Circle Oil Plc Regulatory News (COP)

29 Jun 2006 13:19

Circle Oil PLC29 June 2006 29 June 2006 Circle Oil plc (the "Company") and its subsidiaries ("Circle" or the "Group") Results for the Year ended 31 December 2005 a year of further progress and achievement Highlights • Significant additions to licence portfolio in Oman and Panama • Acquisition of new licence in Rharb Basin in Northwestern Morocco • €14.4 Million (Stg £10 Million) institutional placing completed in August 2005. • Ongoing working capital requirements adequately funded • Work programmes on schedule in Namibia, Oman and Panama • Substantial progress made in seeking out new additional licences and projects Mr Thomas Anderson, Chairman of Circle Oil, said: "With the reassessment work on our existing holdings showing some veryencouraging results, our work programmes underway and a number of new dealssigned or under negotiation, I am looking forward to an exciting period forCircle over the next 12 to 18 months. As the Company develops a balancedportfolio of international exploration assets I know that our team is fullyfocused on the end game, namely getting joint venture partners into our largeacreage blocks and production from one or more of our assets as soon aspossible." Enquiries (+44 20 7638 9571): Circle Oil plc David Hough, CEO Citigate Dewe Rogerson Media enquiries: Martin Jackson/George Cazenove Analyst enquiries: Nina Soon Also www.circleoil.com CHAIRMAN'S STATEMENT I am pleased to report a year of further progress and achievement in 2005 and Ican confirm that this has continued into 2006 with the signing of an agreementon an exciting new gas play in Morocco and the current status of negotiations ona number of prospects in several countries in the Middle East and North Africa. In Oman, Circle was awarded Block 49 in June 2005 and Block 52 in September2005. Circle was awarded its offshore Panama Block in late August 2005. Asubstantial amount of work has been carried out by our Houston-based technicalteam reprocessing and reassessing the available data on our Namibia, Oman andPanama holdings. So far the results of these studies have been very encouragingand have given us a greater understanding of the potential for each of theselicences. Importantly, it has given direction and focus to the 2006 workprogrammes which are now underway. Over the past eight months, Circle's acquisition programme has focused primarilyon the Middle East and North Africa and has resulted in the recent award of avery interesting concession in the Rharb Basin, northwestern Morocco.Historically, exploration there has demonstrated the ability to find and producesignificant amounts of hydrocarbons in the form of methane. This gas occurs indefined prospects which are numerous but small in size. They are, however, economically attractive as they occur at shallow depths (lessthan 1,500 metres) and there is a nearby gas pipeline network and a local marketfor the gas. Initially, Circle will carry out a detailed seismic study over thearea which will be followed by a drilling programme. In Namibia, an environmental impact study was awarded to a local company and hasbegun over the area of initial interest. This will be followed by a seismicsurvey next year. Despite much correspondence between the parties, China Shinefailed to demonstrate to Circle, before the proposed agreement with it on ourNamibian licences expired in September 2005, that China Shine had the technicaland financial capability to deliver on the terms of the agreement. However, anumber of potential partners, including some major oil companies, are currentlystudying our Namibian and other portfolios with a view to participating with usin our exploration activities, which is in line with Circle's stated strategy. In Oman, preparations are underway for an aerogravity and aeromagnetic surveyover a large area of Block 49 to be followed by a seismic survey next year. Inaddition, a 6,000 km seismic survey of Block 52 has been awarded to TGS Nopecwhich will commence in the autumn. We are contemplating the acquisition of some regional seismic data in thePanamanian area later this year and are currently checking out the availabilityof a suitable ship. A participating agreement has been signed on our Panamanianlicence with an Australian company Montage Petroleum Limited. Montage has takena one third share in the licence and will contribute to future explorationprogrammes in proportion to its interest in the licence. Having completed the studies on our Celtic Sea acreage we concluded that thedrilling of a well could not be justified at this time and the licence wassurrendered. As you are aware, in August 2005, Circle raised Stg £10 million gross in aplacing of new shares. This has resulted in the Company having approximately US $17.5 million in itstreasury at the end of May 2006 which is sufficient to cover its ongoingexpenditure requirements and obligations. I would like to take this opportunity to welcome three new members to Circle'steam: Professor Chris Green to the Board, Brendan McMorrow to the position ofChief Financial Officer and Company Secretary and Dr. Bob LoPiccolo as VicePresident Exploration. I have no doubt that the depth of knowledge andexperience of each of these individuals in all aspects of natural resourcesexploration and development will contribute significantly to Circle's future. With the reassessment work on our existing holdings showing some veryencouraging results, our work programmes underway and a number of new dealssigned or under negotiation, I am looking forward to an exciting period forCircle over the next 12 to 18 months. As the Company develops a balancedportfolio of international exploration assets I know that our team is fullyfocused on the end game, namely getting joint venture partners into our largeacreage blocks and production from one or more of our assets as soon aspossible. Thomas Anderson, Chairman OPERATIONS REVIEW NAMIBIA Circle has converted its two-year reconnaissance license in the Owambo Basininto a four-year exclusive Exploration Licence. During the first phase thelicence requires a seismic data acquisition and a one-well drilling program. Twoadditional extensions, each of two years, are optional and require the drillingof an additional well during each extension. The block occupies an area of approximately 140,000 square kilometres and coversnearly all of the prospective part of the Owambo Basin in northern Namibia. In2004 Circle's subsidiary, First African Oil Corporation, completed its firstoperations in the area by acquiring some 7,627 kilometres of aerogravity andaeromagnetic data in the central and western portions of the block. This datahas been interpreted and is being used to help plan the upcoming seismicprogramme. From the historical and new data interpretation two main play types have beenidentified. Both involve thrombolitic or stromatolitic (algal) sources andreservoirs of late Proterozoic to early Cambrian age. The first play typeinvolves several large, gentle structures. One well, on a poorly definedstructure in the Etosha National Park, has tested the objective interval and aminimal amount of oil was recovered. Chemical analyses relate it to theProterozoic thereby confirming the play concept. A second play type defines a number of potentially large algal mounds orcarbonate banks within the prospective interval. These are often associated withstructural elements in the basement and are seen as analogous to reefal typebuildups seen outcropping in the nearby Nama Basin. Having completed a large portion of the historical seismic reinterpretation andincorporating the results of the new aerogravity/aeromagnetic survey, tenderdocuments are being prepared to carry out a dual-purpose 2D seismic programme inthe spring of 2007. This programme will be used to firm up two drillableprospects and detail a number of other leads. In agreement with our partner NAMCOR, and for environmental reasons, Circle didnot convert that section of the concession that encompasses the Etosha NationalPark, one of the finest game parks in Africa. The company has recently commencedan Environmental Impact Assessment of the area to be covered by the new seismicprogramme. This survey is being undertaken by a local Namibian company. SULTANATE OF OMAN Circle has two concessions in the Sultanate of Oman. The first, Block 49, islocated in the southwestern border area with Saudi Arabia while the Company'sBlock 52, lies offshore from the south and southeastern coasts. Onshore Block 49 An Exploration and Production Sharing Agreement between the Sultanate of Omanand Circle Oil Oman Ltd. on Block 49 was negotiated and signed in June 2005.The agreement calls for three years of seismic and potential-fields dataacquisition and analysis, followed by two, optional extensions, of eighteenmonths each, which would involve further data acquisition as well as drillingcampaigns. The block occupies an area of 15,438 sq. km and is located in the Rub Al KhaliBasin. Circle has done a full inventory of all historic data on the area and hastransferred a considerable portion of the 11,438 km of seismic and 18,047 km ofaeromagnetics to Houston for reinterpretation. This work began late last yearand is ongoing. To date, two main play concepts are being pursued: the Sahmah play and the LowerHaima/Huqf play. The Sahmah play in the Rub Al Khali Basin in Saudi Arabia hasbeen a major provider of hydrocarbons for many years and the Company is hopefulthat this play extends into the north of Block 49. Several billion barrels of oil have been discovered in Proterozoic/Cambrianreservoirs associated with the Ara Salt in the South Oman Salt Basin to thesoutheast of the block. There is evidence of the presence of a similar saltbasin beneath the western part of Block 49. This new salt basin has been namedthe Ghudun Salt Basin and the exploration program for Block 49 has the two-foldobjective of confirming the extent of salt and delineating likely targets fordrilling. An aerogravity/magnetic programme over a portion of the area has been awarded toFugro and it will be flown this summer. Data from this survey will help definethe extent of the Ghudun Salt Basin in the Block. The company may conduct amagneto-telluric profiling survey through parts of the block as an additionalconfirmatory measure of salt presence and thickness. In the autumn anEnvironmental Impact Assessment will be completed to be followed by a 2D,seismic acquisition programme. Offshore Block 52 An Exploration and Production Sharing Agreement between the Sultanate of Omanand Circle Oil Oman Offshore Ltd. on Block 52 was negotiated and signed inSeptember 2005. This agreement calls for seismic data acquisition and analysisduring the first three years. Two optional extensions of three years each willinvolve further seismic data acquisition as well as drilling campaigns. The block occupies an area of 90,760 square kilometres with water depths rangingfrom 200 to 3,500 meters. Copies of the 10,540 km of previously acquired 2D,seismic data have been obtained, along with the associated gravity and magneticdata. Three wells have been drilled prior to the granting of the licence toCircle. A satellite-based seep study was commissioned last year as well as an analysisof existing gravity and magnetic data; the results of these studies and ourongoing reinterpretation indicate three different exploration opportunities mayexist within the block. Existing gravity, magnetic, and seismic data are beinginterpreted. Circle will carry out a marine seismic survey this Autumn. TheCompany has already tendered this survey and the contract has been awarded toTGS-Nopec. The three play areas are: 1) an inboard basin, which is the southwestern extension of the Messiah Trough,has seen most of the seismic activity and all of the drilling. The basinappears to be at least Tertiary and possibly older in age; two of the wellsconfirm that the basement highs have been stripped of pre-Jurassic sediments,while the third well and the seismic suggest that the potentially prolific Huffsequence may be preserved off the highs. 2) a trusted amphibolites (oceanic crust) has been emplaced along part of theshelf and the possibility is good that large structures, again with the Huffsequence preserved, may be present beneath the amphibolites. 3) a large, deep Tertiary Basin in the western half of the block. Currentseismic control demonstrates the presence of mini-basins which probably receiveddeep water sediments delivered through submarine canyons. This unexplored basinwas created by the rifting which opened the Gulf of Aden; the sediment wouldhave been derived from the granitic and Paleozoic rocks exposed along the coastsof Oman and Yemen. PANAMA On August 29, 2005 Circle was granted a Geological, Geochemical, and GeophysicalProspecting Permit on Block A in the deep water Caribbean, offshore Panama. Theblock is comprised of some three million acres and lies in water depths rangingfrom 500 to 3,000 meters. The company has obtained and is evaluating existingdata. Circle may carry out a short regional seismic survey there later this yeardepending on the availability of a suitable seismic survey ship in the area. The block is located at an interesting juncture where the deformed, accretionaryprism on the north side of Panama overlaps the edges of the Costa Rica andMagdalena submarine fans. To date there have been no wells drilled in the areaand only a limited amount of seismic data is available. Seeps, gas hydrates, andmud volcanoes all suggest the presence of an active petroleum system. Thislocation may have the potential to combine good reservoir rocks with largestructures and mature source rocks. A participation agreement has been signed with Montage Petroleum Limited, aprivate Australian company with offices in London and the USA. Montage'sdirectors have a history of success in offshore oil exploration in projectssimilar to the Panama property. Montage has taken a one third interest in thelicence and will contribute to future exploration programmes pro rata to itsparticipating interest. Montage intends to seek a listing on the AustralianStock Exchange later this year. MOROCCO Circle Oil Maroc Ltd (COML), a wholly owned subsidiary of Circle Oil plc, hassigned an Exploration and Exploitation Agreement with Office National desHydrocarbures et des Mines (ONHYM) for the Sebou Concession (296 sq. km)situated in the Rharb Basin, Morocco. The Exploration Agreement is for a totalperiod of eight years with the right of automatic conversion to a minimum (butextendable) 25 year exploitation period. The Sebou Permit has previously been owned, explored and exploited by ONHYM.Under the agreement the percentage interest in the permit is COML 75% and ONHYM25%. The permit is highly prospective and is located in a basin that has anhistoric natural gas production of almost 1 billion cubic metres of gas. 2Dseismic and well calibration is available and ONHYM have extensive knowledge ofthe area. Small scale gas production within the Rharb is presently from fourwells. COML as operator will be conducting a 3D seismic survey and drilling 6wells over the next 3 year period. The Rharb Basin is a foredeep Basin located in the external zone of the RifFolded belt. Sedimentary evolution started with a thick series of Eocene andOligocene turbidites in the north. Marine conditions in the Middle Mioceneresulted in shaly to shaly-sand sedimentation overlain by the Prerif-nappe.During the early Tortonian era a series of turbiditic sand lenses were depositedand a subsequent rise in the sea level permitted the deposition of a very thickseries of marls. Similar events occurred during the Late Tortonian, Messinianand Pliocene. Exploration within the Rharb has concentrated on the Tertiary depositionalsystem which contains commercial deposits of biogenic gas. These individualprospects are small in size but important and economically interesting. They areshallow and located generally between 500 and 1,500 metres. They are veryinexpensive to drill and also, to hook up due to the presence of a local gaspipeline network. There is also a good market with increasing demand for thesale of the natural gas to local industry. The agreement is important as it provides COML with a low risk concession withthe concomitant potential of low cost, fast track development. Previous successrates in the Rharb basin have been in excess of 60%. The area generally has goodcharge and good natural drive and there are multiple prospects alreadyidentified within the permit. These will be fully assessed and ranked by the 3Dseismic survey prior to commencing drilling in 2007. Prospects previouslydeveloped and ranked by ONHYM will also be included. The permit has considerable potential for the exploration and development ofmore natural gas and exploitation would be by a series of low cost wells/producers each producing from 20-80 million cubic metres of gas. The producedgas will be sold to local industry at locally agreed commercial rates. Ifsuccessful, the development will allow COML to achieve production in arelatively short time scale and provide a long term continuing earningscontribution to COML. CONSOLIDATED PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED 31 DECEMBER 2005 Audited Audited 12 Months to 9 months to 31 December 31 December 2004 2005 Euro • Euro •TURNOVER - - ADMINISTRATION EXPENSES (1,545,340) (927,920) EXPLORATION COSTS WRITTEN OFF (160,823) EXCEPTIONAL ITEM - (313,685) OPERATING LOSS (1,706,163) (1,241,605) Interest receivable and similar income 279,554 30,625 LOSS BEFORE TAXATION (1,426,609) (1,210,980) Taxation (2,733) (27,178) LOSS FOR THE YEAR/PERIOD (1,429,342) (1,238,158) Basic loss per share (1.0c) (2.4c)Diluted loss per share (1.0c) (2.3c) CONSOLIDATED BALANCE SHEET AS AT 31 DECEMBER 2005 Audited Audited 2005 2004 Euro • Euro • FIXED ASSETSOil & gas interests 3,359,254 637,245Tangible assets 59,976 8,648 3,419,230 645,893 CURRENT ASSETSDebtors 272,945 84,804Cash at bank 14,588,657 5,383,697 14,861,602 5,468,501 CREDITORS (Amounts falling due (426,855) (434,966) within one year) NET CURRENT ASSETS 14,434,747 5,033,535 TOTAL ASSETS LESS CURRENT LIABILITIES 17,853,977 5,679,428 NET ASSETS 17,853,977 5,679,428 CAPITAL AND RESERVESCalled up share capital 1,609,472 1,268,639 Share premium 18,983,599 5,627,556Profit and loss account (2,739,094) (1,216,767) SHAREHOLDERS' FUNDS 17,853,977 5,679,428 CONSOLIDATED CASHFLOW STATEMENT FOR THE YEAR ENDED 31 DECEMBER 2005 Audited Audited 12 Months to 9 Months to 31 December 2005 31 December 2004 Euro • Euro •NET CASH OUTFLOW FROM OPERATING ACTIVITIES (1,822,358) (984,983) RETURN ON INVESTMENTS AND SERVICING OF FINANCEInterest received 175,739 30,625 NET CASH INFLOW FROM RETURN ON INVESTMENTS AND 175,739 30,625SERVICING OF FINANCE TAXATIONFranchise tax (2,733) (27,178) CAPITAL EXPENDITURE AND FINANCIAL INVESTMENTPayments to acquire oil & gas interests (2,777,195) (480,337)Payments to acquire tangible fixed assets (65,369) (9,941) TOTAL CAPITAL EXPENDITURE AND FINANCIAL INVESTMENT (2,842,564) (490,278) NET CASH OUTFLOW BEFORE (4,491,916) (1,471,814) USE OF LIQUID RESOURCES AND FINANCING FINANCINGIssue of ordinary share capital 14,750,219 5,230,961Share issue expenses (1,053,343) (322,147)NET CASH INFLOW FROM FINANCING 13,696,876 4,908,814 INCREASE IN CASH 9,204,960 3,437,000 CONSOLIDATED STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES FOR THE YEAR ENDED 31 DECEMBER 2005 Audited Audited 12 Months to 9 Months to 31 December 2005 31 December 2004 Euro • Euro •Loss for the year/PERIOD (1,429,342) (1,238,158)Exchange translations adjustment (92,985) 21,297 TOTAL RECOGNISED LOSS FOR THE YEAR/PERIOD (1,522,327) (1,216,861) NOTES TO THE FINANCIAL STATEMENTS Basis of preparation The financial statements have been prepared in accordance with the historicalcost convention, the relevant Statements of Recognised Practice for the oil andgas industry, other applicable accounting standards generally accepted inIreland and Irish statute comprising the Companies Acts, 1963 to 2005 and theEuropean Communities (Companies: Group Accounts) Regulations, 1992. Accountingstandards generally accepted in Ireland in preparing financial statements givinga true and fair view are those published by the Institute of CharteredAccountants in Ireland and issued by the Accounting Standards Board. The 2005 Annual Report will be available on the Company's website(www.circleoil.com) on 30 June 2006 and will then be posted to shareholders. CONSOLIDATION POLICY The consolidated financial statements include the financial statements of theparent company and all of its subsidiaries made up to the end of the financialyear. BASIC AND DILUTED LOSS PER SHARE The calculation of basic loss per share is based on the Group's loss of€1,429,342 which is after taxation and on the weighted average number of equityshares in issue of 139,883,263. The effect of options granted is to increase theweighted average number of shares for the calculation of the diluted earningsper share by 11,554,110 to 151,437,373. Dividends The directors do not recommend the payment of a dividend in respect of the yearended 31 December 2005 (2004: •Nil). This information is provided by RNS The company news service from the London Stock Exchange