IOG.L Regulatory News (IOG)

26 Jan 2006 07:00

Island Oil and Gas PLC26 January 2006 26 January 2006 ISLAND OIL & GAS PLC PRELIMINARY RESULTS FOR THE YEAR ENDED 31 JULY 2005 Island Oil & Gas plc ("Island" or the "Company"), today announces itspreliminary results for the year-ended 31 July 2005. These are the first set ofpreliminary results since the Company's admission to AIM in December 2004. FINANCIAL HIGHLIGHTS: * Turnover of Stg£484,000 from gas sales * Reduced loss before tax of Stg£127,000 * Retained cash balances of Stg£8.366 million (excluding the Stg£8.31 million proceeds of the December 2005 private placing) HIGHLIGHTS * August 2004 - Island executed an option agreement with Marathon Oil Ireland Ltd giving the Company an exclusive option to explore the oil and gas bearing reservoirs underlying the Kinsale gas accumulation. * October 2004 - Island acquired Island Expro Ltd, adding Licensing Options 03/4 (Old Head of Kinsale) and 04/2 (Schull Prospect) and the benefit of an August 2004 15% farm-out agreement with Petroceltic International plc over 03/4. * November 2004 - Island raised Stg£8.24 million by way of a private placing at 40p per share. * December 2004 - Island completed its successful admission to AIM. Island also executed a sale and purchase agreement with Lundin Petroleum AB which was subsequently completed in June 2005. * January 2005 - Island executed a farm-in agreement with Ramco Donegal Ltd and Sunningdale Donegal Basin Ltd over Frontier Exploration Licence 1/05 in the Donegal Basin, gaining a 26% interest in the Licence * April 2005 - Island announced its interim results for the six months ended 31 January 2005, reporting a loss before tax of Stg£545,000 and retained cash balances of Stg£8.472 million. * June 2005 - Island announced the completion of the Lundin Transaction, adding important acreage and commercial agreements related to the use of Celtic Sea infrastructure and gas sales agreements, as well as net production and revenue from Seven Heads after 1 October 2004. Also in June, Licence Extensions were granted for Licensing Options 03/5 and 03/6 both acquired as part of the Lundin Transaction. Post year end: * August 2005 - Island was awarded Frontier Exploration Licence 3/05 in the Northeast Rockall Basin. * October 2005 - Island executed a rig contract with Petrolia Drilling Limited for the Petrolia semi-submersible drilling unit for a three-well programme offshore Ireland in 2006. * December 2005 - Island successfully raised Stg£8.31 million by way of a private placing at 70p per share, with a further Stg£4.15 million receivable in April 2006 if all the warrants associated with the placing are exercised. We expect the Annual Report to be posted on 27 January 2006. This 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, we have successfully developed a portfolio of Irish oil and gas interests that includes nine previous oil and gas discoveries and aninterest in a producing field. We operate and have large equity interests inmost of these projects. "During the year we have matured three projects which are ready for drilling in2006 and, most importantly, have secured a drilling rig and substantial fundingand support from the investment community in Ireland and the United Kingdom toimplement and execute a sustained drilling programme during the first half of2006. This programme places the Company in an excellent position to enhanceshareholder returns during 2006." Enquiries: Lisa J NewmanNewman ConsultingTel: +44 (0)1252 878682 ISLAND OIL & GAS PLC PRELIMINARY RESULTS FOR THE YEAR ENDED 31 JULY 2005 CHAIRMAN'S STATEMENT We have spent the past year rapidly developing a portfolio of Irish oil and gasinterests that includes nine previous oil and gas discoveries and an interest in a producing field. We operate and have large equity interests in most of these projects. During the year we have matured three projects which are ready for drilling in2006 and, most importantly, have secured a drilling rig and substantial fundingand support from the investment community in Ireland and the United Kingdom toimplement and execute a sustained drilling programme during the first half of2006. This programme places the Company in an excellent position to enhanceshareholder returns during 2006. In the months preceding our successful AIM Admission, we added a number ofimportant projects to our portfolio. In August 2004, we executed an optionagreement with Marathon Oil Ireland Ltd giving us an exclusive option to explorethe oil and gas bearing reservoirs underlying the Kinsale gas accumulation. InOctober 2004, Island acquired Island Expro Ltd, adding Licensing Options 03/4(Old Head of Kinsale) and 04/2 (Schull Prospect), strategically adjacent to theSeven Heads and Kinsale Head gas infrastructure, and also the Company acquiredthe benefit of an August 2004 farm-out agreement with Petroceltic Internationalplc. November 2004 saw Island successfully complete a private placing at 40p pershare, raising Stg£8.24 million ahead of its Admission to AIM in December 2004.We believe that the AIM listing has been extremely important in the developmentof the Company. Following the AIM Admission, Island has continued to deliver upon its statedstrategy. In December 2004, we executed a sale and purchase agreement withLundin Petroleum AB ("Lundin") for a portfolio of offshore Irish assets. InJanuary 2005, the Company executed a farm-in agreement with Ramco Donegal Ltd and Sunningdale Donegal Basin Ltd for Frontier Exploration Licence 1/05 in the Donegal Basin, gaining a 26% interest in the Licence and adding important acreage in the under-explored but highly prospective Atlantic Margin. In June 2005, Island reached an important milestone in the development of theCompany's project portfolio with the announcement of the completion of theLundin Transaction. The Transaction added important acreage, including a 12.5%participating interest in the Seven Heads Petroleum Lease (Seven Heads gas) anda 12.5% debt-free interest in the Seven Heads infrastructure; a 12.5% interestin Licensing Option 03/5 covering Seven Heads oil; a 22% participating interestin Licensing Option 03/6 (Roscarberry Licensing Option), and an Option, which Island exercised post year end, to acquire a further 5%groundfloor interestin Frontier Exploration Licence 1/05 in the Donegal Basin. In June 2005, LicenceExtensions were granted for Licensing Options 03/5 and 03/6 both acquired aspart of the Lundin Transaction. The Transaction also gave us importantcommercial agreements with Marathon Oil Ireland Limited ("Marathon") for accessto the Kinsale production facilities for the processing of our share of Seven Heads production, and with RWE Trading (Ireland) Limited ("RWE") to provide a sales outlet for gas production. In addition, it provided net production and revenue from Seven Heads gas from 1 October 2004. Post year end, in August 2005, Island has been awarded Frontier ExplorationLicence 3/05 (the 'Killala Licence') in the Northeast Rockall Basin, addingimportant acreage in the Atlantic Margin. The Company has a 100% interest andoperatorship in the Licence which is located approximately 70 kilometres off thewest coast of Ireland and approximately 35 kilometres north of the Corrib gasfield. The Licence contains one very significant exploration prospect covering an area of up to 80 square kilometres, together with a number of other prospects and leads. In October 2005, we successfully executed a rig contract for a three-wellprogramme offshore Ireland in 2006 with Petrolia Drilling Limited despite ahighly competitive market for offshore drilling rigs. The drilling programmewill see us drill two Celtic Sea wells and one Donegal Basin well. It is plannedthat the Celtic Sea wells will include a well on the Old Head of KinsaleProspect in Licensing Option 03/4, which can now be converted into anExploration Licence. The second Celtic Sea well, subject to government andpartner approvals, may be an appraisal well on the Seven Heads Petroleum Leaseclose to existing infrastructure and designed to extend the area of provenreserves and significantly increase Island's production revenues from 2007onwards. Alternatively, a well may be drilled to test the Schull South Prospecton Schull Licensing Option 04/2 which can now also be converted to an Exploration Licence. In the Atlantic Margin, we will be drilling a well on the Inishbeg Prospect in Frontier Exploration Licence 1/05 in theDonegal Basin during 2006. The Inishbeg Prospect is in shallow water and anyproduction could either be exported to Northern Ireland, or via existingpipelines to the United Kingdom mainland. Outside Ireland, we have been pursuing strategic opportunities where the Companyand its key management can apply their technical skills and country experience.These include an offshore exploration permit application in the Aquitane Basinin southwest France for the Arcachon (formerly Cap Feret) Permit. Island iscompeting for the exploration permit with Vermilion REP SAS ("Vermilion"), aCanadian company and currently the largest oil producer in France. Island awaitsa response from the French Ministry on the timing of a potential award of theexploration permit. The Company is also pursuing potential new projects inLibya, the Netherlands and East Timor, all of which are at an early stage. Financial Review The funds required to facilitate the expansion of the Company, and therealisation of our planned exploration programme, have been raised in twotranches. In November 2004, prior to Island's Admission to AIM, a privateplacing raised some Stg£8.24 million in new equity finance. These shares wereissued at 40p per share. In December 2005, a further placing was arranged at a price of 70p per share toraise Stg£8.31 million gross. A further Stg£4.15 million is receivable by theCompany in April 2006, if the warrants attached to the placing shares areexercised. Both of these placings expanded our shareholder base and brought in investmentfrom both existing and new institutional and private investors. Meantime, the gross gas revenue from our interest in Seven Heads from theeffective date, 1 October 2004, through to the 31 July 2005 year end amounted tosome Stg£484,000. The profit arising from the gas sales has helped us achieve asubstantial reduction in the Stg£545,000 loss before tax as reported in ourinterim accounts (for the six months ended 31 January 2005) down to theStg£127,000 loss before tax for the year ended 31 July 2005. I am also pleased to report that our cash balances at the year end remained at ahealthy Stg£8.366 million (which of course excludes the Stg£8.31 million raisedvia the December 2005 private placing). This compares favourably with theStg£8.472 million in our balance sheet at 31 January 2005 given the level ofexpenditure on both exploration and corporate activity during the period. Board Changes During the year under review we outsourced most of our exploration andadministration requirements. Now with more projects and the development of our2006 drilling programme, over a very short time scale, we are activelyrecruiting more personnel, mostly on short-term contracts, to assist us tosuccessfully manage and operate our drilling programme. The acquisition of theSeven Heads producing gas interest provides us with cashflow to help meet ourprojected personnel and administrative expenses. Post year end, we are expanding the Board with the appointment of Terry Jones asFinance Director. Terry joins Island with a wealth of commercial and financialexperience and negotiating skills arising from his management under verydifficult circumstances of the Seven Heads Gas Sales Contract for Ramco Energyplc. Our Acting Finance Director, Jack McKinney, will replace Phil Beck asCommercial Director whilst Phil will move to take up the role of New VenturesDirector. These changes will end the temporary arrangements put in place onlisting the Company in 2004 and will result in the above individuals being ableto focus on those areas of the business to which their expertise is most suited. We also are taking steps to appoint a further new Director with responsibilityfor operations, including the 2006 drilling programme and the planning andexecution of a 2007 drilling programme, subject to rig availability, on ourAtlantic Margin licences. Outlook The year under review has seen Island successfully pursue our stated strategy;adopting our synergy-based approach to appraisal and exploration, complementedby strategic acquisitions. We are optimistic about the future. After many years of low energy prices andoversupply the market has stabilised with medium term forecasts being made of asustainable oil and gas price at a level significantly higher than thoseprevailing when Island's portfolio of oil and gas discoveries were first made. Our increased production revenues from the Seven Heads gas field during the past year reflect this new energy pricing environment and have established Island's position as a producer of natural gas in Ireland. Worldwide the oil and gas industry is in a growth phase with high energy pricesand there is now an increased interest in new oil and gas projects, particularlythose where previously non-commercial or technically challenging oil and gasdiscoveries have been made but remain undeveloped. Economic thresholds for thedevelopment of such discoveries have been adjusted to reflect higher energyprices. Our experience over the last year demonstrates this with the Companyreceiving a number of unsolicited approaches to review and evaluate itsportfolio of Irish oil and gas interests. The investment market is also supportive of exploration and productioncompanies. Investment continues at a high level and many investors have seensubstantial returns from the sector in the last two years. This is supported bythe fact that post year end we successfully completed a private placing (at 70pper share) within a very short timescale to raise Stg£8.31 million inclusive ofexpenses and a further Stg£4.15 million if warrants are exercised by April 2006. The 2006 drilling programme is focused on gas exploration and appraisal and isdesigned to present a well-balanced profile of low to high risk prospects withthe potential to secure at the low end of the risk profile early cash flow,through tie-back of new discoveries to existingCeltic Sea infrastructure, and to secure at the high end of the risk profile,through the Inishbeg Prospect in the Donegal Basin, the potential to transformthe Company through the discovery of a major new gas resource in shallow water. Notwithstanding the above we are also beginning the process of planning, subjectto rig availability, our 2007 drilling programme which will focus on exploringour deepwater Killala Prospect in the Rockall Basin which, if successful, hasthe potential to be the largesthydrocarbon discovery made to date in Irish waters as well as continuingappraisal and development of our Connemara and Seven Heads oil discoveries. We will continue to seek to expand the geographic spread of our oil and gasinterests during 2006 and we look forward as a first step in this process to thepossible award of an exploration permit in France. The substantial progress made by the Company during the past year would not havebeen possible without the dedication and total commitment shown by the Board ofDirectors of the Company to deliver that which we set out to achieve in our AIMadmission document. We would also like to thank the Company's many professionaland technical advisors for their advice and assistance during what has been an extraordinarily active year for the Company Bryan BenitzChairman CONSOLIDATED PROFIT AND LOSS ACCOUNTFor the year ended 31 July 2005 Year ended Period ended 31 July 31 July 2005 2004 Stg£'000 Stg£'000 Turnover 484 -Cost of sales (263) - ___________ __________Gross profit 221 - Profit on sale of interest in licence and sale of financial asset 104 -Exploration and licence expenses - (20)Administration expenses (728) (48) ____________ ___________ Operating loss - continuing operations (403) (68)Interest receivable and similar income 276 3 ____________ ____________ Loss on ordinary activities before taxation (127) (65)Taxation on loss on ordinary activities (21) (1) ____________ ____________ Loss for the financial year (148) (66)Profit and loss account at beginning of year (66) (1)Foreign exchange movement on reserves - 1 ____________ ____________ Profit and loss account at end of year (214) (66) ____________ ____________ ____________ ____________ Loss per share (pence) (0.0042) (0.0083) ____________ ___________ ____________ ___________ STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSESFor the year ended 31 July 2005 Year ended Period ended 31 July 31 July 2005 2004 Stg£'000 Stg£'000 Loss for financial year (148) (66)Unrealised profit on disposal of 47 -intangible asset ____________ ____________ Total recognised gains and losses for the financial year (101) (66) _____________ ____________ CONSOLIDATED BALANCE SHEETAt 31 July 2005 31 July 31 July 2005 2004 Stg£'000 Stg£'000Fixed assetsTangible assets 2,617 -Intangible assets 3,309 50 _____________ ___________ 5,926 50 _____________ ___________Current assetsBank and cash 8,366 974Debtors 245 7 _____________ ___________ 8,611 981 Creditors: amounts falling due within one year (205) (111) _____________ ____________ Net current assets 8,406 870 _____________ ____________ Total assets less current liabilities 14,332 920Provision for liabilities and charges (617) - _____________ ____________ Net assets 13,715 920 _____________ ____________ _____________ ____________ Capital and reservesCalled up share capital 326 75Share premium 13,556 911Unrealised reserve 47 -Profit and loss account (214) (66) _____________ _____________ _____________ _____________ Shareholders' funds - equity 13,715 920 CONSOLIDATED CASHFLOW STATEMENTFor the year ended 31 July 2005 Year ended Period ended 31 July 31 July 2005 2004 Stg£'000 Stg£'000 Net cash (outflow)/inflow from operating activities (416) 36 Returns on investments and servicing of finance 276 3Corporation tax (27) -Capital expenditure and financial investment (343) (50) Acquisition of subsidiary undertakings 200 - ___________ _____________ Net cash outflow before financing (310) (11) Financing 7,702 985 ____________ ____________ Increase in cash for the year 7,392 974 ____________ ____________ ____________ ____________ This information is provided by RNS The company news service from the London Stock Exchange