29 Sep 2008 07:00
29 September 2008
CIRCLE OIL PLC
("Circle" or the "Company")
2008 INTERIM RESULTS
Circle Oil Plc (AIM: COP), the international oil and gas exploration and development company, is pleased to announce its results for the six month period ended 30 June 2008.
Highlights:
Over 80 anomalies identified and mapped by 3D seismic study in Morocco
Gas well ONZ4, in which Circle has a 60% interest, will provide the Company with its first revenue
In Tunisia drilling has commenced on the Serdouk prospect
In Egypt drilling on the Al-Amir SE 1 well site on the NW Gemsa permit is nearing completion
Petroholland agrees to take a 70% interest in the Owamba Basin licence in Namibia
Circle completed a £33 million equity funding - principal subscribers were Libya Oil Holdings and Kaupthing Bank
CHAIRMAN'S STATEMENT
Dear Shareholder,
During the period under review Circle has focused on building its exploration programmes on all of its North African and Oman licences. It is Circle's intention over the next 18-24 months to drill approximately 15 wells on its licences in Egypt, Tunisia and Morocco, and carry out a large 3D seismic study on its onshore block in Oman. This is a very ambitious programme for a company of our size but I believe that the portfolio which we have carefully assembled over the past two years warrants such an intensive campaign. The funds raised in our recent private placing mean the Company is fully funded to complete all of this work. Currently, drilling has just begun in Morocco and is ongoing in Egypt and Tunisia.
OPERATIONS
In Morocco the 3D seismic study on the Sebou area has been completed and the results processed and interpreted. In excess of 80 anomalies each of which has the potential to be a gas producer have been identified and mapped. A back to back six well drilling programme has just started to test the first batch of these prospects. Each well is expected to take 4-5 weeks to complete including mobilisation, drilling, testing and demobilisation. Should the drilling discover commercial gas fields the Company has already purchased three completion strings to assist in bringing these wells into production without delay.
A landmark event for Circle has also just occurred in Morocco with the commencement of production from the ONZ4 well. Circle has a 60% interest in this well and its share of production will provide the Company with its first revenue from exploration and development activities. Circle expects that through its drilling programmes over the next two years the production base will expand rapidly in the Rharb Basin with the gas produced being sold locally where there is a significant and growing market.
In Tunisia the drilling of the side-track of the Zita 1 well was suspended in June to allow the drilling of a commitment well on the Grombalia permit in the north of the country and to complete further geological and geophysical studies in the Ras Marmour area. Following rig maintenance and the receipt of the necessary government approvals the rig began drilling the Serdouk prospect. Once the Serdouk well is completed the partners may drill a second well in the Grombalia permit and then intend to return to the Zita prospect to conduct further evaluation there.
In Egypt the drilling on the Al-Amir SE 1 well site on the NW Gemsa permit is nearing completion and results are expected shortly.
In Oman the Ministry of Oil and Gas has given approval to carry out a large 3D seismic study over part of Block 49 to assess the potential prospectivity of the proposed Ghudun Salt Basin. This is thought to be a direct analogy or continuation of the nearby South Oman Salt Basin, a proven oil province with very good production. The 3D study should begin later this year and will cover an area of approximately 900 sq km. We are currently having discussions with a number of interested parties on the possibility of a farm-in to our offshore Block 52.
Following protracted negotiations, the Company recently announced that a farm-in agreement had been signed on our Namibian Owambo Basin licence with Petroholland Limited, a Dutch company, operating out of Bahrain. Petroholland is taking a 70% stake in the licence in return for which it has agreed to pay Circle US$15 million in cash and pay all of the costs associated with Circle's residual 20% share in the licence through to production.
FINANCIAL
In order to fund the very aggressive and extensive exploration programme planned for the next 18-24 months Circle recently concluded a £33 million equity funding as announced on 5 September 2008. The principal subscribers to the funding were Libya Oil Holdings Limited ("LOH"), a subsidiary of Libya Africa Investment Portfolio, and Kaupthing Bank from Iceland. LOH now hold a 29.6% interest in Circle and Kaupthing have a 15.6% holding.
The Group reports a loss of US$2.15 million for the period (1H 2007: US$1.23 million). The increased loss is mainly due to net financing costs associated with the US$30 million convertible loan which was drawn down in July 2007. The Group remains well funded with cash balances of US$12.25 million at 30 June 2008 which excludes the £33 million proceeds from the equity funding noted above.
In order to increase our profile within the financial and investment community we have appointed Fox-Davies Capital as our second London broker. The appointment of Fox-Davies as joint broker is coupled to the welcome expansion of Collins Stewart into Ireland and their appointment of a respected in-house senior oil analyst.
BOARD
As announced on 19 September 2008 John McKeon, a founding director of Circle, has decided to step down from the Board to pursue his other diverse interests. I, together with all the other Board members, would like to thank him for his very substantial contribution to the Company since its inception and wish him every success in his future undertakings.
OUTLOOK
As can be seen from the outline of the Company's activities, it has indeed been a very busy period for the team. With Circle now involved in drilling in three countries simultaneously the workload continues to expand. However, the Company remains focused on attaining significant production in the short to medium term and given the financial support of our new investors this can only be seen as a full endorsement of the Company's portfolio and exploration strategy.
I would like to thank all our shareholders for their support and my fellow directors and the Circle team in all of our areas of interest for their contribution over the period. I believe that the initial production from Morocco is but a tiny foretaste of what is to come as our exploration and development programme and strategy unfolds over the next few years.
Thomas Anderson,
Chairman of the Board
26 September 2008
For further information contact:
Circle Oil plc (+44 20 7638 9571)
David Hough, CEO
Collins Stewart Europe Limited (+44 20 7523 8350)
Adrian Hadden
James Cassley
Fox-Davies Capital (+44 207 936 5230)
Richard Hail
Citigate Dewe Rogerson (+44 20 7638 9571)
Martin Jackson
George Cazenove
Notes to Editors
Circle Oil Plc
Circle Oil Plc (AIM: COP) is an international oil & gas exploration and development Company with an expanding portfolio of assets in Morocco, Tunisia, Oman, Egypt and Namibia with a combination of low-risk near-term production and significant exploration upside potential. The Company listed on AIM in October 2004.
Internationally, the Company has continued to expand its portfolio over the past 2 years and now has assets in the Rharb Basin, Morocco; the Ras Mamour Permit in southern Tunisia; the Mahdia Permit offshore Tunisia; the Grombalia Permit in northern Tunisia; the Zeit Bay area of Egypt and the Owambo Basin, Namibia. Circle also has the largest licence holding of any Company in Oman. In addition to its highly prospective Block 52 offshore, the Company also has an ongoing exploration program in Block 49 onshore.
The Company's strategy is to locate and secure additional licenses in prospective hydrocarbon provinces and through targeted investment programmes, monetise the value in those assets for the benefit of shareholders. This could be achieved through farm-outs to selected partners who would then invest in and continue the development of the asset into production, or Circle may itself opt to use its own expertise to appraise reserves and bring assets into production, generating sustained cash flow for further investment.
Further information on Circle Oil is available on its website - www.circleoil.net
Circle Oil PLC
CONDENSED CONSOLIDATED INCOME STATEMENT
FOR THE SIX MONTHS ENDED 30 JUNE 2008 - UNAUDITED
| Notes | For the six months ended 30 June 2008 | For the six months ended 30 June 2007 | For the year ended 31 December 2007 | |||
| US$000 | US$000 | US$000 | ||||
| Turnover | - | - | - | |||
| Administrative expenses | (1,647) | (1,535) | (3,185) | |||
| Share option credit/(expense) | 2 | 73 | (158) | (226) | ||
| Exploration costs write-off | - | - | (530) | |||
| Foreign exchange (loss)/gain | (23) | 184 | 187 | |||
| Operating loss - continuing activities | (1,597) | (1,509) | (3,754) | |||
| Finance revenue | 700 | 277 | 2,945 | |||
| Finance costs | (1,257) | - | (1,913) | |||
| Loss before taxation | (2,154) | (1,232) | (2,722) | |||
| Taxation | - | - | (13) | |||
| Loss for the financial period | (2,154) | (1,232) | (2,735) | |||
| Basic and diluted loss per share | 3 | 1.32c | 0.76c | 1.68c | ||
Circle Oil PLC
CONDENSED CONSOLIDATED BALANCE SHEET AT 30 JUNE 2008 - UNAUDITED
| Notes | 30 June 2008 | 30 June 2007 | 31 December 2007 | |||
| US$000 | US$000 | US$000 | ||||
| Assets Non-current assets | ||||||
| Intangible assets | 4 | 39,361 | 14,505 | 26,475 | ||
| Property, plant and equipment | 364 | 211 | 298 | |||
| 39,725 | 14,716 | 26,773 | ||||
| Current assets | ||||||
| Trade and other receivables | 216 | 321 | 237 | |||
| Cash and cash equivalents | 5 | 12,252 | 7,339 | 29,715 | ||
| 12,468 | 7,660 | 29,952 | ||||
| Total assets | 52,193 | 22,376 | 56,725 | |||
| Equity and liabilities | ||||||
| Capital and reserves | ||||||
| Called up share capital | 2,159 | 2,147 | 2,147 | |||
| Share premium | 25,746 | 25,708 | 25,708 | |||
| Other reserves | 2 | 1,837 | 1,903 | 2,049 | ||
| Retained losses | (12,422) | (8,721) | (10,268) | |||
| Total equity | 17,320 | 21,037 | 19,636 | |||
| Non-current liabilities | ||||||
| Convertible loan - debt portion | 17,978 | - | 17,376 | |||
| Derivative financial instruments | 11,242 | - | 11,560 | |||
| 29,220 | - | 28,936 | ||||
| Current liabilities | ||||||
| Trade and other payables | 5,653 | 1,339 | 8,153 | |||
| Total current liabilities | 5,653 | 1,339 | 8,153 | |||
| Total liabilities | 34,873 | 1,339 | 37,089 | |||
| Total equity and liabilities | 52,193 | 22,376 | 56,725 |
Circle Oil PLC
CONDENSED CONSOLIDATED cash flow statement
FOR THE SIX MONTHS ENDED 30 JUNE 2008 - UNAUDITED
| Notes | 30 June 2008 | 30 June 2007 | 31 December 2007 | |||
| US$000 | US$000 | US$000 | ||||
| Net cash used by operations | 6 | (1,717) | (2,142) | (3,987) | ||
| Taxes paid | - | - | (3) | |||
| Net cash outflow from operating activities | (1,717) | (2,142) | (3,990) | |||
| Cash flows from investing activities | ||||||
| Payments to acquire oil & gas interests | (15,225) | (5,027) | (10,573) | |||
| Payments to acquire property, plant and equipment | (39) | (29) | (184) | |||
| Interest received | 416 | 321 | 1,144 | |||
| Net cash used in investing activities | (14,848) | (4,735) | (9,613) | |||
| Cash flows from financing activities | ||||||
| Issue of convertible loan | - | - | 30,000 | |||
| Financing costs | - | - | (349) | |||
| Interest paid | (898) | - | (549) | |||
| Net cash from financing activities | (898) | - | 29,102 | |||
| (Decrease)/increase in cash and cash equivalents | (17,463) | (6,877) | 15,499 | |||
| Cash and cash equivalents at beginning of period | 29,715 | 14,216 | 14,216 | |||
| Cash and cash equivalents at end of period | 12,252 | 7,339 | 29,715 | |||
Circle Oil PLC
consolidated STATEMENT OF CHANGES IN EQUITY
FOR THE SIX MONTHS ENDED 30 JUNE 2008 - UNAUDITED
| Share capital US$000 | Share premium US$000 | Share based payments reserve US$000 | Translation reserve US$000 | Accumulated losses US$000 | ||||||
| At 1 January 2007 | 2,147 | 25,708 | 1,563 | (3) | (7,533) | |||||
| Share based payment | - | - | 340 | - | - | |||||
| Net loss for period | - | - | - | - | (1,185) | |||||
| At 30 June 2007 | 2,147 | 25,708 | 1,903 | (3) | (8,718) | |||||
| Share based payment | - | - | 149 | - | - | |||||
| Net loss for period | - | - | - | - | (1,550) | |||||
| At 1 January 2008 | 2,147 | 25,708 | 2,052 | (3) | (10,268) | |||||
| Issue of shares | 12 | 38 | - | - | - | |||||
| Share based payment | - | - | (212) | - | - | |||||
| Net loss for period | - | - | - | - | (2,154) | |||||
| At June 30 2008 | 2,159 | 25,746 | 1,840 | (3) | (12,422) | |||||
Circle Oil PLC
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED 30 JUNE 2008
1. Basis of preparation
The condensed financial statements have been prepared using accounting policies consistent with International Financial Reporting Standards and in accordance with International Accounting Standard (IAS) 34 Interim Financial Reporting.
The accounting policies used in these interim financial statements are consistent with those used in the most recent annual audited financial statements.
2. Share option credit
The fair value of employee share options is recognised as an employee expense in the income statement (share option expense) and a corresponding reserve set up in balance sheet (share option reserves). The associated expense is amortised over the vesting period of the share options. For the six months to 30 June 2008 a credit of US$73,000 arose (1H 2007: US$158,000 charge) as a result of certain options lapsing during the period.
3. Basic and diluted loss per share
The calculation of basic loss per share attributable to the ordinary equity holders is based on the following data:
| | 30 June 2008 | | 30 June 2007 | | 31 December 2007 |
| | US$000 | | US$000 | | US$000 |
| | | | | | |
| Loss for period attributable to equity holders of the parent | (2,154) | | (1,232) | | (2,735) |
| | | | | | |
| | ‘000 | | ‘000 | | ‘000 |
| Weighted average number of ordinary shares for the purposes of basic earnings per share | 163,200 | | 162,697 | | 162,697 |
| | | | | | |
As all of the Group's potential ordinary shares were anti-dilutive for the period ended 30 June 2008 the diluted loss per share is not applicable.
Circle Oil PLC
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED 30 JUNE 2008
4. Intangible assets
The movement on intangible assets which relate to oil and gas interests during the period was:
| | 30 June 2008 | | 30 June 2007 | | 31 December 2007 |
| | US$000 | | US$000 | | US$000 |
| Cost: | | | | | |
| At 1 January | 26,475 | | 9,296 | | 9,296 |
| Additions | 12,886 | | 5,209 | | 17,709 |
| Amounts written-off | - | | - | | (530) |
| | | | | | |
| At 30 June/31 December | 39,361 | | 14,505 | | 26,475 |
| | 30 June 2008 | | 30 June 2007 | | 31 December 2007 |
| By geographical area: | US$000 | | US$000 | | US$000 |
| | | | | | |
| Morocco | 16,033 | | 1,833 | | 9,587 |
| Oman | 7,250 | | 5,840 | | 6,901 |
| Tunisia | 5,852 | | 2,736 | | 5,310 |
| Egypt | 5,663 | | - | | - |
| Namibia | 4,489 | | 3,796 | | 4,544 |
| Other | 74 | | 300 | | 133 |
| | | | | | |
| At 30 June/31 December | 39,361 | | 14,505 | | 26,475 |
5. Cash at bank
| | | At 1 January 2008 | | Cash Outflow | | At 30 June 2008 |
| | | US$000 | | US$000 | | US$000 |
| | | | | | | |
| Cash at bank | | 29,715 | | (17,463) | | 12,252 |
The cash at bank at 30 June 2008 includes $2,488,000 in restricted cash (30 June 2007: $2,344,000) relating to bank guarantees issued in respect of the completion of certain work programs.
Circle Oil PLC
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED 30 JUNE 2008
6. Reconciliation of operating loss to net cash used by operations
| | | 30 June 2008 | | 30 June 2007 | | 31 December 2007 |
| | | US$000 | | US$000 | | US$000 |
| Operating loss | | (1,597) | | (1,509) | | (3,754) |
| Decrease in creditors | | (121) | | (849) | | (1,186) |
| (Increase)/decrease in debtors | | (13) | | (40) | | 77 |
| Exploration costs written off | | - | | - | | 530 |
| Exchange translation movement | | - | | 47 | | - |
| Share option (credit)/expense | | (73) | | 158 | | 120 |
| Depreciation | | 87 | | 51 | | 226 |
| | | | | | | |
| Net cash used by operations | | (1,717) | | (2,142) | | (3,987) |
7. Post balance sheet events
On 5 September 2008, the Company announced the successful placing of 173,684,211 new ordinary shares to a number of new investors for gross proceeds of £33 million.
On 9 September 2008, the Company announced the signing of a farm-out agreement on its Owambo Basin licence in Northern Namibia with Petroholland Ltd., whereby Circle will receive US$15 million for a 70% interest in the licence.
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, 6 Lower Mallow St., Limerick, Ireland or by download from the Company's web-site at www.circleoil.net