27 Jun 2008 17:19
Circle Oil Plc
( The "Company") and its Subsidiaries ( "Circle" or the "Group")
Preliminary results for the year ended 31 December 2007
| ·; | Raised US$30 million in June by convertible loan from KGL Petroleum of Kuwait |
| ·; | 2D seismic acquisition and processing on Block 52 in Oman |
| ·; | 3D seismic survey and processing on the Sebou permit in Morocco |
| ·; | First exploration well drilled on Ras Marmour permit in Tunisia |
| ·; | Farm-in to NW Gemsa Block in Egypt and Mahdia permit in Tunisia |
| ·; | Progress towards production of ONZ4 gas well in Morocco |
Mr Thomas Anderson, Chairman of Circle Oil, said:
"The Board considers Circle to now be positioned to reap the rewards of its low risk strategy with the well drilling programmes in Morocco, Tunisia and Egypt. If these drilling programmes result in new discoveries then we will expedite the development of these fields to take advantage of the current high oil and gas prices. With production from the ONZ4 gas discovery in Morocco pending, we are entering a new phase in our development and I am looking forward with enthusiasm and confidence to increasing our cash flow from this and other potential discoveries on our acreage over the coming period."
For further information contact:
Circle Oil plc
David Hough, CEO (+44 20 7638 9571)
Citigate Dewe Rogerson (+44 20 7638 9571)
Media enquiries: Martin Jackson
Analyst enquiries: George Cazenove
Collins Stewart Europe Limited (+44 20 7523 8350)
Adrian Hadden
James Cassley
Notes to Editors
Circle Oil
Circle Oil Plc (AIM: COP) is an international oil & gas exploration and development company with a growing portfolio of assets in Egypt, Morocco, Tunisia, Namibia and Oman. The company listed on AIM in October 2004.
Circle has the largest licence holding of any company in Oman. In addition to Block 52, the company also has an ongoing exploration program in onshore Block 49. Worldwide, the company is active in exploration in the Owambo Basin, Namibia; in the Zeit Bay area of Egypt; the Rharb Basin, Morocco; the Mahdia Permit offshore Tunisia; the Ras Mamour Permit in southern Tunisia and Grombalia Permit in northern Tunisia.
The Company's strategy is to locate and secure licences in new 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 long term cash flow for further investment.
www.circleoil.net
CHAIRMAN'S STATEMENT
In line with the new exploration strategy announced in last year's annual report, we have continued to assemble a balanced portfolio of exploration assets, including those the Board considers to be advanced lower risk projects in Morocco, Tunisia and Egypt. Circle is now at the start of an exciting phase in its development, with drilling programmes underway in each of these countries and negotiations ongoing with a number of companies wishing to joint venture our licences in Oman and Namibia.
In Morocco, we have completed the 3D seismic study on our Sebou licence in the Rharb Basin. Analysis of these results has been very encouraging and has outlined many anomalies each of which has the potential for a gas discovery. These anomalies, will be drilled over the coming years, and a rig has been contracted to start this drilling programme in July. Circle is about to sign the agreement with ONHYM, exercising its right to participate in the ONZ4 well, which discovered gas in the Sebou area in August 2006. This well is planned to go into production immediately and will provide our first cash flow. We are confident that further gas discoveries will be made during the current drilling programme and that these fields will be brought into production as quickly as possible to build up our cash flow.
Drilling of the Zita 1 well in the Ras Marmour licence in Tunisia commenced in the last quarter of 2007. Hydrocarbons were encountered in the well, but due to technical reasons and high water saturation levels it was decided to drill a sidetrack well from Zita 1. The sidetrack well also encountered hydrocarbons, but had technical problems similar to the original well, although the water saturation levels were considerably lower. Under the terms of the licence agreement we are obliged to drill a well on the Grombalia licence in northern Tunisia, and to meet licence renewal commitments, this well must start immediately. Accordingly, the rig has moved from the Ras Marmour licence to the Grombalia licence to commence the commitment well. The Zita 1 well, therefore, has been suspended, pending completion of additional technical studies, followed by further drilling on the site at a later date.
Also in Tunisia, Circle has signed a farm-in agreement with Tethys Oil & Mining Inc. to acquire a 70% interest in the offshore Mahdia licence. Historically, this Block was part of a larger licence, and multiple oilfields such as Birsa, Oudna and Tazerka, were discovered in adjacent licences by the previous owners. Multiple structures with the same geology have been identified and mapped in the Mahdia Permit, and a short seismic programme is planned to refine the best drill locations prior to drilling in 2009 onwards. The structures vary in size, but preliminary estimates show that they could host oil fields in the range 10-70 MMBO recoverable.
In Egypt, the Company signed a farm-in agreement with Vegas Oil & Gas to earn a 40% interest in the NW Gemsa block. In adjacent fields the producing reservoirs are the Miocene and Pre-Miocene sandstones, including the Nubia Formation, which is the target of our first well in the block and is predicted to occur at a prognosed depth of about 13,500 feet. The Nubia Sandstone is a known prolific producer in this part of Egypt, and it can be over 1,200 feet thick at this level. The drilling started in mid March and should reach the target depth in July.
In Oman, Circle is planning a 3D seismic study on the southern portion of Block 49. This is scheduled to commence later this year. Negotiations are ongoing with a number of companies regarding a farm-in to this block. Initial evaluation of the 2D seismic results from Block 52 were completed in Houston in March, and these results are being further assessed by our technical staff in Finchampstead, UK.
Circle has significantly strengthened its technical team in Finchampstead by the addition of two senior staff members to run the geology and geophysics departments and manage the increased workload resulting from our drilling and seismic programmes.
During the year Circle raised US$30 million from a convertible loan note with Kuwait based KGL Petroleum Company. We have established a strong working relationship with KGL Petroleum, and together we have been studying a number of prospects in several countries with a view to securing them jointly. Group cash reserves amounted to US$29.7 million at year end.
The financial statements for the Group have for the first time been prepared in accordance with International Financial Reporting Standards (IFRSs), as is now required by both European Union law and AIM stock exchange rules. Full details of the basis of preparation and all other relevant matters are set out in the notes to the financial statements.
The Group changed its functional and presentational currency with effect from 1 January 2007 from the Euro (€) to the US Dollar (US$), as it considers that the US$ is now the currency of the primary economic environment in which it operates. It also believes that by adopting the US$ as its functional and presentational currency, the financial statements will provide a clearer picture of the performance of the Group's business and will minimise the impact of exchange rate fluctuations on reported results.
The Board considers Circle to be positioned now to reap the rewards of its low risk strategy, with the well drilling programmes in Morocco, Tunisia and Egypt. If these drilling programmes result in new discoveries, then we will expedite the development of these fields to take advantage of the current high oil and gas prices. With production from the ONZ4 gas discovery in Morocco pending, we are entering a new phase in our development and I am looking forward with enthusiasm and confidence to increasing our cash flow from this and other potential discoveries on our acreage over the coming period.
Thank you, our shareholders, for your support and our staff for their commitment during the past year.
Thomas Anderson
Chairman
27 June 2008
CONSOLIDATED INCOME STATEMENT
FOR THE YEAR ENDED 31 DECEMBER 2007
| 2007 | 2006 | |||
| US$000 | US$000 | |||
| Turnover | - | - | ||
| Administrative expenses | (3,185) | (3,154) | ||
| Share option expense | (226) | (775) | ||
| Exploration costs written off | (530) | (496) | ||
| Reorganisation costs | - | (154) | ||
| Foreign exchange gain | 187 | 183 | ||
| Operating loss - continuing activities | (3,754) | (4,396) | ||
| Finance revenue | 2,945 | 714 | ||
| Finance costs | (1,913) | - | ||
| Loss before taxation | (2,722) | (3,682) | ||
| Taxation | (13) | - | ||
| Loss for the year | (2,735) | (3,682) | ||
| Basic and diluted loss per share | 1.68c | 2.27c |
CONSOLIDATED BALANCE SHEET AT 31 DECEMBER 2007
| 2007 | 2006 | |||
| US$000 | US$000 | |||
| Assets | ||||
| Non-current assets | ||||
| Intangible assets | 26,475 | 9,296 | ||
| Property, plant and equipment | 298 | 233 | ||
| 26,773 | 9,529 | |||
| Current assets | ||||
| Trade and other receivables | 237 | 325 | ||
| Cash and cash equivalents | 29,715 | 14,216 | ||
| 29,952 | 14,541 | |||
| Total assets | 56,725 | 24,070 | ||
| Equity and liabilities | ||||
| Capital and reserves | ||||
| Called up share capital | 2,147 | 2,147 | ||
| Share premium | 25,708 | 25,708 | ||
| Other reserves | 2,049 | 1,560 | ||
| Retained losses | (10,268) | (7,533) | ||
| Total equity | 19,636 | 21,882 | ||
| Non-current liabilities | ||||
| Convertible loan - debt portion | 17,376 | - | ||
| Derivative financial instruments | 11,560 | - | ||
| Total non-current liabilities | 28,936 | - | ||
| Current liabilities | ||||
| Trade and other payables | 8,153 | 2,188 | ||
| Total current liabilities | 8,153 | 2,188 | ||
| Total liabilities | 38,173 | 2,188 | ||
| Total equity and liabilities | 56,725 | 24,070 | ||
CONSOLIDATED cash flow statement
FOR THE YEAR ENDED 31 DECEMBER 2007
| 2007 | 2006 | |||
| US$000 | US$000 | |||
| Net cash used by operations | (3,987) | (1,300) | ||
| Taxes paid | (3) | - | ||
| Net cash outflow from operating activities | (3,990) | (1,300) | ||
| Cash flows from investing activities | ||||
| Payments to acquire oil & gas interests | (10,573) | (4,819) | ||
| Payments to acquire property, plant and equipment | (184) | (399) | ||
| Interest received | 1,144 | 801 | ||
| Net cash used in investing activities | (9,613) | (4,417) | ||
| Cash flows from financing activities | ||||
| Issue of ordinary share capital | - | 674 | ||
| Issue of convertible loan | 30,000 | - | ||
| Financing costs | (349) | - | ||
| Interest paid | (549) | - | ||
| Net cash from financing activities | 29,102 | 674 | ||
| Increase/(decrease) in cash and cash equivalents | 15,499 | (5,043) | ||
| Cash and cash equivalents at beginning of year | 14,216 | 19,259 | ||
| Cash and cash equivalents at end of year | 29,715 | 14,216 |
NOTES TO THE FINANCIAL STATEMENTS
Basis of preparation
The financial statements have been prepared in accordance with International Financial Reporting Standards (IFRSs) and International Financial Reporting Interpretations Committee (IFRIC) interpretations for the first time. They have also been prepared in accordance with the Companies Acts, 1963 to 2006 and comply with Article 4 of the IAS Regulations.
The financial statements have been prepared on the historical cost basis.
The financial statements in respect of the year ended 31 December 2006 were prepared under Irish GAAP. The comparative figures for the immediately preceding financial year have been restated on a basis consistent with IFRSs.
Basis of consolidation
The consolidated financial statements include the financial statements of the Company and all of its subsidiaries made up to the end of the financial year. Subsidiaries are consolidated in the Group financial statements from the dates on which control over financial and operating policies and decisions is obtained. All intercompany transactions, balances, income and expenses have been eliminated in full on consolidation.
Basic and diluted loss per share
The calculation of the basic loss per share attributable to the ordinary equity holders of the parent is based on the following data:
| 2007 | 2006 | |||
| US$000 | US$000 | |||
| Earnings | ||||
| Loss for the year attributable to equity holders of the parent | (2,735) | (3,682) | ||
| Number of shares | '000 | '000 | ||
| Weighted average number of ordinary shares for the purposes of basic earnings per share | 162,697 | 162,697 | ||
Diluted loss per share is calculated using the weighted average number of ordinary shares assuming the conversion of its potential dilutive equity derivatives outstanding. All of the Group's potential ordinary shares were anti-dilutive for the years ended 31 December 2007 and 2006 respectively. The Group had total potential ordinary shares outstanding of 49,180,951 at 31 December 2007 (2006: 16,543,811).
Dividends
The Directors do not recommend the payment of a dividend in respect of the year ended 31 December 2007 (2006: €Nil).
Availability of Report & Accounts
The 2007 Annual Report will be available on the Company's website (www.circleoil.net) on 30 June 2008 and will then be posted to shareholders.