Echo Energy Regulatory News (ECHO)

23 Nov 2007 07:01

Independent Resources PLC23 November 2007 Independent Resources plc Final Results for the fifteen month period ended 30 September 2007 Highlights • Partnership discussions at Rivara• Positive results from Fiume Bruna• New prospects mapped at Ksar Hadada, partnership discussions• Loss before taxation: £656,359 (2006: £454,691 for 12 months)• Liquid resources as at 30 September 2007: £2.56 million Chairman's statement In reporting the progress made by Independent Resources plc ("IndependentResources", the "Company" or the "Group") in the 15 month period ended 30September 2007, I would like to begin by relaying some very powerful commentsmade recently by Fulvio Conti, CEO of Enel S.p.A., the Italian power and gascompany. In a presentation made to Italy's Chamber of Deputies on 25 September2007, he reminded them of Italy's extreme and growing dependence on importednatural gas to meet its energy needs. He pointed out, in particular, that inJanuary 2006 all sources of gas supplies (import transportation, nationalproduction and gas from storage) were at their technical limits despitegovernment interventions to limit consumption. He also highlighted thedifficult and time-consuming authorisation process for all energy assets whichwould allow Italy to enjoy a less precarious situation. In addition, hereminded the Members of Parliament that Italy's annual demand for gas isexpected to grow by another 15 billion cubic meters over the nine year periodfollowing the crisis of almost two years ago, which laid bare just howvulnerable Italy's energy infrastructure has become. Our shareholders are already well aware that against this backdrop and with itsplanned underground storage facility ("UGS") at Rivara in the Po Valley,Independent Resources has positioned itself to become a key player in Italy'sgas storage market. We must recognise, however, that the project is not movingas quickly as we would like, despite continued positive momentum withenvironmental clearances. We are having to spend time carefully communicatingto a concerned local population both the benign aspects and the materialbenefits of the planned facility and although we can rely on the national andregional governments to remind everybody what is at stake, we are seeking aboveall to carry the local community with us. In the coming months we believe thatwe will be in a position to provide the guarantees that the local populationjustly demands, fully addressing issues of fundamental public interest. As we announced in June, one key aspect of our approach has been the engagementof Italy's Banca Intesa San Paolo to advise us on negotiations with leadingplayers involved in the gas supply and distribution industry who are activelyseeking a stake in the Rivara project. Our appointment of advisers followedapproaches from major integrated and non-integrated gas majors, who are keen tobecome users and/or operators of a large, high-performance storage asset locatedat the central point of Italy's gas supply system. Many gas operators in Italyare unable to execute a long-term business plan without predictable access tosignificant, low-cost and reliable storage. We are currently reviewing these approaches with our advisers and we haveindicated to interested parties that if the conditions are right, we wouldwelcome the opportunity to form an early-stage strategic partnership. Ourstrategy leads us to favour major integrated gas companies with existing storageassets but these companies also tend to commit more slowly than more aggressivegas consumers and traders. We cannot predict at this stage what will be theoutcome of the process, but will of course keep shareholders informed.Certainly a strategic partner would enable the Company to allocate its ownresources more evenly across all of its projects. We remain confident that Rivara is set to become a vital and reliablecentrepiece for Italy's security of supply. Not only does it sit at thecentral point in the Italian gas system but it is also located at what webelieve will become the hub of the Southern European "gas motorway". It isnoteworthy that our potential strategic partners have agreed with ourpreliminary estimates of the potential of developing a commercial operation atRivara. The world-class turnkey contractors that the Company would expect toengage to develop the project have indicated it could come on stream five yearsfrom the end of the permitting phase. Whilst the Board would aim to reduce thattime, we accept that it is still a responsible estimate at this stage. Further information on Rivara is provided in the Review of Operations below. During the period, the Company also moved forward with its separate coal-bedmethane work at Fiume Bruna near the town of Grosseto on Italy's North-Westerncoast. We can also report good progress in Tunisia, where we are managing theearly stages of an exploration reappraisal for our licence partners at KsarHadada, close to entry points on the Trans-Mediterranean and Greenstream gaspipelines. Fiume Bruna, Italy The past year has seen the successful completion by the Company of the firstcoal-bed methane ("CBM") well on its Fiume Bruna permit in central Italy. Wehave learnt a lot from this well and the information obtained is being put togood use now in the planning of the next wells on the permit. Importantly, thedata has also been used to validate our model of the CBM resource. In January 2007 the Company submitted its application for the necessaryapprovals to carry out this next phase of work. Since then we have beeninteracting with the local, provincial and regional administrations to transforman objectively positive opinion in favour of the project into permittingreality. Beyond the highly attractive volumes of methane that could be produced fromFiume Bruna, its longer term potential to act as storage site for carbon dioxide(CO2) remains of strong interest. This "green" element of the project, a meansof reducing emissions of CO2 and enhancing methane production, has attractedmuch positive interest within the local region. Ksar Hadada, Tunisia The Company maintains a 40% interest in the 7,012 km2 Ksar Hadada explorationpermit, onshore Tunisia. The large volumes of seismic and well data providedby the Tunisian state oil company to the Company and its partners have now beenused to remap this huge area (equivalent to about 32 North Sea blocks). TheCompany has identified an additional prospect to add to the Sidi Toui and Oryxprospects and is encouraged by the potential that is appearing in the AcacusSandstone play which, we understand, is currently proving prolific just over theborder in Libya. I believe the Company and its partners are now stronglypositioned to make highly informed decisions on the next steps for this block.We believe that it is now a good time to hold highly prospective acreage in astable country, as many oil companies find themselves cash rich but with fewopportunities to pursue. The Company and its partners have signalled awillingness to invite additional partners to demonstrate the potential of thisblock. Our objective is to intelligently and prudently exploit the veryextensive opportunities on this block, all of which remain untested. We will bekeeping the market abreast of developments in this area. Grayson NashExecutive Chairman 19 November 2007 Independent Resources plc Review of operations Fifteen month period ended 30 September 2007 During its second full year since incorporation, Independent Resources hascontinued to make considerable progress on each of its three assets, steadilyadvancing their development in order to create a highly focused, distinctive andultimately profitable energy enterprise. Rivara, Italy Shareholders are already aware that our key asset is the proposed Rivara UGSfacility near Bologna in Italy. This is a massive fractured limestone formation with geological characteristicsthat are unusual and potentially of key importance to Italy's energy planners inseveral key ways at a time when the country is facing a growing shortfall in gasdeliverability. Crucially, its fracture characteristics and natural water drive mean it providesthe capability to inject and withdraw natural gas rapidly to match seasonaldemand patterns and take advantage of the associated trading opportunities. Itis also located in a strategically important position, lying close to Italy'sbalancing point on the natural gas "highway" that supplies Europe from NorthAfrica. Taken together, its size, location and unusual geological characteristics meanRivara has the potential to become one of Italy's largest and most valuable gasstorage facilities. Innovative work undertaken by the Company to maximise theenvironmental benefits of Rivara also mean it is set to become one of Italy'smost eco-friendly gas storage projects. Independent Resources submitted its full planning application and accompanyingenvironmental impact assessment ("EIA") for the Rivara development in September2006, following more than a year of detailed preparation and consultation withthe local, regional and national authorities. The EIA is similar in many waysto the UK's planning process and is designed to create public exposure as ameans of ensuring that planned projects are compliant with environmental andregulatory requirements and viable within those parameters. Although this process is inevitably time-consuming, we have explained inprevious statements that the Company takes it very seriously, believing it to bepart of a procedure that is not only necessary, but also that represents a goodand just approach to the concerns of the local communities. Pursuant tosubsequent requests by the Ministry of Environment for substantially more anddetailed additional information to be integrated into the Company's EIA,Independent Resources filed these with the Ministry of Environment in June 2007. Progress has since been delayed because Italy's Ministry of Environment decidedto re-organise the structure and method of its Environmental Impact Studyproceedings and effectively terminated the Ministry's VIA Commission on 24 July2007. The Commission is just now being re-established. Following theCommission's termination, the Company received notification from the Ministry ofEnvironment in early August 2007 that it was not yet possible to reach adecision on the Rivara EIA pending the provision of further information. TheCompany is therefore preparing to submit not only the requested information, butwill also go beyond the scope of the request and deliver a holistic review ofall its submissions to date. As we have mentioned before, the process istime-consuming but a vital part of the life of any meaningful energy assetdevelopment in Italy. The Company will also implement a process that it is intended will enhanceRivara's profitability by generating electricity from the stored natural gaswithout actually burning the gas, before it is distributed for use by consumers.This highly efficient and environmentally friendly technology will use theflow pressure from gas withdrawals to drive turbines that will generateelectricity for use onsite and for transmission to the Italian grid. Inaddition, over the last twelve months the Company's engineers have identifiedways to recover heat from its compression units and transform this intoadditional electrical energy. The Company has been working diligently onincreasing energy efficiency and developing state-of-the-art environmentalimpact mitigation. Continuing our earlier work, further technical studies completed during the yearhave added significantly to our understanding of the reservoir's geological andproduction characteristics. The emphasis has been on enabling the Company todescribe its safety and efficiency characteristics. In particular, theCompany's engineers have been running reservoir simulations to analyseproduction profiles and the site's ability to respond to peak demand periods.One early and interesting outcome of this approach has been the identificationof likely cost savings alongside reductions in our anticipated environmentalimpact. We look forward to the next phase of the project, which will likely beplanned and executed by a leading petroleum services firm as soon as thepermitting phase has been cleared. Fiume Bruna, Italy Following our successful drilling of the first CBM well in Italy we have, overthe last year, completed the analysis of the coals retrieved from the well andof their gas content. The preliminary conclusions from this extensive body ofknowledge are encouraging and have considerably increased our understanding ofthe CBM resource in our 100% held Fiume Bruna licence area. These conclusionshave been derived following a collaborative effort involving Norwest QuestaEngineering ("NQE") which found that the stratigraphic well penetrated coalsthat are gas saturated and contain a well developed cleat system in the brightbands. Gas saturation and cleating are conducive to CBM production. NQE is aleading US consultancy group with specialist CBM expertise. These resultsprovide us not only with the confidence to move to the next phase of the projectbut also information vital to its planning. This next phase involves the acquisition and processing of new seismic data andthe drilling of a new well which will be put on long-term production test.Detailed planning for this work has continued with NQE throughout 2007 and isexpected to be put into effect next year. In January 2007 the Company lodged an application, including environmentalimpact assessment ("EIA"), for approval of this next phase. The approval coversnot only the drilling of the next well and the acquisition of new seismic databut also up to seven additional wells in a predefined area. As part of theprocess the Company is currently providing responses to questions posed by therelevant authorities. Approval is expected within four months, upon receipt ofwhich we will be ready to implement the work. Rigs and service companies whoare available to carry out the work have been short-listed and negotiations areprogressing with them; a seismic acquisition and processing contractor has beenengaged. A number of project presentations have been made locally andregionally which have led to a wider public and governmental understanding ofour project and to a good level of support. More generally, there has been a heightening of interest in European CBM withinthe industry and the investment community. For Fiume Bruna this has translatedinto a number of unsolicited farm-in and financing approaches that underline theattractiveness of this project. Some of these approaches have been rejectedwhilst others continue to be considered by the board. Ksar Hadada, Tunisia Independent Resources holds a 40% interest in the prospective Ksar Hadadapermit, onshore Tunisia. We believe Ksar Hadada provides high-reward, low-costtargets with attractive production sharing terms in a stable and benignpolitical environment. Since the receipt last year of a large volume of new seismic and well data fromthe Tunisian national oil company, ETAP, the Company has been busy reprocessing,integrating and interpreting that data. This has been done by IndependentResources on behalf of all of the parties to the licence. It has been a majorundertaking but the remapping of the 7,000 km block has yielded valuable newinsights into the area which have significantly enhanced its prospectivity. Theexisting Sidi Toui and Oryx prospects have been better defined and validated anda new prospect, South Salah, added to the inventory. As well as the above, theAcacus Sandstone is now developing into an attractive play in Ksar Hadada. Inthe last few months oil flow rates greater than 12,000 barrels of oil per dayhave been achieved from the Acacus in exploration wells drilled across theborder in Libya. In the light of these findings, we feel that our decision todelay drilling until after the remapping is completed was the right one. Independent Resources and its partners in Ksar Hadada have received a number ofapproaches from companies keen to farm-in to the acreage which have so farresulted in an initial offer from one such party that would substantially fund athree-well programme. Over the past year, oil and gas activity in Tunisia hasaccelerated; almost all open onshore acreage has been licensed and a number ofrigs suitable for our needs have been brought into the country. It is theintention of Independent Resources and our partners to pursue a partial farm-outover the next months. If consummated, such a deal is likely to lead to drillingsoon thereafter. Business growth In addition to its three existing assets, Independent Resources has also beenactively pursuing additional opportunities that are consistent with its strategyof growth through well-planned expansion into areas and project types that havea logical fit with our strengths and existing portfolio. Throughout the year wehave seen considerable progress on several of these and hope to be in a positionto make announcements in the near future. Building on the foundations laid in our first year of operations, the last yearhas seen good progress across all three projects, despite delays in some areas.We are now poised for a busy and exciting year ahead. Dr Stephen Staley Managing Director 19 November 2007Independent Resources plc Consolidated income statement 15 month period ended 30 September 2007 15 months ended Year ended 30 September 2007 30 June 2006Continuing operations £ £ Revenue 2,220 - Cost of sales - - Gross profit 2,220 - Administrative expenses (882,746) (592,775) Operating loss (880,526) (592,775) Net financial income 224,167 138,084 Loss on ordinary activitiesbefore taxation (656,359) (454,691) Taxation - - Loss for the period (656,359) (454,691) Earnings per shareFrom continuing operations Basic (0.02) (0.02) Diluted (0.02) (0.02) Independent Resources plc Consolidated balance sheet As at 30 September 2007 30 September 2007 30 June 2006 £ £Non-current assets Property, plant and equipment 122,497 104,263 Goodwill 2,044,146 2,044,146 Other intangible assets 2,444,320 633,888 4,610,963 2,782,297 Current assets Trade and other receivables 338,590 110,184 Cash and cash equivalents 2,557,212 5,067,130 2,895,802 5,177,314 Current liabilities Trade and other payables (142,959) (103,998) Current taxation liabilities (22,752) (15,823) (165,711) (119,821)Net current assets 2,730,091 5,057,493 Net assets 7,341,054 7,839,790 Equity attributable to equity holders of the parent Share capital 334,333 334,333 Share premium account 5,843,828 5,843,828 Shares to be issued 2,041,815 2,041,815 Share option reserve 238,237 75,802 Foreign currency translation reserve (6,109) (1,297) Losses (1,111,050) (454,691) Total equity 7,341,054 7,839,790 Independent Resources plc Consolidated cash flow statement Fifteen month period ended 30 September 2007 15 months ended Year ended 30 September 2007 30 June 2006Cash flows from operating activities £ £ Loss before taxation (656,359) (454,691)Adjustments for: Depreciation of property, plant and equipment 24,981 3,172 Financial income (224,324) (138,088) Financial costs 157 4 (855,545) (589,603) Increase in trade and other receivables (228,406) (94,749)Increase in trade and other payables 45,890 108,292Share based payment 162,435 75,802Exchange rate difference on investments (7,631) (1,297) Cash used in operations (883,257) (501,555) Interest paid (157) (4) Net cash used in operating activities (883,414) (501,559) Cash flows from investing activities Interest received 224,324 138,088Purchase of intangible assets (1,808,398) (633,888)Purchases of property, plant and equipment (42,430) (106,676)Acquisition of subsidiary - (6,996) Net cash used in investing activities (1,626,504) (609,472) Cash flows from financing activities Issue of share capital - 7,266,970Share issue costs - (1,088,809) Net cash from financing activities - 6,178,161 Net decrease in cash and cash equivalents (2,509,918) 5,067,130 Cash and cash equivalents at 1 July 2006 5,067,130 - Cash and cash equivalents at 30 September 2007 2,557,212 5,067,130 Independent Resources plc Fifteen month period ended 30 September 2007 Notes: 1. The Directors submit their Report and Accounts for the period from 1 July2006 to 30 September 2007. The comparative period is from 16 June 2005(incorporation) to 30 June 2006. 2. Basis of Presentation The financial information set out in this announcement, which does notconstitute the statutory accounts of the Group, is extracted from the Group'sstatutory accounts for the period ended 30 September 2007, which were approvedby the Board on 20 November 2007. The auditors have reported on those accountsand their report was unqualified and did not contain a statement under section237(2) or (3) of the Companies Act 1985. The full statutory accounts will beincluded in the Group's annual report, which will be mailed to shareholders on29 November 2007. Additional copies will be available at the Group's offices:The Hollow, Penn Lane, Melbourne, Derbyshire DE73 8EP after that date. Theaccounts have been prepared in accordance with International Financial ReportingStandards adopted by the European Union. The accounts will be delivered to theRegistrar of Companies after the Company's Annual General Meeting, which isscheduled for 21 December 2007. 3. Revenue and Segmental information The Group's operations are located in England, Italy and Tunisia. The Group has generated £2,220 of revenue during the period in its Tunisian operations. The following is an analysis of the carrying amount of segment assets, and additions to property, plant and equipment, analysed by the geographical area in which the assets are located. United Italy Tunisia Total Kingdom 2007 Carrying amount of segment assets 18,847 103,650 - 122,497 Additions to property, plant & equipment in the period 20,666 21,764 - 42,430 Depreciation charges 9,823 15,158 - 24,981 Carrying amount of liabilities 103,688 32,836 29,187 165,711 Results for the period (337,602) (316,444) (2,313) (656,359) 2006 Carrying amount of segment assets 8,004 96,259 - 104,263 Additions to property, plant & equipment in the period 11,176 96,259 - 107,435 Depreciation charges 3,172 - - 3,172 Carrying amount of liabilities 102,833 16,988 - 119,821 Results for the period (326,147) (128,544) - (454,691) 4. Earnings per share The calculation of basic and diluted earnings per share at 30 September 2007 wasbased on the loss attributable to ordinary shareholders of £656,359 and aweighted average number of ordinary shares outstanding during the period ending30 September 2007 of 33,433,333 as shown below. In accordance with IAS 33 and as the group has reported a loss for the period,the share options are not dilutive. 2007 2006 £ £ Net loss for the period (656,359) (454,691) Basic and diluted weighted average ordinary shares 33,433,333 19,144,521 in issue during the period 5. Statement of changes in equity Profit Share Share Shares Share Exchange Total and loss capital premium to be option difference reserve issued reserve on investment £ £ £ £ £ £ £Group 1 July 2006 (454,691) 334,333 5,843,828 2,041,815 75,802 (1,297) 7,839,790Loss for the 15 (656,359) - - - - - (656,359)month periodShare based payments - - - - 162,435 - 162,435Exchange difference onInvestment - - - - - (4,812) (4,812) 30 September2007 (1,111,050) 334,333 5,843,828 2,041,815 238,237 (6,109) 7,341,054 30 September2007 (1,111,050) 334,333 5,843,828 2,041,815 238,237 (6,109) 7,341,054 This announcement can be viewed in full on the Company's web-site www.ir-plc.com. Stephen Staley, Managing Director, Independent Resources plc: +44 1332 865 253Grayson Nash, Executive Chairman, Independent Resources plc: +39 339 635 8634 Jonathan Wright, Seymour Pierce +44 207 107 8000 David Smith, Deloitte Corporate Finance +44 207 936 3000 Allan Piper, First City Financial Public Relations +44 207242 2666 This information is provided by RNS The company news service from the London Stock Exchange