Circle Oil Plc Regulatory News (COP)

27 Sep 2007 07:02

Circle Oil PLC27 September 2007 27 September 2007 CIRCLE OIL PLC ("Circle" or the "Company") 2007 Interim Results A Period of Considerable Progress Circle Oil plc (AIM: COP), the international oil and gas exploration anddevelopment company, is pleased to announce its results for the six month periodended 30 June 2007. HIGHLIGHTS • Negotiated farm-in agreements on two concessions in Tunisia, the Grombalia Permit in north and the Ras Mamour Permit in south of the country. • Drilling contract signed on the Zita prospect in the Ras Mamour Permit and drilling commenced. • US$30 million unsecured convertible loan agreement signed in June with the Kuwait based company KGL Petroleum and funds received in full in July. • Completed shooting and processing of 6,300 km of 2D seismic in Block 52 offshore Oman. Mr Thomas Anderson, Chairman of Circle Oil, said: "It has been a very busy period for the Group and the workload is rapidlyexpanding with the start of drilling in Tunisia and seismic operations inMorocco and I look forward to reporting on the results of these programmes indue course." For further information contact: Circle Oil plc David Hough, CEO (+44 20 7638 9571) Citigate Dewe Rogerson (+44 20 7638 9571) Media enquiries: Martin JacksonAnalyst enquiries: George Cazenove Collins Stewart Europe Limited (+44 20 7523 8350) Chris Howard Notes to Editors Circle Oil plc (AIM: COP) is an international oil & gas exploration anddevelopment company with a growing portfolio of assets in Morocco, Tunisia,Namibia, Oman and Panama. The company listed on AIM in October 2004. Circle has the largest licence holding of any company in Oman. In addition toBlock 52, the company also has an ongoing exploration program in onshore Block49. Worldwide, the company is active in exploration in the Owambo Basin,Namibia; in the Caribbean Sea, offshore Panama; the Rharb Basin, Morocco; theRas Mamour Permit in southern Tunisia and Grombalia Permit in northern Tunisia. The Company's strategy is to locate and secure licences in new hydrocarbonprovinces and through targeted investment programmes, monetise the value inthose assets for the benefit of shareholders. This could be achieved throughfarm-outs to selected partners who would then invest in and continue thedevelopment of the asset into production, or Circle may itself opt to use itsown expertise to appraise reserves and bring assets into production, generatinglong term cash flow for further investment. www.circleoil.net CIRCLE OIL PLC ("Circle" or the "Company") Chairman's Statement I am pleased to report that the period under review has been one of considerableprogress and growth for Circle Oil particularly on our later stage explorationprojects in Tunisia and Morocco. In addition, the Company has obtained by wayof an unsecured convertible loan the finances necessary to fund its presentexploration programme for the next 18-24 months and to invest in a number of newlater stage exploration projects that are currently under review. Operations In April, Circle announced that it had agreed farm-in terms with EXXOIL, aTunisian oil exploration and development company, to earn interests in two ofEXXOIL's licences in Tunisia, namely Ras Marmour and Grombalia. The targets tobe drilled in both licences are adjacent to existing producing oilfields and thestart of drilling of the first well, Zita-1, on the Zita prospect in the RasMamour permit, was reported on the 23rd August. The Zita prospect is 4 km east of the producing Ezzaouia discovery well. Thisfield was first discovered by Marathon in 1986 and production reportedly reached21,500 barrels of oil equivalent per day (boepd) for several years. It is nowproducing approximately 3,000 boepd and has reportedly produced a total ofapproximately 29 million barrels to the end of 2006. The same potentialreservoirs as those of the Ezzaouia oil field are proposed in the Zita prospectwith the upper prospective formation having an area of nearly 6 km2 and thelower 8 km2. This gives the Zita prospect a potential of approximately 36million barrels recoverable out of the two identified prospective horizons.Further news on drilling progress will be announced on completion of thedrilling of the well. Once drilling of the Zita-1 well is finished the rig will move to the GrombaliaLicence to drill one of the mature prospects there. The presently chosen Serdoukprospect has a closure area of 5.2 km2 at both prospective levels, the Aboid andBou Dabbous formations, and operator estimated potential recoverable reserves of27.5 million barrels. Serdouk is adjacent to the Belli, Beni Khalled and ElManzah producing oil fields. The Sidi Rais prospect, the presently proposed third well to be drilled, issituated near shore in the Gulf of Tunis, and is one of the most technicallyinteresting and largest prospects in the Grombalia Licence. The initial closurearea has the potential for 287 million barrels of oil (mmbo) in place with anoperator estimated 60 mmbo recoverable. The prospect is in shallow water (13metres) and only approximately 1.5 km offshore which would make developmentcosts potentially low compared with a more conventional offshore development. There are a number of further leads and prospects in both permits and additionaldrilling is proposed for 2008 following evaluation of this year's results andthe completion of a small amount of 2D seismic early next year. In Morocco, we have decided to complete a comprehensive seismic study of theSebou permit in the Rharb area this year. The Environmental Impact Assessmenthas been completed, and surveying and shothole drilling has commenced in thesurvey area. We anticipate that shooting of the survey will commence shortly.Originally we had planned to do the seismic over two years with some limiteddrilling taking place later this year. However, it is now considered moreprudent to first complete this seismic survey and the processing andinterpretation of its results. This will potentially give Circle a large numberof targets which can be properly assessed, ranked and then drilled over the next3-4 years. We have held discussions with Office National des Hydrocarbures etdes Mines (ONHYM) to use their drill rig for the 2008 drilling season whichshould result in the drilling of up to eight wells in the area. The successfulconclusion to our ongoing discussions with ONHYM will result in the gasdiscovery made last autumn in the Sebou area, which Circle has the right toacquire, going into production early next year. In Oman, the final processed results of the offshore seismic survey on Block 52have been presented to Circle for interpretation and this work is ongoing. Theincrease in data quality has exceeded our expectations and should allow acomprehensive appreciation of the play concepts and potential of the block to beincorporated into a farm out document which will enable Circle to seek partnersfor this licence area during 2008. In Oman Block 49, we have been further encouraged by our own work together withthe operations and studies that have been going on around us. There have beenthird party reports of discoveries and positive technical results in adjacentblocks relating to the salt stringer play. Our own gravity modeling and recentreworking of the existing seismic has given us encouragement and because of thiswe are hoping to get approval from the Omani Ministry shortly to change theProduction Sharing Agreement terms to allow us do a concise 3D seismic studyover the southern end of the block. This study, to be carried out in 2008, willenable us to locate and identify potential oil leads and prospects in ourlicence. We have been approached by a number of companies who have expressed a wish toexamine joint venturing with us in either or both of our Omani licences. TheBoard will decide over the coming months whether to bring in suitable partnersor to carry out the next phase of exploration independently, thereby retainingour 100% interest in the two licences. Either way, it is most encouraging thatsuch companies are approaching us with a view to participating in these areas. In Namibia, we are currently negotiating with three potential Joint Venturepartners on our northern licence and we hope to conclude discussions with one ormore of these companies shortly. Board and Staff I am delighted to welcome Rafat Rizvi and Mohammad Sultan to our Board ofDirectors. Rafat's background is in the banking sector and Mohammad's backgroundis oil and gas sector and he is the managing director of KGL Petroleum whichprovided Circle with US$30 million of new funds following the signing of aconvertible loan agreement. Both of these gentlemen bring invaluable experienceand contacts to the Board. In order to cope with the hugely increased workload we are in the process ofexpanding our technical base located in Berkshire, UK and are seeking to addseveral new experienced personnel to the team there in the coming months. InTunisia, we have been very fortunate to have engaged a well respected countrymanager of the highest calibre in Ali Chine, who was the CAO of the Tunisianstate oil company, Enterprise Tunisienne d'Activities Petrolieres ("ETAP") andlatterly advisor to the Tunisian Oil Minister. Ali will be invaluable inassisting Circle to achieve its aspirations in Tunisia, a country which webelieve has significant untapped potential for exploration and development. Wehave also added a highly experienced drilling superintendent, Mimoun Serhir, toour team to manage our future drilling programmes. Financial The Group reported a net loss of US$1.2 million (1H 2006: US$1.9 million) forthe period. The reduced loss over the period was largely due to a decrease inthe cost of share option awards and lower administration expenses. The Group remains well funded with cash balances of US$7.3 million at 30 June2007 which excludes US$30 million proceeds from the convertible loan agreementwhich were received in July. This loan agreement was signed on 11 June 2007 withKuwait based KGL Petroleum Company (Kuwait based closed shareholding company)that operates within the energy sector with a primary focus on oil and gasoperations and petroleum related products. It has investments in the upstream,midstream and downstream sectors as it relates to its oil and gas investmentsportfolio. These interim financial statements have been prepared using accounting policiesconsistent with International Financial Reporting Standards and in accordancewith International Accounting Standard (IAS) 34 Interim Financial Reporting. The interim financial statements in respect of the period ended 30 June 2006were prepared under Irish GAAP. The comparative figures for the immediatelypreceding interim period and the immediately preceding financial year have beenrestated on a basis consistent with International Financial Reporting Standardsand in accordance with International Accounting Standard (IAS) 34 InterimFinancial Reporting. The Group has with effect from 1 January 2007 changed its functional andpresentation currency from the Euro (•) to the US Dollar (US$).The Groupconsiders that the US$ is now the currency of the primary economic environmentin which it operates. The Board believe that by adopting the US$ as itsfunctional and presentation currency, the financial statements will provide aclearer picture of the performance of the Group's business and will minimise theimpact of exchange rate fluctuations on the reported results. Conclusion It has been a very busy period for the Group and the workload is rapidlyexpanding with the start of drilling in Tunisia and seismic operations inMorocco and I look forward to reporting on the results of these programmes indue course. I would like to thank all our shareholders, my fellow directors and Circleemployees for their contribution over this period. I look forward to theircontinuing support and success through their efforts in the years ahead. Thomas AndersonChairman of the Board 27 September 2007 Circle Oil PLC CONDENSED CONSOLIDATED INCOME STATEMENT FOR THE SIX MONTHS ENDED 30 JUNE 2007 - UNAUDITED Notes For the six For the six For the year ended months ended 30 months ended 31 December June 2007 30 June 2006* 2006* US$000 US$000 US$000 Turnover - - - Administration expenses (1,351) (1,854) (2,964) Share option expense 2 (158) (451) (775) Exploration costs write-off - - (496) Reorganisation costs - - (154) Operating loss (1,509) (2,305) (4,389) Interest receivable and similar income 277 373 714 Loss before taxation (1,232) (1,932) (3,675) Taxation - - - Loss for the financial period (1,232) (1,932) (3,675) Basic loss per share 3 0.76c 1.20c 2.27cDiluted loss per share 3 0.69c 1.08c 2.06c * Restated for adoption of International Accounting Standards. CIRCLE OIL PLC CONDENSED CONSOLIDATED STATEMENT OF RECOGNISED INCOME AND EXPENSE FOR THE SIX MONTHS ENDED 30 JUNE 2007 - UNAUDITED For the six months For the six For the year ended ended months ended 31 December 30 June 2007 30 June 2006* 2006* US$000 US$000 US$000 Loss for the financial period (1,232) (1,932) (3,675) Exchange translation movement 47 189 (3) Total recognised loss for the period (1,185) (1,743) (3,678) Effect of share option expense onopening reserves at 1 January 2006 (234) Total recognised loss for the period including opening reserves adjustment (1,977) * Restated for adoption of International Accounting Standards. Circle Oil PLC CONDENSED CONSOLIDATED BALANCE SHEET AT 30 JUNE 2007 - UNAUDITED Notes 30 June 30 June 31 December 2007 2006* 2006* US$000 US$000 US$000 Fixed assetsOil & gas interests 4 14,505 5,412 9,296Tangible assets 211 150 233 14,716 5,562 9,529 Current assetsDebtors 321 252 325Cash at bank 7,339 17,561 14,216 7,660 17,813 14,541 Creditors (Amounts falling due within one year) (1,339) (533) (2,188) Net current assets 6,321 17,280 12,353 Total assets less current liabilities 21,037 22,842 21,882 Net assets 21,037 22,842 21,882 Capital and reservesCalled up share capital 2,147 2,141 2,147Share premium 25,708 25,521 25,708Share option reserves 2 1,903 774 1,563Profit and loss account (8,721) (5,594) (7,536) Shareholders' funds - all equity 21,037 22,842 21,882 * Restated for adoption of International Accounting Standards. Circle Oil PLC CONDENSED CONSOLIDATED cash flow statement FOR THE SIX MONTHS ENDED 30 JUNE 2007 - UNAUDITED Notes 30 June 30 June 31 December 2007 2006* 2006* US$000 US$000 US$000 Net cash outflowfrom operating activities 6 (2,142) (1,552) (1,293) Return on investments and servicing offinanceInterest received 321 407 801 Net cash outflow from returns on investments and servicing of finance 321 407 801 Capital expenditure and financialinvestmentPayments to acquire oil & gas interests (5,027) (935) (4,826)Payments to acquire tangible fixed assets (29) (96) (399) Total capital expenditure and financialinvestment (5,056) (1,031) (5,225) Net cash outflow before Use of liquid resources and financing (6,877) (2,176) (5,717) FinancingIssue of ordinary share capital - 481 674 Net cash inflow from financing - - 674 Decrease in cash 5 (6,877) (1,695) (5,043) * Restated for adoption of International Accounting Standards. Circle Oil PLC STATEMENT OF CHANGES IN EQUITY FOR THE SIX MONTHS ENDED 30 JUNE 2007 - UNAUDITED Share based Share Share payments Translation Accumulated Total capital premium reserve reserve losses equity US$000 US$000 US$000 US$000 US$000 US$000 At 1 January 2006 2,124 25,057 234 (96) (3,755) 23,564 Issue share capital 17 464 481 Share based payment 540 540 Exchange translationmovement 189 189 Net loss for period (1,932) (1,932) At June 30 2006 2,141 25,521 774 93 (5,687) 22,842 Issue share capital 6 187 193 Share based payment 789 789 Exchange translationmovement (192) (192) Net loss for period (1,750) (1,750) At December 30 2006 2,147 25,708 1,563 (99) (7,437) 21,882 Share based payment 340 340 Exchange translationmovement 47 47 Net loss for period (1,232) (1,232) At June 30 2007 2,147 25,708 1,903 (52) (8,669) 21,037 Circle Oil PLC NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED 30 JUNE 2007 - UNAUDITED 1. Basis of preparation European Union (EU) law and AIM stock exchange rules require that the nextannual consolidated financial statements of the Group for the year ended 31December 2007 be prepared in accordance with International accounting standardsadopted for use in the EU. The condensed financial statements have been prepared using accounting policiesconsistent with International Financial Reporting Standards and in accordancewith International Accounting Standard (IAS) 34 Interim Financial Reporting. The interim financial statements in respect of the period ended 30 June 2006were prepared under Irish GAAP. The comparative figures for the immediatelypreceding interim period and the immediately preceding financial year have beenrestated on a basis consistent with International Financial Reporting Standardsand in accordance with International Accounting Standard (IAS) 34 InterimFinancial Reporting. The impact of the restatement is shown below:- Reconciliation of equity under previous GAAP for interimperiod ended 30 June 2006 to equity under IFRS US$000 Equity under Irish GAAP 22,842 Equity under IFRS 22,842 Reconciliation of loss under previous GAAP for interim periodended 30 June 2006 to loss under IFRS US$000 Loss under Irish GAAP (1,932) Loss under IFRS (1,932) Reconciliation of equity under previous GAAP for yearended 31 December 2006 to equity under IFRS US$000 Equity under Irish GAAP 21,882 Equity under IFRS 21,882 Reconciliation of loss under previous GAAP for yearended 31 December 2006 to loss under IFRS US$000 Loss under Irish GAAP (3,675) Loss under IFRS (3,675) Circle Oil PLC NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED 30 JUNE 2007 - UNAUDITED Functional & presentation currency With effect from 1 January 2007, the Group has adopted the US Dollar (US$) asit's functional and presentation currency as this is now regarded as thecurrency of the primary economic environment in which the Group operates. 2. Share option expense The fair value of employee share options is recognised as an employee expense inthe income statement (share option expense) and a corresponding reserve set upin balance sheet (share option reserves). The associated expense is amortisedover the vesting period of the share options. For the six months to 30 June 2007this resulted in a charge of US$158,000. Where an employee or consultants costs, or a portion thereof, is charged to anoil & gas project in accordance with Group accounting policies and where anemployee or consultant has been granted options for which a fair value isrecognised, then a similar portion of the share option expense is charged tothat project or projects. For six months to 30 June 2007 this amounted toUS$182,000 (1H 2006: US$89,000). 3. Basic and diluted loss per share The calculation of basic loss per share is based on the Group's loss of€1,232,000 which is after taxation and on the weighted average number of equityshares in issue of 162,697,200. The effect of options granted is to increase the weighted average number ofshares for the calculation of the diluted earnings per share by 14,900,000 to177,597,200. Circle Oil PLC NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED 30 JUNE 2007 - UNAUDITED 4. Oil & gas interests GroupDeferred development expenditure: US$000Cost:At 31 December 2006 9,296Additions 5,209 At 30 June 2007 14,505 At 30 June 2006 5,412* GroupDeferred development expenditure by geographical area: US$000 Oman 5,840Namibia 3,796Tunisia 2,736Morocco 1,833Panama 170Other licence areas 130 At 30 June 2007 14,505 At 30 June 2006 5,412* Deferred development expenditure at 30 June 2007 represents explorationand related expenditure on the Group's licences and permits in the geographicalareas noted above. The realisation of these intangible assets by the Group isdependent on the development of economic reserves. * Restated for adoption of International Accounting Standards. Circle Oil PLC NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED 30 JUNE 2007 - UNAUDITED 5. Cash at bank At 1 January 2007 Cash Outflow At 30 June 2007 US$000 US$000 US$000 Cash at bank 14,216 (6,877) 7,339 The cash at bank at 30 June 2007 includes $2,344,000 in restricted cash (30 June2006: $2,633,000) relating to bank guarantees issued in respect of thecompletion of certain work programs. 6. Reconciliation of operating loss to net cash outflow from operating activities 30 June 30 June 31 December 2007 2006* 2006* US$000 US$000 US$000 Operating loss (1,509) (2,305) (4,389)Increase/(decrease) in creditors (849) (30) 1,625(Increase)/decrease in debtors (40) 118 (41)Exploration costs written off 496Reorganisation costs 154Exchange translation movement 47 189 (3)Share option expense 158 451 775Depreciation 51 25 90 Net cash outflow from operatingactivities (2,142) (1,552) (1,293) * Restated for adoption of International Accounting Standards. 7. Post balance sheet events On 11 June 2007, the Company announced the signing of an unsecured ConvertibleLoan agreement in the amount of US$30 million with Kuwait based KGL PetroleumLimited. The total funds available under the loan agreement were received by theCompany in July 2007. 8. Interim Report Copies of the Interim Report will be posted to shareholders shortly.Further copies are available from the Company Secretary, Circle Oil plc, 6Lower Mallow St., Limerick, Ireland or by download from the Company's web-siteat www.circleoil.net This information is provided by RNS The company news service from the London Stock Exchange