Circle Oil Plc Regulatory News (COP)

29 Sep 2006 07:04

Circle Oil PLC29 September 2006 29 September 2006 CIRCLE OIL PLC ("Circle" or the "Company") 2006 Interim Results FURTHER PROGRESS IN KEY AREAS Circle Oil plc (AIM: COP), the international oil & gas exploration, developmentand production company with a growing portfolio of assets in Morocco, Namibia,Oman and Panama, today announced its Interim Results for the period to 30 June2006. Highlights • Acquisition, reprocessing and reinterpreting of available data for eachof Circle's four existing licences in Oman, Namibia and Panama continues.Results to date give considerable encouragement in each of the areas. • The award of Sebou, a small but significant licence in the Rharb Basin,Morocco, is Circle's first success in its new evolving strategy of investing inmore advanced projects. A low risk concession, Sebou, has potential for lowcost, fast track development and production. • Circle also signed an agreement with ONHYM to participate in a twowell programme for the Sebou area which has since resulted in a gas discovery,initial interpretation of which indicates it to be typical of those in theRharb. Testing is ongoing. Mr Thomas Anderson, Chairman of Circle Oil, said: "I am very pleased with the results of the compilation programme on Namibia,Oman and Panama and I'm confident that the aggressive exploration strategy beingpursued on these areas will bear fruit. I am however particularly delighted with the gas discovery currently beingtested in the Sebou area, Morocco. This area is an ideal investment at thisstage of Circle's development as it potentially allows us to build up cash flow,on a long term basis, at a low entry cost whilst we still have the opportunityof bigger discoveries elsewhere." Enquiries (+44 20 7638 9571): Circle Oil plc (+44 20 7638 9571)David Hough, CEO Citigate Dewe Rogerson (+44 20 7638 9571)Media enquiries: Martin Jackson/George CazenoveAnalyst enquiries: Nina Soon Also www.circleoil.com Note to Editors Circle Oil is an international oil and gas exploration company with existinglicence operations in Oman, Namibia, Morocco and Panama. Its strategy is tolocate and secure licences and through targeted investment programmes, monetisethe value in those assets for the benefit of shareholders. This will beachieved through farm-outs to selected partners who can then invest in andcontinue the development of the asset into production. In low risk, near-termprojects Circle may itself opt to use its own expertise to appraise reserves andbring assets into production, generating long term cash flow for furtherinvestment. The company listed on AIM in October 2004. CIRCLE OIL PLC ("Circle" or the "Company") 2006 INTERIM REPORT CHAIRMAN'S STATEMENT Dear Shareholder, I am pleased to report that the period under review has been an interesting andproductive one for Circle. Our focus has been twofold, firstly to advance ourknowledge base on our existing portfolio and get these licences ready for anaggressive exploration programme and secondly to build on our later stageprojects to give the Company more short term potential to balance ourexploration portfolio. The team has also been active in seeking joint venture partners in particularfor our onshore Namibian and offshore Omani acreage. Presentations have beenmade to a substantial number of companies in this regard and this work isongoing. We expect that these discussions will be concluded in the comingmonths. OPERATIONS Regarding our existing licences in onshore and offshore Oman, Namibia andPanama, the Company's Houston based exploration team, led by Jack Keyes and BobLoPiccolo, have been extremely busy acquiring, reprocessing and reinterpretingall available data for each of the four licence areas involved. This task hasbeen painstaking but the results of our efforts so far have given usconsiderable encouragement in each of the areas. Our exploration going forwardwill focus on the results of this new work. A number of very interesting but untested anomalies have been identified andthese will be investigated further. Work has already begun on our onshore Omanand Namibian licences and a seismic survey will be undertaken later this year onthe offshore Oman area and on the Panama area once a suitable seismic ship isavailable locally. In onshore Oman, Fugro Aerosurveys, Johannesburg, S.A. has successfullycompleted a 4,800 kilometre airborne survey of the gravity and magnetic fieldsover our Block 49 licence. Block 49 is on the southern edge of the Rub al KhaliBasin and on the eastern flank of the Ghudun Salt Basin. Circle has theexclusive right to explore for oil and gas on this 15,438 square-kilometreblock. Initial processing of the results is very encouraging and analysis of thegravity and magnetic data will be integrated with ongoing studies to optimisethe design of a 2D seismic survey which is scheduled to commence next year. Thepreliminary analysis already indicates that the eastern edge of a postulatedInfraCambrian salt basin, analogous to the nearby highly-oil productive SouthOman Salt Basin, extends into Block 49. The successful completion of this survey marks the first step in Circle'sexploration effort on its onshore Oman concession. The data fills a criticalgap in our knowledge of the geometry of the Ghudun Basin and will be invaluableto us in designing the forthcoming 2D seismic programme. In Namibia, an environmental impact study is well underway over the initialareas of interest. This study is a necessary precursor to the seismic surveywhich is currently being planned . A 6,000 kilometre seismic survey on our offshore Oman licence Block 52 has beenawarded to TGS Nopec and this survey will commence within the next two months. Discussions are ongoing regarding the carrying out of a regional seismic surveyon our offshore Panama licence. The Company has concluded a joint venture on thePanama licence with Montage Petroleum Limited, a private Australian companycurrently preparing for public floatation. We have farmed out a one thirdinterest in the licence to Montage. ACQUISITIONS As part of our portfolio management we are investing in some more advancedprojects. This programme is being directed out of our London office by Prof.Chris Green and Shamil Daoud, our Middle East manager. They are focusing onprojects in the Middle East and North Africa. Projects have already beenexamined in Morocco, Libya, Tunisia, Syria, Jordan, Yemen and Kurdistan inNorthern Iraq and negotiations are ongoing on several of these projects. Our first success in this regard was the awarding in June of a small butsignificant licence in the Rharb Basin, inland from Rabat in northern Morocco.The Sebou licence covers an area of over 269 square kilometres and is for aperiod of 8 years with the right of automatic conversion to a minimum (butextendable) 25 year exploitation period upon the discovery of exploitablehydrocarbons. Under the terms of the agreement the percentage interest in thepermit is Circle 75% and Office National des Hydrocarbures et des Mines (ONHYM)25%. Circle has agreed to carry out a 3D seismic survey to fully assess and rankthe many prospects already identified in the area before commencing a 6 welldrilling programme in 2007 and 2008 drilling periods. This equates to theminimum work programme for the first 3 years of the permit. This agreement is significant in that it provides Circle with a low risk projectand the potential for low cost, fast track development and production. This areahas a history of production from a number of small shallow-depth natural gasdeposits, most of which have given a very good return on investment. There is anexisting local market with good demand for gas in the region and an establishedpipeline network through the permit area. Success here will provide a long termcontinuing earnings contribution to the Company. Side by side with the awarding of the Sebou licence, Circle signed an agreementwith ONHYM to participate in a two well programme already planned by ONHYM forthe Sebou area. I am very pleased to inform you that this drilling campaign hasresulted in a gas discovery initial interpretation of which indicates it to betypical of those in the area. Well testing by ONHYM is ongoing and furtherannouncements will be made to shareholders once the testing, analysis anddiscussion about these results is complete. Circle is interested in further investment in Morocco. We are currentlyexamining a number of other potential projects there and discussions are ongoingwith a potential local partner. FINANCIAL RESULTS The Group recorded an operating loss before tax of €1,464,398 for the half yearperiod. The increased loss reflects costs associated with additional staffingand related office and travel, foreign exchange losses and the implementationof Financial Reporting Standard 20 Share Based Payment ("FRS 20"). FRS 20requires an estimate of the non-cash costs associated with the issuing of shareoptions to be charged to the profit and loss account. These non-cash costsamounted to €342,000 for the half year. At June 30, the Group had cash balances of €13.3 million (including €1.99million of restricted cash) and no debt. The Group had a working capital surplusof €13.1 million at the end of the reporting period. CONCLUSION I am very pleased with the results of the compilation programme on Namibia, Omanand Panama and am confident that the aggressive exploration strategy beingpursued on these areas will bear fruit. I am, however, particularly delightedwith the gas discovery currently being tested in the Sebou area and the ongoingacquisition programme there and in other countries in North Africa and theMiddle East. The Sebou area is an ideal investment for a Company at our stage ofdevelopment as it potentially allows us to build up cash flow, on a long termbasis, at a low entry cost whilst we still have the opportunity of biggerdiscoveries elsewhere. I would like to thank all our shareholders, my fellow directors and Circleemployees for their contribution over this period. I look forward to successthrough their efforts in the years ahead as we enhance the value of the Company. Thomas AndersonChairman of the Board 29 September 2006 CIRCLE OIL PLCUNAUDITED CONSOLIDATED PROFIT AND LOSS ACCOUNTFOR THE SIX MONTHS ENDED 30 JUNE 2006 Notes For the six months For the six ended 30 June 2006 months ended 30 June 2005 Euro • Euro • TURNOVER - - Administration expenses (1,405,007) (630,552) Share option expense 2 (342,000) - OPERATING LOSS (1,747,007) (630,552) Interest receivable and similar income 282,609 52,961 LOSS BEFORE TAXATION (1,464,398) (577,591) Taxation - - LOSS FOR THE 3 (1,464,398) (577,591) FINANCIAL PERIOD Basic loss per share 4 (0.91c) (0.46c)Diluted loss per share 4 (0.82c) (0.43c) CONSOLIDATED STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSESFOR THE SIX MONTHS ENDED 30 JUNE 2006 For the six months For the six ended 30 June 2006 months ended 30 June 2005 Euro • Euro • Loss For The Financial Period 3 (1,464,398) (577,591)Exchange translations movement 143,324 (31,636) Total recognised loss for the period (1,321,074) (609,227) Effect of share option expense on opening reserves at 1 (177,639)January 2006 Total recognised loss for the period (1,498,713)including opening reserves adjustment CIRCLE OIL PLCUNAUDITED CONSOLIDATED BALANCE SHEET AT 30 JUNE 2006 Notes 30 June 30 June 2006 2005 Euro • Euro • Fixed AssetsOil & gas interests 5 4,100,525 1,373,568Tangible assets 113,561 25,390 4,214,086 1,398,958 Current AssetsDebtors 190,903 208,808Cash at bank 13,304,696 4,222,914 13,495,599 4,431,722 Creditors (Amounts falling due (403,750) (760,479) within one year) Net Current Assets 13,091,849 3,671,243 Total Assets Less Current Liabilities 17,305,935 5,070,201 Net Assets 17,305,935 5,070,201 Capital And ReservesCalled up share capital 1,621,972 1,268,639Share premium 19,335,456 5,627,556Share option reserves 2 586,314 -Profit and loss account 3 (4,237,807) (1,825,994) Shareholders' Funds - All Equity 17,305,935 5,070,201 CIRCLE OIL PLCUNAUDITED CONSOLIDATED CASH FLOW STATEMENTFOR THE SIX MONTHS ENDED 30 JUNE 2006 Notes 30 June 30 June 2006 2005 Euro • Euro • NET CASH OUTFLOW 7 (1,175,647) (458,480) FROM OPERATING ACTIVITIES RETURN ON INVESTMENTS AND SERVICING OF FINANCEInterest received 308,314 52,961 NET CASH OUTFLOW FROM RETURNS ON INVESTMENTS AND (867,333) (405,519)SERVICING OF FINANCE CAPITAL EXPENDITURE AND FINANCIAL INVESTMENTPayments to acquire oil & gas interests (708,515) (736,323)Payments to acquire tangible fixed assets (72,470) (18,941) TOTAL CAPITAL EXPENDITURE AND FINANCIAL INVESTMENT (780,985) (755,264) NET CASH OUTFLOW BEFORE (1,648,318) (1,160,783)USE OF LIQUID RESOURCES AND FINANCING FINANCINGIssue of ordinary share capital 364,357 - NET CASH INFLOW FROM FINANCING 364,357 - DECREASE IN CASH 7 (1,283,961) (1,160,783) CIRCLE OIL PLCNOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTSFOR THE SIX MONTHS ENDED 30 JUNE 2006 1. BASIS OF PREPARATION The interim accounts which are unaudited, have been prepared on a consistentbasis and using the same accounting policies as the audited financial statementsfor the year ended 31 December 2005 with the exception of the adoption ofFinancial Reporting Standard 20 "Share Based Payment" ("FRS 20"), which wasadopted with effect from 1 January 2006. 2. SHARE OPTION EXPENSE During the period the Company adopted FRS 20 which applies to AIM listedcompanies for accounting periods commencing on or after 1 January 2006. The fairvalue of employee share options is recognised as an employee expense in theprofit & loss account (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 period to 30 June 2006this resulted in an additional charge of €342,000. The effect of the standard on opening capital and reserves at 1 January 2006 isto increase the loss brought forward by €177,639 and increase share optionreserves by a similar amount. There is no change to the prior period ended 30June 2005. 3. PROFIT AND LOSS ACCOUNT Group 30 June 2006 30 June 2005 Euro • Euro • Opening Balance (2,739,094) (1,216,767)Effect of share option expense on opening balance (177,639)Loss for the financial period (1,464,398) (577,591)Exchange translations adjustments 143,324 (31,636)Closing Balance (4,237,807) (1,825,994) The opening balance at 1 January 2006 has been restated to take account of shareoption expense accounted for in accordance with FRS 20. See Note 2. 4. BASIC AND DILUTED LOSS PER SHARE The calculation of basic loss per share is based on the Group's loss of€1,464,308 which is after taxation and on the weighted average number of equityshares in issue of 161,685,046 The effect of options granted is to increase the weighted average number ofshares for the calculation of the diluted earnings per share by 16,876,519 to178,561,565. CIRCLE OIL PLCNOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTSFOR THE SIX MONTHS ENDED 30 JUNE 2006 5. OIL & GAS INTERESTS GroupDeferred development expenditure: Euro •Cost:At 31 December 2005 3,359,254Additions 899,560Farm-in payments (158,289) At 30 June 2006 4,100,525 At 30 June 2005 1,373,568 GroupDeferred development expenditure by geographical area: Euro • Namibia 2,180,799Oman 1,635,960Iraq 254,999Panama 17,069Morocco 7,825Other licence areas 3,873 At 30 June 2006 4,100,525 At 30 June 2005 1,373,568 Deferred development expenditure at 30 June 2006 represents exploration andrelated expenditure. The realisation of this intangible asset is dependent onthe development of economic reserves. 6. CASH AT BANK At 1 January Cash Outflow At 30 June 2006 2006 Euro • Euro • Euro • Cash at bank 14,588,657 (1,283,961) 13,304,696 The cash at bank at 30 June 2006 includes €1,995,315 in restricted cash (30 June2005: Nil). CIRCLE OIL PLCNOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTSFOR THE SIX MONTHS ENDED 30 JUNE 2006 7. RECONCILIATION OF OPERATING LOSS TO NET CASHOUTFLOW FROM OPERATING ACTIVITIES 30 June 30 June 2006 2005 Euro • Euro • Operating loss (1,747,007) (630,552)(Decrease)/Increase in creditors (23,106) 325,513Decrease/(Increase) in debtors 90,256 (124,004)Movement in exchange translations 143,324 (31,636)Share option expense 342,000 -Depreciation 18,886 2,199 NET CASH (OUTFLOW) FROM OPERATING ACTIVITIES (1,175,647) (458,480) 8. INTERIM REPORT Copies of the Interim Report will be posted to shareholders shortly. Furthercopies are available from the Company Secretary, Circle Oil plc, 6 Lower MallowSt., Limerick, Ireland or by download from the Company's web-site atwww.circleoil.com This information is provided by RNS The company news service from the London Stock Exchange