Global Petroleum Regulatory News (GBP)

16 Mar 2007 09:38

Global Petroleum Ltd16 March 2007 16 March 2007 Global Petroleum Ltd INTERIM FINANCIAL REPORT FOR THE HALF-YEAR ENDED 31 DECEMBER 2006 The directors of Global Petroleum Limited ("the Company" or "Global") presenttheir report together with the condensed consolidated financial report for thehalf-year ended 31 December 2006 and the review report thereon. DIRECTORS The directors of the Company at any time during or since the end of thehalf-year are: Dr John Armstrong (Executive Chairman) - appointed 31 May 2002 Mr Peter Blakey - appointed 4 October 2001 Mr Peter Dighton - appointed 23 December 2003 Mr Mark Savage - appointed 23 November 1999 Mr Peter Taylor - appointed 4 October 2001 REVIEW OF OPERATIONS Operating results During the December 2006 half-year, the group recorded a loss of $9,355,031(December 2005 half-year: $338,677). The loss includes a write-down in relationto the Kenya project of $8,077,329 following the unsuccessful drilling of thePomboo No. 1 well (refer below). Principal activities As announced in the Company's last quarterly report, the principal activities inregard to the Company's projects were as follows. Kenya (Global 20%) The Company began drilling its first well in the December 2006 quarter. Thewell, Pomboo No. 1 in Licence L-5, Kenya, spudded on 2 December 2006. TheCompany's weekly report dated 28 December 2006 reported that the depth reachedwas 2,944 metres (751 metres below the seabed). The costs associated with Global's 20% in respect of this well are fully carriedso no costs were incurred by the Company. The other joint venture parties are: Woodside Energy 30% (and operator) Dana Petroleum 30% * Repsol Exploracion 20%* Since the end of the half-year, on 23 January 2007, Woodside as operator of theCompany's Kenya Joint Venture announced that Pomboo No. 1 had reached a totaldepth of 4,887 metres and would be plugged and abandoned. The well encountered"in excess of 200 metres of moderate to good quality reservoir sandstones" inthe primary target zone from 4,685m to the total depth but without oil or gas. It had been expected that the drilling rig would move to Licence L-7 immediatelyfollowing Pomboo to drill Sokwe South No. 1. However at a meeting of the JointVenture on 24 January 2007 it was decided not to drill Sokwe South No. 1 in thisdrilling campaign. The voting equity of Woodside and Repsol as farminees wassufficient to make this decision binding on the Joint Venture. The Company'sannouncement dated 25 January 2007 advised shareholders of this outcome. While there are numerous prospects and leads in our Kenya Licences L-5 and L-7,and Pomboo has established the presence of reservoirs and seals, the well lackedoil and gas shows. The JV has decided that the next phase of exploration shouldbe determined after a comprehensive technical assessment of the relevance andimplications of the new information obtained from Pomboo. This work is expectedto occur over the next three to six months. *Footnote: Another transaction is pending which, subject to the necessarypermissions, will result in the transfer of a 3% interest in L-5 and L-7 fromDana to Repsol, resulting in Repsol having a 23% interest in L-5 and L-7 andDana a 27% interest. Not drilling Sokwe South No. 1 following Pomboo was a disappointing result whenshareholders were expecting the Company to be participating in two wells inKenya in this drilling programme. However, when the Woodside review is completed in three to six months' time, theJoint Venture will agree the forward plan for L-5 and L-7 - subject to theacceptability of the plan to the Kenya Government. The costs associated with Global's 20% in L-5 and L-7 are carried for allactivities through the drilling of one well in each Licence. Woodside iscontractually obliged to drill these two wells - one each in L-5 and L-7. Onlyone well, Pomboo in L-5, has so far been drilled. Refer also to Woodside's release "Pomboo-1 Drilling Result" (23 January 2007)and other Global releases in late 2006 and on 25 January 2007. The carrying value of the Company's Kenya exploration expenditure has beenwritten-down at 31 December 2006 by $8,077,329 to reflect the unsuccessfuldrilling of the first of the two carried wells. Falkland Oil and Gas Limited ("FOGL") (Global shareholding 14.0%) In its six-monthly report for the period ended 30 September 2006 (dated 21December 2006) FOGL noted that it had raised £8 million via a convertible loannote, that an independent technical report by TRACS International assessed thatin the 10 prospects on which they focussed that the risked prospective resourcepotential was 863 million barrels net to FOGL, and that the forward programinvolved a Controlled Source Electro-Magnetic Survey (CSEM), further 2D seismicand seafloor coring surveys targeting the Company's top 20 prospects. FOGL'sgoal was stated to be "secure a rig during 2007 and commence drilling in 2008". On 5 February 2007, FOGL announced an update on the exploration programme. TheCSEM survey over prospects within the 2004 licences commenced on 3 February 2007and will continue for the following three months to acquire a series of CSEMlines over the top 20 prospects and leads. The 10,000km 2D seismic programmecommenced on 19 December 2006 and over 3,000km of data have been acquired todate. The 2D survey is expected to take approximately five months to complete.The processing and interpretation of both the CSEM and 2D surveys is expected totake up to six months to complete. FOGL noted that the work programme was"progressing well" and that the results of these surveys will provide betterdefinition of the top 20 prospects and leads and enable them to identify thebest prospects and leads for drilling. At a FOGL share price of 90 pence per share (as at 9 March 2007), Global'sshareholding is valued at A$28.8 million (16 cents per Global share). Thecarrying value of Global's shareholding recorded in the financial statements at31 December 2006 was A$33.0 million (based on the FOGL share price at 31December 2006 of 103.5 pence per share). Malta Exploration Study Agreement Area 3 - Blocks 4 & 5 (Global 80%) During the half-year, RWE obtained the services of seismic company Fugro whorecorded 852km of new 2D seismic lines in November 2006. This work, togetherwith reprocessing of other seismic surveys in the Study Area, and theacquisition of new magnetic and gravity data has satisfied the MaltaGovernment's Study Agreement work commitment. The Malta Government has extended the Study Agreement to 31 March 2007 to enableRWE as operator of the project to interpret the new and reprocessed information. When this work is complete, the Joint Venture (RWE and Global) will make adecision as to whether to enter a Production Sharing Contract with the MaltaGovernment which is likely to involve a well commitment. Global's 30% share(including 3% of behalf of a UK marketing agency that assisted Global in thefarm-in process) of the costs of such a well would be fully carried by RWE. At the Company's AGM on 17 November 2006 shareholders approved an extension oftime to 30 June 2008 for the issue to the related party vendors of AstralPetroleum Limited their share of an additional four million fully paid ordinaryshares in the Company if the Company achieves an unconditional commitment by RWEto drill a well in respect of the Malta Exploration Study Agreement. Ireland Licence Option 03/3 (Global 100%) The Company's campaign to introduce a new company to this project has not beensuccessful. Discussions with the Petroleum Affairs Division of the IrelandDepartment of Communications, Marine and Natural Resources indicated that nofurther extensions to the option deadline of 31 December 2006 would be availableand that the only route available to Global was to enter a licence with a wellcommitment. As a farminee was not found to share the risk and the cost of suchwell by the end of calendar year 2006, the Licence Option has now terminated.The carrying value of the Company's exploration expenditure in relation toIreland of $773,629 was written-off at 31 December 2006. Outlook When available, the work program timing implications of the planned review ofKenya L-5 and L-7 together with the results of the ongoing work by FOGL and thedecision by RWE, will be considered by Directors in regard to the mostappropriate way forward for the Company. SUBSEQUENT EVENTS On 5 March 2007, the Company announced that Dr John Armstrong will step down asExecutive Chairman and retire from the board effective 2 April 2007. Mr IanMiddlemas will become a director on that date and Mr Mark Savage will becomeChairman. Mr Middlemas is a chartered accountant with over 20 years' experienceand is a director of a number of publicly listed companies. J D Armstrong Director Brisbane 14 March 2007 CONDENSED CONSOLIDATED INTERIM INCOME STATEMENT FOR THE SIX MONTHS ENDED 31 DECEMBER 2006 Note 31 Dec 2006 31 Dec 2005 $ $RevenueRendering of services 4 30,000 62,111Other incomeGains on disposal - available-for-saleinvestments 6 - 1,093,589 ExpensesSalaries and employee benefits expense (225,952) (229,045)Consulting and professional fees (193,533) (315,772)Shareholder costs (82,206) (60,744)Occupancy costs (14,372) (18,673)Depreciation expense (8,623) (11,530)Administrative and other expenses (51,597) (66,357)Exploration and evaluation expenditurewritten off 7 (9,004,862) (944,482) -------- --------Results from operating activities (9,551,145) (490,903) -------- -------- Financial income - interest income 204,712 150,782Net foreign exchange gain / (loss) (8,598) 1,444 -------- --------Net financing income 196,114 152,226 -------- -------- Loss before tax (9,355,031) (338,677) Income tax expense - - -------- --------Loss for the period attributable to equityholders of the parent 4 (9,355,031) (338,677) -------- -------- Cents CentsBasic and diluted loss per share (5.41) (0.20) CONDENSED CONSOLIDATED INTERIM BALANCE SHEET AS AT 31 DECEMBER 2006 Note 31 Dec 2006 30 June 2006 $ $ Current assetsCash and cash equivalents 6,866,738 6,991,006Trade and other receivables 69,467 258,166Other financial assets 600 600 --------- ---------Total current assets 6,936,805 7,249,772 --------- --------- Non-current assetsInvestments 6 32,993,674 35,173,534Property, plant and equipment 27,065 42,034Exploration and evaluation expenditure 7 9,178,491 17,775,089 --------- ---------Total non-current assets 42,199,230 52,990,657 --------- ---------TOTAL ASSETS 49,136,035 60,240,429 --------- --------- Current liabilitiesTrade and other payables 269,387 380,940Employee benefits 21,078 12,397 --------- ---------Total current liabilities 290,465 393,337 --------- ---------TOTAL LIABILITIES 290,465 393,337 --------- ---------NET ASSETS 48,845,570 59,847,092 --------- --------- EquityIssued capital 8 35,590,053 35,056,684Reserves 31,278,857 33,458,717Accumulated losses (18,023,340) (8,668,309) --------- ---------TOTAL EQUITY 48,845,570 59,847,092 --------- --------- CONDENSED CONSOLIDATED INTERIM STATEMENT OF CHANGES IN EQUITY FOR THE SIX MONTHS ENDED 31 DECEMBER 2006 Six months Note Share Fair value Foreign Accumulated Totalended 31 capital reserve currency losses equityDecember 2006 translation reserve $ $ $ $ $ Balance at 1July 2006 35,056,684 33,411,563 47,154 (8,668,309) 59,847,092 -------- -------- -------- -------- --------Loss for the period - - - (9,355,031) (9,355,031) Change in fair value -available-for-saleinvestments - (2,179,860) - - (2,179,860) -------- -------- -------- -------- --------Total recognisedincome and expensefor the period - (2,179,860) - (9,355,031) (11,534,891)Exercise of options 537,500 - - - 537,500 Share issue expenses (4,131) - - - (4,131) -------- -------- -------- -------- --------Balance at 31December 2006 35,590,053 31,231,703 47,154 (18,023,340) 48,845,570 -------- -------- -------- -------- -------- Six months ended 31 December 2005 Balance at 1 July2005 34,436,135 - 48,455 (7,711,002) 26,773,588Impact of change inaccounting policyrelating to adoption of AASB132 andAASB 139 3 - 39,188,153 - - 39,188,153 -------- -------- -------- -------- --------Balance at 1July 2005 -restated 34,436,135 39,188,153 48,455 (7,711,002) 65,961,741 -------- -------- -------- -------- --------Loss for the period - - - (338,677) (338,677)Change in fair value -available-for-sale investments - 1,041,766 - - 1,041,766Fair value - available-for-sale investmentstransferred to profit/loss ondisposal - (5,352,938) - - (5,352,938) -------- -------- -------- -------- --------Total recognisedincome and expense for the period - (4,311,172) - (338,677) (4,649,849)Exercise of options 125,000 - - - 125,000Share issue expenses (1,321) - - - (1,321) -------- -------- -------- -------- --------Balance at 31December 2005 34,559,814 34,876,981 48,455 (8,049,679) 61,435,571 -------- -------- -------- -------- -------- CONDENSED CONSOLIDATED INTERIM STATEMENT OF CASH FLOWS FOR THE SIX MONTHS ENDED 31 DECEMBER 2006 31 Dec 2006 31 Dec 2005 $ $Cash flows from operating activitiesCash paid to suppliers and employees (664,967) (700,876)Interest received 205,116 200,652Management fees received 25,000 168,627 -------- --------Net cash from operating activities (434,851) (331,597) -------- -------- Cash flows from investing activitiesAcquisition of property, plant and equipment (1,825) (2,497)Exploration expenditure, including overheadscapitalised (220,961) (461,474) -------- --------Net cash from investing activities (222,786) (463,971) -------- -------- Cash flows from financing activitiesProceeds from the issue of share capital 537,500 125,000Share issue expenses (4,131) (1,321) -------- -------- --------Net cash from financing activities 533,369 123,679 -------- -------- Net decrease in cash and cash equivalents (124,268) (671,889)Cash and cash equivalents at 1 July 6,991,006 6,159,540 -------- --------Cash and cash equivalents at 31 December 6,866,738 5,487,651 -------- -------- NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS 1. REPORTING ENTITY Global Petroleum Limited (the "Company") is a company domiciled in Australia.The consolidated interim financial report of the Company as at and for the sixmonths ended 31 December 2006 comprises the Company and its subsidiaries(together referred to as the "consolidated entity") and the consolidatedentity's interests in associates and jointly controlled entities. The consolidated annual financial report of the consolidated entity as at andfor the year ended 30 June 2006 is available upon request from the Company'sregistered office at Level 9, 46 Edward Street, Brisbane QLD 4000 or atwww.globalpetroleum.com.au. 2. STATEMENT OF COMPLIANCE The consolidated interim financial report is a general purpose financial reportwhich has been prepared in accordance with AASB 134: Interim Financial Reportingand the Corporations Act 2001. International Financial Reporting Standards("IFRS") form the basis of AASBs adopted by the AASB, and for the purpose ofthis report are called Australian equivalents to IFRS ("AIFRS"). Theconsolidated interim financial report also complies with IFRS andinterpretations adopted by the International Accounting Standards Board. The consolidated interim financial report does not include all of theinformation required for a full annual financial report, and should be read inconjunction with the consolidated annual financial report of the consolidatedentity as at and for the year ended 30 June 2006. This consolidated interim financial report was approved by the Board ofDirectors on 14 March 2007. 3. SIGNIFICANT ACCOUNTING POLICIES Except as described below, the accounting policies applied by the consolidatedentity in this consolidated interim financial report are the same as thoseapplied by the consolidated entity in its consolidated financial report as atand for the year ended 30 June 2006. In the prior financial year the consolidated entity adopted AASB 132: FinancialInstruments: Disclosure and Presentation and AASB 139: Financial Instruments:Recognition and Measurement in accordance with the transitional rules of AASB 1.This change has been accounted for by adjusting the opening balance of reservesat 1 July 2005, as disclosed in the statement of changes in equity. Estimates The preparation of the interim financial report requires management to makejudgements, estimates and assumptions that affect the application of accountingpolicies and the reported amounts of assets and liabilities, income and expense.Actual results may differ from these estimates. Except as described below, in preparing this consolidated interim financialreport, the significant judgements made by management in applying theconsolidated entity's accounting policies and the key sources of estimationuncertainty were the same as those that applied to the consolidated financialreport as at and for the year ended 30 June 2006. During the six months ended 31 December 2006 management reassessed its estimatesin respect of the carrying value of Kenya and Ireland exploration expenditurebased on the exploration activities during the half-year and the status of theprojects at 31 December 2006 (see note 7). 4. SEGMENT REPORTING Segment information is presented in the condensed consolidated interim financialstatements in respect of the consolidated entity's geographical segments, whichare the primary basis of segment reporting. The geographical segment reportingformat reflects the consolidated entity's management and internal reportingstructure. Inter-segment pricing is determined on an arm's length basis. Segment resultsinclude items directly attributable to a segment as well as those that can beallocated on a reasonable basis. Segment capital expenditure is the total costincurred during the period to acquire segment assets that are expected to beused for more than one period. Geographical segments The consolidated entity's geographical segments are as follows: ------------- -------- ------- ------- -------- ------ --------- ---------31 Dec 2006 Australia Europe Africa Falkland Iraq Eliminations Consolidated Islands $ $ $ $ $ $ $ ------------- -------- ------- ------- -------- ------ --------- ---------Segment revenueExternal revenue 30,000 - - - - - 30,000 -------- ------- ------- -------- ------ --------- ---------Total revenue 30,000 --------- ResultSegment result (323,678) (882,677) (8,128,688) (359) (19,629) - (9,355,031) -------- ------- ------- -------- ------ --------- ---------Income tax expense - ---------Loss for theperiod (9,355,031) --------- ------------- -------- ------- ------- -------- ------ --------- ---------31 Dec 2005 Australia Europe Africa Falkland Iraq Eliminations Consolidated $ $ $ Islands $ $ $ $ ------------- -------- ------- ------- -------- ------ --------- ---------Segment revenueExternal revenue - - - 62,111 - - 62,111 -------- ------- ------- -------- ------ --------- ---------Total revenue 62,111 --------- ResultSegment result (280,620) (203,531) (943,158) 1,100,182 (11,550) - (338,677) -------- ------- ------- -------- ------ --------- ---------Income tax expense - ---------Loss for the period (338,677) --------- Business segments The consolidated entity operates within one business segment, being thepetroleum and mineral exploration industry. Accordingly, the consolidatedentity's total revenue and loss for the period relates to that business segment. 5. INTERESTS IN JOINT VENTURE OPERATIONS The consolidated entity holds the following interests in joint ventures, whoseprincipal activities are in petroleum exploration. Joint venture % interest held ConsolidatedJoint venture Principal activity 31 Dec 2006 31 Dec 2005 % %Kenya Petroleum exploration 20.0 20.0TM Services - Global(Iraq) Petroleum exploration 50.0 50.0Malta Petroleum exploration 80.0 - 6. INVESTMENTS 31 Dec 2006 30 June 2006 $ $ Listed equity securities available-for-sale - atfair value 32,993,674 35,173,534 -------- -------- Investments in listed equity securities available-for-sale represent aninvestment in Falkland Oil and Gas Limited ("FOGL"). The consolidated entity disposed of its investment in Falkland Gold and MineralsLimited ("FGML") in December 2005 for net proceeds of $1,827,416 and recorded anet gain on disposal of $1,093,589. 7. EXPLORATION AND EVALUATION EXPENDITURE $CostBalance at 1 July 2006 17,775,089Expenditure incurred 408,264Expenditure written-off (9,004,862) --------Balance at 31 December 2006 9,178,491 -------- Expenditure written-off includes a write-down in relation to the Kenya projectof $8,077,329 following the unsuccessful drilling of the Pomboo No. 1 well, andthe write-off of expenditure in relation to Ireland of $773,629 following expiryof the licence option. The remaining amounts written-off ($153,904) relate toother projects. The recoverability of the carrying amounts of exploration and evaluation assetsis dependent on the successful development and commercial exploitation or saleof the respective area of interest. 8. CAPITAL AND RESERVES Share capital Movements in shares on issue during the period were as follows: Number of Issue price ordinary shares $ $ Balance at 1 July 2006 172,294,787 35,056,684Allotment upon exercise of options 2,150,000 0.25 537,500Share issue expenses (4,131) ----------- -------- --------Balance at 31 December 2006 - fully 174,444,787 35,590,053paid ----------- -------- -------- 9. CONTINGENCIES There were no changes in contingent liabilities since 30 June 2006. 10. RELATED PARTIES Arrangements with related parties continue to be in place. For details on thesearrangements, refer to the 30 June 2006 annual financial report. Detailsregarding changes in related party share option holdings and share holdings areset out below. Options and rights over equity instruments The movement during the interim period in the number of options over ordinaryshares in Global Petroleum Limited held, directly, indirectly or beneficially,by each key management person, including their related parties, is as follows: Held at Granted as Exercised Held at Vested and 1 July 2006 compensation 31 Dec 2006 exercisable at 31 Dec 2006DirectorsDr J Armstrong 18,000,000 - (2,000,000) 16,000,000 6,000,000Mr P Dighton 250,000 - (50,000) 200,000 200,000 Movements in shares The movement during the interim period in the number of ordinary shares inGlobal Petroleum Limited held, directly, indirectly or beneficially, by each keymanagement person, including their related parties, is as follows: Held at Acquisitions Received - Disposals Held at 1 July 2006 exercise of 31 Dec 2006 options DirectorsDr J Armstrong 266,667 - 2,000,000 (1,236,667) 1,030,000Mr P Blakey 28,924,318 - - (1,500,000) 27,424,318Mr P Taylor 28,924,318 - - (1,500,000) 27,424,318Mr P Dighton - - 50,000 (50,000) -Mr M Savage - - - - -ExecutivesMr D Olling 50,000 - - - 50,000 11. SUBSEQUENT EVENTS On 5 March 2007, the Company announced that Dr John Armstrong will step down asExecutive Chairman and retire from the board effective 2 April 2007. Mr IanMiddlemas will become a director on that date and Mr Mark Savage will becomeChairman. Mr Middlemas is a chartered accountant with over 20 years' experienceand is a director of a number of publicly listed companies. This information is provided by RNS The company news service from the London Stock Exchange