Echo Energy Regulatory News (ECHO)

20 Nov 2006 07:02

Independent Resources PLC17 November 2006 Independent Resources plc Final Results for the period to 30th September 2006 Highlights • Solid continuing progress on key Rivara gas storage project• Successful start to coal bed methane data acquisition at Fiume Bruna• Integration of significant new quantities of data on highly prospective Ksar Hadada license• Strong cash management Chairman's statement I am pleased to present Independent Resources' first annual report since ourincorporation in June 2005 and our successful admission to AIM last December. During that time, we have made important and encouraging progress towards ourvision of becoming a significant and profitable international energy company.Our business model is centred on large-scale storage of natural gas, with addedvalue derived from both commercial activities and upstream oil and gasoperations. The company raised just over £5 million (pre-expenses) on admission to AIM,following a pre-IPO placement of £2 million in August 2005. Our working capitalposition as of 30 September 2006 was £4.6 million. We are committed to managingour expenditures very prudently as we continue to evaluate and develop ourportfolio of assets to the point of commercial exploitation. As this is our first annual report to shareholders, I believe it is appropriateto provide a little background about Independent Resources' distinctive businessstrategy and the context in which we are applying that model. Our geographical focus is on Italy, which has been historically and isincreasingly committed to natural gas as its primary fuel for power generationas well as industrial use and domestic heating. The country does not have anynuclear generating capacity. Italy is the third-largest gas market in Europe after the UK and Germany, andthe fastest growing in absolute terms. While it was once able to satisfy itsdemand for gas from domestic production, depletion and rapid demand growth hasmeant that the country now imports more than 80% of its natural gas fromfar-away sources such as Russia and Algeria. Security of supply is understandably a key concern in Italy today. It was one ofthe first European countries to begin liberalising its gas market in response toEU Directives designed to promote greater competition and new investment in theenergy sector. Italy's physical location as a land-bridge between North Africa and ContinentalEurope means that it can ultimately participate in and benefit from a huge andtransparent energy trading space from Cap Bon in Tunisia to the Interconnectorat Zeebrugge in Belgium, to the Hub at Baumgarten in Austria, and to the majorentry points into Germany from Russia. It was in this context that the founding directors of Independent Resourcesdecided to create a new energy trading company, backed by the physical assetsand access to the commodity that would maximise its profitability. The core asset underpinning our strategy, and the one that has been the focus ofmuch of our management activity since incorporation, is the Rivara undergroundgas storage facility near Bologna. Italy has an urgent need not only for more gas storage, but better storage. Theunique geological characteristics of Rivara will permit more economical storage,and more rapid injection and withdrawal of large volumes of gas than thecountry's existing facilities, which are located in depleted sandstone gasreservoirs. Evidence of this rapidly growing need arose last winter, when Italy experiencedits first full-blown gas supply crisis, primarily due to a lack of adequate gasstorage capacity and deliverability. The commercial value of Rivara within that context also became increasinglyapparent during the reporting period, with approaches being made to IndependentResources by several of Europe's leading gas players expressing potentialinterest in participating in the project. The Board will continue to evaluateall such approaches to determine whether it is in our shareholders' bestinterests to pursue them further at this very early stage in the development ofwhat we believe will be an extremely valuable and long-term infrastructureinvestment. The Rivara project is designed to take advantage of both the macroeconomicaspects described above and the valuable microeconomic opportunities that willaccrue to the operator of a large, high-performance gas storage facility withina dynamic market. With a project capacity of 3.2 billion cubic metres, Rivara would add more than20 per cent to Italy's current gas storage capacity. At the same time, itsphysical operation will be integrated into a trading platform that will enableoptimal management of large volumes of gas from Italy's and Europe's twoprincipal long-term suppliers -- Gazprom in Russia and Sonatrach in Algeria - aswell as from other major energy players seeking a strong commercial involvementin such a strategic location. Several important and very positive milestones were reached during the period inadvancing both planning and technical aspects of the Rivara project, and theseare summarised in the review of operations. The third element of our integrated strategy, in addition to large-scale gasstorage and trading activities, is to extend our value chain into the upstreamsector. At the time of writing, the company is acquiring data from an initialstratigraphic borehole on our wholly-owned Fiume Bruna coal bed methane (CBM)permit in central Italy. The results of this test drilling will greatly assistin formulating and executing the next phase of appraisal for this low-cost butsubstantial resource, which we expect to start exploiting by the end of 2008. Looking beyond initial commissioning of Fiume Bruna, we believe that the field'sproductivity and economics can be further enhanced by the injection of carbondioxide (CO2) into the coal bed. Independent Resources has world-class expertisein CO2 injection and sequestration, and recently became a full member of theCarbon Capture and Storage Association - a UK-based organisation whose missionis to promote geological storage of CO2 as a means both of reducing atmosphericemissions of this greenhouse gas and of enhancing the recovery of hydrocarbons. In early 2006, the Tunisian government formally approved Independent Resources'proposal to farm in to a 40 per cent interest in the promising Ksar Hadadaconcession onshore Tunisia. Our original intention, with operator Petroceltic,was to re-enter and test an existing well on the large Sidi Toui structure inthe second half of 2006. However, after receiving valuable additional seismicdata from the state oil company ETAP, we decided to postpone the re-entry until2007 in order to interpret and integrate this additional data with our existingdata. More information about our activities relating to both Fiume Bruna and KsarHadada is included in the review of operations. We are encouraged by the advances we have made to date in implementing ouruniquely integrated strategy, and are confident that it will yield outstandingbenefits to our shareholders in the coming years. I would like to express my appreciation to my fellow directors for their sharedcommitment and individual contributions to our objectives; to our small butgrowing team of dedicated employees in Italy; and to all our shareholders. Yourcontinued support in the creation and growth of Independent Resources plc isgreatly valued, and we look forward to keeping you informed of our progress. Grayson NashExecutive Chairman 17 November 2006 Review of operations In its first full year since incorporation, Independent Resources plc madeconsiderable progress in derisking each of the major assets in its portfolio,and advancing their development in order to create a highly focused, distinctiveand profitable energy enterprise. Rivara, Italy The company's key asset, the proposed Rivara underground gas storage (UGS)facility near Bologna in Italy, is a massive fractured limestone formation thatprovides the capability to inject and withdraw natural gas rapidly to matchseasonal demand patterns and take advantage of the associated tradingopportunities. The size and unusual characteristics of this geological formation mean that ithas the potential to become one of Italy's largest and most valuable natural gasstorage facilities, at a time when the country is facing a growing shortfall ingas deliverability. Rivara's geographical location, too, is strategically important, lying close toItaly's balancing point on the natural gas "highway" that supplies Europe fromNorth Africa. After more than a year of detailed preparation and consultation with the local,regional and national authorities, Independent Resources submitted its fullplanning application and accompanying environmental impact assessment (EIA) forthe Rivara development in September. We are continuing to work in close cooperation with all the relevantauthorities, who recognise the country's pressing need for additional gasstorage capacity. Our expectation is that all the required planning consents tobegin development of the Rivara UGS will be secured within the first half of2007. Our plans remain on schedule to bring Rivara onstream in 2010. Also as part of this cooperative approach, Independent Resources signed aMemorandum of Understanding (MoU) in May 2006 with Bologna-based Hera SpA, theprincipal multi-utility within the Emilia Romagna region. As geographicneighbours with overlapping business objectives and a common regulatory regime,both parties recognise that there are potential benefits to be gained throughcooperation. While no binding obligations are entailed in the MoU, we areconfident that this arrangement will generate mutually advantageous businessopportunities for both companies in the coming years. To further enhance the Rivara project's long-term profitability, the company hasdevised a process that will enable it to generate electricity from the storednatural gas -- without burning the gas. This highly efficient andenvironmentally friendly technology will use the flow pressure from gaswithdrawals to drive turbines that will generate electricity for use onsite andfor export to the Italian grid. Finally on Rivara, additional technical studies completed during the year haveadded significantly to our understanding of the reservoir's geologicalcharacteristics, enabling the company to identify the optimal location for thesurface facilities. Acquisition of the 6.6 hectare site has been formally agreedwith the landowner. Fiume Bruna, Italy During September, Independent Resources began drilling its first stratigraphicborehole on its 100 per cent-held Fiume Bruna coal bed methane (CBM) concessionin Tuscany. CBM is becoming an increasingly significant and valuable energysource elsewhere in Europe and in the US. We believe this is the first well inItaly drilled specifically to evaluate a CBM formation, and the experience weand our service companies have gained through the process will be invaluable forfuture wells. The purpose of this preliminary borehole is to acquire additional data on theFiume Bruna coal formation. We expect to have a full gas content analysis of therecovered coal samples by January next year. This will enable us to optimise andimplement the next phase of appraisal prior to expected first production in 2008as scheduled in our AIM admission document. Annual production is targeted to reach up to 10 billion cubic feet in 2009, andpotentially twice that volume in subsequent years. In addition, we believe thatenhanced CBM technology using CO2 injection could increase recovery and extendthe productive life of Fiume Bruna considerably. Ksar Hadada, Tunisia Independent Resources' third major asset is its 40 per cent interest in thehighly prospective Ksar Hadada concession onshore Tunisia. The Tunisiangovernment formally approved our farm-in to this Petroceltic-operated permitarea in February 2006. Ksar Hadada covers an area of approximately 7000 square kilometres within theprolific Ghadames basin, where a number of major oil and gas fields have beendiscovered in neighbouring Libya and Algeria. The primary prospect within thepermit area is the large Sidi Toui structure. The partners' original intention was to re-enter and test an earlier well onthis structure, Sidi Toui-3, in the second half of this year. In August,however, we received from the Tunisian national oil company, ETAP, a largeamount of historic seismic and well data for the acreage. Based on an initial and promising assessment of this data, as well as thecurrent scarcity and high cost of drilling rigs in the region, it was decided topostpone the planned re-entry until we have integrated this additional data intoour existing interpretation. We believe this exercise will prove extremelyvaluable not only to our understanding of the Sidi Toui structure but also ofother identified and potential prospects within the concession area. We expect to complete this additional interpretation in the first quarter of2007 and to secure a drilling rig for the Sidi Toui-3 re-entry in the thirdquarter next year. All work obligations for the first term of the licence have already beenfulfilled, and we continue to be excited as we learn more about the geology ofKsar Hadada. The majority of the prospects and leads identified are quiteshallow and close to existing infrastructure, making them relatively inexpensiveto drill and develop. Business growth Independent Resources is continuing to seek and evaluate additionalopportunities, both in gas storage and in the upstream sector, that areconsistent with our focused strategy and offer potential for further profitablegrowth. While much still needs to be done before each of the company's current assets -Rivara, Fiume Bruna and Ksar Hadada - begin to generate cash, we are encouragedby the results of our operations in the past year and will be workingenergetically to bring them much closer to profitability in the year ahead. Dr Stephen StaleyManaging Director 17 November 2006 Consolidated income statement Period ended 30 September 2006 2006Continuing operations £ Revenue - Cost of sales - ___________ Gross profit - Administrative expenses (775,453) ___________ Operating loss (775,453) Net financial income 196,775 ___________ Loss on ordinary activities before taxation (578,678) Tax - ___________ Loss for the period (578,678) ___________ Earnings per shareFrom continuing operations Basic (0.03) ___________ Diluted (0.03) ___________ Consolidated balance sheet As at 30 September 2006 2006 £ Non-current assets Property, plant and equipment 99,003 Goodwill 2,044,146 Other intangible assets 1,003,226 ___________ 3,146,375 Current assets Trade and other receivables 127,731 Cash and cash equivalents 4,632,907 ___________ 4,760,638 Current liabilities Trade and other payables (143,257) Current tax liabilities (13,333) ___________ (156,590) Net current assets 4,604,048 ___________ Net assets 7,750,423 ___________ Equity attributable to equity holders of the parent Share capital 334,333 Share premium account 5,843,828 Shares to be issued 2,041,815 Share option reserve 108,289 Foreign currency translation reserve 836 Losses (578,678) ___________ Total equity 7,750,423 ___________ Consolidated cash flow Period ended 30 September 2006 2006Cash flows from operating activities £ Loss before taxation (578,678)Adjustments for: Depreciation of property, plant and equipment 7,960 Financial income (196,896) Financial costs 121 ___________ (767,493)Increase in trade and other receivables (112,296)Increase in trade and other payables 145,061Share based payment 108,289Exchange rate difference on investments 836 ___________ Cash used in operations (625,603) Interest paid (121) ___________ Net cash used in operating activities (625,724) Cash flows from investing activities Interest received 196,896Purchase of intangible assets (1,003,226)Purchases of property, plant and equipment (106,204)Acquisition of subsidiary (6,996) ___________ Net cash used in investing activities (919,530) Cash flows from financing activities Issue of share capital 7,266,970Share issue costs (1,088,809) ___________ Net cash used in financing activities 6,178,161 ___________ Cash and cash equivalents at 30 September 2006 4,632,907 ___________ Notes:______ 1. The accounts are for the period 16th June 2005, when the company was incorporated, to 30th September 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 30th September 2006, which were approvedby the Board on 17th November 2006. The auditors have reported on those accountsand their report was unqualified. The full statutory accounts will be includedin the Group's annual report, which will be mailed to shareholders on 22ndNovember 2006. Additional copies will be available at the Group's offices TheHollow, Penn Lane, Melbourne, Derbyshire DE73 8EP after that date. The accountshave been prepared under the historical cost convention and in accordance withInternational Financial Reporting Standards and International AccountingStandards, adopted for use by the European Union, and on the going concernbasis. The accounts will be delivered to the Registrar of Companies after theGroup's Annual General Meeting, which is scheduled for 15th December 2006. 3. Revenue and Segmental information The group has not generated any revenue during the period. The Group's operations are located in England, Italy and Tunisia. The following is an analysis of the carrying amount of segment assets, and additions to property and plant and equipment analysed by the geographical area in which the assets are located. Additions to property plant and Carrying amount equipment in of segment assets the period 2006 2006 £ £ United Kingdom 7,071 11,176 Italy 91,932 95,787 Tunisia - - __________ __________ 99,003 106,963 __________ __________ 4. Earnings per share The calculation of basic and diluted earnings per share at 30 September 2006 was based on the loss attributable to ordinary shareholders of £578,678 and a weighted average number of ordinary shares outstanding during the period ending 30 September 2006 of 21,929,623, as shown below. 2006 £ Net loss for the period (578,678) __________ Basic and diluted weighted average ordinary shares in issue during the period 21,929,623 ___________ In accordance with IAS 33 and as the Group has reported a loss for the period, the share options are not dilutive. 5. Statement of changes in equity Share Exchange Profit and Share Share Shares to be option difference on loss reserve capital premium issued reserve investment Total £ £ £ £ £ £ £Group 16 June 2005 - - - - - - - Loss for the period (578,678) - - - - - (578,678) New shares issued - 334,333 6,932,637 2,041,815 - - 9,308,785 Transaction costs - - (1,088,809) - - - (1,088,809) Share based payments - - - - 108,289 - 108,289Exchange difference on investment - - - - - 836 836 __________ __________ __________ __________ 30 September 2006 (578,678) 334,333 5,843,828 2,041,815 108,289 836 7,750,423 __________ __________ __________ __________ _________ __________ __________ This announcement can be viewed in full on the Company 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 This information is provided by RNS The company news service from the London Stock Exchange