IOG.L Regulatory News (IOG)

19 Apr 2006 07:01

Island Oil and Gas PLC19 April 2006 19 April 2006 ISLAND OIL & GAS PLC INTERIM RESULTS FOR THE SIX MONTHS ENDED 31 JANUARY 2006 Island Oil & Gas plc ("Island" or the "Company"), the technology-led explorationand production company, today announces its interim results for the six monthsended 31 January 2006. FINANCIAL HIGHLIGHTS: * Increased turnover of Stg£476,000 from gas sales * Reduced loss before tax of Stg£33,000 (six months ended 31 January 2005: loss before tax Stg£545,000) * Retained cash balances of Stg£13.6million * Loss per share 0.13pence Stg (six months ended 31 January 2005: loss per share 2.18pence Stg). HIGHLIGHTS * August 2005 - Island was awarded a 100% interest in the 'Killala Licence' in the strategically important Northeast Rockall Basin, adding further acreage in the Atlantic Margin * October 2005 - Island successfully concluded a rig contract with Petrolia Drilling Limited for its 2006 three-well drilling programme which commences in April 2006. * December 2005 - Island successfully raised Stg£8.31 million by way of a private placing, with a further Stg£4.15million receivable if all warrants associated with the placing are exercised. * January 2006 - Island announced important Board changes allowing the Company to fully capitalise upon the skills and experience of the Island team, and ending temporary arrangements put in place at the time of the Company's listing in 2004. Post interim period: * February 2006 - the Irish Authorities granted extensions to Licensing Options 03/5 (the Seven Heads Oil Option) and 03/6 (the Roscarberry Licensing Option), both in the Celtic Sea. * March 2006 - Island announced that it had made an application for six blocks in the Slyne-Erris-Donegal Bid Round. The blocks applied for are in the Southern Slyne Basin and Donegal Basin in the important Atlantic Margin. * April 2006 - Island announced that it has executed a further drilling contract with Petrolia Drilling Limited for the provision of the Petrolia rig for its planned 150 day drilling programme in 2007. It is expected that Interim Results will be posted to shareholders within thenext 14 days. Commenting upon the interim results, Paul Griffiths, Island's Chief Executive,said: "The period under review has seen us create significant opportunities forenhancing shareholder value by making considerable progress in the expansion ofour project portfolio, whilst also preparing for our 2006 drilling programme andfor further exploration and appraisal drilling planned for 2007. "We intend to start 2006 three-well programme with two wells in the Celtic Seaon a Sub-Area of the Seven Heads Petroleum Lease and at the Old Headof Kinsale, followed by a well on the Inishbeg Prospect in the Donegal Basin.The commencement of drilling on all three prospects is subject to the usual regulatory consents and approvals. "We have also, in a tight rig market, successfully secured the Petrolia rig forour proposed 2007 drilling programme. This gives us an opportunity to evaluateour existing, and future, prospects along the Atlantic Margin, follow-up any2006 exploration success, and potentially develop an international spread ofprojects. We remain excited by the Company's portfolio and prospects." Enquiries: Lisa J Newman MCIPR MIRSNewman Consulting Tel: +44 (0)1252 878682 Island Oil & Gas plc ("Island" or the "Company") INTERIM RESULTS CHAIRMANS STATEMENT Introduction The six months ended 31 January 2006, to which these interim accounts relate,and through to the present time has been an extremely busy period as the Companygears up for a three-well drilling programme, starting in the second quarter ofthis year. Wells are planned at the Sub-Area of Seven Heads and the Old Head ofKinsale in the Celtic Sea, as well as the Inishbeg prospect in our Donegal BasinFrontier Exploration Licence, subject to the usual regulatory consents andapprovals. In addition to preparations for an active 2006 explorationprogramme, we have also been continuing the expansion of our project portfolioand developing our 2007 exploration plans. In our results for the year ended 31 July 2005 published in late January 2006,we reported a number of post balance sheet events, including the award in August2005 of Frontier Exploration Licence 3/05 (the 'Killala Licence'); thesuccessful execution of a rig contract in October 2005 for our 2006 three-welldrilling programme, and the successful conclusion of a private placing inDecember 2005. We also announced the restructuring of our Board, including theappointment of our Finance Director, Terry Jones. Subsequent to the six monthsended 31 January 2006, we announced the conclusion in February 2006 of aSub-Area Equity Interest Assignment Agreement for the Seven Heads PetroleumLease with Marathon International Petroleum Hibernia Limited, and our Licenceapplication in March 2006 for six blocks in the recent Slyne-Erris-Donegal BidRound. FINANCIAL RESULTS The Group recorded a loss on ordinary activities before tax of Stg£33,000 forthe half year period. In December 2005, Island successfully raised Stg£8.31 million by way of aprivate placing at 70 pence per share, with a further Stg£4.15 millionreceivable in April 2006 if all the 5,937,000 warrants associated with theplacing are exercised. We are pleased to report that as of 7 April 2006,2,354,230 warrants have been exercised, representing 39.65% of the warrantsissued, and raising a further Stg£1.65 million for the Company at this earlystage in the exercise process. At the end of the reporting period, cash balances amounted to some Stg£13.6million. These balances take no account of the cash received as a result of thewarrants exercised, as detailed above, as these were exercised after the periodfor which the accounts were prepared. The financial results for the half year have been prepared following theaccounting policies set out in the Company's 2005 Annual Report and these havebeen applied on a consistent basis. Gas Production Revenue Island became a gas producer with effect from 1 October 2004 as a result of theacquisition of a 12.5% participating interest in the Seven Heads PetroleumLease. At the time of our Annual General Meeting held in March 2006, we werepleased to report that we had received in total some Stg£1.2 million in gassales receipts from Seven Heads up to the end of February 2006. Gas salesrevenues through to the end of March 2006 now total Stg£1.5 million. Of thisfigure, Stg£476,000 is reflected in the results for this half year and compareswith some Stg£484,000 for the 10 month period from 1 October 2004 to 31 July2005 as reported in our 2005 Annual Report. Under the production regimeintroduced by the new Operator, production from the field was increased from 4mmscfd to 10 mmscfd from 1 February this year as part of a winter profilingstrategy. Portfolio Expansion In August 2005, Island was awarded the 'Killala Licence' in the strategicallyimportant Northeast Rockall Basin, adding further acreage in the AtlanticMargin. The Company has a 100% interest and operatorship in this 15 yearFrontier Exploration Licence, which is located approximately 70 kilometres offthe west coast of Ireland and approximately 35 kilometres north of the Corribgas field. The Licence contains one very significant exploration prospectcovering an area of up to 80 square kilometres, together with a number of otherprospects and leads. The Northeast Rockall Basin had historically beenneglected but has recently received extensive attention as exploration companiesreconsider the potential of this area in the light of oil and gas pricesprevailing at present, and now being forecast for the future. In February 2006, the Irish Authorities granted extensions to two of Island'sCeltic Sea Licensing Options: Licensing Option 03/5 (the Seven Heads Oil Option)and Licensing Option 03/6 (the Roscarberry Licensing Option), until 31 December2006. Island has a 12.5% participating interest in the Seven Heads Oil Option.A decision on future exploration activity will be taken during this year, andthrough an Option Agreement executed with Ramco Oil and Gas Limited in April2004, Island can acquire a further 44.4% equity interest in the Seven Heads OilLicensing Option by committing to and funding 74% of an appraisal well to testthe oil-bearing Lower Wealden reservoirs in the Seven Heads structure. The Roscarberry Licensing Option is located immediately to the north of SevenHeads. Island has a 22% participating interest in the Option which includes theRoscarberry Prospect. Island, alongside its partners, has completed a workprogramme designed to mature for drilling this Prospect, a potentiallysignificant Greensand gas structure, in advance of a decision on futureexploration activity to be taken this year. Any future gas production couldpotentially be tied back to the Seven Heads infrastructure. In March 2006, the Company announced that an application was made to thePetroleum Affairs Division of the Department of Communications, Marine andNatural Resources for six blocks in the Slyne-Erris-Donegal Bid Round, whichclosed on 15 March 2006. The areas applied for are in the Southern Slyne Basin,where a large structural lead prospective for Triassic gas was identified, andin the Donegal Basin, where a series of potential Triassic structures weremapped on trend with the Inishbeg Prospect, which will be drilled by Island andits partners later this year. These structures are potentially prospective forboth oil and gas. The Atlantic margin is seen by the Company as a strategicallyimportant area for the future discovery of the large quantities of indigenousgas necessary to reduce Ireland's long term dependence on gas imported from theUnited Kingdom. 2006 Drilling Programme In October 2005, Island successfully executed a rig contract with PetroliaDrilling Limited for the 'Petrolia' rig for the planned 2006 drilling programme,which will commence during the second quarter of 2006. This was a realachievement in what is a highly competitive market for offshore drilling rigs.Following the conclusion in February 2006 of a Sub-Area Equity InterestAssignment Agreement (the "Agreement") for the Seven Heads Petroleum Lease withMarathon International Petroleum Hibernia Limited, through its wholly-ownedsubsidiary Marathon Seven Heads Limited (formerly Ramco Celtic Sea Ltd), thefirst well of the 2006 drilling programme will be drilled to test a possibleextension of the Seven Heads gas field. This first well will be located in an area immediately to the west of the 48/24-6 production well, which has to date encountered some of the best producingsands in the Seven Heads gas field. Island will fund 100% of the cost of thewell, including testing, in return for increasing its equity interest in all ofthe un-appraised parts of the Seven Heads Petroleum Lease west of a definedpartition line. Island's equity interest in the Sub-Area will increase from12.5% to 55.75%. Island will operate the well during the drilling period butoperatorship will revert back to Marathon once the drilling programme has beencompleted. It is intended that the second and third wells of the programme will respectively be on the Old Head of Kinsale Prospect in the Celtic Sea, and on the Inishbeg Prospect in the Donegal Basin, subject to government and partnerapprovals. The Old Head of Kinsale lies immediately to the southeast of theKinsale field. Island plans to drill a well on the Old Head of Kinsalestructure immediately after the Seven Heads well. Thereafter in the AtlanticMargin, the Company will be involved with a 31% equity interest in a well beingdrilled on the Inishbeg Prospect in Frontier Exploration Licence 1/05 in theDonegal Basin with Lundin as Operator. The Inishbeg Prospect is in shallow waterand in the event of a commercial discovery this could be linked to existingonshore pipeline facilities to supply the Irish market and with the potential todevelop an export market through the existing gas interconnectors which alreadylink Ireland to the UK and beyond. 2007 Drilling Programme In recent days, Island executed a further drilling contract with PetroliaDrilling Limited for the provision of the semi-submersible drilling unit"Petrolia" in 2007. The contract is for a 150 day drilling programme. It iscurrently anticipated that the 2007 drilling programme will be primarily focusedalong the Atlantic Margin off the west coast of Ireland, subject to thenecessary regulatory consents being granted, but further details of theprogramme will be announced during the coming months. The remainder of theprogramme remains flexible in order to allow for possible appraisal drillingbased on a potentially successful outcome to the 2006 drilling campaign. Inaddition, Island is reviewing the opportunity to progress potential newinternational ventures in Northwest Europe and North Africa which are currentlybeing evaluated. Further details in relation to the 2007 drilling programme will be announced inthe coming months. BOARD We announced, in January 2006, important changes to the Island Board. The Boardchanges were enacted in order to allow the Company to fully capitalise upon theskills and experience of the Island team during an important time in theCompany's development. These changes included the appointment of Terry Jones asFinance Director. In addition, Island's Acting Finance Director, Jack McKinney,replaced Phil Beck as Commercial Director whilst Phil moved to take up the roleof New Ventures Director. These changes ended the temporary arrangements put inplace on listing the Company in 2004. The Company has also expanded itsoperational and support team and has opened a new registered office in thecentre of Dublin with further facilities set up in Aberdeen and Cork to supportour drilling operations. OUTLOOK & PROSPECTS: With an active drilling programme about to commence and further explorationdrilling contemplated in 2007, we believe that Island is creating a significantopportunity for enhancing shareholder value. We will shortly be commencing our three-well 2006 drilling programme with twowells in the Celtic Sea and a well on the Inishbeg Prospect in the DonegalBasin. In addition, the Company has successfully secured the Petrolia rig forour proposed 2007 drilling programme. The 2007 drilling programme providesIsland with an opportunity to evaluate its existing and potential futureprospects along the Atlantic Margin offshore Ireland, and follow-up on any 2006exploration success and, importantly, to potentially develop an internationalspread of exploration and appraisal projects. Rig availability, in a tightmarket, gives us significant leverage to use to attract new potential partnersto our extensive portfolio of mature exploration projects at a time whenquality, high risk/high reward exploration targets are in short supply and rigavailability is limited. Island Oil & Gas plcConsolidated profit and loss accountInterim to 31 January 2006unaudited) 6 Months 6 Months Year ended 31 ended 31 ended 31 Jan 2006 Jan 2005 July 2005 Stg£'000 Stg£'000 Stg£'000 Turnover 476 - 484 Cost of sales (389) - (263) ------ ----- ------ Gross profit 87 - 221 Profit on sale of interest inlicence and sale of financial asset - 104 104Other expenses - (194) -Administration expenses (319) (533) (728) ------ ------ ------ Operating loss - continuing operations (232) (623) (403)Interest receivable and similar income 199 78 276 ----- ----- ----- Loss on ordinary activities before taxation (33) (545) (127)Taxation on loss on ordinary activities (35) (12) (21) ------- ------ ------ Loss for the financial period/year (68) (557) (148)Profit and loss account at beginning of period/year (214) (66) (66)Foreign exchange movement on reserves - (2) - ------ ------ ---- Profit and loss account at end of period/year (282) (625) (214) ====== ======= ====== Loss per share (pence) (0.13) (2.18) (0.42) ======== ====== ======== Island Oil & Gas plcConsolidated balance sheetat 31 January 2006(unaudited) 31 Jan 31 Jan 31 July 2006 2005 2005 Stg£'000 Stg£'000 Stg£'000 Fixed assetsTangible assets 2,335 - 2,617Intangible assets 6,830 2,836 3,309 --------- ------- ------ 9,165 2,836 5,926 Current assetsBank and cash 13,556 8,472 8,366Debtors 394 62 245 ------- ------ ------ 13,950 8,534 8,611 Creditors: amounts falling due within one year (941) (303) (205) -------- ----------- ------- Net current assets 13,009 8,231 8,406 -------- --------- ------ Total assets less current liabilities 22,174 11,067 14,332Provision for liabilities and charges (631) - (617) ---------- -------- ------- Net assets 21,543 11,067 13,715 ========== ========= ======= Capital and reservesCalled up share capital 406 298 326Share premium 21,372 11,394 13,556Unrealised reserve 47 - 47Profit and loss account (282) (625) (214) -------- --------- ------- Shareholders' funds 21,543 11,067 13,715 ========= ========== ======= Island Oil & Gas plcConsolidated cash flow statementInterim to 31 January 2006(unaudited) 6 Months 6 Months Year ended 31 ended 31 ended 31 Jan 2006 Jan 2005 July 2005 Stg£'000 Stg£'000 Stg£'000 Net cash inflow/(outflow)from operating activities 564 (557) (416) Returns on investments and servicing of finance 199 41 276 Corporation tax (2) (10) (27) Capital expenditure and financial investment (3,465) 122 (343) Acquisition of subsidiary undertakings - 200 200 -------- ------- ------ Net cash (outflow) before financing (2,704) (204) (310) Financing 7,894 7,702 7,702 --------- -------- ------- Increase in cash for the period/year 5,190 7,498 7,392 ========= ======== ======= Reconciliation of net cash flowto movement in net cashIncrease in cash during the period/year 5,190 7,498 7,392Net cash at start of period/year 8,366 974 974 -------- -------- ------ Net cash at end of period/year 13,556 8,472 8,366 ========= ========= ======= This information is provided by RNS The company news service from the London Stock Exchange