IOG.L Regulatory News (IOG)

20 Apr 2005 07:00

Island Oil and Gas PLC20 April 2005 20 April 2005 ISLAND OIL AND GAS PLC ("Island" or "the Company") INTERIM RESULTS FOR THE SIX MONTHS ENDED 31 JANUARY 2005 CHAIRMAN'S STATEMENT The six months to 31 January 2005 has been a period of intense activity on anumber of important fronts in the development of Island. The Company has, inthat time: * Executed an option agreement with Marathon Oil Ireland Ltd in August 2004 through which Island has an exclusive option to earn 50% of Marathon's equity in all oil and gas-bearing reservoirs below 4,000 feet subsea within an area defined by the extent of the overlying Kinsale gas accumulation; * Acquired in October 2004, through the acquisition of Island Expro Ltd, an interest in two additional Celtic Sea licences, Licensing Options 03/4 and 04/2, which are both prospective for gas and are located to the southeast of Ireland, adjacent to the Kinsale and Seven Heads gas infrastructure. * Acquired as a result of the Island Expro acquisition the benefit of a farm-out agreement entered into by Island Expro in August 2004 with Petroceltic International plc ("Petroceltic"), whereby Petroceltic acquired a 15% interest in Licensing Option 03/4, which lies to the southeast of the Kinsale gas field and contains two prospective gas structures. The consideration was paid by the issue of shares in Petroceltic which were subsequently sold for £104,000. A further amount of £296,000 is payable by Petroceltic in cash or shares on the execution of a rig contract to drill this prospect. Island, as operator, retains a 50% interest in this Licence, which will revert to 65% if Petroceltic chooses not to enter into the rig contract. * Raised in November 2004 £8.24 million, gross of expenses, in a private placing to institutional and private investors, prior to successfully listing on AIM in London in December 2004. * Executed a Sale and Purchase Agreement with Lundin Petroleum AB (the "Lundin Transaction") in December 2004 to acquire a portfolio of offshore Irish oil and gas assets, including a 12.5% interest in the producing Seven Heads gas field and a 12.5% interest in the undeveloped oil-bearing reservoirs below the gas, for a consideration of four million shares of Island. The completion of this complex transaction is now in its final stages. * Executed a farm-in agreement in January 2005 with Ramco Donegal Limited and Sunningdale Donegal Basin Limited to earn a 26% interest in Frontier Exploration Licence 1/05 in the Donegal Basin, which contains two large gas prospects, subject to drilling an exploration well in 2006. Island has an option to acquire an additional 5% groundfloor interest in this licence upon completion of the Lundin Transaction. Strong demand for oil and uncertain supply has driven oil prices to record highsin the six months to 31 January 2005. The future outlook for a prolonged periodof higher oil prices should provide a stable commercial environment for Islandto evaluate, appraise and potentially develop its equity interests in theundeveloped Connemara oil field off the west coast of Ireland, and its exclusiveoptions to appraise the deeper Seven Heads and Kinsale oil-bearing reservoirs. The long-term outlook for gas prices is equally positive and Island anticipates,in conjunction with its present and prospective future partners, developing amulti-well Celtic Sea drilling programme for 2006 to appraise its gas prospects,and existing gas discoveries, around the Kinsale and Seven Heads gas fields. Financial Results: The Group recorded an operating loss of £623,000 for the period, which includesthe full cost of the AIM listing process; the costs incurred in raising the£8.24 million in new equity finance, as well as the costs associated with theIsland Expro acquisition. Despite these considerable costs, Island retained£8.472 million cash balances as at 31 January 2005. We have chosen to reportthese results in Sterling, since that is the main currency in which most of ourbusiness is transacted, and in which our cash balances are held. Future Prospects: Island proposes to continue with its synergy-based approach to appraisal andexploration drilling, complemented by strategic acquisitions designed to addreal value to our portfolio. In the Celtic Sea, completion of the Lundin Transaction will place Island in astrong position to implement its strategy of utilising, wherever possible,existing infrastructure and conducting an aggressive, reduced risk, drillingprogramme with suitable partners. It is currently anticipated that up to threeCeltic Sea wells will be drilled during 2006, two of which are likely toappraise specific and confirmed oil and gas discoveries. Island has commencedbuilding an operating team in preparation for this programme. West of Ireland, Island will accelerate its evaluation of the Connemara oilfield and surrounding exploration prospects, and will have a significantinterest in the consortium established to drill a large gas prospect in itsDonegal licence in 2006. Looking internationally, Island is continuing to progress its exploration permit application in France, and is also exploring specific potential opportunities in Libya. Island expects oil and gas prices to remain strong, based on increased demandfrom the developing Indian and Chinese economies. The industry demand forquality exploration prospects is increasing and the ability to secure suchprospects on attractive commercial terms is becoming more difficult. In thecurrent exploration market, a successful 2006 drilling campaign should create an opportunity to realise value for Island shareholders through a trade sale ofsome of its equity interest in any new oil or gas discovery, at a time when theratio of the value of reserves in the ground to investment is maximised, usually prior to development drilling. The remaining months of 2005 will be a busy period for Island, and an importantphase in the further development of the Company as it consolidates its confirmed oil and gas discoveries and prospects and prepares to begin a multi-well drilling programme in 2006. Completion of the Lundin Transaction will result in Island gaining a 12.5% share of the gas revenues, net of expenses, which have arisen from the Seven Heads gas production. These revenues will accrue from 1 October 2004, being thecommencement date of the current gas contract. No income or expenditure fromthis source has been reflected in the accounts to 31 January 2005, as theTransaction has not been completed. Island is keen to participate in any viable investment programme designed toincrease future revenues from Seven Heads in 2005 and beyond. It is expectedthat a further announcement regarding completion of the Lundin Transaction willbe made shortly. It remains to me to extend my thanks and appreciation to my fellow Directors for their hard work during the period under review. Bryan BenitzChairman Enquiries: Newman ConsultingLisa J Newman MCIPR MIRS T: +44 (0)1252 878682M: +44(0)7717 500257newmanconsulting@hotmail.com ISLAND OIL AND GAS PLCFINANCIAL INFORMATION(Unaudited) 6 months 9 months ended ended 31 January 31 July 2005 2004PROFIT AND LOSS ACCOUNT Stg£000's Stg£000's Profit on sale of interest in licence and financial 104 0asset Exploration and Licence Expenses (194) (20) Administration expenses(1) (533) (48)_______________________________________________________________________________Operating (Loss) (623) (68) Interest receivable 78 3_______________________________________________________________________________(Loss) before tax (545) (65) Tax (12) (1)_______________________________________________________________________________(Loss) after tax attributable to shareholders (557) (66) Profit and Loss account at beginning of period (66) (1)Foreign Exchange movement on reserves (2) 1_______________________________________________________________________________ Profit and Loss account at end of period (625) (66)_______________________________________________________________________________Loss per share - in pence (2.18) (1)Included in Administration Expenses are Stg£340,000 for Professional Fees inconnection with the recent AIM listing. In addition, share issue expenses of Stg£534,000 were written off against the Share Premium in the period. ISLAND OIL AND GAS PLCFINANCIAL INFORMATION(Unaudited) 31 January 31 July 2005 2004BALANCE SHEET Stg£000's Stg£000's Intangible Assets 2,836 50_______________________________________________________________________________ Current AssetsBank and Cash 8,472 974Debtors 62 7_______________________________________________________________________________ 8,534 981 Creditors: amounts falling due within one year (303) (111)_______________________________________________________________________________ Net Current Assets 8,231 870_______________________________________________________________________________ Net Assets 11,067 920_______________________________________________________________________________ Represented by; Share Capital 298 75Share Premium 11,394 911Profit and loss account (625) (66)_______________________________________________________________________________ Shareholders' Funds 11,067 920_______________________________________________________________________________ ISLAND OIL AND GAS PLCFINANCIAL INFORMATION(Unaudited) 6 months 9 months 31 January 31 July 2005 2004CASH FLOW STATEMENT Stg£000's Stg£000's Net Cash (outflow)/inflow from Operating Activities (557) 36_______________________________________________________________________________ Returns on InvestmentsInterest received 41 3_______________________________________________________________________________ Net Cash inflow from returns on Investments 41 3_______________________________________________________________________________ Capital Expenditure and Financial InvestmentExpenditure on intangible assets (2,786) (50)Sale of Investments 104 0_______________________________________________________________________________ (2,682) (50)_______________________________________________________________________________ Taxation (10) 0_______________________________________________________________________________ Net Cash (outflow) before Financing activities (3,208) (11)_______________________________________________________________________________ Financing ActivitiesIssue of Shares, net of expenses 10,706 985_______________________________________________________________________________ Increase in Cash 7,498 974_______________________________________________________________________________ Reconciliation of Net Cash Flow to movement in Net CashIncrease in Cash during the period 7,498 974Net Cash at start of period 974 0_______________________________________________________________________________ Net Cash at end of period 8,472 974_______________________________________________________________________________ The accounting policies applied in the preparation of the unaudited interimresults are consistent with those used in the preparation of the statutoryfinancial statements for the year ended 31 July 2004 with the followingadditions: Basis of consolidation The consolidated financial statements comprise the financial statements of theparent undertaking and its subsidiary undertakings. The results of companiesacquired are dealt with in the profit and loss account from the date controlpasses. Foreign currencies The results and cashflows of non-sterling group undertakings are translated into sterling using the average exchange rate and related balance sheets have been translated at the rates of exchange ruling at the balance sheet date. Exchange rate differences arising on the translation of results of non-sterling group undertakings and on the restatement of opening net assets are dealt with through retained profit net of differences on related foreign currency borrowings. Transactions denominated in foreign currencies are translated into sterling andrecorded at the rate of exchange ruling at the date of the transaction.Monetaryassets and liabilities arising in foreign currencies are translated into euro at the rate of exchange ruling at the balance sheet date. Profits and losses arising from exchange differences have been included in theprofit and loss account. Intangible fixed assets Oil and gas interests The cost of acquiring oil and gas interests are included as intangible assetsand are amortised over the expected useful lives of the related oil and gasinterests once the commercial viability of the interests has been established.Prior to establishing the commercial viability of the interests they are carried at cost. The oil and gas interests are reviewed at least annually for impairment and arewritten down if impairment has occurred. Ends. -------------------------- This information is provided by RNS The company news service from the London Stock Exchange