20 Apr 2009 07:00
| For Immediate Release | 20 April 2009 |
GLOBAL ENERGY DEVELOPMENT PLC
("Global" or the "Company")
AUDITED FINAL RESULTS FOR THE YEAR ENDED 31 DECEMBER 2008
Global Energy Development PLC, the Latin America focused petroleum exploration and production company (LSE-AIM: "GED"), announces its audited final results for the year ended 31 December 2008.
Highlights:
New additional pay zones identified; and
Commercial hydrocarbon production established in the new Boral prospect area.
* The industry average price for WTI crude oil in 2008 was $99.57, $11.02 higher than the price invoiced by the Company due to the Company producing and selling approximately 59% of its 2008 net production in the second half of 2008 when oil prices were lower.
For further information:
Global Energy Development PLC
Catherine Miles, Company Secretary +44 (0)20 7228 4266
www.globalenergyplc.com +44 (0)7909918034
Matrix Corporate Capital LLP +44 (0)20 3206 7204
| Alastair Stratton | |
| Tim Graham |
Notes to Editors:
The Company's shares have been traded on AIM, a market operated by the London Stock Exchange, since March 2002 (LSE-AIM: "GED"). The Company's balanced portfolio covers the countries of Colombia, Peru and Panama and comprises a base of production, developmental drilling and workover opportunities and several high-potential exploration projects. The Company currently holds seven contracts: five in Colombia; one in Peru; and one in Panama.
Proven and probable oil and gas reserves are estimated quantities of commercially producible hydrocarbons which the existing geological, geophysical and engineering data show to be recoverable in future years from known reservoirs. The proved reserves reported by Ralph E. Davis Associates, Inc. ("Ralph E. Davis"), independent petroleum engineers, conform to the definition approved by the Society of Petroleum Engineers ("SPE") and the World Petroleum Council ("WPC"). The probable and possible reserves reported by Ralph E. Davis conform to definitions of probable and possible reserves approved by the SPE/WPC using the deterministic methodology.
The information contained within this announcement has been reviewed by Ralph E. Davis.
In addition, the information contained within this announcement has been reviewed by Mr. Stephen Voss, a Director of the Company, for the purpose of the Guidance Note for Mining, Oil and Gas Companies issued by the London Stock Exchange in respect of AIM companies which outlines standards of disclosure for natural resource projects. Mr. Voss is a Registered Professional Engineer in Texas and has been a Member of SPE for 26 years.
EXECUTIVE CHAIRMAN'S STATEMENT
2008 saw the Company report record annual financial results in terms of revenue, gross profit and profit before and after tax. This was primarily as a result of the oil price surge during the first half of the year and new production volumes being added during the second half due to drilling successes in the Colombian Rio Verde contract area.
It was unfortunate that these new production volumes coincided with the swift decline in the oil price during the second half of 2008, and the altered oil price environment has led the Company to be particularly focused on cash management and efforts to improve cash flow from operations.
The drilling successes in the Rio Verde contract area, and subsequent independent analysis of the area, has resulted in several significant prospects being identified and this contract will now take priority in the Company's near-term plans, with expenditure focused on the quick payout development opportunities existing there.
The Rio Verde contract was one constituent of the increase in the Company's reserves reported as at 31 December 2008. The values reported for each reserve category, even at a depressed year end oil price, highlight the pipeline of value able to be realised when cash resources are available.
The Company is currently undertaking a number of initiatives to apportion the cash flow generated from production to areas of the Company's portfolio that will provide quick benefits, and while any petroleum production company remains at the mercy of the oil price, the Company has taken necessary actions to ultimately prosper in an industry that remains integral.
Mikel Faulkner
Executive Chairman
20 April 2009
VICE CHAIRMAN'S REVIEW OF OPERATIONS
Financials
Revenue for the year ended 31 December 2008 was $32.8 million, 20.2% higher than the prior year (2007: $27.3 million) as a result of increased production and a higher average price for WTI crude oil. Gross production during 2008 was 504,636 barrels of oil ("bbls") (2007: 478,030 bbls), with production net to the Company of 438,007 bbls (2007: 413,775 bbls). Despite Lease Operating Expenses ("LOE") being higher primarily as a result of increased oil transportation costs and equipment rental due to drilling activity and new production, gross profit was $17.3 million, an improvement of 25.9% against the prior year (2007: $13.8 million). Operations and general and administrative expenses were slightly increased over the prior year at $6.3 million (2007: $5.8 million) due to an increased number of employees and consultants as a result of the drilling activity. The peak number of employees plus consultants in 2008 was 74 but in efforts to reduce costs in line with the decline in the oil price, the number of employees plus consultants now stands at 58. Operating profit for 2008 was, therefore, $11.1 million (2007: $9.9 million), profit before tax was $9.9 million (2007: $8.9 million) and net income was $7.3 million (2007: $7.0 million).
The Company's average operating cash netback per barrel, this being average sales less royalties and other operating costs and taxes, was $35.31 against an average price for WTI crude oil invoiced by the Company of $88.55 (2007: average operating cash netback per barrel $30.44; average price for WTI invoiced $72.48). The industry average price for WTI crude oil in 2008 was $99.57, $11.02 higher than the price invoiced by the Company due to the Company producing and selling approximately 59% of its 2008 net production in the second half of 2008 when oil prices were lower. The Company's average net wellhead price after oil transport and quality adjustments was $75.90 (2007: $66.18).
2008 Reserve Report
The independent petroleum engineers Ralph E. Davis reported that, as at 31 December 2008, proved reserves net to the Company totalled 64.3 million barrels of oil equivalent ("BOE") (as at 31 December 2007: 4.6 million BOE), proved plus probable ("2P") reserves net to the Company totalled 131.0 million BOE (as at 31 December 2007: 15.2 million BOE) and proved plus probable plus possible ("3P") reserves net to the Company totalled 254.6 million BOE (as at 31 December 2007: 64.9 million BOE).
The considerable increase in all the reserve categories has arisen predominately due to Ralph E. Davis re-evaluating all the historic data available on the Company's contract areas, rebasing the previously recorded reserves, adding in newly available data and then conforming exactly to the definitions of proved, probable and possible reserves approved by: Society of Petroleum Engineers ("SPE"); World Petroleum Council ("WPC"); American Association of Petroleum Geologists ("AAPG"); and Society of Petroleum Evaluation Engineers ("SPEE"). In addition, the Company had drilling successes during 2008, and lower forecasted future oil prices when compared to last year increased the time period until the Company's cost recovery and, therefore, the timing of Ecopetrol's back-in at two Colombian contracts. The most notable increases in reserves occurred within the Colombian Bocachico and Bolivar and Peruvian Block 95 contracts due to the volumetric effect of calculating reserves at the subsurface point of lowest known oil based on all available data and analysis.
The closing WTI crude oil price as at 31 December 2008, the date of the Reserve Report, was $44.60 per barrel, an approximate 54% reduction against 2007 (2007: 31 December 2007: $95.98). Based upon this starting price, the Net Present Value at a 10% discount ("NPV10") of the proved reserves was $971 million (2007: $214 million). The NPV10 of the 2P reserves totalled $1.5 billion (2007: $641 million) and the NPV10 of the 3P reserves totalled $2.3 billion (2007: $2.5 billion).
Overview of Contracts and Activities
Colombia
All the Company's contracts in Colombia, bar the Rio Verde contract, are in the exploitation phase and as such do not have any significant pending contractual commitments and, therefore, only a minimal obligatory spend.
The Rio Verde contract area has experienced growth in gross production from 600 barrels of oil per day ("bopd") to over 1,000 bopd during 2008 as a result of the drilling success of the Boral 1 and Tilodiran 3 wells. New additional pay zones were also opened in the lower Gacheta and upper Mirador formations with a total of five productive formations having now been tested in the Rio Verde area: the massive Ubaque; upper Ubaque; lower Gacheta; upper Gacheta; and Mirador formations. Importantly, the Boral 1 well established commercial hydrocarbon production in the new Boral prospect area to the east of the expanding Tilodiran field. Additional wells are now being planned for both the Boral and Tilodiran field areas, with number and locations dependent on the interpretation of seismic which is planned to be acquired during 2009.
The Company recently accepted all the conditions of an amendment to the Rio Verde contract whereby Phases IV and V are collapsed into one phase ending May 2010, therefore, substituting the need to drill a well by May 2009. Under the revised confirmed terms, by May 2010 the Company must now acquire approximately $4.0 million of mostly 3D seismic and drill an exploratory well.
The Cajaro 1 and Estero 5 wells within the Alcaravan contract area were shut-in during February 2009 due to surface mechanical reasons. The depressed oil price and prevailing LOE made these two wells as well as the Estero 1 & 2 wells potentially uneconomical. Therefore, the Company petitioned and received permission to suspend these wells temporarily. These four wells will be re-evaluated in the event of higher oil prices and ongoing initiatives to reduce LOE. Before they were shut-in, these four wells contributed approximately 280 bopd gross together with 14,000 barrels of water per day.
There was no significant spend on the Bocachico and Bolivar contracts during 2008 and the Company is considering options to realise the reserves on these contracts, one of which is commercial partnering.
As stated above, LOE increased in 2008 but LOE has now been cut by approximately 22% from the average in the fourth quarter of 2008 and the further reduction of LOE is a high priority for the Company. Efforts are focused on three initiatives: the purchase of Colombian national grid power to replace site generated power which uses high-cost diesel fuel; the elimination of temporary field rental equipment; and reduction of trucking transport costs for oil sales by engaging oil purchasers in closer proximity to the Rio Verde contract area. These efforts are progressing well. In March 2009, for example, a contract was signed with Perenco as the primary buyer of the Company's oil due to it being a more convenient delivery location for the Rio Verde contract production, which now forms the bulk of the Company's daily production volumes.
The Company continues to have an outstanding receivable from Ecopetrol in relation to the Cajaro 1 well production dispute, currently amounting to $4.5 million along with a provision made against it of $2.4 million. The production dispute is ongoing and the Company continues to expect a protracted process to resolve it. The Company is now reviewing arbitration procedures and rules and continues to believe it will be successful in the technical arbitration.
Peru In October 2008, the Company finally received approval from the Peruvian Ministry of Energy and Mines in relation to the Environmental Impact Study ("EIS") at the Block 95 contract area. Therefore, the Company now has approval for its seismic and drilling plans related to the Bretana field and other nearby areas. The current obligations under the contract require the Company to have contracted for a $2.0 million seismic acquisition programme prior to the end of 2009. Contractors are being contacted and are expected to be available for the programme.
Panama
In Panama, the location of the Company's only pure exploration project, the Company complied with the initial Phase 1 work commitments of the Garachine contract, including the mapping of a number of seismically defined geologic features that appear to be reefal in nature.
The Company is currently planning the magnetic studies that are required under the extension sought by the Company and previously granted by the Directorate of Hydrocarbons. It is the Company's intention to conduct these studies to better understand the nature of the geologic structures in the contract area, especially in regard to distinguishing between buried non oil-bearing volcanoes and oil-bearing carbonate pinnacle reefs and buildups.
Conclusion
Although the oil industry has been challenging of late due to the oil price decline, almost all commentators point to an improving price. The immediate focus for the Company is improving gross profit margins by reducing LOE further and using the hoped for additional cash flow to expand the production base.
The Rio Verde contract will take precedence through 2009 with the Block 95 contract also building in terms of activity levels towards the end of the year. Several initiatives to realise the considerable reserve base will also be considered. With all these projects in the pipeline or already underway, the Company continues to make progress despite the current industry environment.
Stephen Voss
Vice Chairman
20 April 2009
FINANCIAL INFORMATION
| Consolidated Income Statement | ||||
| For the year ended 31 December 2008 | ||||
| Note | 2008 $'000 | 2007 $'000 | ||
| Revenue | 2 | 32,800 | 27,289 | |
| Cost of sales | (15,461) | (13,514) | ||
| Gross Profit | 17,339 | 13,775 | ||
| Other income | 122 | 678 | ||
| Other income - correction of miscellaneous income | - | 1,240 | ||
| 122 | 1,918 | |||
| Administrative costs | (6,304) | (5,841) | ||
| Operating Profit | 11,157 | 9,852 | ||
| Finance income | 183 | 164 | ||
| Finance expense | (1,417) | (1,141) | ||
| Profit before taxation | 9,923 | 8,875 | ||
| Income tax expense | (2,627) | (1,882) | ||
| Profit after taxation for the year | 7,296 | 6,993 | ||
| Earnings Per Share | 3 | |||
| - Basic | $ 0.21 | $ 0.20 | ||
| - Diluted | $ 0.20 | $ 0.19 | ||
Consolidated statement of changes in equity
| Share Capital | Capital Reserve | Share Premium | Retained Earnings | Other Reserve | Total | |
| At 1 January 2007 | 539 | 210,844 | 26,439 | (174,016) | 1,826 | 65,632 |
| Profit for the period | - | - | - | 6,993 | - | 6,993 |
| Total recognised income and expense for the period | - | - | - | 6,993 | - | 6,993 |
| Share based payment | - | - | - | 480 | - | 480 |
| At 1 January 2008 | 539 | 210,844 | 26,439 | (166,543) | 1,826 | 73,105 |
| Profit for the period | - | - | - | 7,296 | - | 7,296 |
| Total recognised income and expense for the period | - | - | - | 7,296 | - | 7,296 |
| Share based payment | - | - | - | 165 | - | 165 |
| At 31 December 2008 | 539 | 210,844 | 26,439 | (159,082) | 1,826 | 80,566 |
| Consolidated Balance Sheet | ||||
| As at 31 December 2008 | ||||
| 2008 $'000 | 2007 $'000 | |||
| Assets | ||||
| Non-current assets | ||||
| Intangible assets | 5,358 | 4,419 | ||
| Property, plant and equipment | 98,294 | 82,499 | ||
| Deferred tax assets | 1,214 | 288 | ||
| 104,866 | 87,206 | |||
| Current assets | ||||
| Inventories | 1,290 | 884 | ||
| Trade and other receivables | 5,245 | 9,367 | ||
| Term deposits | 1,508 | 1,831 | ||
| Cash & cash equivalents | 3,722 | 4,602 | ||
| 11,765 | 16,972 | |||
| Total assets | 116,631 | 103,890 | ||
| Liabilities | ||||
| Current liabilities | ||||
| Trade and other payables | (7,099) | (4,223) | ||
| Non-current liabilities | ||||
| Convertible loan notes | (16,197) | (15,810) | ||
| Deferred tax liabilities | (11,768) | (10,010) | ||
| Long term provisions | (1,001) | (674) | ||
| Other payables | - | (68) | ||
| (28,966) | (26,562) | |||
| Total liabilities | (36,065) | (30,785) | ||
| Net assets | 80,566 | 73,105 | ||
| Capital and reserves attributable to equity holders of the company | ||||
| Share capital | 539 | 539 | ||
| Share premium | 26,439 | 26,439 | ||
| Other reserve | 1,826 | 1,826 | ||
| Capital reserve | 210,844 | 210,844 | ||
| Retained losses | (159,082) | (166,543) | ||
| Total equity | 80,566 | 73,105 |
| Consolidated Cash Flow Statement | ||||
| For the period ended 31 December 2008 | ||||
| 2008 $'000 | 2007 $'000 | |||
| Cash flows from operating activities | ||||
| Operating profit before interest and taxation | 11,157 | 9,852 | ||
| Depreciation, depletion and amortisation | 6,356 | 6,805 | ||
| Write-off unsuccessful exploration costs | - | 65 | ||
| Decrease/(Increase) in trade and other receivables | 3,321 | (5,939) | ||
| (Increase)/decrease in inventories | (406) | 115 | ||
| Increase in trade and other payables | 2,412 | 767 | ||
| Increase in long-term provisions | 127 | 66 | ||
| Accretion expense on convertible notes | 387 | 283 | ||
| Provision against unitisation receivable | 800 | 1,050 | ||
| Loss on disposal of assets | 25 | - | ||
| Other non-cash items | 46 | 63 | ||
| Shared based Payment | 165 | 480 | ||
| Cash generated from operations | 24,390 | 13,607 | ||
| Income taxes paid | (2,178) | (1,202) | ||
| Net cash flows from operating activities | 22,212 | 12,405 | ||
| Investing activities | ||||
| Capital expenditure and financial investment | ||||
| - Expenditure on tangible fixed assets | (21,810) | (12,242) | ||
| - Expenditure on intangible fixed assets | (939) | (1,040) | ||
| Disposal of PPE | 46 | 108 | ||
| Interest received | 183 | 164 | ||
| Decrease/ (Increase) in short-term deposits | 323 | (938) | ||
| Net cash flows from investing activities | (22,197) | (13,948) | ||
| Financing activities | ||||
| Interest paid | (895) | (810) | ||
| Net cash flows from financing activities | (895) | (810) | ||
| (Decrease) in cash and cash equivalents | (880) | (2,353) | ||
| Cash and cash equivalents at beginning of year | 4,602 | 6,955 | ||
| Cash and cash equivalents | 3,722 | 4,602 |
ABRIDGED NOTES TO THE FINANCIAL INFORMATION
For the twelve months ended 31 December 2008
1. Basis of Preparation
The financial statements of the Group for the twelve months ended 31 December 2008 have been prepared in accordance with International Financial Reporting Standards, International Accounting Standards and Interpretations (collectively IFRS) issued by the International Accounting Standards Board (IASB) as adopted by European Union.
2. Segmental analysis
In the opinion of the Directors, the operations of the Group companies comprise one single class of business including oil and gas exploration, development and production of oil and gas reserves, and the sale of hydrocarbons and related activities. The Group operates in one geographic area, Latin America.
3. Earnings per share (EPS)
Basic earnings per share amounts are calculated by dividing profit for the period attributable to ordinary equity holders of the parent by the weighted average number of ordinary shares outstanding during the year.
Diluted earnings per share amounts are calculated by dividing profit for the period attributable to ordinary equity holders of the parent by the weighted average number of ordinary shares outstanding during the year, plus the weighted average number of shares that would be issued on the conversion of dilutive potential ordinary shares into ordinary shares. The calculation of the dilutive potential ordinary shares related to employee and director share option plans includes only those options with exercise prices below the average share trading price for each period.
| 2008 $'000 | 2007 $'000 | |
| Net profit attributable to equity holders used in basic calculation ($'000) | 7,296 | 6,993 |
| Add back interest and accretion charge in respect of convertible loan notes ($'000) | 1,281 | 970 |
| Net profit attributable to equity holders used in dilutive calculation ($'000) | 8,577 | 7,963 |
| Basic weighted average number of shares | 35,328,428 | 35,328,428 |
| Earnings Per Share | ||
| - Basic | $0.21 | $0.20 |
| - Diluted | $0.20 | $0.19 |
| Dilutive potential ordinary shares | ||
| Shares related to convertible notes | 4,565,027 | 4,565,027 |
| Employee and Director share option plans | 3,755,196 | 3,145,196 |
| Diluted weighted average number of shares | 43,648,651 | 43,038,651 |
The calculation of the diluted EPS assumes all criteria giving rise to the dilution of the EPS are achieved and all outstanding share options are exercised.
4. Post balance sheet events
On 16 April 2009, the Company accepted all the conditions of an amendment to the Colombian Rio Verde contract whereby Phases IV and V are collapsed into one phase ending May 2010, therefore, substituting the need to drill a well by May 2009. Under the revised confirmed terms, by May 2010 the Company must now acquire approximately $4.0 million of mostly 3D seismic and drill an exploratory well.
- Ends -