22 Jun 2009 07:05
22 June 2009
Circle Oil Plc
(The "Company") and its Subsidiaries ("Circle" or the "Group")
Preliminary results for the year ended 31 December 2008
Circle Oil plc (AIM: COP), the international oil and gas exploration, development and production company, is pleased to announce its results for the year ended 31 December 2008.
Highlights
Over the past year Circle has been transformed, becoming both an explorer and now a producer of oil and gas, with production established in Egypt and Morocco.
12 exploration wells have been completed with commercial hydrocarbons discovered in 9 of these wells, a very impressive hit rate, with 2 wells that intersected hydrocarbons yet to be tested.
Drilling results and development success are a testament to Circle's technical team in the UK and country management teams in each area of interest.
Provisional interpretation of the undrilled southern section of Oman Block 49 indicates possible presence of Ara Salt. A 3D seismic survey is planned later this year; confirmation of Circle's prognosis, of a complementary salt basin and/or connection into the prolific producing South Oman salt basin, could turn the area into a potential top class oil play.
Petroholland farming in to Circle's Owambo Basin License, Namibia and as operator, will undertake a significant exploration programme at no cost to Circle (20% interest).
Successful private placing in September 2008 raised £33 million (US$58 million); the principal participants in this funding were Libya Oil Holdings (28.72% interest in Circle) and Kaupthing Bank HF of Iceland (15.12% interest).
Cash and cash equivalents at 31 December 2008 were US$32.7 million.
Thomas Anderson, Chairman of Circle, said:
"Circle intends to continue its aggressive exploration programme while expanding production levels in Egypt and providing additional pipeline capacity for the increased production capability we now have in Morocco. As our production increases, it is pleasing to note that oil prices are also recovering from their lows and remain quite firm. This favourable background, together with our drilling and development actions, will result in a substantial increase in Circle's revenues.
"I said in Circle's last annual report that I was looking to the future with confidence and enthusiasm. The results for the past 12 months clearly underpin this view and I believe that our team can transform Circle into a substantial oil and gas producer over the coming years."
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:
Circle Oil plc
Circle Oil plc (AIM: COP) is an international oil & gas exploration and production 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 at www.circleoil.net
This information is provided by RNS, the company news service from the London Stock Exchange
Chairman's Statement
The Company has enjoyed tremendous success in the year ended 31 December 2008 as it has moved from being an explorer into a producer of both oil and gas. The decision taken a couple of years ago to focus on the acquisition of lower risk, near production assets in Morocco, Tunisia and Egypt has undoubtedly been proven the correct strategy for Circle, as reflected by the drilling results achieved over the past nine months, particularly in Morocco and Egypt.
The Company announced last autumn that it was commencing a 15 well drilling programme on its North African licences and began with wells being drilled in Morocco and Egypt. To date a total of 12 wells have been completed and commercial hydrocarbons have been discovered in 9 of these wells, a remarkable hit rate by any standards, with 2 wells which intersected hydrocarbons yet to be tested. Great credit is due to our team for this success.
Operations
In Morocco, drilling began with the ONZ-6 well and a discovery was announced in early November 2008 with the well testing gas at a sustained rate of 3.32 MMscfd. Discoveries followed in December in CGD-9, testing gas at 8.86 MMscfd, in February 2009 in KSR-8 which has two zones testing at rates of 12.48 and 6.76 MMscfd, in April in well DRJ-6 with a 4 metre gas sand that has yet to be flow tested and in May in well CGD-10 which tested 3.9 MMscfd. The results of the final well of the 6 well programme KSR-9 have just been announced and this well also discovered gas in two zones which tested at 8.05 MMscfd and 4.66 MMscfd.
On the production front, ONZ-4 which was acquired as part of our original agreement with ONHYM went into production in September 2008 but steady production was not achieved until November due to infrastructural problems in the main pipeline. ONZ-6 is now also in production and the combined rate of flow from both wells is 55-60,000m3/day which is in line with the current requirements of the CMCP paper mill in Kenitra. Negotiations have commenced with a number of other large gas users in the area and we expect to be selling gas to these companies in due course.
As reported in the release of 16 February 2009 on the KSR-8 discovery, the drilling programme was severely hampered from early January 2009 by unprecedented rains and extensive flooding in the Rharb Basin. This flooding did not subside until late March resulting in a considerable amount of standby expense as the drill sites were inaccessible and the tying in of new discoveries into the main trunk line was halted. The drilling has now been completed and tie in plans are back in motion.
In Tunisia, the Serdouk well was drilled on the Grombalia permit. The well confirmed the prospect stratigraphy and structure but no oil was encountered primarily due to the lack of permeability in the formations and it was plugged and abandoned.
In Egypt, we have had tremendous success on the NW Gemsa permit beginning with the announcement in October 2008 of the Al Amir SE-1 ST discovery. This well tested 41 API oil and flowed at rates of 3,388 bopd and 4.25 MMscfd. We then re-entered the Al Amir-1X discovery well, which was originally drilled in 2005, to drill a new sidetrack section of the well to reappraise it as a potential producer. The sidetrack confirmed the upper pay zone but also discovered a new lower pay zone in the Gharib formation dolomites. Both zones contain heavy oil of 16 API.
In January 2009, the Company drilled an appraisal well on the Al Amir SE field, Al Amir SE-2X. This well discovered oil and gas in two pay zones: the upper is 22' thick, the lower 20' thick. The lower zone was tested and flowed at sustained average rates of 5,785 bopd and 7.8 MMscfd. In February 2009 the Company applied to the Egyptian General Petroleum Company for the necessary permits to bring the Al Amir field into production. The development lease was granted and production commenced at 1,450 bopd increasing to 3,000 bopd for a period but now stabilised at 2,000 bopd as a number of receiving tanks and other infrastructural equipment is refurbished at the Gaswarina facility where our oil is piped. Once this work is completed the production levels from Al Amir will be increased.
The drill rig then moved to drill targets Shehab in the centre and Geyad in the northern part of the NW Gemsa licence. The Shehab-1 well encountered significant hydrocarbon bearing sandstones with 22' of net pay in the Kareem formation. It was decided not to test these formations at this location but to do so in a future well in an updip location. The timing of the drilling of this well has yet to be decided. The rig then moved to drill the Geyad-1 well where a new discovery was made in the Kareem formation with 29' of net pay that flow tested 40 API oil at a sustained rate of 2,809 bopd and gas at 3.04 MMscfd. The drill rig has now moved back to Al Amir to drill additional appraisal wells there.
In tandem with our extensive drilling campaign, an offshore seismic study was also carried out on the Mahdia licence in Tunisia, results of which will be used to firm up the locations for the initial well to be drilled on that acreage. Tender documents were also received from eight seismic contractors for the large 3D study proposed for the southern portion of our Block 49 in Oman. These tenders are currently being assessed and it is hoped to award the contract so that the field acquisition can commence in the fourth quarter this year.
I am also very pleased to report that we are soon to be joined in Namibia by a well funded partner, Petroholland, who will carry out a significant exploration programme on our Namibian licence at no cost to Circle Oil for its 20% retained interest in the licence. I wish Petroholland every success in their exploration efforts in this area.
Financial
On the financial front and in order to pay for its aggressive exploration programme Circle successfully carried out a private placing last September which raised £33 million (US$58 million). The principal participants in this funding were Libya Oil Holdings, a wholly owned subsidiary of Libya Africa Investment Portfolio, who now hold a 28.72% interest in Circle and Kaupthing Bank HF of Iceland who hold a 15.12% interest in the Company.
The Group recorded a loss of US$10.7 million in 2008 (US$2.7 for 2007). Pre-licence costs amounting to US$3.5 million in relation to the Mahdia licence were expensed. A foreign exchange loss of US$8.9 million was recorded due to the weakening of sterling versus the US dollar. This position has now been cancelled out with a foreign exchange gain recorded in the early part of 2009. Finance revenue amounted to US$8.5 million which related to a gain of US$7.5 million on derivative financial instruments and interest income of US$1.0 million. Net finance costs for the year amounted to US$2.8 million and comprised actual interest expense of US$1.8 million and effective interest of US$1.9 million (both relating to the convertible loan) less US$0.9 million of interest capitalised to various projects.
Cash and cash equivalents at 31 December 2008 were US$32.7 million. Total assets for the Group at year-end were almost US$100 million.
I would like to take this opportunity to welcome Ramadan Aburawi of Libya Oil Holdings to our Board and I look forward to his contribution over the coming years. I would also like to thank John McKeon, a founding director of Circle who resigned last September to pursue other interests, for his contributions over the years since the Company's formation and I wish him every success in his new ventures.
It was a very significant undertaking for a company of the size of Circle to commit to a 15 well drilling programme, raise the necessary funds and have the success rate that has been achieved to date. These results fully justify the expenditure on the best available technology at our technical office near Reading and are a testament to our technical team in the UK and our country management teams in each of our areas of interest under the guidance of Prof. Chris Green. The Vegas Oil and Gas team in Egypt who run the drilling programme in NW Gemsa are also to be commended.
Outlook
Looking ahead, Circle intends to continue with its aggressive exploration programme while expanding its production levels in Egypt through additional appraisal wells on each of its discoveries there. In Morocco we will tie in our recent discoveries to fill the existing pipeline and lay a new trunk line to Kenitra to take the increased production capacity that we now have. All of these actions will result in a substantial increase in the Company's revenues which in time is planned to cover the cost of the ongoing exploration programme. The Company is also seeking to increase its production base by acquiring development or production assets. A number of such projects in the Middle East /North Africa region are currently being assessed.
As our oil production increases it is pleasing to note that oil prices which almost touched US$150 per barrel last July and then plummeted to the mid US$30's per barrel is now trading in the region of US$70 per barrel and remains quite firm. This is very good news for Circle as its cost of production in the NW Gemsa concession is very low.
I said in last year's annual report that I was looking to the future with confidence and enthusiasm. The results for the past 12 months clearly underpin this view and I believe that our team can transform Circle into a substantial oil and gas producer over the coming years.
Finally I would like to thank you, our shareholders, for your support and all of our staff and the staff of our project partners for their commitment during the past year.
Thomas Anderson
Chairman
Date 18 June 2009
Circle Oil PLC
CONSOLIDATED INCOME STATEMENT
FOR THE YEAR ENDED 31 DECEMBER 2008
| 2008 | 2007 | |||
|
| US$000 | US$000 | ||
| Revenue | - | - | ||
|
|
|
|
|
|
| Administrative expenses | (3,006) | (3,185) | ||
| Share option expense | (956) | (226) | ||
| Pre-licence costs | (3,479) | - | ||
| Exploration costs written-off | - | (530) | ||
| Foreign exchange (loss)/gain | (8,944) | 187 | ||
| Operating loss - continuing activities | (16,385) | (3,754) | ||
| Finance revenue | 8,497 | 2,945 | ||
| Finance costs | (2,795) | (1,913) | ||
| Loss before taxation | (10,683) | (2,722) | ||
| Taxation | (29) | (13) | ||
| Loss for the year | (10,712) | (2,735) | ||
| Basic and diluted loss per share | 4.60c | 1.68c |
Circle Oil PLC
CONSOLIDATED BALANCE SHEET
AT 31 DECEMBER 2008
| 2008 | 2007 | |||
| US$000 | US$000 | |||
| Assets | ||||
| Non-current assets | ||||
| Exploration and evaluation assets | 65,827 | 26,475 | ||
| Property, plant and equipment | 310 | 298 | ||
| 66,137 | 26,773 | |||
| Current assets | ||||
| Trade and other receivables | 921 | 237 | ||
| Cash and cash equivalents | 32,670 | 29,715 | ||
| 33,591 | 29,952 | |||
| Total assets | 99,728 | 56,725 | ||
| Equity and liabilities | ||||
| Capital and reserves | ||||
| Called up share capital | 4,799 | 2,147 | ||
| Share premium | 78,393 | 25,708 | ||
| Other reserves | 3,183 | 2,049 | ||
| Retained losses | (20,621) | (10,268) | ||
| Total equity | 65,754 | 19,636 | ||
| Non-current liabilities | ||||
| Convertible loan - debt portion | 19,261 | 17,376 | ||
| Derivative financial instruments | 4,078 | 11,560 | ||
| Total non-current liabilities | 23,339 | 28,936 | ||
| Current liabilities | ||||
| Trade and other payables | 10,635 | 8,153 | ||
| Total current liabilities | 10,635 | 8,153 | ||
| Total liabilities | 33,974 | 37,089 | ||
| Total equity and liabilities | 99,728 | 56,725 | ||
Circle Oil PLC
CONSOLIDATED cash flow statement
FOR THE YEAR ENDED 31 DECEMBER 2008
| 2008 | 2007 | |||
| US$000 | US$000 | |||
| Operating activities | ||||
| Net cash used by operations | (3,665) | (4,176) | ||
| Taxes paid | (13) | (3) | ||
| Net cash outflow from operating activities | (3,678) | (4,179) | ||
| Cash flows from investing activities | ||||
| Payments to acquire oil & gas interests | (34,906) | (10,573) | ||
| Payments to acquire property, plant and equipment | (187) | (184) | ||
| Interest received | 690 | 1,144 | ||
| Net cash used in investing activities | (34,403) | (9,613) | ||
| Cash flows from financing activities | ||||
| Issue of ordinary share capital | 58,077 | - | ||
| Issue of convertible loan | - | 30,000 | ||
| Financing costs | (6,261) | (349) | ||
| Interest paid | (1,805) | (549) | ||
| Net cash from financing activities | 50,011 | 29,102 | ||
| Increase in cash and cash equivalents | 11,930 | 15,310 | ||
| Cash and cash equivalents at beginning of year | 29,715 | 14,216 | ||
| Effect of foreign exchange rate changes | (8,975) | 189 | ||
| Cash and cash equivalents at end of year | 32,670 | 29,715 |
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). They have also been prepared in accordance with the Companies Acts, 1963 to 2006.
The financial statements have been prepared on the historical cost basis.
The 2008 Annual Report will be available on the Company's website (www.circleoil.net) on
22 June 2009 and will then be posted to shareholders.
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:
| 2008 | 2007 | |||
| US$000 | US$000 | |||
| Earnings | ||||
| Loss for the year attributable to equity holders of the parent | (10,712) | (2,735) | ||
| Number of shares | '000 | '000 | ||
| Weighted average number of ordinary shares for the purposes of basic earnings per share | 232,772 | 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 2008 and 2007 respectively. The Group had total shares and potential ordinary shares outstanding of 100,121,099 at 31 December 2008 (2007: 49,180,951).
Dividends
The Directors do not recommend the payment of a dividend in respect of the year ended 31 December 2008 (2007: €Nil).