12 May 2008 07:01
Embargoed for release: 0700 on 12 May 2007
Northern Petroleum Plc ("Northern", "the Group" or "the Company") Unaudited Preliminary Results for the Year Ended 31 December 2007 Financial highlights: Unaudited Unaudited Year ended Year ended 31 December 31 December 2007 2006 ‚£'000 ‚£'000 Revenue 4,086 307 Profit / (loss) before taxation 19,409 (1,704) Profit / (loss) for the year 14,942 (1,704) Basic earnings / (loss) per share on profit / 21.21p (2.66)p(loss) for the year Diluted earnings / (loss) per share on profit 19.73p (2.66)p/ (loss) for the year Cash and cash equivalents 22,179 15,954
Deferred consideration (Dyas Strategic 9,533
-Alliance) Net assets 40,966 23,857 Total distributable reserves 16,344 1,358 Net Commercial Oil & Gas Reserve Quantities 76.55
60.53
- Proven and Probable reserves (million boe)
Operational highlights - 2007:
* Substantial profit on the sale during the year of 25% of the Group's interests in six onshore Netherlands fields to Dyas B.V; * Netherlands production of 0.88 billion cubic feet of gas;
* Booked P2 reserves increased by 26.5% year on year to 76.55 million boe, a
fifth successive year of increase, with reserves now in each of the Group's
three core areas;
* Independent engineering reports over the Giove and Rovesti discoveries in
the Southern Adriatic, adding 26.61 million of Italian P2 reserves assessed
by Blackwatch as having an NPV10 value of $305 million, assuming a $70 per
barrel price; * Development operations commenced at Ottoland and Brakel; * A cost free move into assessing 30 Bcf working volume underground gas storage project at Waalwijk alongside two operators of gas storage
facilities in Essent B.V. and Star Energy Group Plc. The Waalwijk licence
is believed to also contain substantial upside with tested oil in two zones
; and
* A Strategic Alliance has been established with Dyas B.V. targeting new
assets and corporate acquisitions in selected EU countries and elsewhere.
Operational highlights - 2008:
* Front End Engineering Design ("FEED") studies for all six oil and gas field
developments have been completed with the tender packages issued for long
lead items. Gross initial production rates in total for the six fields of
approximately 3900 barrels of oil equivalent per day (Northern share post
Dyas transactions of approximately 1750 barrels of oil equivalent per day)
under oil and e-gen development schemes;
* Significant increases in initial field production rates to be expected if
one or more of the discoveries are developed as gas fields, rather than
e-gen, as gas production would not be facilities constrained;
* Independent resource evaluationof six of the Company's drilling prospects
in the Adriatic Sea, with the combined potential of the prospects assessed
at2.29 billion barrels of oil in place at a P50 probability, rising to a
potential of 6.03 billion barrels at a P10 probability;
* Negotiations are ongoing with potential downstream companies and marine
service companies to progress the appraisal and development of the Rovesti
and Giove oil fields in the southern Adriatic;
* The Company is working on plans to drill 10 wells across the portfolio in
the next 18 months;
* Northern's first operated well in Italy will be drilled in the summer of
2008 on the Savio licence (mean estimate of 220 bcf of gas in place), on
trend to the recent Abbadesse gas discovery. Further wells planned during
the next 12 months include Matamata (mean estimate of 1 billion barrels of
oil in place), Nieuwendijk (mean estimate of 56 million barrels of oil in
place), Tiendeveen (mean estimate of 67 bcf of gas plus condensates in
place) and Markwells Wood-1 (mean estimate of 27.5 million barrels of oil
in place); and
* At Avington the Planning Application for the Field Development Plan is with
Hampshire County Council with a decision expected to be received in Q2 or
Q3 2008. Long term production could commence shortly after receipt of the
approvals.
For further information please contact:
Northern Petroleum Plc Tel: +44 (0) 20 7469 2900
Derek Musgrove, Managing Director
Chris Foss, Finance Director
Graham Heard, Exploration & Technical Director
Bishopsgate Communications Limited Tel: +44 (0) 20 7562 3350
Nick Rome / Maxine Barnes
Notes to Editors:
Northern Petroleum Plc is an AIM listed oil and gas production, development,exploration and asset trading company with core interests under its managementin The Netherlands, Italy and the United Kingdom.In The Netherlands Northern is currently embarked upon a programme to place twooil fields and four gas fields into production. In Italy Northern is seekingmarine fleet, service and refining companies as partners to appraise andproduce two offshore oilfields with 53.2 million barrels or reserves.The Company has acquired the management interests in the producing Waalwijk gasfield where it intends to implement plans to increase late phase gas productionand move to develop a 30 Bcf underground gas storage facility alongside StarEnergy and Essent. A second deal brought in gas production from block P12operated by Wintershall, also in The Netherlands.
Northern's Netherland partner list is impressive, comprising NAM (Shell/Exxon Mobil), Dyas, EBN, Essent, Wintershall and Star Energy (Petronas).
The Company has the second largest exploration position in Italy of licencesunder management where activities can be expected to pick-up as the result ofthe extra funds now available. In addition the Company has announced plans todrill a projected eastward extension of the producing Horndean oil field inWest Sussex and two other wells in the area.
Overall the Company is working on plans to drill 10 wells across the portfolio in the next 18 months.
Further information on Northern is available at www.northpet.com.
CHAIRMAN'S STATEMENT
Summary
* Transactions with Dyas B.V. place Netherlands administrative processes in
perspective and suggest an industry valuation of reserves at this stage;
and
* A much strengthened cash position has enabled faster progress on the
massive potential the Group has in Italy. In the Southern Adriatic alone
53.23 million barrels of P2 reserves have been established and confirmed by
independent work together with an exploration potential with a mean
estimate of 2.29 billion barrels of oil in place in just six of many
structures and leads mapped to date.
It gives me the greatest pleasure to report results for the 2007 full year of apre-tax profit of ‚£19.41 million and undiluted earnings of 21.21p per sharewhich compares with a pre-tax loss last year of ‚£1.70 million or 2.66p loss pershare. This has been achieved whilst increasing year on year our reserves by26.5% to 76.55 million boe independently assessed, proven and probable,notwithstanding the sale of 13.9 million boe, including the applicable NAM netprofits interests, in the Netherlands in a transaction with Dyas B.V. which wasa major contributor to reported profits. It is an excellent result for theyear.The 26.61 million boe of Italian P2 reserves net to Northern added during theyear have been independently assessed to have a value in excess of $305 millionassuming a $70 per barrel oil price.Production was ahead of forecast throughout the year with the Waalwijk gasfield exceeding forecasted production levels by 6.6% in the five months duringwhich we operated the field. Our production revenues in both the Netherlandsand the UK at Horndean have of course benefited from the rise in both oil andgas prices, which has continued in 2008.Our costs have risen substantially reflecting our deployment to meet increasedactivity levels in current and future operations. Even with the competition inthe industry for well qualified and experienced personnel we have retained andincreased our staff complement where appropriate. Our staff are an importantasset for realising shareholder value. During the year we moved to excellentmodern offices in the City with considerable room for further expansion.Our cash position has been maintained at healthy levels throughout the periodand was in excess of ‚£22 million at year end. This continues to bepredominantly held in Euros with concomitant ‚£1.4 million of foreign exchangegains accruing and with a further ¢â€š¬13 million as delayed payments to bereceived under the Dyas Strategic Alliance.The results for the year ended 31 December 2007 have been prepared underInternational Financing Reporting Standards (IFRS), in accordance with theLondon Stock Exchange rules for AIM-listed companies. All comparative valuesfor the previous year have been restated to align with IFRS requirements. Areconciliation between comparative values under IFRS, and as formerly reportedunder UK Generally Accepted Accounting Principles (UK GAAP), was published withthe 2007 Interim Report and is available on the Group's website at www.northpet.com.Given the significant pipeline of opportunities available to the Group withinits existing asset base, the Board has decided that it would not be appropriateto propose a dividend at this time.We expect production to increase and grow markedly in the Netherlands startingin late 2008 relying upon negotiations with owners to make use of existinglocal gas treatment facilities, thus keeping your company on an earnings trendto which our massive Italian asset position will contribute more and more incoming years. The substantial potential is, and was always, evident.In the current year we look to further increase our income from productionthrough both volume and already increased prices beyond $100 per barrel. Wehope to further add substantial income from asset realisation and trading,reflecting once again our philosophy of taking profits when the major portionof the value added has been gained. A strategy suited to a project richcompany, a distinguished position that was achieved by moving forward ahead ofoil and gas price increases and the crowd that followed.During the year operations in the Netherlands have proceeded more slowly thanwe would have liked as we dealt with the reality of the regulatory and planningauthorities in order to realise our production goals. Progress has been madewith the re-drilling at Ottoland and a sidetrack completed. The Ottoland wellwill now be fracced in the next few months to enhance production rates.There has been discernable progress with planning at Papekop and Brakel in thesouth, whilst with the two gas fields in the north, Geesbrug and Grolloo, wehave in the additional time available restructured the projects to have theoption to take advantage of production declines at nearby gas processingfacilities. This would allow Northern to potentially pipe untreated gas tothose ready built facilities which now have greater spare capacity.This has been a constructive reaction to the checks in the administrative andplanning processes. With the considerable increases in gas prices, compared tothose of electricity, and the lack of facilities constraints under a gasdevelopment scenario, the economics of gas sales over small unit generation ofelectricity are greatly changed and the new gas piping schemes are moreprofitable and have been analysed to have shorter lead times.We plan to drill two high potential exploration wells in the Netherlands withinthe year in addition to the workover requirements at Papekop. Studies continueas to the future of the Waalwijk field as a storage facility.In Italy the independent studies which resulted in the large gains to reservesin the Durres basin have also highlighted the enormous wider potential of ourleases in the Southern Adriatic with the confirmation of a number of prospects,also previously mapped by Enterprise Oil Plc, with billions of barrels of oilpotential.The Giove and Rovesti fields have been assessed to contain 53.23 millionbarrels of P2 reserves with a NPV10 value of $305 million, assuming only a $70per barrel price. Development would be by sub-sea completion and an FPSO, withproduction rates for each field projected at over 20,000 bopd. Negotiations areongoing with potential downstream parties and marine service companies toprogress the appraisal and development of the fields as the wells and FPSOrepresent the major part of the capital costs and an equity dilution for theprovision of services is considered advantageous to rapidly advance thedevelopments within current financial resources.Six of the Company's drilling prospects in the Adriatic Sea have beenindependently assessed, with the combined potential of the prospects being 2.29billion barrels of oil in place at a P50 probability, rising to a potential of6.03 billion barrels at a P10 probability. These prospects alone aresubstantial, being located in the awarded licences, however considerableadditional potential is recognised in the further three adjacent preliminaryawards.We have further large prospects with billion barrel potential to the west ofSicily in the thrust belt and in the Sicily Channel. Northern is innegotiations with suitable farm out partners to progress the development ofthese licences. In the eastern Po Valley we have identified multiple gasprospects in the Savio and Longastrino licences and we expect the Savioprospect to be drilled later this year, which at 220 bcf GIIP is significantlylarger than many prospects recently drilled in the North Sea.In the UK we are seeking drilling sites or waiting on planning approval priorto drilling three wells on our licences - Markwells Wood -1, Hedge End -2, andan exploration well straddling the PEDL 099 and 155 boundaries. We will conductthe appropriate consultation processes concerning drilling locations and willalso fulfil all obligations to the local community under good oil field anddrilling practice. Development consent has been sought for the Avington fieldoperated by Star Energy to allow production to commence from two wells. Afurther appraisal well is also planned for the Avington-1 discovery that is notpart of the current field development.
Northern has applied for additional licences in the UK 13th Onshore Licencing Round and awards are expected later in the year.
Tullow Oil has stated that it plans to drill the large Matamata prospect offshore Guyane during the second half of this year. Long lead time items are in the process of being acquired.
I believe that from reading the long list of opportunities open to us outlinedabove you will agree with me that our strong asset and earnings positionwarrants fuller recognition for the quality of our portfolio and our equallystrong and capable group of staff and management, who thoroughly deserve yourthanks for bringing your company into such an exciting and well basedcondition.
I look forward to reporting on our progress through the coming year.
R H R LathamChairman Year Year ended ended 31 31 December December 2007 2006 Notes ‚£'000 ‚£'000 Revenue 4,086 307 Production costs (1,381) (44) Depreciation, depletion and amortisation (2,299) (125) Cost of sales (3,680) (169) Gross profit 406 138 Administrative expenses - other (2,777)
(1,732)
Administrative expenses - share (648) (523)incentives Administrative expenses - total (3,425) (2,255) Other operating income 534 63 Profit on disposal of assets 3 19,730 -
Deemed profit on disposal of associate 102
45
Profit / (loss) from operations 17,347 (2,009) Finance income 2,173 415 Share of operating loss in associates (111)
(110)
Profit / (loss) before taxation 19,409 (1,704) Income tax expense (4,467) - Net profit / (loss) for the financial 14,942 (1,704)year Basic earnings / (loss) per share on 4 21.21p
(2.66p)
profit / (loss) for the year Diluted earnings / (loss) per share on 4 19.73p
(2.66p)
profit / (loss) for the year All amounts relate to continuing activities and are attributable to equityshareholders of the parent. 2007 2006 Notes ‚£'000 ‚£'000 Assets Non-current assets Intangible assets 5 7,460 6,643 Property, plant and 3,6,9 7,855 2,146equipment Investments in joint - -ventures Investments in associates 121 130 Other receivables 7 5,499 750 20,935 9,669 Current assets Inventories 73 27 Trade and other 7 10,604 1,818receivables Cash and cash equivalents 22,179 15,954 Non-current assets classified - -as held for sale 32,856 17,799 Total assets 53,791 27,468 Liabilities Non-current liabilities Trade and other payables 38 - Provisions 4,660 230 Deferred tax liability 4,155 - 8,853 230 Current liabilities Trade and other payables 3,382 3,381 Corporation tax liability 590 - 3,972 3,381 Total liabilities 12,825 3,611 Net assets 40,966 23,857 Capital and reserves Share capital 8 3,540 3,511 Share premium 18,923 18,529 Special reserve 3,599 3,599(Distributable) Special reserve 122 122(Undistributable) Share incentive plan 795 295reserve Foreign currency 1,242 42translation reserve Retained earnings 12,745 (2,241) Total equity 40,966 23,857
All amounts are attributable to equity shareholders of the parent.
Year ended Year ended 31 December 31 December 2007 2006 ‚£'000 ‚£'000
Cash flows from operating activities Profit / (loss) before taxation 19,409
(1,704)
Depreciation, depletion and amortisation 2,246
132
Depreciation - non oil and gas tangible 79
41assets
Profit on disposal of property, plant (10,876)
-and equipment
Foreign exchange (gain) / loss (1,394)
47 Finance income (779) (415) Share based payments 544 311
Expenses settled by issue of shares 44
25
Share of operating loss in associate 111
110
Deemed profit on disposal of associate (102)
(45)
Net cash inflow / (outflow) before changes in 9,282 (1,498)working capital Increase in inventories (46) - Increase in trade and other receivables (12,068)
(742)
Increase in trade and other payables 67 2,654 (12,047) 1,912
Net cash (outflow) / inflow from (2,765)
414operating activities
Cash flows from investing activities
Interest received 779 415 Purchase of property, plant and (3,156) (1,548)equipment
Sale of property, plant and equipment 11,681
-
Expenditure on exploration and (687) (3,751)evaluation assets Loan to associated company (750) (750) Net cash inflow / (outflow) used in 7,867 (5,634)investing activities
Cash flows from financing activities Issue of ordinary shares (net of issue - 18,926costs)
Proceeds from the exercise of warrants 379
351
Net cash inflow from financing 379 19,277activities Net increase in cash and cash 5,481 14,057equivalents Cash and cash equivalents at start of 15,954 1,904year Exchange movement 744 (7) Cash and cash equivalents at end of year 22,179
15,954
There have been no significant non-cash transactions during the year.
Share Share p Special Share Foreign Retained remium incentive currency plan translation capital account reserves reserve reserve earnings Total ‚£'000 ‚£'000 ‚£'000 ‚£'000 ‚£'000 ‚£'000 ‚£'000 At 1 January 2006 2,697 41 3,721 87 - (634) 5,912 Exchange differences - - - - 42 (6) 36on translation of foreign operations Net income / (expense) - - - - 42 (6) 36recognised directly in equity Loss for the year - - - - - (1,704) (1,704) Total recognised income - - - - 42 (1,710) (1,668)and expense for the year Issue of shares 814 19,562 - - - - 20,376during the year Costs relating to - (1,074) - - - - (1,074)share placing Equity share - - - (103) - 103 -warrants issued Charge for share based - - - 311 - - 311payments Transfer between special - - 25 - - - 25reserves Transfer between special - - (25) - - - (25)reserves At 1 January 2007 3,511 18,529 3,721 295 42 (2,241) 23,857 Exchange differences - - - - 1,200 - 1,200on translation of foreign operations Net income recognised - - - - 1,200 - 1,200directly in equity Profit for the year - - - - - 14,942 14,942 Total recognised income - - - - 1,200 14,942 16,142and expense for the year Issue of shares 29 394 - - - - 423during the year Equity share - - - (44) - 44 -warrants issued Charge for share based - - - 544 - - 544payments At 31 December 2007 3,540 18,923 3,721 795 1,242 12,745 40,966
All amounts are attributable to equity shareholders of the parent.
1. BASIS OF PREPARATION
The financial information presented in this announcement is unaudited and doesnot constitute statutory accounts within the meaning of s240 of the CompaniesAct 1985. The information has however been extracted from the Company'sstatutory accounts for the year ended 31 December 2007 on which the Company'sauditors are expected to give an unqualified opinion.
2. ACCOUNTING POLICIES
The principal accounting policies applied in the preparation of these consolidated financial statements are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated.
Basis of preparation
The period beginning 1 January 2007 is the first period for which it became mandatory for the Group to comply with International Financial Reporting Standards ("IFRS"). The adoption of these standards and interpretations has resulted in changes to the Group's accounting policies and the impact of the adoption of IFRS on the results for the previous year ended 31 December 2006.
This is therefore the first annual reporting period being prepared under IFRS,although the financial results of the Group for the six months ended 30 June2007 were previously prepared on a basis which is consistent with IFRS.The financial statements have been prepared in accordance with EU EndorsedInternational Financial Reporting Standards (IFRS's and IFRIC interpretations)issued by the International Accounting Standards Board ("IASB"), and with thoseparts of the Companies Act 1985 applicable to companies reporting under IFRS.The Group has adopted all of the standards and interpretations issued by theInternational Accounting Standards Board and the International FinancialReporting Interpretations Committee that are relevant to its operations.
First-time adoption of IFRS
In preparing these financial statements, the Group has elected to apply the following transitional arrangements permitted by IFRS 1 'First-time Adoption of International Financial Reporting Standards':
* Business combinations effected before 1 January 2006, including those that
were accounted for using the merger method of accounting under UK accounting standards, have not been restated. * Only those exchange differences arising on the retranslation of foreign operations since 1 January 2006 have been recognised as a separate
component of equity, with the related reserve being reset to zero at that
date.
* IFRS 2 'Share-based payments' has been applied to employee options granted
after 7 November 2002 that had not vested by 1 January 2006.
* The Group has made estimates under IFRS's at the date of transition, which
are consistent with those estimates made for the same date under UK GAAP
unless there is objective evidence that those estimates were in error, i.e.
the Group has not reflected any new information in its opening IFRS balance
sheet but reflected that new information in its income statement for
subsequent periods.
New standards and interpretations
(a) New standards, amendments to published standards and interpretations to existing standards effective in 2007 and adopted by the Group
- IFRS 7, Financial Instruments: disclosures and a complementary amendment toIAS 1, Presentation of Financial Statements - capital disclosures (effectivefor accounting periods beginning on or after 1 January 2007). IFRS 7 introducesnew requirements aimed at improving the disclosure of information aboutfinancial instruments. It requires the disclosure of qualitative andquantitative information about exposure to risks arising from financialinstruments, including specified minimum disclosures about credit risk,liquidity risk and market risk. Where those risks are deemed to be material tothe Group it requires disclosures based on the information used by keymanagement. It replaces the disclosure requirements in IAS 32 `FinancialInstruments: disclosure and presentation'. It is applicable to all entitiesthat report under IFRS.
Oil and gas assets: exploration and evaluation
The Company has continued to apply the full cost method of accounting forExploration and Evaluation ("E&E") costs, having regard to the requirements ofIFRS 6 `Exploration for and Evaluation of Mineral Resources'. Under the fullcost method of accounting, costs of exploring and evaluating oil and gasproperties are accumulated and capitalised by reference to appropriatecash-generating units. For E&E asset purposes the Group has cash-generatingunits by country: The Netherlands, Italy, United Kingdom and Other EU.E&E costs are initially capitalised within `Intangible assets'. Such E&E costsmay include costs of licence acquisition, technical services and studies,seismic acquisition, exploration drilling and testing, but do not include costsincurred prior to having obtained the legal rights to explore an area, whichare expensed directly to the income statement as they are incurred.
Intangible E&E assets related to each exploration licence/prospect are not depreciated and are carried forward until the existence (or otherwise) of commercial reserves has been determined. The Group definition of commercial reserves for such purpose is proven and probable reserves on an entitlement basis.
If commercial reserves have been discovered, the related E&E assets are assessed for impairment as set out below The carrying value, after any impairment loss, of the relevant E&E assets is then reclassified as development and production ("D&P") assets within property, plant and equipment.
E&E assets are assessed for impairment when facts and circumstances suggestthat the carrying value of the E&E cash-generating unit to which they relatemay exceed its future recoverable amount. Such indicators include the point atwhich a determination is made as to whether or not commercial reserves exist.Where the E&E assets concerned fall within the scope of an established D&Pcash-generating unit, the E&E assets are tested for impairment together withthe established D&P assets as a single cash-generating unit. The aggregatecarrying value is compared against the expected recoverable amount of thecash-generating unit, generally by reference to the present value of the futurenet cash flows expected to be derived from production of commercial reserves.These ceiling test values are calculated on the basis of expected futureproduct prices or, if applicable at prices specified in a sale contract, anddiscounted at rates between 7.50% and 12.50% per annum, depending on riskconsiderations on an asset by asset basis. Intangible E&E assets that relate tosuch E&E activities remain capitalised as intangible E&E assets at cost lessaccumulated amortisation. Such E&E assets are amortised on a unit of productionbasis over the life of the commercial reserves of the cash-generating unit towhich they relate.Where the E&E assets to be tested fall outside the scope of any established D&Pcash-generating unit and there are deemed to be no commercial reserves the E&Eassets concerned will generally be written off in full.
Any material impairment loss is recognised in the income statement and separately disclosed.
Property, plant and equipment
Oil and gas assets: development and production
Development and production assets are accumulated on a cash-generating unitbasis and represent the cost of developing the commercial reserves discoveredand bringing them into production, together with the E&E expenditures incurredin finding commercial reserves transferred from intangible E&E assets asoutlined above.The net book values of producing assets are depreciated on a cash-generatingunit basis using the unit of production method based on entitlement to provideby reference to the ratio of production in the period to the related commercialreserves of the cash-generating unit, taking into account any estimated futuredevelopment expenditures necessary to bring additional non producing reservesinto production.An impairment test is performed for D&P assets whenever events andcircumstances arise that indicate that the carrying value of development orproduction phase assets may exceed its recoverable amount. The aggregatecarrying value is compared against the expected recoverable amount of thecash-generating unit, generally by reference to the present value of the futurenet cash flows expected to be derived from production of commercial reserves.These ceiling test values are calculated on the basis of expected futureproduct prices or, if applicable at prices specified in a sale contract, anddiscounted at rates between 7.50% and 12.50% per annum, depending on riskconsiderations on an asset by asset basis. The cash-generating unit applied forimpairment test purposes is generally the field, except that a number of fieldinterests may be grouped as a single cash-generating unit where the cash flowsof each field are in some way interdependent.
Decommissioning
Where a material liability for the removal of production facilities and siterestoration at the end of the productive life of a field exists, a provisionfor decommissioning is recognised. The amount recognised is the present valueof estimated future expenditure determined in accordance with local conditionsand requirements. A property, plant and equipment asset of an amount equivalentto the provision is also created and depreciated on a unit of the productionbasis. Changes in estimates are recognised prospectively, with correspondingadjustments to the provision and the associated fixed assets.
3. PROFIT ON DISPOSAL OF ASSETS
2007 2006 Notes ‚£'000 ‚£'000 Disposal of property, plant i) 10,876 -and equipment Disposal of proprietary ii) 8,854 -knowledge Total profit on disposal of 19,730 -assets
i. Disposal of Property, plant and equipment
It was announced on 23 April 2007 that the Company, had signed a binding Headsof Agreement with Dyas B.V. ("Dyas") under which Dyas would acquire, with aneffective date of 1 January 2007, a quarter of the Company's interests in sixoil and gas discoveries and three exploration wells. In exchange, Dyas agreedto transfer a 23.6% interest in the producing gas field in block P12, a 30.4%interest in two gas discoveries in the Zuid Friesland permit and pay ¢â€š¬18millionin cash to the Company, which additionally retained a 5% overriding oilproduction royalty over part of the transferred oil reserves in the Ottolandand Papekop oil fields. 2007 2006 Notes ‚£'000 ‚£'000 Sale proceeds 12,472 -
Cost of share of assets disposed of 6 (239)
- Accounting adjustment* 6 (866) Disposal expenses (491) -
Profit on disposal of property, 10,876
-
plant and equipment * In accordance with generally accepted accounting practice the carrying valueof the six oil and gas discoveries were reduced to nil at the effectivedisposal date of 1 January 2007. This had the effect of reducing the reportedprofit on disposal of these assets by ‚£866,000.
ii. Disposal of proprietary knowledge
The Company also announced on 23 April 2007 that Northern and Dyas would, undera Strategic Alliance Agreement ("Strategic Alliance"), work together for aperiod of four years to identify and pursue new business opportunities inmutually agreed regions of the world excluding all existing licences andapplications of the parties. Northern will be the management company, Operator,for the Strategic Alliance. Under the terms of the agreement, in addition tothe Dyas pro-rata share of costs, Northern will receive instalments totallingof ‚£8,854,000 [¢â€š¬14 million] over four years for Northern's proprietaryknowledge. Northern has received the second Strategic Alliance installment of ‚£3.57 million [¢â€š¬4.5 million] from Dyas that fell due on 30 April 2008.
4. EARNINGS PER SHARE
Basic earnings per share amounts are calculated by dividing profit for the period attributable to ordinary equity holders of the parent by the weighted average number of ordinary shares outstanding during the year.
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. 2007 2006 ‚£'000 ‚£'000 Net profit / (loss) attributable to equity holders 14,942 (1,704)used in basic calculation Net profit / (loss) attributable to equity holders 14,942 (1,704)used in dilutive calculation Basic weighted average 70,453,273 63,948,884number of shares Dilutive potential of ordinary shares: Warrants exercisable under 5,270,000 - Company schemes Diluted weighted average 75,723,273 63,948,884number of shares
The calculation of the diluted EPS assumes all criteria giving rise to the dilution of the EPS are achieved and all outstanding share options that in are in money at year end are exercised.
5. EXPLORATION AND EVALUATION ASSETS
Exploration and evaluation assets represent the cost of investment in oil andgas projects where it is too early to make a decision regarding the existenceor otherwise of commercial reserves. United Italy Netherlands Other EU Total Kingdom ‚£'000 ‚£'000 ‚£'000 ‚£'000 ‚£'000 Cost: At 1 January 2007 2,994 848 2,742 153 6,737 Additions 26 440 179 42 687
Transfer to property, plant and - (73) - -
(73)equipment (note 6) Exchange movement - 19 276 - 295 At 31 December 2007 3,020 1,234 3,197 195 7,646 Depletion, depreciation and amortisation: At 1 January 2007 36 - 28 30 94 Charge for the year - - 45 45 90 Exchange movement - - 2 - 2 At 31 December 2007 36 - 75 75 186 Net book value: At 31 December 2007 2,984 1,234 3,122 120 7,460 At 31 December 2006 2,958 848 2,714 123 6,643
6. PROPERTY, PLANT AND EQUIPMENT
a. Oil and Gas Assets Oil and Gas Oil and Gas Oil and Oil and Gas Oil and Gas Gas Assets Assets Assets Assets Assets Total (Netherlands) -Developed (Netherlands) (UK) - (UK) - (Italy) -Undeveloped -Undeveloped Developed Undeveloped ‚£'000 ‚£'000 ‚£'000 ‚£'000 ‚£'000 ‚£'000 Cost: At 1 - 1,373 236 445 - 2,054 January 2007 Additions 4,894 3,082 - 30 - 8,006 Transfer from exploration - - - - 73 73 and evaluation assets (note 5) Disposals* - (1,105) (9) - - (1,114) [note 3i)] Exchange movement 446 263 - - - 709 At 31 December 5,340 3,613 227 475 73 9,728 2007 Depletion, depreciation and amortisation: At 1 - - 67 - - 67 January 2007 Charge for 2,138 - 18 - - 2,156 the year Exchange movement 161 - - - - 161 At 31 December 2,299 - 85 - - 2,384 2007 Net book value:
At 31 December 2007 3,041 3,613 142 475 73 7,344 At 31 December 2006 - 1,373 169 445 - 1,987 * In accordance with generally accepted accounting practice the carrying valueof the six oil and gas discoveries were reduced to nil at the effectivedisposal date of 1 January 2007. This had the effect of reducing the reportedprofit on disposal of these assets by ‚£866,000. b. Non Oil and Gas Assets Computer Leasehold and Office Total improvements equipment ‚£'000 ‚£'000 ‚£'000 Cost: At 1 January 2007 - 231 231 Additions 240 191 431 At 31 December 2007 240 422 662 Depreciation: At 1 January 2007 - 72 72 Provided during the year 16 63 79 At 31 December 2007 16 135 151 Net book value: At 31 December 2007 224 287 511 At 31 December 2006 - 159 159
7. TRADE AND OTHER RECEIVABLES
2007 2006 ‚£'000 ‚£'000 Non-current assets Other receivables 5,499 - Loans - 750 5,499 750 Current assets Trade receivables 4,610 356 Other receivables 27 32 VAT recoverable 125 165 Loans 1,500 - Prepayments and accrued income 4,342 1,265 Total trade and other 16,103 2,568receivables The ‚£5,499,000 included in non-current assets represents two instalments of theStrategic Alliance fee from Dyas B.V. ("Dyas") which fall due in April 2009 andApril 2010. The instalment due in April 2008 is disclosed within currentassets.All outstanding loans above are due from ATI Oil Plc and relate to the drawndown balance of a finance facility of up to ‚£2,000,000 to ATI Oil Plc, securedover certain of ATI's assets. All funds drawn down under the terms of thefacility are currently repayable in full on 31 May 2008 in the event that theyare not repaid before that date.In return for providing this facility, Northern Petroleum Plc, in addition toreceiving fees and interest, has been granted options to farm into, and therebyearn an additional interest in up to seven offshore blocks in which ATI Oil Plchas an interest. These options expire three months after the cancellation ofthe facility by either party.Loans and receivables are required to be shown at fair value. The fair valuesof trade and other receivables are based on cash flows discounted using a ratebased on the credit rating of those companies. The discount rate applied was inthe range of 0% to 7% (2006: 0% to 0%).The non current trade receivable due from Dyas is denominated in Euros andtotals ¢â€š¬8.5 million. As at 24 April 2008 the foreign exchange gain on thisreceivable when compared to the year end exchange rate was ‚£840,000, comparedto a fair value discount of ‚£734,000.8. SHARE CAPITAL 2007 2006 ‚£'000 ‚£'000 Authorised: 311,316,404 ordinary shares of 5p each 15,566
15,566
Allotted, issued and called up:
70,794,581 (2006: 70,219,851) ordinary shares of 5p 3,540 3,511 each
9. ACQUISITION AND DISPOSAL OF ASSETS
Due to the inherently uncertain nature of the oil and gas industry, andexploration and evaluation assets in particular, the assumptions underlying theassigned values below are significantly judgemental in nature. The acquisitionand disposal considerations below are considered equal to the aggregate of thefair values of the assets and liabilities acquired or disposed, and thereforeno goodwill has been recorded on the acquisitions. Deferred tax has beenrecognised, where applicable, in respect of any fair value adjustments.
a. Waalwijk:
The Company announced on 27 March 2007 that subsidiaries of Northern had agreedto purchase from Wintershall Noordzee B.V. ("WINZ") its gas producing andstorage project interests in the Waalwijk Production Licence ("Waalwijk")onshore The Netherlands, with an effective date of 1 January 2007. Theconsideration for the oil and gas assets was ‚£2,255,000 [¢â€š¬3,346,000], settledby way of NPN assuming WINZ's decommissioning liability at Waalwijk plus ‚£337,000 [¢â€š¬500,000] in cash.
Effect of the acquisition
The acquisition had the following effect on the Group's assets and liabilities: Book Fair value Carrying Waalwijk production licence values adjustments values
Net assets at date of acquisition: ‚£'000 ‚£'000
‚£'000
Property, plant and equipment - oil and gas 2,255 - 2,255reserves Decommissioning liability (1,918) - (1,918)
Consideration amount settled in cash 337 -
337
b. Acquisition and disposal transactions with Dyas:
It was announced on 23 April 2007 that the Company, had signed a binding Headsof Agreement with Dyas B.V. ("Dyas") under which Dyas would acquire, with aneffective date of 1 January 2007, a quarter of the Company's interests in sixoil and gas discoveries and three exploration wells. In exchange, Dyas agreedto transfer a 23.6% interest in the producing gas field in block P12, a 30.4%interest in two gas discoveries in the Zuid Friesland permit and pay ¢â€š¬18millionin cash to the Company, which additionally retained a 5% overriding oilproduction royalty over part of the transferred oil reserves in the Ottolandand Papekop oil fields.Further information in respect of the profit in respect of the partial disposalof the Company's interests in these six oil and gas discoveries is disclosed innotes 3 and 6.It was also announced on 23 April 2007 that under the same Heads of Agreementthe Company had agreed to purchase from Dyas its gas producing interests in theP12 Production Licence ("P12") offshore The Netherlands and a 30.4% interest intwo gas discoveries in the Zuid Friesland permit, with an effective date of 1January 2007. The consideration was ‚£2,639,000 [¢â€š¬3,915,000], settled by way ofthe Company assuming Dyas' decommissioning liability at P12 plus ‚£300,000
[¢â€š¬445,000] in cash.Effect of the acquisitionThe acquisition had the following effect on the Group's assets and liabilities: Book Fair value Carrying P12 licence - values adjustments Values
net assets at date of acquisition: ‚£'000 ‚£'000
‚£'000
Property, plant and equipment - oil and gas 2,639 - 2,639reserves Decommissioning liabilities (2,339) -
(2,339)
Consideration amount settled in cash 300 -
300
10. APPROVAL BY DIRECTORS
These preliminary results for the year ended 31 December were approved by the Directors on 9 May 2008.
11. ANNUAL REPORT AND ACCOUNTS
The Annual Report and Accounts will shortly be made available in electronicformat on the Company's website, www.northpet.com, and posted to shareholders.Following posting the Annual Report will also be available free of charge for aperiod of not less than one month by application to the Company Secretary atthe Company's registered office being Martin House, 5 Martin Lane, London,
EC4R0DP. - 1 -
Unaudited Consolidated Income StatementFor the year ended 31 December 2007
Unaudited Consolidated Balance Sheetat 31 December 2007
-
8 -
Unaudited Consolidated Cash Flow Statementfor the year ended 31 December 2007
- 36 -- 17 -
Unaudited Consolidated Statement of Changes in Equityfor the year ended 31 December 2007
Notes to the Unaudited Preliminary Resultsfor the year ended 31 December 2007
vendor