IOG.L Regulatory News (IOG)

11 Oct 2006 07:30

Island Oil and Gas PLC11 October 2006 11 October 2006 ISLAND OIL & GAS PLC PRELIMINARY RESULTS FOR THE YEAR ENDED 31 JULY 2006 Island Oil & Gas plc ("Island" or the "Company"), today announces itspreliminary results for the year ended 31 July 2006. The year under review hasseen the Company's transition into an accomplished operator offshore Irelandwith two successful Celtic Sea gas wells during the year, at Seven Heads Westand at the Old Head of Kinsale. FINANCIAL HIGHLIGHTS: * Increased turnover of Stg£1.151 million principally from gas sales (year ended 31 July 2005: Stg£484,000). * Loss before tax of Stg£411,000 as expected, given the Company's high level of activity (year ended 31 July 2005: loss before tax Stg£127,000). * Loss per share Stg£0.0074 (year ended 31 July 2005: Stg£0.0042). OPERATIONAL HIGHLIGHTS: * August 2005 - Island was awarded a 100% interest in the 'Killala Licence' in the strategically important Northeast Rockall Basin, adding further acreage to its Atlantic Margin portfolio. * October 2005 - Island successfully concluded a rig contract with Petrolia Drilling Limited for its semi-submersible drilling unit ("Petrolia Rig") for its 2006 drilling programme, which has now been completed resulting in two successful gas wells from Seven Heads West and the Old Head of Kinsale, both operated by Island. * December 2005 - Island successfully raised Stg£8.31 million by way of a private placing (the "placing"). In May 2006, the Company announced that all warrants associated with the placing had been exercised, raising a further Stg£4.156 million. * February 2006 - the Minister for Communications, Marine and Natural Resources granted extensions to Licensing Options 03/5 (the Seven Heads Oil Option) and 03/6 (the Roscarberry Licensing Option), both in the Celtic Sea. * April 2006 - Island announced the execution of a further drilling contract with Petrolia Drilling Limited for the provision of the Petrolia Rig for its drilling programme in 2007. * May 2006 - Island announced that Platinum Petroleum Limited ("Platinum"), an international energy investment group, had agreed a major strategic investment in the Company. Island also entered into a Memorandum of Understanding with Platinum granting Island an opportunity to participate in international exploration and production opportunities. * June 2006 - Island announced a successful gas test from its first ever well as an independent Irish operator, Well 48/23-3, at the Seven Heads West Sub Area in the Celtic Sea. Upon completion of drilling and testing, Island also satisfied the terms of a Sub-Area Equity Interest Assignment Agreement with Marathon International Petroleum Hibernia Limited ("Marathon"), thus increasing its equity interest from 12.5% to 55.75%. * July 2006 - Island announced that the Old Head of Kinsale 49/23-1 well, the second in the 2006 drilling programme, encountered a gross gas column of 100 feet in Lower Cretaceous reservoirs. The well was suspended for further evaluation. Gas in place was announced in August 2006 as being in the range 90 to 120 bcf. Post Year-End: * August 2006 - The Company was awarded two new Frontier Exploration Licences ("FEL") in the Slyne-Erris-Donegal Bid Round which closed in March 2006. FEL 3/06, the Inishowen Licence in the Rockall Basin, and FEL 4/06, the Inishmore Licence in the Southern Slyne Trough strengthen Island's position in the important Atlantic Margin, offshore Ireland. * September 2006 - Island announced the provision of a 2007 drilling slot to Providence Resources plc ("Providence") for the Petrolia Rig in 2007, and a common strategy report between Island and Providence on the joint development of the companies' Celtic Sea oil assets, based on a shared floating production facility. * October 2006 - Island announced that it had entered into a Cooperation Agreement with EnCore Oil plc ("EnCore") covering the future development by both companies of their respective portfolios of exploration and near-development interests both in Ireland and the UK. EnCore was also granted an exclusive option by Island to acquire up to a 20% working interest in the Island-operated Frontier Exploration Licence 1/04 on the Atlantic Margin, offshore the west of Ireland in the Porcupine Basin. Also in October, Island announced the appointment of Carl Kindinger asNon-executive Director, bringing a wealth of both industry and financialexperience. Island's Annual Report will be posted during December 2006. The Report will besent to all shareholders whose names appear on the register at the date ofposting. Commenting upon the results, Paul Griffiths, Island's Chief Executive, said: "Over the past year, Island has established itself as an accomplished operatorand has drilled two successful gas wells. The Company, in a competitive market,also secured rig contracts for both 2006 and 2007, allowing us to move aheadwith the appraisal and development of our portfolio, and has added some veryattractive exploration acreage." Enquiries: Lisa J NewmanNewman Consulting Tel: +44 (0)1252 878682 ISLAND OIL & GAS PLC PRELIMINARY RESULTS FOR THE YEAR ENDED 31 JULY 2006 CHAIRMAN'S STATEMENT The past year has seen a major transformation in Island Oil & Gas plc ("Island"or the "Company") from an oil and gas exploration company with a number ofinterests offshore Ireland, to a successful operator with two Celtic Sea gaswells in 2006, an expanded portfolio of licence interests, and an activeexploration and near-production drilling programme going forward in 2007. Thistransformation has been based firstly on the success of our stated strategy ofimplementing and executing a sustained 2006 drilling campaign, and secondly onexecuting a further contract for the provision of the Petrolia Rig in 2007. During the year, the Company executed an agreement with Platinum PetroleumLimited ("Platinum"), an international energy investment group and a majorshareholder in Island, whereby we will gain access to internationalopportunities, in addition to those being pursued by the Company, necessary forthe future expansion of our portfolio. The year under review commenced with the expansion of the Company's AtlanticMargin portfolio with the award in August 2005 of Frontier Exploration Licence 3/05 (FEL 3/05) in the Northeast Rockall Basin. Island and Shell E & P Irelandwere the two successful applicants in the Northeast Rockall Licensing Round. FEL3/05 contains the Killala Prospect which lies some 35 kilometres north of theCorrib gas field and in the same basin as Shell's Dooish hydrocarbon discovery.This was a timely and significant addition to our exploration portfolio and onethat established Island as an important stakeholder on the Atlantic Marginfairway, west of Ireland. Subsequently, ExxonMobil farmed into an existinglicence in the Porcupine Basin, thereby establishing the Atlantic Margin as a focus of renewed interest for multi-national oil companies. In February 2006 we concluded a Sub-Area Equity Interest Assignment Agreementwith our strategic partner in the Celtic Sea, Marathon International PetroleumHibernia Limited ("Marathon"), through which Island would increase its interestto 55.75% in an unappraised part of the Seven Heads gas field by drilling andpaying for the cost of an appraisal well (the West Seven Heads Sub-structure).In the same month Island also extended Licensing Options 03/5 (Seven Heads Oil)and 03/6 (Roscarberry) until 31 December 2006 pending the results of our 2006drilling programme. During March 2006, Island undertook to further establish its position in theAtlantic Margin through its application to the Department of Communications,Marine and Natural Resources for six blocks in the Slyne-Erris-Donegal BidRound. Shortly after the financial year end, in August 2006, the Company wasawarded FEL 4/06 in the Southern Slyne Trough. Island, as operator, and LundinPetroleum AB will each hold a 50% interest in the newly named Inishmore Licence,which increases its stake in prospects analogous to the proven Corrib gas play.The Company was also awarded FEL 3/06 in the South Donegal Basin. Island, asoperator, and Lundin Petroleum AB will each hold a 40% interest, and EndeavourEnergy UK Limited a 20% interest in the newly named Inishowen Licence, whichallows the Company to evaluate an underexplored frontier exploration basinpotentially prospective for Triassic gas plays. In April 2006, Island set itself apart in a competitive market by not onlysecuring a contract for the Petrolia Rig for its 2006 drilling programme, butalso executing a further contract with Petrolia Drilling Limited for the samerig for its 2007 drilling programme. In May 2006, Island announced that Platinum had agreed a strategic investment inIsland of up to Stg£10 million by way of two convertible loans. Both these loanswere subsequently drawn down in full and converted by 8 August 2006. Platinumcan invest up to an additional Stg£11 million in Island by way of exercising upto 10 million warrants at Stg£1.10 per share at any time in the 12 month periodending 9 June 2007. We also entered into a Memorandum of Understanding withPlatinum which gives us the opportunity to further our longer term ambitions toincrease our international acreage portfolio through opportunities generated andpresented by Platinum. A landmark achievement for the Company was our success in the Celtic Sea, withour first well as operator, well 48/23-3. The well tested gas at a combined rateof 13.2 mmscf per day. The well was suspended as a potential gas producerpending a further detailed assessment. Our success was recognised by astatement from Noel Dempsey, T.D., Minister for Communications, Marine andNatural Resources, congratulating Island upon the success of the well andIsland's technical competence as an independent operator, in Ireland. Island announced in July 2006 that the Old Head of Kinsale 49/23-1 well hadencountered a gross gas column of 100 feet in Lower Cretaceous reservoirs. Thewell was suspended for further evaluation. Gas in place was announced as beingin the range 90 to 120 bcf. This marked the first successful gas explorationwell in the Celtic Sea for 16 years. The results validated Island's stated lowrisk strategy of exploring for and appraising gas prospects around existinginfrastructure which, if successful, could fast track subsea tie-backs aimed atgenerating early cash flow. This success has been achieved bylowering technical risk through a significant improvement in seismic dataquality following reprocessing and a better understanding of reservoir risk. The2007 work programme will focus on the further appraisal and development of ourgas assets. Post financial year end, in August 2006, Island announced that the Inishbegexploration well in the Donegal Basin had been plugged and abandoned. Althoughthis was disappointing, the South Donegal Basin still remains largelyunexplored, and the acreage that the Company was awarded in theSlyne-Erris-Donegal Licensing Round remains prospective for Triassic gas. During the year, the full benefit of the acquisition in 2005 of a 12.5%participating interest in the Seven Heads gas field and a 12.5% debt-freeinterest in the Seven Heads infrastructure was realised with a significantincrease in gas sales. Revenues for Q4 2006 and full year 2007 are set toincrease further as Seven Heads goes to compression, which will allow anincrease in the production rate to at least 12 mmscf per day. Outside Ireland, we still await the result of our application for an offshoreexploration permit, the Arcachon Permit, in the Aquitaine Basin in southwestFrance. The Company is also pursuing near-production projects in the Netherlandsand hopes to make an announcement shortly. The Company continues to actively recruit more personnel as our exploration andadministration requirements increase, following the successful 2006 drillingcampaign and ongoing plans for the development of our portfolio. FINANCIAL REVIEW The funds required to implement and execute the 2006 drilling programme wereraised in two tranches in 2005 and 2006 respectively. December 2005 saw Islandsuccessfully complete a private placing at Stg£0.70 per share, raising Stg£8.31million to partly fund the 2006 drilling programme. Warrants attached to theissue of these shares were fully taken up by May 2006 raising a furtherStg£4.156 million in drilling funds. May 2006 saw Island's major shareholder, Platinum, conclude an agreement withthe Company whereby it could make a strategic investment of up to Stg£10 millionin Island by way of two convertible loans. Both these loans were subsequentlydrawn down in full and converted by 8 August 2006. Platinum can invest up to anadditional Stg£11 million in Island by way of exercising up to 10 millionwarrants at Stg£1.10 per share, at any time in the 12 month period ending 9 June2007. These placings both expanded our shareholder base and strengthened thestrategic investment made by Platinum in Island. The Group recorded a loss on ordinary activities before tax of Stg£411,000,compared to Stg£127,000 in the year ended 31 July 2005. Gross revenue from ourinterest in the Seven Heads gas field resulted in improved turnover of Stg£1.151million compared to Stg£0.484 million in the previous year, reflecting increasedproduction together with higher realised gas prices due to winter profiling.Administration costs for the year were Stg£1.267 million compared to Stg£0.728million in the previous year. This increase reflects the Company's growth duringthe period, which saw the establishment of a Dublin Headquarters and relatedmanagement systems. Cash balances at the year end amounted to Stg£6.071 million. These balances takeno account of the cash received as a result of the second convertible loan beingexecuted in August amounting to Stg£5.5 million, which occurred after year end. A further Stg£2 million was received in October 2006 as part of the exclusive option granted to EnCore. BOARD CHANGES Post financial year end, Jack McKinney stepped down from an active role in theCompany, where he held positions as Commercial Director and Acting FinanceDirector. The Board would like to thank Jack for his significant contribution inthe establishment and early growth of the Company. In October 2006, the Company appointed Carl Kindinger as a Non-executiveDirector to oversee the financial management of the Company including thefurther development of the Company's portfolio of oil and gas assets. Carl hasconsiderable experience in financial planning, project cost control, feasibilitystudies, cross border mergers and acquisitions and international tax planning.He has successfully raised project-related finance and working capital frominternational banks, and has initiated a number of IPO's. During the year Terry Jones resigned as Finance Director. Karl Prenderville, former Finance Director of Enterprise Energy Ireland Ltd, hasbeen appointed consultant Financial & Commercial Manager. Karl has worked in theoil industry for over 25 years in the UK, Indonesia, Cambodia, Vietnam &Seychelles. He brings valuable experience from working on the Camar Oil Fielddevelopment in Indonesia and the Corrib Gas development in Ireland, both forEnterprise Oil. His experience further strengthens Island's financial team. The Company will seek to appoint additional executive and Non-executiveDirectors to support its increasing level of activity. OUTLOOK The year under review has seen Island successfully pursue our stated strategy ofimplementing and executing a multi-well drilling programme. This has resulted inIsland establishing itself as an accomplished operator, having drilled twosuccessful gas wells. The Company has already secured a rig contract for 2007 tocontinue this appraisal and development programme. This also allows Island tocontrol the growth of its business by seeking out strategic alliances from aposition of strength. Island has a balanced portfolio of low risk, near-production assets (the CelticSea gas assets and Connemara oil field) and higher risk exploration acreage withexposure to large prospects (Slyne and Rockall) on the Atlantic Margin. TheCompany is making good progress in its re-evaluation of the Connemara oil fieldas a potential near-production candidate for 2008/2009. The work completed todate has generated significant interest, which is substantiated by the exclusivefarm-in option already granted to EnCore Oil. Similarly, we anticipate stronginterest from potential farminees having established a portfolio of high-impactexploration prospects along the Atlantic Margin. The strength of gas prices during the year has increased ourproduction revenue from the Seven Heads gas field and demonstrates the potentialvalue of the Celtic Sea infrastructure. Island is well positioned to attract investment for its near-production projectsin the Celtic Sea, on the Atlantic Margin and, potentially, in the Netherlands.We will seek finance through joint venture partnerships and the investmentcommunity. Establishing Island as a leading operator offshore Ireland and having drilledthe first gas discovery in the Celtic Sea for 16 years, is an outstandingachievement. Finally, we would like to thank our shareholders as we look forward to yourcontinuing support in the development of your Company. CONSOLIDATED PROFIT AND LOSS ACCOUNTFor the year ended 31 July 2006 Year ended Year ended 31 July 31 July 2006 2005 Stg£'000 Stg£'000 Turnover 1,151 484Cost of sales (712) (263) ---------- ----------- Gross profit 439 221 Profit on sale of interest in licence and sale of financial asset - 104Administration expenses (1,267) (728) ---------- ----------- Operating loss - continuing operations (828) (403)Interest receivable and similar income 446 276Unwinding of discount on decommissioning provision (29) - ---------- ----------- Loss on ordinary activities before taxation (411) (127)Taxation on loss on ordinary activities (8) (21) ---------- ----------- Loss for the financial year (419) (148) Earnings per share (Stg£) (0.0074) (0.0042) =========== =========== STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSESFor the year ended 31 July 2006 Year ended Year ended 31 July 31 July 2006 2005 Stg£'000 Stg£'000 Loss for financial year (419) (148)Unrealised profit on disposal of intangible asset - 47 ---------- ----------- Total recognised gains and losses for the financial year (419) (101) ========== =========== CONSOLIDATED BALANCE SHEETAt 31 July 2006 2006 2005 Stg£'000 Stg£'000 Fixed assetsTangible assets 2,147 2,617Intangible assets 30,950 3,309 ----------- ---------- 33,097 5,926 Current assetsDebtors 9,893 245Cash at bank and in hand 6,071 8,366 ----------- ---------- 15,964 8,611 Creditors: amounts falling due within one year (13,311) (205) ----------- ----------- Net current assets 2,653 8,406 Total assets less current liabilities 35,750 14,332Provision for liabilities and charges (646) (617) ----------- ----------- Net assets 35,104 13,715 =========== =========== Capital and reservesCalled up share capital 478 326Share premium 29,712 13,556Shares to be issued 5,500 -Unrealised reserve 47 47Profit and loss account (633) (214) ----------- ----------- Shareholders' funds 35,104 13,715 =========== =========== CONSOLIDATED CASHFLOW STATEMENTFor the year ended 31 July 2006 Year ended Year ended 31 July 31 July 2006 2005 Stg£'000 Stg£'000 Net cash (outflow) from operating activities (569) (416) Returns on investments and servicing of finance 446 276 Corporation tax 7 (27) Capital expenditure and financial investment (18,486) (343) Acquisition of subsidiary undertakings - 200 ----------- ----------- Net cash outflow before financing (18,602) (310) Financing 16,307 7,702 ----------- ----------- (Decrease)/increase in cash for the year (2,295) 7,392 =========== =========== This information is provided by RNS The company news service from the London Stock Exchange