Interest inour permits will no doubt be enhanced by the recent news that, in an adjacentproduction concession, Eni will redevelop the Aquila oil field this year with anew build FPSO, and have announced plans for eight years of additionalproduction with an initial rate of 9,000 barrels of oil per day. "Also in the southern Adriatic Sea, we have seven applications which can nolonger be applied for by others. These contain a significant number ofadditional exploration prospects. We look forward to the important award ofthese further permits and embarking upon the exploration of the wider area inthis proven petroleum province. Increasing recognition by the oil industry ofthe exploration potential in the Adriatic is also demonstrated by our and othersignificant companies' expressions of interest in the announced Montenegrolicensing round."Within the Longastrino permit in the Po Valley, our new partner is OrcaExploration Group Inc. The drilling of the La Tosca prospect is scheduled forlater this year. Orca will be funding all costs to the budgeted level fordrilling and testing at which point Northern will retain a minimum 25% interestin this permit. A site has been selected and we now await governmentalauthorisations to proceed to drilling."In the Sicily Channel, whilst some secondary prospects in C.R147.NP offshoreof Pantelleria are located within an area that has been banned from drillingunder the 2010 Environmental Act, the primary prospects to the north lieoutside the 12 nautical mile zone covered by that Act and therefore unaffected.The outlook for these prospects has been improved by the Lambouka gas discoverymade by ADX Energy in 2010 nearby and down dip in Tunisian waters. We areputting a drilling programme together to cover two C.R147.NP prospects and thelarger Vesta prospect in C.R146.NP adjacent to the boundary with Malta. Thetiming is a matter of some difficulty in the contracting of rigs, which willneed to undertake modifications to satisfy EU standards, that are primarilydeployed in the Eastern Mediterranean.
"I believe that the upside potential and value of our Italian projects is significant, and of a different order of magnitude to the ventures in The Netherlands, so increasingly our focus and priorities will be aimed towards them. Importantly as previously mentioned the majority of our projects lie beyond the 12 nautical mile limit that is the subject of the 2010 new Law as advised to you on 2 July 2010.
"Of interest to shareholders is our participation, albeit a small 1.25% netbeneficial interest, in the Tullow, Shell, and Total well offshore Guyane,currently drilling the Zaedyus prospect, a 300-700 million barrel target.Although not in a core area, this well represents another good explorationproject for Northern. If successful, there is the possibility that a newpetroleum province will be opened up and at least six further similarstructures have been mapped. The Zaedyus prospect alone offers an attractiveupside, which if within the target range, offers a finding cost considerablyunder $1 per barrel to Northern."The projects in the south of England have been reviewed. Three oil discoveriesare involved, as well as a small level of oil production from the Horndean andAvington fields. At current oil prices the oil discoveries are potentiallyvaluable assets as summarised in an RPS Energy report of April 2010. Whilst westated a willingness to sell these assets to a buyer finding them morestrategically interesting, Northern remains steadfast in its intent onrealising an appropriate value for shareholders."The values of these projects have been enhanced by the rise in oil prices andwould be even further so by the successful testing of oil this summer atMarkwells Wood in West Sussex following the December 2010 discovery. Detailedanalysis of the core taken in the Great Oolite reservoir is ongoing todetermine the details of the programme and in particular the reservoircompletion treatments."As the Markwells Wood, Baxter Copse and Hedge End oil discoveries offer a goodprofit potential it is in shareholders' interests that these projects continue.We expect that progress will be made through 2011 and into 2012."The Markwells Wood operation was a great example of Northern's ability to workwith the local community in deploying best practices of the modern oilindustry. The Company's targets are second to none in being a good corporateneighbour with a very high level of respect for the total environment. I amgrateful for all the kind words and accolades on the Markwells Wood operations,and thank the Northern team for their deep seated commitment to best practice -just as they also achieved favourable comment among the local communities inThe Netherlands. Northern takes great pride in its performance during thedrilling operations, and its ability to conduct this with a very low level ofimpact on the local community, the constructive interaction with whom enabled areduced disruption from our operations."A degree of optimism can be taken from the results of a study initiated withthe encouragement of EBN, The Netherlands state oil company. In recent monthsNuTech Energy Alliance, a firm of US consultants expert in the field of oil andgas shale investigation, conducted an examination of the potential of shales inthe southwest of the Netherlands. The view of the chosen US expert consultantsis very encouraging and shareholders should find the description in theOperations Report to be of interest.
"For the year 2010 the Board is continuing the practice of not recommending payment of a dividend. The Company's financial resources will be committed to investing in the Company's assets.
"We have come a long way since the 1999 reorganisation of an ailing Russian orientated company. We are now in areas of low political risk and we are in production from six gas fields and two oil fields.
"In The Netherlands we have proven ourselves to be a good corporate citizen anda full cycle company capable of drilling wells and placing fields intoproduction and have the opportunity and plans to expand upon this base. We havemade an oil discovery in our UK onshore portfolio. In Italy we have assembled,and are exploring, a large licence position, predominantly offshore, andcontinue to introduce new partners in conformity with our strategy. We havepride and distinction in that we remain Operator in our six licence venturewith Shell Italia. I await with interest the results of the well currentlydrilling the Zaedyus prospect offshore Guyane."Shareholders will recognise that, for the foreseeable future, we will continueto be a project rich company. That fortunate position leads us to continue astrategy of seeking, through trading and farmouts, to realise an early valuefrom some assets to fund the growth plans of the Group."On this basis I can advise that your Board looks to the future with confidenceas it increases the pace of activities as swiftly as possible within theconstraint of avoiding further dilution of shareholders' equity. The next 18months will prove to be a critical period of potential value creation for theCompany as the high impact Italian assets are de-risked and further explored.
"Vital to Northern's success are the people who help us to unlock the potential within the portfolio. On behalf of the Board I thank them all for their continued commitment and the achievements of the last year."
R H R LathamChairman of the Board7 June 2011Operations Review
A more detailed review of Northern's extensive portfolio of assets is included in the Review of Operations within the 2010 Annual Report.
Production, Reserve and Capex Guidance
On 27 May 2011, Northern announced that it would be revising its 2011 production forecasts and is making changes to reserve estimates in the Netherlands. The adjustments concern three of the five gas fields operated by Northern. Following the update, the Group has 89.4 million barrels of oil equivalent of net proven and probable reserves.
The revisions to reserves follow an ongoing economic and technical evaluation.Reprocessing of the 3D seismic data over Geesbrug and Wijk en Aalburg fields,plus much of the rest of the Netherlands acreage has been underway for sometime. When it has been received and interpreted, the static and dynamic fieldmodels will be updated with the production data later this year, it will thenbe possible to make a further assessment of the reserves.
The revisions were as follows:
Fields Previous 1P Revised 1P Previous 2P Revised 2P Gas (Bscf) Gas (Bscf) Geesbrug 73.63 60.22 137.85 72.79 Grolloo 6.44 2.29 10.52 3.00 Wijk en Aalburg 3.82 0.36 5.49 2.83
The above revisions reduce the Group's 2P reserves by 75.24 Bscf, which is theequivalent of 12.97 million barrels of oil equivalent (13%), to 89.4mboe of net2P reserves.The forecasted range for 2011 Group production is now 1,550 to 1,650 boepd.Average production for the first four months of 2011 has been just over 1,900barrels oil equivalence per day. The difference between this and the aboveproduction guidance for 2011 is largely down to Northern's expectation ofsignificant downtime at Wijk en Aalburg in the second half of 2011 while weseek to address and hopefully resolve the issues causing the increasingquantities of oil, followed by increasing quantities of water, which haveaffected production levels. As a first step in the determination of possibleinterventions down-hole gauges were placed in the well on 25 May, which wasthereafter shut in to allow for pressure build up.The carrying value of the Wijk en Aalburg field as at 31 December 2010 isapproximately €8 million. If the well interventions are ultimatelyunsuccessful, then Northern would expect to see significant non cash depletionand impairment charges to the income statement within the results for the yearending 31 December 2011, the exact quantum of which would depend on, interalia, future field performance and gas prices.
Northern expects to make capital investments of approximately €15 million in 2011 developing its reserves and resources.
In accordance with the AIM Rules - Guidance for Mining and Oil & Gas Companies,the information contained in this announcement has been reviewed and signed offby the Exploration and Technical Director of Northern, Mr Graham Heard CGeolFGS, who has over 35 years experience as a petroleum geologist. - Ends -
For further information please contact:
Northern Petroleum Plc Tel: +44 (0) 20 7469 2900 Derek Musgrove, Managing Director Chris Foss, Director of Finance, Legal &
Corporate Affairs
Graham Heard, Exploration & Technical Director Sophie Hull, Head of Corporate Communications Cenkos Securities (NOMAD and Joint Broker)
Jon Fitzpatrick Tel: +44 (0) 20 7397 8900
Ken Fleming / Beth McKiernan Tel: +44 (0) 131 220 6939 Jefferies International (Joint Broker) Tel: +44(0) 20 7029 8000
Chris Snoxall Financial Dynamics Tel: +44 (0) 20 7831 3113
Billy Clegg / Edward Westropp
Bishopsgate Communications Tel: +44 (0) 20 7562 3350
Nick Rome / Michael Kinirons
Notes to Editors:
Further information on Northern is available at www.northpet.com
Consolidated Income Statement For the year ended 31 December 2010 Year Year ended ended 31 31 December December 2010 2009 Notes €'000 €'000 Revenue 14,968 5,084 Production costs (4,884) (2,077) Depletion and amortisation - property, (3,387) (1,525)plant & equipment Cost of sales (8,271) (3,602) Gross profit 6,697 1,482 Pre-licence costs (593) (847) Administrative expenses - other (4,246)
(2,565)
Administrative expenses - share (359) (1,927)incentives Administrative expenses - total (4,605)
(4,492)
Profit / (loss) from operations 1,499 (3,857) Finance costs (1,524) (552) Finance income 17 1,365
Share of operating loss of joint (8)
(80)ventures & associates Loss before tax (16) (3,124) Tax (expense) / credit (1,139) 973 Loss for the year (1,155) (2,151) Basic earnings per share on loss for 3 (1.3) (2.9)the year cents cents Diluted earnings per share on loss for 3 (1.3)
(2.9)
the year cents
cents
All results are from continuing activities and are attributable to equity shareholders of the parent.
Consolidated Statement of Comprehensive IncomeFor the year ended 31 December 2010 Year ended Year ended 31 31 December December 2010 2009 €'000 €'000 Loss for the year (1,155) (2,151)
Exchange differences on translation of 164
(41)foreign operations
Other comprehensive income/(loss) for the 164
(41)year, net of income tax Total comprehensive loss for the year (991)
(2,192)
All amounts are attributable to equity shareholders of the parent.
Consolidated Statement of Financial Position
at 31 December 2010 2010 2009 Notes €'000 €'000 Assets Non-current assets Intangible assets 4 31,810 27,880 Property, plant and 5 58,123 45,895equipment Investments in joint 579 259ventures Investments in associates 15 15 Loans and other 6 129 118receivables 90,656 74,167 Current assets Inventories 124 98 Trade and other 6 8,668 14,376receivables Cash and cash equivalents 21,430 15,002 30,222 29,476 Total assets 120,878 103,643 Liabilities Current liabilities Trade and other payables 6,326 8,103 Corporation tax liability - 2,895 6,326 10,998 Non-current liabilities Trade and other payables 30 169 Provisions 16,286 9,564 Deferred tax liabilities 12,865 9,148 29,181 18,881 Total liabilities 35,507 29,879 Net assets 85,371 73,764 Capital and reserves Share capital 7 5,768 4,983 Share premium 11,501 194 Merger reserve 10,289 10,289 Special reserve 28,428 28,410(Distributable) Special reserve 155 173(Un-distributable) Share incentive plan 3,964 3,865reserve Foreign currency (345) (509)translation reserve Retained earnings 25,611 26,359 Total equity 85,371 73,764
All amounts are attributable to equity shareholders of the parent.
Consolidated Statement of Cash Flowsfor the year ended 31 December 2010 Year ended Year ended 31 December 31 December 2010 2009 €'000 €'000
Cash flows from operating activities
Loss before tax (16) (3,124) Depletion and amortisation 3,387 1,525
Depreciation - non oil and gas property, 205
181plant and equipment Foreign exchange loss / (gain) 348 (567) Finance income (17) (798) Finance charges 1,176 552 Share based payments 799 1,210
Expenses settled by issue of shares 65
63
Share of operating loss in associate 8
80
Net cash inflow / (outflow) before movements in 5,955
(878)working capital Increase in inventories (26) (43) Decrease in trade and other 8,247 9,831receivables
(Decrease) / increase in trade and (2,539)
2,127other payables Net cash inflow from changes in working 5,682 11,915capital Taxes paid (2,857) (964) Net cash inflow from operating 8,780 10,073activities
Cash flows from investing activities
Interest received 17 178 Interest paid (6) (69) Purchase of property, plant and (9,526) (16,939)equipment Expenditure on exploration and (2,835) (12,768)evaluation assets
Purchase of other intangible assets (999)
-
Investment in joint venture company (328)
(183)
Acquisition costs of ATI net of cash and - (727)cash equivalents acquired Net cash outflow from investing (13,677) (30,508)activities
Cash flows from financing activities Issue of ordinary shares net of fees 11,464
-
associated with placing Proceeds from the exercise of equity 270
60warrants
Net cash inflow from financing 11,734
60activities Net increase / (decrease) in cash and 6,837 (20,375)cash equivalents Cash and cash equivalents at start of 15,002 34,927year
Effect of exchange rate movements (409)
450
Cash and cash equivalents at end of 21,430
15,002
year
Other than the ATI acquisition in 2009 there have been no significant non-cash transactions during either year.
Consolidated Statement of Changes in Equity for the year ended 31 December 2010 Share Share incentive Foreign Share premium Merger Special plan currency Retained capital account reserve reserves reserve translation earnings Total reserve €'000 €'000 €'000 €'000 €'000 €'000 €'000 €'000 At 1 January 4,488 23,964 - 4,698 2,384 (468) 28,479 63,5452009 Total - - - - - (41) (2,151) (2,192)comprehensive loss for the year Cancellation - (23,885) - 23,885 - - - -of share premium account Issue of 8 115 - - - - - 123shares during the year ATI 487 - 10,289 - 302 - - 11,078acquisition Equity share - - - - (31) - 31 -warrants exercised Share based - - - - 1,210 - - 1,210payments At 31 4,983 194 10,289 28,583 3,865 (509) 26,359 73,764December 2009 Total - - - - - 164 (1,155) (991)comprehensive loss for the year
Issue of 715 11,437 - - - - - 12,152shares during the year - placing Costs and - (688) - - - - - (688)fees associated with share placing Issue of 70 558 - - (293) -
- 335shares during the year - warrants and staff bonus Equity share - - - - (407) - 407 -warrants exercised Share based - - - - 799 - - 799payments At 31 5,768 11,501 10,289 28,583 3,964 (345) 25,611 85,371December 2010
All amounts are attributable to equity shareholders of the parent.
Notes to the Group Financial Statementsat 31 December 2010 1. BASIS OF PREPARATION The financial information set out above does not constitute the Company'sstatutory accounts for the years ended 31 December 2010 or 2009 but is derivedfrom those accounts. Statutory accounts for 2009 have been delivered to theRegistrar of Companies, and those for 2010 will be delivered in due course. Theauditors have reported on those accounts; their reports were (i) unqualified,(ii) did not include a reference to any matters to which the auditors drewattention by way of emphasis without qualifying their report and (iii) did notcontain a statement under section 498 (2) or (3) of the Companies Act 2006 inrespect of the accounts for 2009 and 2010.
Going concern basis of preparation
After consideration of the guidance provided to company directors by theFinancial Reporting Council (FRC) in the document "Going Concern and LiquidityRisk: Guidance for Directors of UK Companies 2009" the Directors consider theuse of the going concern basis of accounting is appropriate for the Companybecause no material uncertainties related to events or conditions that may castsignificant doubt about the ability of the Company to continue as a goingconcern have been identified by the Directors.The Company has processes in place in order to ensure a reasonable cash balanceis maintained at all times. The Company continually monitors its cash balancesand these are reported to the Board at least weekly. The Board also reviews theforecast cash balance at the end of each of the next twelve months on a rollingbasis. Before making a decision to add new commitments the Board considers therisks to the delivery of these cash forecasts.The Group has created a substantial range of projects and opportunities many ofwhich are described in this Annual Report and Accounts. It is clear that theGroup can only fund a very small portion of these opportunities, and clearlynot the capital intensive offshore projects, from its current cash balances.Some projects will be funded from cash flow from production, whilst others willhave to wait on cash created by trading of assets and other projects willrequire farming out before they can progress. The Group has no external debtbut now has the production and reserve base to obtain debt and the Board ishighly likely to seek to use this capacity to fund some projects. In additionthe Company has authority from its shareholders to raise cash by the issue ofnew shares to fund its programmes.After making appropriate enquiries, the Directors have a reasonable expectationthat the Group has adequate resources to meet all its commitments and tocontinue in operational existence for the foreseeable future. Accordingly theycontinue to adopt the going concern basis in preparing the Annual Report andAccounts. 2. ACCOUNTING POLICIES The financial information presented in this results announcement for the yearended 31 December 2010 has been prepared in accordance with InternationalAccounting Standards and International Financial Reporting Standards as adoptedby the European Union at 31 December 2010.
The principal accounting policies applied in the preparation of these consolidated group financial statements are set out in the 2009 Annual Report. These policies have been consistently applied to all the years presented, unless otherwise stated.
Changes in accounting policies
In the current year, the following new and revised standards and Interpretations have been adopted but have had no effect on the amounts reported in these group financial statements.
i. Standards affecting the reported results and financial position
Revised IFRS 3 - Business Combinations
The revised standard applies prospectively to business combinations made after1 January 2010. Business combinations which took place before 1 January 2010 donot need to be restated as a result of the adoption of this standard. The mostsignificant changes to the Group's previous accounting policies for businesscombinations are as follows:
* all transaction costs which previously could be capitalised are now
expensed as they are incurred;
* any pre-existing equity interest in the entity acquired is re-measured to
fair value at the date of obtaining control, with any resulting gain or loss recognised in the income statement; and * any changes to the cost of an acquisition, including contingent consideration, resulting from events after the date of acquisition are recognised in the income statement.
IAS 38 - Intangible Assets
The IASB issued amendments to IAS 38 in April 2009, which clarifies thedescription of valuation techniques commonly used to measure the fair value ofintangible assets acquired in a business combination for which no active marketexists.
IAS 27 - Consolidated and Separate Financial Statements
The amendments to IAS 27 (2008), arising due to the amendments to IFRS 3,reflect changes to the accounting for non-controlling (minority) interest anddeal primarily with the accounting for changes in ownership interests insubsidiaries after control is obtained, the accounting for the loss of controlof subsidiaries, and the allocation of profit or loss to controlling andnon-controlling interests in a subsidiary.IFRS 2 - Share based paymentsIn June 2009 IFRS 2 was amended to clarify the scope and accounting for groupcash-settled share based payment transactions in the separate financialstatements of the entity receiving the goods or services, when that entity hasno obligation to settle the share based transaction.
IAS 36 - Impairment of assets
In April 2009 IAS 36 was amended to state that the largest unit to which goodwill is allocated is operating segment level as defined in IFRS 8 before applying the aggregation criteria of IFRS 8.12.
ii. Standards affecting presentation and disclosure
IAS 1 - Presentation of Financial Statements
In April 2009 IAS 1 "Presentation of Financial Statements" was amended to statethat the classification of the liability component of a convertible instrumentas current or non-current is not affected by terms that, at the option of theholder, result in settlement of the liability through issue of equityinstruments.
IAS 7 - Statement of Cash Flows
In April 2009 the IASB issued amendments to IAS 7 "Statement of Cash Flows" which requires that only expenditure that results initially in the recognition of an asset may be classified as a cash flow from investing activities.
3. LOSS PER SHARE
Basic earnings or losses per share amounts are calculated by dividing theprofit or loss for the period attributable to ordinary equity holders of theparent by the weighted average number of ordinary shares outstanding during theyear.Diluted earnings per share amounts are calculated by dividing profit for theperiod attributable to ordinary equity holders of the parent by the weightedaverage number of ordinary shares outstanding during the year, plus theweighted average number of shares that would be issued on the conversion ofdilutive potential ordinary shares into ordinary shares. The calculation of thedilutive potential ordinary shares related to employee and director shareoption plans includes only those warrants with exercise prices below theaverage share trading price for each period. 2010 2009 €'000 €'000 Net loss attributable to equity holders used in 1,155 2,151basic calculation Net loss attributable to equity holders used in 1,155 2,151dilutive calculation Number Number `000 `000 Basic weighted average number 86,094 75,184of shares Dilutive potential of ordinary shares: Warrants exercisable under - -Company schemes Diluted weighted average 86,094 75,184number of shares
The calculation of the diluted EPS assumes all criteria giving rise to the dilution of the EPS are achieved.
4. INTANGIBLE ASSETS
a. Exploration and Evaluation Assets
Intangible assets consist of the Group's exploration projects which are pendingdetermination of technical feasibility and commercial viability of extracting amineral resource. United Italy Netherlands Other EU Total Kingdom €'000 €'000 €'000 €'000 €'000 Cost: At 1 January 2010 4,479 9,629 13,753 188 28,049 Additions 718 589 1,527 1 2,835 Transfers - - (44) - (44) Exchange movement 138 - - 2 140 At 31 December 2010 5,335 10,218 15,236 191 30,980 Exploration expenditure written off: At 1 January 2010 42 - 99 28 169 Exchange movement - - - - - At 31 December 2010 42 - 99 28 169 Net book value: At 31 December 2010 5,293 10,218 15,137 163 30,811 b. IT systems Computer software €'000 Cost: At 1 January 2010 - Additions 999 At 31 December 2010 999 Depreciation: At 1 January 2010 - Charge for the year - At 31 December 2010 - Net book value: At 31 December 2010 999The additions of €999,000 above comprise software and implementation costs fora new IT system. The IT system is due to go live in 2011 and no depreciationhas been charged in 2010 (2009: Nil).
5. PROPERTY, PLANT AND EQUIPMENT
a. Oil and Gas Assets Oil and Gas Oil and Gas Oil and Gas Oil and Gas Oil and Gas Assets Assets Assets Assets Assets Total (Netherlands) (Netherlands) (UK)- (UK) - (Italy) Developed -Undeveloped Developed Undeveloped -Undeveloped €'000 €'000 €'000 €'000 €'000 €'000 Cost: At 1 January 22,043 12,810 745 778 16,352 52,7282010 Additions 8,476 5,519 16 1,066 258 15,335 Disposal (119) - - (25) - (144) Transfers 10,952 (10,908) - - - 44 Adjustments 231 - - - - 231 Exchange - - 20 20 - 40movement At 31 December 2010 41,583 7,421 781 1,839 16,610 68,234 Depletion and amortisation: At 1 January 6,735 - 466 - - 7,2012010 Charge for 2,738 - 72 - - 2,810the year Impairment loss 577 - - - - 577 Disposal (119) - (25) - - (144) Exchange movement - - 13 - - 13 At 31 December 9,931 - 526 - - 10,4572010 Net book value: At 31 December 2010 31,652 7,421 255 1,839 16,610 57,777 b. Non Oil and Gas Assets Leasehold Computer and Motor Total improvements office vehicles equipment €'000 €'000 €'000 €'000 Cost: At 1 January 2010 303 601 - 904 Additions - 147 36 183 At 31 December 2010 303 748 36 1,087 Depreciation: At 1 January 2010 178 358 - 536 Charge for the year 76 126 3 205 At 31 December 2010 254 484 3 741 Net book value: At 31 December 2010 49 264 33 346
6. TRADE AND OTHER RECEIVABLES
2010 2009 €'000 €'000 Non-current assets Loans 129 118 129 118 Current assets Trade receivables 1,833 1,590 Other receivables 95 4,208 Corporation tax 2,540 144 VAT recoverable 347 3,530 Prepayments and accrued income 3,853 4,904 Total trade and other 8,797 14,494receivables 7. SHARE CAPITAL 2010 2009 €'000 €'000 Authorised: 311,316,404(2009: 311,316,404) ordinary shares of 5p 19,648 19,648each
Allotted, issued, called up and fully paid: 91,987,445(2009: 78,987,248) ordinary shares of 5p 5,768 4,983each
The ordinary shares above all hold the same voting rights and there are no restrictions on the distribution of dividends.
8. APPROVAL BY DIRECTORS
The results for the year ended 31 December 2010 were approved by the Directors on 7 June 2011.
9. ANNUAL REPORT AND ACCOUNTS
The Annual Report and Accounts will today be made available in electronicformat on the Company's website, www.northpet.com, and will shortly be postedto shareholders. Following posting, the Annual Report will also be availablefree of charge for a period of not less than one month by application to theCompany Secretary at the Company's registered office being Martin House, 5Martin Lane, London, EC4R 0DP.
vendor