DES.L Regulatory News (DES)

25 Sep 2006 07:01

Desire Petroleum PLC25 September 2006 For immediate release 25 September 2006 Desire Petroleum plc ("Desire" or "the Company") Interim Results For the six month period ended 30 June 2006 CHAIRMAN'S STATEMENT Dear Shareholder, In my Chairman's Statement in the Company's Annual Report for the year ended 31December 2005, I informed shareholders of your Board's new strategy aimed atidentifying potential farm-in partners with access to drilling rigs suitable forresuming drilling in Tranches C and D in the North Falkland Basin. This strategyis now well under way and we have contracted Tristone Capital Limited, aninvestment bank specialising in the oil and gas industry, to help Desire widenthe search for a suitable partner. Although no agreement has yet been reached,discussions with several potential partners are continuing. These discussionsare complex and take time, especially as all potential partners wish toundertake their own detailed interpretation of the data. Due to the continuing high oil price, rig availability has not improved in thelast six months. It is reported that there are currently ninety six new rigsunder construction and, as these enter service, the current tightness in the rigmarket is likely to improve. However, your Board believes that the Company'sstrategy of seeking potential partners with rig availability is the only onelikely to result in an early resumption of drilling. The high oil price does, ofcourse, have the beneficial effect of increasing the value of any discovery madein Tranches C and D and the Company has recently commissioned a new study of theeconomics of such a discovery using both current oil prices and Industry costs.This study has demonstrated that, using conservative estimates, a field with a30-40 million barrel recoverable reserve will be economic and that, at US$ 50per barrel, a 200 million barrel field would be worth c. US$ 1.7 billionundeveloped and a 400 million barrel field would be worth c. US$ 4.0 billionundeveloped. Apart from the lack of a rig, all of the most important steps to resume drillingare now in place. The Falkland Islands Government has approved the EnvironmentalImpact Assessment, subject to the submission of an addendum once the rig detailsare known. The EIA was prepared by RPS Energy, one of the leading environmentalconsultancies in Europe, who conducted an assessment of the likely environmentalimpact of a three well drilling programme in Tranches C and D. They identifiedmeasures necessary to mitigate the potential impacts and concluded that withthese in place the proposed operations could be undertaken without significantimpact on the environment. All of the wellheads and tubulars required for theproposed drilling programme are expected to be delivered before the end of theyear. As soon as a rig is in place and approved by the Falkland IslandsGovernment there should be no obstacle to an immediate resumption in drilling.There have been significant developments relating to Desire's other tranches inthe North Falkland Basin. On 28 June 2006, Rockhopper Exploration plc announcedthe preliminary results of two Controlled Source Electromagnetic (CSEM) surveys(commonly known as sea-bed logging) over their licences PLO23 and PLO24 parts ofwhich extended into Desire's Tranches I and L. According to the Rockhopper announcement: "the preliminary results of bothsurveys have indicated the presence of discreet resistors in the area of targetswhich, when combined with the existing seismic data, could prove to be apositive indicator of hydrocarbons." The northernmost survey covered a prospectwhich extends into Tranche I and, in general, the survey results, which arestill being analysed, may enhance the prospectivity of all of the southernextension of the North Falkland Basin including Tranches I and L. Shareholderswho may be interested in some of the latest thinking on the geology of the NorthFalkland Basin are referred to the Desire Website (www.desireplc.co.uk) on whichthe full text of a recent paper published in The Journal of Petroleum Geologyentitled "Exploring for fan and delta sandstones in the offshore FalklandBasins", is reproduced. The loss after tax for the half-year ended 30 June 2006 was £1,684,000, almostentirely due to currency exchange losses. Most of the Company's funds are heldin dollars, to match anticipated expenditure on future exploration programmes.The strengthening of the pound against the dollar since the year-end has had theeffect of unwinding much of the currency exchange gain made in 2005. In accordance with Financial Reporting Standard 20 (FRS 20), the Company hasrecognised a charge to the income statement representing the fair value ofoutstanding employee share options and other share-based payments. The fairvalue has been calculated using the Black-Scholes valuation model, and thisvalue is charged to the income statement over the relevant vesting periods. Thecharge for the period of £124,000 is included within administrative expenses.Notwithstanding this charge, administrative expenses remain low and continue tobe covered by interest received. Dr Colin B. PhippsChairman For further information, please contact: Desire Petroleum plc 020 7436 0423Ian Duncan, Chief Executive Buchanan Communications 020 7466 5000Ben Willey Group Profit and Loss AccountFor the six months ended 30 June 2006 ---------As restated--------- 6 Months 6 Months Year ended ended ended 30.6.06 30.6.05 31.12.05 £000 £000 £000 Administrative expenses (456) (421) (616) Foreign exchange (loss)/gain (1,626) 984 2,003 -------- -------- ---------- Operating (loss)/profit (2,082) 563 1,387 Interest receivable 566 214 682 -------- -------- ---------- (Loss)/profit on ordinary activities beforetaxation (1,516) 777 2,069 Taxation (168) (47) (185) -------- -------- ---------- (Loss)/profit on ordinary activities aftertaxation retained for the period (1,684) 730 1,884 -------- -------- ---------- (Loss)/earnings per share (pence): Basic (0.76) 0.37 0.90 (Loss)/earnings per share (pence): Diluted n/a 0.35 0.87 Group Balance Sheet As at 30 June 2006 ---------As restated-------- As at As at As at 30.6.06 30.6.05 31.12.05 £000 £000 £000 Fixed assets Tangible assets 7 3 3Intangible assets 6,543 5,863 6,351 -------- -------- --------- 6,550 5,866 6,354 Current assets Debtors 112 163 178Cash at hand and in bank 25,054 25,252 26,642 -------- -------- --------- 25,166 25,415 26,820 Creditors: amounts due within one year (440) (270) (345) -------- -------- ---------Net current assets 24,726 25,145 26,475 -------- -------- ---------Total assets less current liabilities 31,276 31,011 32,829 -------- -------- --------- Capital and reserves Called up share capital 2,215 2,186 2,214Share premium account 45,389 44,781 45,383Merger reserve 13,343 13,343 13,343Profit and loss account (29,671) (29,299) (28,111) -------- -------- --------- 31,276 31,011 32,829 Group Cash Flow StatementFor the six months ended 30 June 2006 ---------As restated---------- 6 Months 6 Months Year ended ended ended 30.6.06 30.6.05 31.12.05 £000 £000 £000 Net cash outflow (301) (440) (656)from operating activities Returns on investment and 529 214 660servicing of finance - Interest received TaxationTaxation paid - - (6) Capital expenditure and financial investmentPurchase of tangible fixed assets (5) - (2)Purchase of intangible fixed assets (192) (355) (843) -------- -------- --------- Net cash inflow/(outflow) before financing 31 (581) (847) FinancingIssue of share capital (net of expenses) 7 24,390 25,020 -------- -------- --------- Increase in cash in period 38 23,809 24,173 Foreign exchange (loss)/gain (1,626) 984 2,003 -------- -------- --------- Movement in net cash (1,588) 24,793 26,176 -------- -------- --------- ---------As restated--------- Reconciliation of operating (loss)/profit to 6 Months 6 Months Yearnet cash outflow from operating activities ended ended ended 30.6.06 30.6.05 31.12.05 £000 £000 £000 Operating (loss)/profit (2,082) 563 1,387Exchange differences 1,626 (984) (2,002)Decrease/(increase) in debtors 103 (122) (115)Decrease/(increase) in creditors (73) 94 30Charge for depreciation 1 - 2Share based payment charge 124 9 42 -------- -------- ---------Net cash outflow from operating activities (301) (440) (656) Notes to the Interim Financial Statements For the six months ended 30 June 2006 1. Basis of preparation The interim financial information has been prepared on the basis of theaccounting policies set out in the accounts for the year ended 31 December 2005with the exception of share based payments set out in note 2. The interimfinancial information is unaudited but has been reviewed by the Auditors andtheir report is set out on page 8. The financial information does not constitutestatutory accounts as defined by section 240 of the Companies Act 1985. Fullaccounts of the company for the year ended 31 December 2005 on which theAuditors gave an unqualified report, have been delivered to the Registrar ofCompanies. 2. Share based payments During the period the group has adopted FRS 20 and restated comparativesaccordingly. The fair value of shares/options granted is recognised as anemployee expense with a corresponding increase in equity. The fair value ismeasured at the grant date and spread over the period during which the employeebecame unconditionally entitled to shares/options. In accordance with thetransitional provision of FRS 20 no expense is recorded in respect of grantsmade prior to 27 November 2002 or vested by 1 January 2006 Operating profits have been reduced as follows: 6 Months 6 Months Year ended ended ended 30.6.06 30.6.05 31.12.05 £000 £000 £000 Share based payment charge 124 9 42------------------ -------- -------- --------- Notes to the Interim Financial Statements For the six months ended 30 June 2006 3. Earnings per share The calculation of basic earnings per share is based upon the (loss)/profit forthe period and the weighted average number of 221,439,812 (2005 - 197,265,075)shares in issue during the period. The diluted earnings per share is based uponthe (loss)/profit for the period and the number of shares in issue as follows: 6 Months 6 Months Year ended ended ended 30.6.06 30.6.05 31.12.05 thousands thousands thousands Weighted - average number of shares 221,440 197,265 208,453 Dilution: Share options in issue n/a 9,307 7,088 -------- -------- --------- 221,440 206,572 215,541 -------- -------- --------- When the group reports a loss for the period then, in accordance with FinancialReporting Standard 14, the share options are not considered dilutive. 4. Taxation Taxation comprises a provision for taxation 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,Worcestershire WR13 5NZ Auditor's Review Desire Petroleum PLC We have been instructed by the Company to review the financial information forthe six months ended 30 June 2006 which comprises the profit and loss account,the balance sheet, the cash flow statement and the related notes. We have readthe other information contained in the interim report and considered whether itcontains any apparent mis-statements or material inconsistencies with thefinancial information. Directors' responsibilities The interim report, including the financial information contained therein, isthe responsibility of, and has been approved by, the Directors. The Directorsare responsible for preparing the interim report in accordance with the ListingRules of the Financial Services Authority which require that the accountingpolicies and presentation applied to the interim figures should be consistentwith those applied in preparing the preceding annual accounts except where anychanges, and the reasons for them, are disclosed. Review work performed We conducted our review in accordance with guidance contained in Bulletin 1999/4issued by the Auditing Practices Board for use in the United Kingdom. A reviewconsists principally of making enquiries of Group management and applyinganalytical procedures to the financial information and underlying financial dataand based thereon, assessing whether the accounting policies and presentationhave been consistently applied unless otherwise disclosed. A review excludesaudit procedures such as tests of controls and verification of assets,liabilities and transactions. It is substantially less in scope than an auditperformed in accordance with United Kingdom Auditing Standards and thereforeprovides a lower level of assurance than an audit. Accordingly we do not expressan audit opinion on the financial information. Review conclusion On the basis of our review we are not aware of any material modifications thatshould be made to the financial information as presented for the six monthsended 30 June 2006. UHY Hacker YoungManchester2006 This information is provided by RNS The company news service from the London Stock Exchange