Circle Oil Plc Regulatory News (COP)

23 Sep 2009 07:00



23 September 2009

CIRCLE OIL PLC

("Circle" or the "Company")

2009 INTERIM RESULTS

Circle Oil Plc (AIM: COP), the international oil and gas exploration, development and production company, is pleased to announce its results for the six month period ended 30 June 2009.

Highlights

Morocco

- Completed six well drilling programme in Morocco with discoveries in five wells and log and pressure

sampling indicating likely commercial gas in the sixth well which is yet to be tested.

 

- Gas well ONZ-6 brought into production joining ONZ-4 with combined 2-2.5MMscfd currently being

produced from both.

Egypt

Drilling continues on NW Gemsa permit with five commercial wells completed since drilling began in mid 2008. A 

sixth well is presently planned to be tested.

 

- Production commenced in Al-Amir field from two wells at 2,300 bopd, and has since almost doubled to

approximately 4,500 bopd in 3rd Quarter 2009.

 

- 500,000 barrels of 41oAPI oil have been produced from NW Gemsa permit by mid-September 2009.

Finance

 

- Raised c.£16.5 million (c.US$27.2 million) in secondary placing with broker Fox Davies Capital.

 

 

Thomas Anderson, Chairman of Circle, commented:

"I am delighted with the progress of the Company during this period. Our daily production levels, particularly in Egypt, are building up and we are working hard to bring the next four gas wells in Morocco on-stream which should result in a healthy increase in revenues. 

There is no doubt that the Company has been transformed over the past 12 months by our extraordinary success rate with the drill bit and our ability to bring discoveries into production quickly. I believe that we can look forward to further success in Morocco and Egypt and I am also confident that we can add significantly to our growth with further drilling success both onshore and offshore in Tunisia and from proving up our blocks in Oman."

  

 

CHAIRMAN'S STATEMENT

Dear Shareholder,

This has been a very busy and eventful period for Circle with drilling programmes continuing in both Egypt and Morocco and successful results being achieved in every hole drilled and tested. Two wells remain to be tested as both had good indications of hydrocarbons. Our only disappointment was in Tunisia where the Company drilled its only dry hole.

The period has been truly transformational for the Company. I was confident that we had a number of excellent prospects to drill when I announced in last year's interims that we were embarking on an ambitious 15 well drilling programme through to the end of 2009 on our North African prospects. However the results achieved from these two programmes has been exceptional by any standard and full credit is due to our technical team for this remarkable achievement. 

OPERATIONS

It is our intention to increase our production levels in both Egypt and Morocco as quickly as possible. In Morocco, two fields ONZ-4 and ONZ-6 are already in production and four more are in the process of being tied into existing infrastructure. We have also commenced the planning and engineering processes to build a new larger trunk line to Kenitra, north of Rabat, to deliver gas from both the 2008-09 drilling campaign and any future discoveries. Negotiations are ongoing with a number of gas users in the area to take the increased production and all of the output from the Sebou permit will be sold locally.

In Egypt, Al-Amir SE1 and Al-Amir SE2 went into production in February at a rate of 2,300 bopd. Earlier this month Al-Amir SE3 and Geyad 1 went into production giving a combined average rate from the four wells of 4,300-4,500 bopd. 

Plans are being finalised to bring the heavy oil discovery at Al-Amir 1 into production at an initially projected rate of approximately 500 bopd. 

The appraisal drilling continues and future successful wells will be connected to the infrastructure and brought into production as quickly as possible. 

Looking forward to the next 12 months the Company intends to embark on the next six well programme in Morocco and continue, without a break, our NW Gemsa drilling. We are at the final stage of selecting the contractor for the 3D seismic study in Oman on Block 49 and expect to begin the data acquisition later this year. Processing and interpretation will follow during 2010. 

We are also planning a follow up 2D seismic study on the offshore Block 52 in Oman. We have had some interest from potential joint venture partners in this block and continue to work towards concluding a joint venture agreement on the permit in the medium term. We are also planning a small 2D seismic programme on our onshore blocks in Tunisia to give us better geological control in both permits before commencing further drilling on both areas.

As mentioned in the 2008 Annual Report in June, the Company is examining the possibility of adding value rapidly by investing in development or production projects in the MENA region. We have been examining a number of P1/P2 projects in this area with a view to negotiating farm-ins. These studies are ongoing and we will report on them to shareholders in due course.

FINANCIAL

In order to fund the exploration and development programme outlined above the Company decided to carry out a secondary placing of its shares with institutional investors which closed on 21 August 2009. Despite the tough market conditions, £16.5 million (US$ 27.2 million) gross was raised by placing 61 million shares at a price of 27 pence each. These funds together with increasing revenue from production will be used to pay for our upcoming ambitious programme.

First production revenue recorded in the income statement amounted to US$3.5 million and relates to oil and gas sales in Africa. Cost of sales has been stated at an equivalent amount as sufficient information will not be available until field appraisal is more complete which will then fully quantify the detailed commercial aspects of extracting oil and gas from the Groups exploration and evaluation assets in this area.

The Company remains well funded with cash balances of US$8.8 million at 30 June 2009. This does not include the US$27.2 million proceeds from the share placing noted above. The loss for the period is mainly made up of a non-cash accounting charge in accordance with IAS 39 Financial Instruments: Recognition and Measurement, relating to the conversion rights attaching to the convertible loan.

OUTLOOK

In summary, I am delighted with the progress of the Company during this period. Our daily production levels, particularly in Egypt, are building up and we are working hard to bring the next four gas wells in Morocco on-stream which should result in a healthy increase in revenues from there. 

There is no doubt that the Company has been transformed over the past year by our impressive success rate with the drill bit and our ability to bring discoveries into production quickly. I believe that we can look forward to further success in Morocco and Egypt and I am also confident that we can add significantly to our growth by further drilling success both onshore and offshore in Tunisia and from proving up our blocks in Oman.

I would like to thank all our shareholders for their support, my fellow directors and the Circle team in each of our areas of interest for their contribution and commitment over the period.

Thomas Anderson

Chairman 

22 September 2009

Glossary
API:	American Petroleum Institute density scale
Bopd:	Barrels of oil per day
MMscfd:	Millions standard cubic feet per day
MENA:	Middle East /North Africa
P1 projects:	Projects with proven hydrocarbon reserves claiming to have a reasonable certainty (normally 90% confidence) of being recoverable
P2 projects:	Projects with proven and probable hydrocarbon reserves, claiming a 50% confidence level of being recoverable

Circle Oil PLC

CONDENSED CONSOLIDATED INCOME STATEMENT

FOR THE SIX MONTHS ENDED 30 JUNE 2009 - UNAUDITED

	Notes	For the six months ended 30 June 2009		For the six months ended 30 June 2008		For the year ended 31 December 2008
		US$000		US$000		US$000
Sales revenue	5	3,512		-		-
Cost of sales	4	(3,512)		-		-
Gross profit		-		-		-
Administrative expenses		(1,313)		(1,647)		(3,006)
Share option (expense)/credit	2	(987)		73		(956)
Pre-licence costs		-		-		(3,479)
Foreign exchange gain/(loss)		1,007		(23)		(8,944)
Operating loss - continuing activities		(1,293)		(1,597)		(16,385)
Finance revenue	7	89		700		8,497
Finance costs	8	(14,720)		(1,257)		(2,795)
Loss before taxation		(15,924)		(2,154)		(10,683)
Taxation		-		-		(29)
Loss for the financial period		(15,924)		(2,154)		(10,712)
Basic and diluted loss per share	3	4.57c		1.32c		4.60c

Circle Oil PLC

CONDENSED CONSOLIDATED BALANCE SHEET AT 30 JUNE 2009 - UNAUDITED

	Notes	30 June 2009		30 June 2008		31 December 2008
		US$000		US$000		US$000
Assets Non-current assets
Exploration and evaluation assets	6	91,147		39,361		65,827
Property, plant and equipment		249		364		310
		91,396		39,725		66,137
Current assets
Trade and other receivables		3,602		216		921
Cash and cash equivalents	9	8,779		12,252		32,670
		12,381		12,468		33,591
Total assets		103,777		52,193		99,728
Equity and liabilities
Capital and reserves
Called up share capital		4,799		2,159		4,799
Share premium		78,393		25,746		78,393
Other reserves	2	4,826		1,837		3,183
Retained losses		(36,545)		(12,422)		(20,621)
Total equity		51,473		17,320		65,754
Non-current liabilities
Convertible loan - debt portion		20,344		17,978		19,261
Derivative financial instruments		17,146		11,242		4,078
		37,490		29,220		23,339
Current liabilities
Trade and other payables		14,814		5,653		10,635
Total current liabilities		14,814		5,653		10,635
Total liabilities		52,304		34,873		33,974
Total equity and liabilities		103,777		52,193		99,728

 Circle Oil PLC

CONDENSED CONSOLIDATED cash flow statement

FOR THE SIX MONTHS ENDED 30 JUNE 2009 - UNAUDITED

	Notes	30 June 2009		30 June 2008		31 December 2008
		US$000		US$000		US$000
Net cash used by operations	10	(4,336)		(1,694)		(3,665)
Taxes paid		-		-		(13)
Net cash outflow from operating activities		(4,336)		(1,694)		(3,678)
Cash flows from investing activities
Payments to acquire oil & gas interests		(20,058)		(15,225)		(34,906)
Payments to acquire property, plant and equipment		(23)		(39)		(187)
Interest received		426		416		690
Net cash used in investing activities		(19,655)		(14,848)		(34,403)
Cash flows from financing activities
Issue of ordinary share capital		-		-		58,077
Financing costs		-		-		(6,261)
Interest paid		(907)		(898)		(1,805)
Net cash from financing activities		(907)		(898)		50,011
(Decrease)/increase in cash and cash equivalents		(24,898)		(17,440)		11,930
Cash and cash equivalents at beginning of period		32,670		29,715		29,715
Effect of foreign exchange rate changes		1,007		(23)		(8,975)
Cash and cash equivalents at end of period		8,779		12,252		32,670

  

Circle Oil PLC

consolidated STATEMENT OF CHANGES IN EQUITY 

FOR THE SIX MONTHS ENDED 30 JUNE 2009 - 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 2008		2,147		25,708		2,052		(3)		(10,268)
Issue of share capital		12		38		-		-		-
Share based payment		-		-		(212)		-		-
Net loss for period		-		-		-		-		(2,154)
At 30 June 2008		2,159		25,746		1,840		(3)		(12,422)
Issue of share capital		2,640		52,647		-		-		-
Share based payment		-		-		1,705		-		-
Reserve transfer		-		-		(359)		-		359
Net loss for period		-		-		-		-		(8,558)
At 31 December 2008		4,799		78,393		3,186		(3)		(20,621)
Issue of share capital		-		-		-		-		-
Share based payment		-		-		1,643		-		-
Net loss for period		-		-		-		-		(15,924)
At 30 June 2009		4,799		78,393		4,829		(3)		(36,545)

 

 Circle Oil PLC

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED 30 JUNE 2009 

1. Basis of preparation

The condensed financial statements have been prepared using accounting policies consistent with International Financial Reporting Standards (IFRS) 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. 

The Group has adopted the following new or revised standards:

IFRS 8 Operating Segments (effective for accounting periods beginning on or after 1 January 2009)

IAS 1 (Revised 2007) Presentation of Financial Statements (effective for accounting periods beginning on or after 1 January 2009)

The adoption of these standards has not led to any changes in the Group's accounting policies.

 

2. Share option expense

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 2009 a charge of US$987,000 arose (1H 2008: US$73,000 credit).

 

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 2009		30 June 2008		31 December 2008
	US$000		US$000		US$000
Loss for period attributable to equity holders of the parent	(15,924)		(2,154)		(10,712)
	'000		'000		'000
Weighted average number of ordinary shares for the purposes of basic earnings per share	348,184		163,199		232,772

As all of the Group's potential ordinary shares were anti-dilutive for the period ended 30 June 2009 the diluted loss per share is not applicable.

 

4. Cost of sales

Sufficient information will not be available until field appraisal is more complete which will then fully quantify the detailed commercial aspects of extracting oil and gas from the Group's exploration and evaluation assets in Egypt and Morocco. Therefore, revenue from these wells has been credited to the income statement with an equivalent amount based on such revenues being charged to cost of sales and credited against exploration and evaluation assets while the detailed commercial and technical information is being determined.

Circle Oil PLC

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED 30 JUNE 2009

 

5. Segmental reporting

Six months to 30 June 2009	Africa		Middle-East		Corporate		Total
	US$000		US$000		US$000		US$000
Sales revenue	3,512		-		-		3,512
Segment result	-		-		-		-
Administration expenses	(889)		(275)		(149)		(1,313)
Operating loss	(889)		(275)		(149)		(1,313)
Share option expense	-		-		(987)		(987)
Finance costs	-		-		(14,720)		(14,720)
Finance revenue	-		-		89		89
Other gains	39		-		968		1,007
Loss before and after tax	(850)		(275)		(14,799)		(15,924)
Total assets	85,714		9,205		8,858		103,777
Total liabilities	(13,395)		(722)		(38,187)		(52,304)

Corporate comprises mainly corporate expenses, cash and other assets and liabilities not directly attributable to an operating segment.

Circle Oil PLC

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED 30 JUNE 2009

 

Six months to 30 June 2008	Africa		Middle-East		Corporate		Total
	US$000		US$000		US$000		US$000
Sales revenue	-		-		-		-
Segment result	-		-		-		-
Administration expenses	(1,222)		(313)		(112)		(1,647)
Operating loss	(1,222)		(313)		(112)		(1,647)
Share option credit	-		-		73		73
Finance costs	-		-		(1,257)		(1,257)
Finance revenue	-		-		700		700
Other losses	(3)		-		(20)		(23)
Loss before and after tax	(1,225)		(313)		(616)		(2,154)
Total assets	32,247		7,275		12,671		52,193
Total liabilities	(3,654)		(745)		(30,474)		(34,873)

Twelve months to 31 December 2008	Africa		Middle-East		Corporate		Total
	US$000		US$000		US$000		US$000
Sales revenue	-		-		-		-
Segment result	-		-		-		-
Administration expenses	(2,094)		(578)		(363)		(3,035)
Operating loss	(2,094)		(578)		(363)		(3,035)
Share option expense	-		-		(956)		(956)
Pre-licence costs	(3,479)		-		-		(3,479)
Finance costs	-		-		(2,795)		(2,795)
Finance revenue	-		-		8,497		8,497
Other gains and (losses)	40		-		(8,984)		(8,944)
Loss before and after tax	(5,533)		(578)		(4,601)		(10,712)
Total assets	58,406		8,255		33,067		99,728
Total liabilities	(9,063)		(745)		(24,166)		(33,974)

Circle Oil PLC

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED 30 JUNE 2009

 

6. Exploration and evaluation assets

The movement on exploration and evaluation assets which relate to oil and gas interests during the period was:

Six months to  30 June 2009		Opening balance US$000		Additions US$000		Depletion US$000		Credits/ transfers US$000		Closing  balance US$000
Africa		57,646		27,844		(3,512)		-		81,978
Middle-East		8,181		988		-		-		9,169
30 June 2009		65,827		28,832		(3,512)		-		91,147

Six months to  30 June 2008		Opening balance US$000		Additions US$000		Depletion US$000		Credits/ transfers US$000		Closing  balance US$000
Africa		19,574		12,669		-		(132)		32,111
Middle-East		6,901		496		-		(147)		7,250
30 June 2008		26,475		13,165		- -		(279)		39,361

Twelve months  to 31 December  2008		Opening balance US$000		Additions US$000		Depletion US$000		Credits/ transfers US$000		Closing  balance US$000
Africa		19,574		38,377		-		(305)		57,646
Middle-East		6,901		1,280		-		-		8,181
31 December 2008		26,475		39,657		-		(305)		65,827

 

Circle Oil PLC

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED 30 JUNE 2009

 

7. Finance revenue

		30 June 2009		30 June 2008		31 December 2008
		US$000		US$000		US$000
Interest receivable		89		382		1,015
Gain on fair value of conversion option		-		184		6,536
Gain on fair value of additional option		-		134		946
		89		700		8,497

 

8. Finance costs

		30 June 2009		30 June 2008		31 December 2008
		US$000		US$000		US$000
Interest payable:
Convertible loan		1,990		1,500		3,690
Capitalised to exploration and evaluation assets		(337)		(243)		(895)
Loss on fair value of conversion option		12,223		-		-
Loss on fair value of additional option		844		-		-
		14,720		1,257		2,795

 

Interest payable relating to the convertible loan includes interest paid of US$907,000 (30 June 2008: US$885,000) and an effective interest expense of US$1,055,000 (30 June 2008: US$587,000) plus amortisation of transaction costs of US$28,000 (30 June 2008: US$28,000).

The loss recorded on both the conversion option and the additional option (relating to the convertible loan) arose mainly as a result of the increase in the Company share price from £0.13 at 31 December 2008 to £0.31 at 30 June 2009. 

9. Cash at bank

 

		At 1 January 2009		Cash Outflow		At 30 June 2009
		US$000		US$000		US$000
Cash at bank		32,670		(23,891)		8,779

 

 

The cash at bank at 30 June 2009 includes $1,302,000 in restricted cash (30 June 2008: $2,488,000) 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 2009

 

10. Reconciliation of operating loss to net cash used by operations

		30 June 2009		30 June 2008		31 December 2008
		US$000		US$000		US$000
Operating loss		(1,293)		(1,597)		(16,385)
Decrease in creditors		(84)		(121)		(490)
Increase in debtors		(3,023)		(13)		(375)
Foreign exchange (gain)/loss		(1,007)		23		8,975
Pre-licence costs		-		-		3,479
Share option expense/(credit)		987		(73)		956
Depreciation		84		87		175
Net cash used by operations		(4,336)		(1,694)		(3,665)

 

11. Post balance sheet events

On 21 August 2009, the Company announced the successful placing of 61,152,776 new ordinary shares to a number of institutional investors for gross proceeds of £16.5 million (US$27.2 million).

 

Copies of the Interim Report are available by download from the Company's web-site at www.circleoil.net

For further information contact:

Circle Oil Plc (+44 20 7638 9571)

David Hough, CEO

Collins Stewart Europe Limited (+44 20 7523 8350)

Adrian Hadden / Adam Cowen

Fox-Davies Capital (+44 20 7936 5230)

Daniel Fox-Davies

Citigate Dewe Rogerson (+44 20 7638 9571)

Martin Jackson / George Cazenove

Notes to Editors:

ENDIR ILFVTALIFFIA