DES.L Regulatory News (DES)

7 Sep 2007 16:18

Desire Petroleum PLC07 September 2007 For immediate release 7 September 2007 Desire Petroleum plc ("Desire" or "the Company") Interim Results Desire Petroleum plc, (AIM: DES) the oil and gas exploration company whollyfocussed on the North Falkland Basin today announces its Interim Results for thesix months ended 30 June 2007. Highlights •AVO studies significantly de-risk prospects on Tranches C and D •AVO studies significantly de-risk prospects on Tranches I and L •New studies identify major additional prospects •Improvement in rig market forseen For further information please contact: Desire Petroleum plc 020 7436 0423Colin Phipps, ChairmanDr Ian Duncan, Chief Executive Officer Buchanan Communications 020 7466 5000Ben WilleyTim ThompsonBen Romney Chairman's Interim Statement Dear Shareholder, Despite the lack of drilling activity in the North Falkland Basin, the past sixmonths have been positive for the Company, with significant de-risking ofseveral drilling prospects and the addition of further prospects to theinventory. The rig market shows continuing, albeit slow, signs of improvement.New rigs are entering the market and, although rig owners are still seekinglong-term contracts at very high rentals, not all have found employment. Inaddition, oil companies, which have taken long-term contracts, are findingthemselves with spare capacity, often because of a lack of drilling success.Desire, together with the other Falkland's Licencees, has looked at a number ofpotential rigs although none has, as yet, proved suitable. However, this searchprocess is continuing and Desire, in particular, is in a good position to takeadvantage of any break in the rig market. Although the lack of drilling is disappointing, the Company has spent the lastsix months increasing the number of drilling prospects on its Licences and insignificantly de-risking several of its existing prospects by additionalgeological and geophysical studies. There has been continuing interest inDesire's Licences from potential partners which may result in a farminee, in duecourse, if the terms are right. However, your Board does not discount drillingfor the Company's own account should a rig become available which is fundablefrom our own resources. AVO (amplitude variation with offset) studies have been completed on Tranches Cand D with positive results. AVO, a technique now widely used in the oilindustry, has a good record in indicating the presence of oil or gas bearingrocks. Special processing of the seismic data is required to identify AVOeffects and the technique is particularly valuable if the data can be calibratedwith well data. Desire has identified AVO anomalies on two prospects in TranchesC and D at Ann (on 2D seismic) and Orca South (on 3D seismic). In both cases thestrongest AVO anomalies are within the area of structural closure and,significantly, can be correlated with the Aptian Sand in the 14/9-1 well whichhad good oil shows. These anomalies potentially indicate the presence ofhydrocarbons and significantly de-risk these prospects, the recoverable reservepotential of which has been re-evaluated as follows: Most Likely MaximumAnn 202 MMB 432 MMBOrca South 55 MMB 117 MMB(MMB = million barrels of oil) These studies have considerably increased the chance of success in theseprospects which Desire now estimates at 50%. The chance of success being thechance, expressed as a percentage, of a prospect containing hydrocarbons. During the period under review, the opportunity was taken to make use of anavailable vessel to acquire a site survey on Ann and this prospect is now readyto be drilled when a rig becomes available. Although AVO anomalies have not been found associated with the deeper Barremiantargets, such as the Liz prospect, it is probable that an AVO effect may not bewell developed in these older rocks with complex lithologies. In addition,identifying AVO anomalies with confidence in these rocks is made more difficultas it is not possible, on the seismic, to tie this interval to any well data.However, the lack of an AVO anomaly does not preclude the presence ofhydrocarbons. The good results from the studies at the shallower Aptian horizons encouragedthe Company to initiate AVO studies over the prospects in Tranches I and L,which are fairly shallow. In Tranches I and L, AVO anomalies have beenidentified with each of the Dawn, Ruth and Kate prospects, significantlyde-risking them. In addition, on Tranche I, a major new, prospect has beenidentified with a recoverable potential of multi-hundred million barrels of oil.A well on Dawn could be sited to test both Dawn and this new prospective horizon. AVO studies are being completed over Tranche L and early indications arepromising. The results of which will be announced in due course. The results of these new studies, together with previous work, has significantlyincreased the number and quality of the prospects on the Company's Licences,increased the potential reserves beyond 2.5 billion barrels of recoverable oiland underlined your Board's confidence in the outlook for a successful drillingcampaign. The Group results for the six months to 30 June 2007 are the first to bepresented under International Financial Reporting Standards (IFRS). Allcomparative values for the previous year have been restated to align with IFRSrequirements. A reconciliation between comparative values under IFRS and asreported under UK Generally Accepted Accounting Principles (UK GAAP) has beenpublished previously and is available on the Group's website atwww.desireplc.co.uk. The loss for the half-year ended 30 June 2007 was £628,000, largely arising fromforeign currency exchange losses and the non-cash charge for share-basedpayments. The weakening of the dollar against the pound since the year-end, to$2.01:£, produced the exchange losses on the Company's dollar funds, which areheld to match future exploration programmes. With the near universal availability of electronic media, your Board has decidedto take advantage of the provision for posting future Reports on the Internetrather than as hard copy. To this end, a suitable resolution will be put toshareholders at the next Annual General Meeting of the Company. Yours sincerely, Dr Colin B. PhippsChairman GROUP INCOME STATEMENTFOR THE SIX MONTHS ENDED 30 JUNE 2007 6 Months ended 6 Months ended Year ended 30.6.07 30.6.06 31.12.06 £'000 £'000 £'000Administrative expenses (380) (332) (669)Share-based payment expense (136) (124) (263)Foreign exchange loss (476) (1,626) (2,686)---------------- ---------- ------------- -------------Operating loss (992) (2,082) (3,618)Finance income 515 566 1,135---------------- ---------- ------------- -------------Loss before tax (477) (1,516) (2,483)Income tax expense (151) (168) (336)---------------- ---------- ------------- -------------Loss for the period (628) (1,684) (2,819)---------------- ---------- ------------- -------------Loss per share(pence): Basic (0.28) (0.76) (1.27)Loss per share (pence): Diluted N/a N/a N/a---------------- ---------- ------------- ------------- GROUP BALANCE SHEETAS AT 30 JUNE 2007 As at As at As at 30.6.07 30.6.06 31.12.06 £'000 £'000 £'000Non-current assetsIntangible assets 7,146 6,544 6,867Property, plant and equipment 2,294 6 1,474------------- ------------- ------------- ------------- 9,440 6,550 8,341 ------------- ------------- ------------- -------------Current assetsTrade and other receivables 235 112 654Cash and cash equivalents 21,220 25,054 22,812 21,455 25,166 23,466 ------------- ------------- ------------- -------------Total assets 30,895 31,716 31,807------------- ------------- ------------- -------------Current liabilitiesTrade and other payables (254) (241) (903)Income tax payable (487) (199) (336)Bank overdrafts and loans (22) - (40)------------- ------------- ------------- -------------Total liabilities (763) (440) (1,279)------------- ------------- ------------- -------------Net assets 30,132 31,276 30,528------------- ------------- ------------- -------------EQUITYShare capital 2,230 2,215 2,225Share premium 45,718 45,389 45,627Retained earnings (17,816) (16,328) (17,324)------------- ------------- ------------- -------------Total equity 30,132 31,276 30,528------------- ------------- ------------- ------------- GROUP STATEMENT OF CHANGES IN EQUITYFOR THE SIX MONTHS ENDED 30 JUN E 2007 6 Months ended 6 Months ended Year ended 30.6.07 £'000 30.6.06 31.12.06 £'000 £'000Opening balance(and as restated forconversion to IFRS) 30,528 32,829 32,829Loss for the financialperiod (628) (1,684) (2,819)New shares issued 96 7 255Share-based payments 136 124 263------------------- ------------- ----------- ----------Closing balance 30,132 31,276 30,528------------------- ------------- ----------- ---------- GROUP CASH FLOW STATEMENTFOR THE SIX MONTHS ENDED 30 JUNE 2007 6 Months 6 Months Year ended ended ended 30.6.07 30.6.06 31.12.06 £'000 £'000 £'000Net cash from operating activities (216) (294) (1,184) Investing activitiesInterest received 515 529 1,135Purchase of tangible and intangible assets (1,493) (197) (1,383)----------------------- -------------- -------- -------Net cash from/(invested in) investingactivities (978) 332 (248)----------------------- -------------- -------- -------Financing activitiesProceeds on issue of shares 96 7 255----------------------- -------------- -------- -------Net cash from financing activities 96 7 255----------------------- -------------- -------- -------Net (decrease)/increase in cash and cashequivalents (1,098) 45 (1,177)Cash and cash equivalents at the beginningof 22,772 26,635 26,635periodEffect of foreign exchange rate changes (476) (1,626) (2,686)----------------------- -------------- -------- -------Cash and cash equivalents 21,198 25,054 22,772at the end period----------------------- -------------- -------- ------- GROUP CASH FLOW STATEMENTFOR THE SIX MONTHS ENDED 30 JUNE 2007 6 Months 6 Months Year ended ended ended 30.6.07 30.6.06 31.12.06 £'000 £'000 £'000Reconciliation of operating loss tonet cash from operating activitiesOperating loss for the period (992) (2,082) (3,618)Foreign exchange 476 1,626 2,686Depreciation on property plant and equipment 1 1 3Share-based payment expense 136 124 263------------------------- --------- --------- ---------Operating cash flows before movement in workingcapital (379) (331) (666)Decrease/(increase) in receivables 137 103 (288)Increase/(decrease) in payables 26 (66) (31)------------------------- --------- --------- ---------Cash generated from operations (216) (294) (985)Income tax paid - - (199)------------------------- --------- --------- ---------Net cash from operating activities (216) (294) (1,184)------------------------- --------- --------- --------- NOTES TO THE INTERIM FINANCIAL STATEMENTSFOR THE SIX MONTHS ENDED 30 JUNE 2007 1 - Basis of preparation and accounting policies As an AIM-listed company, the Group is required to adopt International FinancialReporting Standards (IFRS) with effect from 1 January 2007. The Group's date oftransition to IFRS was 1 January 2006. The results for the six months to 30 June 2007 represent the Group's firstinterim financial statements prepared in accordance with IFRS. The Group's firstannual report under IFRS will be for the year ended 31 December 2007. A reconciliation between comparative values under IFRS and as reported under UKGenerally Accepted Accounting Principles (UK GAAP) has been published previouslyand is available on the Group's website at www.desireplc.co.uk. The informationprovided also includes details of accounting policies expected to be adopted bythe Group under IFRS, and the exceptions from retrospective application of IFRSthat the Group has applied under IFRS 1 'First Time Adoption of InternationalFinancial Reporting Standards'. The financial information does not constitute statutory accounts as defined bysection 240 of the Companies Act 1985. Full accounts of the company for the yearended 31 December2006 on which the Auditors gave an unqualified report, have been delivered tothe Registrar of Companies.________________________________________________________________________________________________ 2 - Segmental informationBased on risks and returns, the directors consider that the primary reportingformat is by business segment. The directors consider that there is only onebusiness segment being the exploration and production of oil and gas.________________________________________________________________________________________________ 3 - Loss per shareThe calculation of basic earnings per share is based upon the loss for theperiod and the weighted-average number of shares in issue during the period. 6 Months 6 Months Year ended ended ended 30.6.07 30.6.06 31.12.06 thousands thousands thousandsWeighted-average number of shares 222,858 221,440 221,935------------- ------------- ------------- ------------- When the group reports a loss for the year then, in accordance withInternational Accounting Standard 33, the share options are not considereddilutive. 4 - TaxCurrent tax comprises a provision for tax on the interest receivable less anyallowable expenses, and any adjustment for over or under provision in priorperiods.________________________________________________________________________________________________ 5 - Copies of report Copies of this interim statement will be despatched to shareholders and will beavailable to the public at the Registered Office,Mathon Court, Mathon, Malvern,WorcestershireWR13 5NZ.________________________________________________________________________________________________ 6 - Reconciliation of balance sheet 1 January 2007 for the impact of IFRS UK GAAP Adjustment IFRS £'000 £'000 £'000Non-current AssetsIntangible assets 8,331 (1,464) 6,867Property, plant and equipment 10 1,464 1,474------------- ------------- ------------- -------------Other Reserves 13,343 (13,343) -Retained earnings (30,667) 13,343 (17,324)------------- ------------- ------------- ------------- An explanation of these adjustments can be found in the Group's IFRS conversiondocument on the website as highlighted in note 1 INDEPENDENT REVIEW REPORT TODESIRE PETROLEUM P L C Introduction We have reviewed the accompanying balance sheet of Desire Petroleum Plc as of 30June 2007 and the related statements of income, changes in equity and cash flowsfor the six month period then ended, and a summary of significant accountingpolicies and other explanatory notes. Management is responsible for thepreparation and fair presentation of this interim financial information inaccordance with International Financial Reporting Standards. Our responsibilityis to express a conclusion on this interim financial information based on ourreview. Scope of Review We conducted our review in accordance with International Standard on ReviewEngagements 2410, "Review of Interim Financial Information Performed by theIndependent Auditor of the Entity." A review of interim financial informationconsists of making inquiries, primarily of persons responsible for financial andaccounting matters, and applying analytical and other review procedures. Areview is substantially less in scope than an audit conducted in accordance withInternational Standards on Auditing and consequently does not enable us toobtain assurance that we would become aware of all significant matters thatmight be identified in an audit. Accordingly, we do not express an auditopinion. Conclusion Based on our review, nothing has come to our attention that causes us to believethat the accompanying interim financial information does not give a true andfair view of the financial position of the entity as at 30 June 2007, and of itsfinancial performance and its cash flows for the six month period then ended inaccordance with International Financial Reporting Standards as applicable in theUnited Kingdom. UHY Hacker YoungManchester2007 This information is provided by RNS The company news service from the London Stock Exchange