Circle Oil Plc Regulatory News (COP)

28 Jun 2007 07:01

Circle Oil PLC28 June 2007 28 June 2007 CIRCLE OIL PLC (THE "COMPANY") AND ITS SUBSIDIARIES ("CIRCLE" OR THE "GROUP") RESULTS FOR THE YEAR ENDED 31 DECEMBER 2006 MOVING TOWARDS A BALANCED PORTFOLIO Highlights • Acquisition of new licence in Rharb Basin in Morocco • Successful acquisition of over 6,000 km 2D marine seismic offshore Oman Block 52 • Gravity modelling in Oman Block 49 provides further support for salt basin • Farmed in to lower risk, mature exploration projects in two permits in Tunisia • Farm-out process in Namibia and Oman on-going • Committed to an aggressive 18-24 month drilling programme beginning July 2007 • Moroccan Permit 3D seismic awarded to be acquired summer 2007 • Concluded a US$30 million convertible loan agreement with KGL Petroleum in June 2007 Mr Thomas Anderson, Chairman of Circle Oil, said: "It has been an exciting past year for Circle Oil as we move towards owning amore balanced portfolio. Our acquisitions in North Africa and our commitment toan aggressive drilling campaign give the Company the possibility of gainingproduction quickly and cash flow in the short to medium term. Furthermore, in 2007, we have made real progress with our financing byconcluding a US$30 million convertible loan agreement with our partners at KGLPetroleum. In short, we are well set for the future and I look forward toreporting to shareholders later in the year" Enquiries (+44 20 7638 9571): Circle Oil plcDavid Hough, CEO Citigate Dewe RogersonMedia enquiries: Martin Jackson/George CazenoveAnalyst enquiries: Nina Soon Also www.circleoil.net CHAIRMAN'S STATEMENT The last 12 months have been a period of great activity for Circle as theCompany's strategy has shifted towards owning a more balanced portfolio. TheCompany now has large scale exploration acreage in Oman and Namibia, combinedwith the addition of more advanced lower risk, mature exploration projects inTunisia and Morocco. Operations The acquisition of these later stage exploration licences in Morocco, June 2006,and Tunisia, in April 2007, gives Circle the possibility to achieve productionquickly on lower risk, low-cost drilling and development acreage. This shouldlead to the Company generating rising cash flow from operations in the short tomedium term. Circle is committed to an aggressive well drilling campaign in both thesecountries over the next 18-24 months and is already taking the necessary stepsto enable the drilling programme to be carried out on a near continuous basisstarting in July this year with only a break during the winter months. TheCompany is continuing to examine the possibility of acquiring other advancedacreage in Morocco, Tunisia and a number of other countries in North Africa andthe Middle East. Progress on these negotiations will be reported to shareholdersin due course. In Morocco, in the Rharb, it is expected that the gas discovery made by ONHYMlast August should go into production later this year. Discussions are presentlyunderway to finalise Circle's acquisition of this discovery and once these havebeen successfully concluded we should move quickly to get the well intoproduction. The gas from this discovery and any initial discoveries made byCircle in the Rharb can be piped through the existing pipeline network, to besold to local industry. The farming-out process of our large Namibian licence has taken much longer toeffect than originally expected. However, negotiations are ongoing with twointerested groups. On the other hand, the two Omani licences have attractedconsiderable attention, but the Company will not be in a position to concludeany farm-in agreement on the offshore Block 52 until the results of the seismicsurvey shot last winter have been processed and interpreted. The interpretationof the data is expected to be completed in the fourth quarter of 2007 and shouldconsiderably enhance the prospectivity of this area. Our onshore Block 49 has generated most interest, primarily because of reportedsuccessful drilling in an adjacent Block. This report is to be coupled with ourown new internal gravity modelling, which gives further evidence of theexistence of an analogous salt basin within our Block and the possibility of agood "salt stringer" play. Circle has recently secured office accommodation in Rabat and Tunis and is inthe process of building its team in both countries to manage the exploration anddevelopment programmes in each country. Country managers are being appointed inMorocco and Tunisia and a very experienced drilling supervisor will join theteam shortly. The Houston office is being wound-down with its work beingreassigned to our new UK offices in Wokingham, Berkshire where a number ofadditional specialists will be recruited over the coming months. The Houstonstaff have set up their own consultancy company with Circle's cooperation andtheir services are available to Circle should they be needed. Financing Given the level of activity of the work programmes planned for the coming twoyears, I am delighted that the Company has concluded a US$30 million convertibleloan agreement with KGL Petroleum, a substantial Kuwaiti company. The loan has amaturity of five years, is convertible into ordinary Circle shares at £0.25 pershare, and carries a 6% coupon. In addition, KGL has the right to subscribe foran additional 15 million shares at a price of £0.50p per share for a three yearperiod. Once exercised, this option will generate an additional $15 million forCircle. Negotiations with a number of other institutions who may participate inincreasing the financing are ongoing. Once the financing is complete, together with Circle's current cash balances,the Company will have sufficient funds to carry out its planned initial drillingprogramme in Tunisia and Morocco. It will also be able to undertake anyadditional follow-up drilling and bring into production the economic discoveriesdrilled during the programme. The balance of the funds will be used to pay theinitial costs of exploration work on other prospective assets currently beingnegotiated, and subject to the Company's wish and other approvals conduct acomprehensive 3D survey within Block 49 in Oman. Board I would like to take this opportunity to welcome Rafat Rizvi to the Board. Rafathas had a long and successful career, primarily in the banking sector in theMiddle East and Far East, and I am sure that his advice and skills will proveinvaluable as we seek to put in place a longer-term financing programme for ourfuture developments. I am also delighted that Mohammad Sultan, Managing Director of KGL Petroleum,has joined our Board. Having Mohammad on our Board further cements the bondbetween our two companies. He is determined to transform KGL Petroleum into avery substantial oil company within a short period. Circle will be in a positionto assist KGL in this regard by giving KGL significant technical support inproject evaluation, exploration and appraisal in return for KGL's financialsupport for Circle. On larger projects Circle and KGL Petroleum will partnereach other using the combined experience, capabilities and network of bothcompanies for their mutual benefit. Outlook Finally, following the exciting developments of the past year, I am lookingforward with great confidence and expectation to the results of the next twoyears in the growth of Circle Oil. The acquisitions in Tunisia and Moroccoshould move the Company towards its revenue expectations. Block 49 could beanother key to creating real company growth. I would like to thank my fellow directors, staff and consultants for theirefforts and commitments over the past year. Their ongoing hard work is providinga strong base for Circle's rapid growth in the coming years. Thomas AndersonChairman27 June 2007 CONSOLIDATED PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED 31 DECEMBER 2006 2006 2005* •'000 •'000 Turnover - - Administration expenses (2,245) (1,545) Share option expense (587) (178) Exploration costs written off (376) (161) Reorganisation costs (117) - Operating loss (3,325) (1,884) Interest receivable and similar income 541 280 Loss before taxation (2,784) (1,604) Taxation - (3) Loss for the year (2,784) (1,607) Basic loss per share 1.7c 1.1cDiluted loss per share 1.6c 1.0c * As restated for FRS 20: Share-based Payment. CONSOLIDATED BALANCE SHEET AT 31 DECEMBER 2006 2006 2005* •'000 •'000 Fixed assetsOil & gas interests 7,050 3,359Tangible assets 177 60 7,227 3,419 Current assetsDebtors 246 273Cash at bank 10,770 14,589 11,016 14,862 Creditors (Amounts falling due (1,658) (427)within one year) Net current assets 9,358 14,435 Total assets less current liabilities 16,585 17,854 Net assets 16,585 17,854 Capital and reservesCalled up share capital 1,627 1,609Share premium 19,477 18,984Share based payment reserve 1,184 178Profit and loss account (5,703) (2,917) Shareholders' funds 16,585 17,854 * As restated for FRS 20: Share-based Payment. CONSOLIDATED CASHFLOW STATEMENT FOR THE YEAR ENDED 31 DECEMBER 2006 2006 2005 •'000 •'000 Net cash outflow from operating activities (979) (1,822) Returns on investments and servicing of financeInterest received 607 176 Net cash inflow from return on investments and 607 176servicing of finance TaxationFranchise tax - (3) Capital expenditure and financial investmentPayments to acquire oil & gas interests (3,656) (2,777)Payments to acquire tangible fixed assets (302) (66) Total capital expenditure and financial investment (3,958) (2,843) Net cash outflow before use of liquid resources (4,330) (4,492)and financing FinancingIssue of ordinary share capital 511 14,750Share issue expenses - (1,053)Net cash inflow from financing 511 13,697 (Decrease)/increase in cash (3,819) 9,205 CONSOLIDATED STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES FOR THE YEAR ENDED 31 DECEMBER 2006 2006 2005* •'000 •'000 Loss for the year (2,784) (1,607)Exchange translation adjustments (2) (93) Total recognised loss for the year (2,786) (1,700) * As restated for FRS 20: Share-based Payment. NOTES TO THE FINANCIAL STATEMENTS Basis of preparation The consolidated financial statements have been prepared in accordance withgenerally accepted accounting practices under the historical cost convention andcomply with financial reporting standards of the Accounting Standards Board, aspromulgated by the Institute of Chartered Accountants in Ireland. The 2006 Annual Report will be available on the Company's website (www.circleoil.net) on 29 June 2007 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. All intercompany transactions and balances have been eliminated in theirpreparation. Basic and diluted loss per share The calculation of basic loss per share is based on the Group's loss of€2,784,000, which is after taxation, and on the weighted average number ofequity shares in issue during the year of 162,147,063. The effect of optionsgranted is to increase the weighted average number of shares for the calculationof the diluted earnings per share by 16,543,811 to 178,690,874. Dividends The Directors do not recommend the payment of a dividend in respect of the yearended 31 December 2006 (2005: •Nil). This information is provided by RNS The company news service from the London Stock Exchange