NAUT.L Regulatory News (NAUT)

22 Feb 2006 07:02

Global Energy Development PLC22 February 2006 Immediate Release 22 February 2006 GLOBAL ENERGY DEVELOPMENT PLC UNAUDITED PRELIMINARY RESULTS FOR THE YEAR ENDED 31 DECEMBER 2005 "Record Financial Results" Global Energy Development PLC ("Global" or the "Company"), the Latin Americafocused petroleum exploration and production company (LSE-AIM: "GED"), todayannounces unaudited results for the year ended 31 December 2005. Financial Highlights •Turnover up 74% to $19,045,000 (2004: $10,974,000) •Gross profit up 74% to $9,290,000 (2004: $5,349,000) •Profit before tax up 63% to $5,094,000 (2004: $3,127,000) •Finding and development cost of $6.88 per proved barrel for the year ended 31 December 2005 •Average cash netback per barrel of $29.15 in 2005 •Capital expenditure in 2005, fully funded from cash flow and cash available, up 114% against 2004 at $18,603,000 €2006 capital expenditure anticipated to be up to $26,000,000, again expected to be fully funded from cash flow from production and cash available Operational Highlights •Acreage position enlarged by almost 74% in 2005 to approximately 5.16 million acres as at 31 December 2005 •Independently audited proved and probable reserves enlarged to 17,474,000 BOE as at 31 December 2005 •Proved and probable reserve replacement ratio for 2005 of approximately 327% •Exited 2005 with several new high-potential exploration assets and production from five Colombian contracts •Two new contracts and a new Technical Evaluation Agreement secured in Colombia during 2005, 100% owned by Global as with all other contracts •Two new contracts pending in both Colombia and Peru following proposals submitted in late 2005 €80% of 2006 capital expenditure to be directed at exploration activities Commenting on the results for 2005 and outlook for the Company, Mikel Faulkner,Chairman, and Stephen Voss, Managing Director, said: "The year ended 31 December 2005 continued the Company's record of unbrokengrowth since its listing on the AIM Market of the London Stock Exchange in March2002. In addition to record financial results achieved through enlargedproduction, historically high oil prices and a new crude oil sales contract, theCompany has added considerable potential in 2005, unrivalled by any other yearsince admission, through securing additional exploration acreage and identifyingfuture acreage positions which should considerably transform the Company. Global benefits from its long association in Latin America and unblemished,extensive operating history in its countries of choice. These qualities alongwith the extensive prospects already secured, validated by an independentreserve engineering company and all 100% owned by Global, should enable theCompany to continue to prosper and grow. 2006 looks to be a very active andtransitional year for Global." For further information: Global Energy Development PLCCatherine Miles, director of Investor Relations +44 (0) 20 7763 7177www.globalenergyplc.com +44 (0) 7909918034 Notes to Editors: Global has been listed on the AIM Market of the London Stock Exchange sinceMarch 2002. The Company currently holds approximately 5.16 million acres througheight contracts in Colombia and Peru, an exclusive Technical EvaluationAgreement ("TEA") in Colombia and a concluded exclusive TEA in Panama which isin the process of being converted into an exclusive contract. Global's portfoliocomprises production from five contracts, developmental drilling and workoveropportunities and several high-potential exploration projects. All Global'scontracts and agreements are 100% owned by Global. CHAIRMAN'S STATEMENT The year ended 31 December 2005 continued the Company's record of unbrokengrowth since its listing on the AIM Market of the London Stock Exchange in March2002. In addition to record financial results achieved through enlargedproduction, historically high oil prices and a new crude oil sales contract, theCompany has added considerable potential in 2005, unrivalled by any other yearsince admission, through securing additional exploration acreage and identifyingfuture acreage positions which should considerably transform the Company. The Company held approximately 5.16 million acres under contract or agreement inLatin America as at 31 December 2005, representing an uplift of almost 74%against the acreage held as at 31 December 2004 and placing the Company as oneof the top independent acreage holders in the region. The new acreage secured in2005, through two new contracts and a Technical Evaluation Agreement ("TEA") inColombia, represented a deliberate move to add more high-potential explorationassets with compelling historical data to the existing exploration projects andestablished, lower-risk producing assets which the Company has been aggregatingsince the early 1990s. The Company's producing assets continue to provide a solid financial base andincreasing internal cash resources with which to grow the Company via workovers,developmental drilling, accelerated exploration activities and the sourcing andsecuring of new contracts. The work programme outlined for 2006 should once again boost production and as aresult cash flow in 2006 should be considerably greater than in 2005 allowing afurther substantial increase in capital expenditure in the year and the firstsignificant spend on the Company's exploration projects. Global's reserve report, as prepared by a pre-eminent independent engineeringcompany, validates the Company's confidence in all its prospects and as at 31December 2005, Global's portfolio had a proved and probable reserve life of justunder 40 years based on 2005 net production. The Company's strategy remains the same: to continue building on the prospectrich portfolio focused in Latin America through securing new contracts, all 100%owned by Global, whilst utilising the existing production and lower-risk, nearproduction assets to generate increasing cash flow to fully fund the Company'sexploration projects which are capable of transforming the Company. Global continues to be one of very few established, independent exploration andproduction companies operating in Latin America, a region that has attractedconsiderable new interest in 2005 and looks set to be a region of increasingfocus. With an extensive and diverse work programme and many high-potentialprospects being rapidly progressed, 2006 is likely to be the most exciting yearyet in the Company's history. Mikel FaulknerExecutive Chairman 21 February 2006 MANAGING DIRECTOR'S REVIEW Financials Turnover for the year ended 31 December 2005 was $19,045,000, an increase of 74%against the prior year (31 December 2004: $10,974,000), with gross profit up 74%at $9,290,000 (31 December 2004: $5,349,000). Profit before tax increased by 63%to $5,094,000 (31 December 2004: $3,127,000). These financial results were achieved on production net to Global of 442,805barrels of oil during 2005, an increase of 21% against 2004, and influenced byprevailing historically high oil prices in 2005 and the Company's new crude oilsales contract with Petrobras, the state oil company of Brazil, which came intoeffect on 1 May 2005 and contained improved financial terms for Global. The Company had a finding and development cost of $6.88 per proved barrel in2005. During the year, Global averaged a cash netback per barrel of $29.15compared with $23.09 for 2004. These netback figures are derived after deductingall production costs from net wellhead prices. Reserves As at 31 December 2005, the Company's independent engineers reported that netproved and probable reserves totalled 17,474,000 BOE, an increase of 6% againstthe prior year, with 5,034,000 BOE and 12,440,000 BOE being attributed to provedreserves and probable reserves respectively. Both the proved and probablereserve cases were an improvement against 2004. Of the exploration contractsheld by the Company and listed below, the Bretana field within the PeruvianBlock 95 Area Licence contract was again attributed just under 4,000,000 BOE ofprobable reserves and the Colombian Luna Llena contract was attributed 85,000BOE of probable reserves for the first time since being signed in November 2005. The Company's proved plus probable reserves replacement ratio for the year,defined as proved plus probable net reserve additions divided by 2005 netproduction, was approximately 327%. Based on Global's 2005 net production, Global's proved reserve life is 11.4years and proved plus probable reserve life is 39.5 years. Review of Operations Production Contracts Global currently has production from five contracts, namely the older Alcaravan,Bolivar and Bocachico Association contracts all currently subject to a 20%royalty and the newer Rio Verde and Los Hatos Exploration and ProductionConcession contracts subject to a 10.5% and 8% royalty respectively. The Companysuccessfully commenced production from the Los Hatos contract during October2005 whilst all the other contracts had production during 2005. During the first quarter of 2005, the Company worked-over and recommencedproduction from the Macarenas 1 and Canacabare 1 wells within the Rio Verde andAlcaravan contracts respectively. In August 2005, the Company commenced rigmobilisation to its first exploratory well on the Los Hatos contract with theLos Hatos 1 well being successfully placed onto production in October 2005. Alsowithin October 2005, the Company commenced the Pilot Test Phase of a Cyclic CO2Injection Project on the Torcaz field within the Bocachico contract arearepresenting an improved recovery programme that the Company hopes willsubstantially increase production and reserve recovery rates on the contractarea. The Company expects to be able to assess the initial impact of thisProject during the first quarter of 2006. In December 2005, the Companycommenced rig mobilisation to the exploratory Tilodiran 2 well within the RioVerde contract and as at February 2006 Global is proceeding to complete and testmore than one potentially oil productive zone following the well beingsuccessfully drilled to a final depth of 13,350 feet. There was no drilling or workover activity on the Bolivar contract during 2005except for the conversion of the Catalina 1 well to gas injection service. It isanticipated that an improved recovery programme will be initiated on thecontract area during 2006. This improved recovery programme will likely followthe proposed acquisition by Global of existing wells on the Bolivar contractarea from Ecopetrol, the state owned Colombian oil company, which would allowthe improved recovery programme to be expanded and more effectively managed.Negotiations for the acquisition of these existing wells are near conclusion. No expenditure is anticipated for the Alcaravan or Los Hatos contracts in 2006as particularly the Alcaravan contract has been the predominate focus ofdrilling investment activity over the last three years and now provides aconsistent base of production. As referred to above, both the Bolivar andBocachico contracts are the focus of improved recovery programmes in 2006 and itis anticipated that the royalties on these contracts will be reduced from thecurrent 20% to 8% under Colombian law that provides for royalty reductionincentives when improved recovery programs such as gas injection are initiatedin existing producing fields. After the work on Tilodiran 2 the Company expectsto drill another exploratory well on the Rio Verde contract acreage in 2006 inorder to rapidly increase production on this contract. Additional near termdrilling opportunities in 2006 are expected to come with the signing of a newcontract in Colombia currently anticipated during the first half of 2006. Through its drilling programme and improved recovery initiatives to beundertaken in 2006 Global expects to record an improvement in its net productionfor 2006 against 2005. Exploration Contracts Colombia Valle Lunar TEA and Luna Llena contract In May 2005, Global signed the approximate 2.1 million acre Valle LunarTechnical Evaluation Agreement ("TEA") with the National Hydrocarbons Agency ofthe Republic of Colombia ("ANH") and in November 2005 it elected to convert369,000 acres of the TEA area into the Luna Llena Exploration and ProductionConcession contract, subject only to an initial 8% royalty, whilst retaining theremainder TEA acreage. The Company took the decision to contract the Luna Llenaarea in order to accelerate its work programme due to the compelling datainitial analysis had yielded. During mid 2005, the Company conducted Landsatanalysis of the TEA acreage which yielded a considerable amount of surface data,particularly within the Luna Llena area. The Luna Llena acreage contains theidentified El Miedo field which has substantial well tests and subsurfacegeologic control that was acquired by two international oil companies in the1980s from an extensive drilling effort conducted by them. Oil production testswere successful at this time. Global completed engineering and geologic studieson the El Miedo field in 2005 and during the first half of 2006 will look toacquire new 2D seismic, reprocess existing seismic and then drill twoexploratory wells in the second half of 2006. Whilst rig availability willlikely constrain all the Company's drilling timetables, light rigs appear to becurrently available for the two shallow exploratory Luna Llena wells. Caracoli contract In December 2005 Global signed the Caracoli Exploration and ProductionConcession contract with ANH. The contract, subject only to an initial 10%royalty, is located in the Catatumbo basin, a sub-basin of the prolificMaracaibo basin which extends in a south-westerly direction from Venezuela intoColombia. This contract is considered by the management to be one of the mostsignificant it has ever signed based upon the average field size in this area ofColombia and nearby Venezuela and following extensive studies and preliminarygeologic analysis completed by Global and its technical staff prior to signingthe contract. Several mapped structures in the contract area have the samegeologic history as prominent adjacent oil fields. In the second half of 2006the Company will proceed with acquiring new 2D seismic, with the locationalready identified, and reprocess existing seismic. The first exploratory wellwill then be drilled in the second half of 2007, with this dependent uponenvironmental permit timing and heavy rig availability. Peru Block 95 Area Licence contract In December 2004, Global received approval for the Block 95 Area Licencecontract in the Maranon Basin of North-eastern Peru and during April 2005 thecontract was signed with Perupetro S.A., the national oil company of Peru. Thiscontract is subject only to an initial 5% royalty. The Company proceeded withacquiring micro-magnetic data and updating geologic maps in 2005 and during late2006 intends acquiring new 2D or 3D seismic within the identified Bretana fieldlocated on Block 95. Global will then likely drill its first exploratory well inthe Bretana field in late 2007, again dependent upon environmental permit timingand rig availability. The Bretana field was identified in the early 1970s and in1974 an international oil company drilled the Bretana 1 well which tested 18degree API gravity oil at rates of approximately 800 bopd. The Company and itsindependent reserve engineers have extensively evaluated the acreage and themanagement believe the contract to have significant exploration potential. Panama Garachine Block Area The Garachine Block Area covering 1.4 million acres in and offshore Panama andless than 100 miles from the Panama Canal continues to be a pending contractfollowing the concluded TEA. The delay in the signing of this contract has beendue to resolving several contract issues whilst negotiating the contract withthe Ministry of Commerce and Industry for the Republic of Panama (the"Ministry"). A final contract draft will shortly be submitted to the Ministry bythe Company and Global currently expects to sign the contract within the firsthalf of 2006. The Garachine Block Area represents a Pinnacle Reef reservoir play with a numberof oil seeps located within the contract boundaries that are producing variousquantities and qualities of crude oil. The area was first identified in the1920s when several shallow wells were drilled onshore by an international oilcompany encountering good oil shows in the Mid Miocene rock section. More recentoffshore exploration in the eastern Gulf substantiated Miocene source potentialand outlined the regional basin structure with a reconnaissance grid of seismicdata. Once the Garachine Block Area contract is fully approved Global willimmediately commence exploratory geologic studies and anticipates the need toacquire 3D seismic over some or all of its prospects. Timing for seismicacquisition is uncertain due to the currently high utilization rate of oilservice equipment. Drilling timing is also highly dependent on jack-up rigavailability. Capital Expenditure Capital expenditure in 2005, fully funded as expected from cash flow from theenlarged production and cash available, totalled $18,603,000 in line withprevious expectations and was a 114% increase on 2004 which totalled $8,700,000. 2006 should see another material uplift in capital expenditure to up to $26million, again using the Company's internally generated cash flow and enabledthrough the anticipated continued enlargement of production coupled withexpected historically high oil prices. As only approximately $8 million isanticipated to be contractually required this leaves up to $18 million to beutilised at the Company's discretion. Therefore Global can retain a high degreeof flexibility and has complete confidence that it will fully comply with allthe terms of its contracts as it has done throughout its long operating history. Highlighting the breadth of exploration projects now within the portfolio,roughly 80% of the 2006 capital expenditure budget is anticipated to be directedtowards exploration activities with 2006 heralding the Company's firstsignificant exploration drilling since admission to AIM. Additional Contracts In Colombia the Company is awaiting feedback and approval on two new contractproposals it submitted in late 2005, one of these having been referred to above,and the Company would hope that at least one of these would be signed within thefirst half of 2006. In Peru, the Company has also submitted proposals to Perupetro S.A. for two newcontracts and is preparing to submit a third. In anticipation of securing atleast one of these in the first half of 2006, the Company established asubsidiary office in Lima in December 2005 with one full-time professional. Thisoffice also allows the more effective management of the existing Block 95 AreaLicence contract. Strategy and Outlook The management and its technical staff continually evaluate prospective acreagein Latin America for new contracts, particularly in Colombia and Peru, utilisingtheir long-standing knowledge of the region. Areas are extensively studied andpreliminary geologic analysis completed prior to securing contracts in order toprovide a high degree of confidence going forward. Competition has intensifiedin Colombia and Peru especially over the past year as investment has beenattracted by the world-leading contract terms, contract sanctity and the veryunder-explored large oil and gas reserve potential. Global benefits from itslong associations in the region and unblemished extensive operating history inits countries of choice. These qualities along with the extensive prospectsalready secured, validated by an independent reserve engineering company and all100% owned by Global, should enable the Company to continue to prosper and grow. 2006 looks to be a very active and transitional year for Global. Stephen VossManaging Director 21 February 2006 GROUP PROFIT AND LOSS ACCOUNTFor the year ended 31 December 2005 2005 2004 (unaudited) (audited)(figures in thousands except for per share information) $000 $000 TURNOVER 19,045 10,974Cost of sales (9,755) (5,625) --------- ---------- GROSS PROFIT 9,290 5,349Administrative expenses (4,364) (2,241)Other Income 176 24 --------- ---------- OPERATING PROFIT 5,102 3,132Interest Receivable 79 18Interest payable (87) (23) --------- ---------- PROFIT ON ORDINARY ACTIVITIES BEFORE TAXATION 5,094 3,127Taxation on profit from ordinary activities (715) (561) --------- ---------- PROFIT ON ORDINARY ACTIVITIES AFTER TAXATION 4,379 2,566 --------- ---------- TRANSFER TO RESERVES 4,379 2,566 --------- ---------- EARNINGS PER ORDINARY SHARE- Basic and diluted 0.13 0.09 --------- ---------- There are no recognised gains and losses other than the profit of $4,378,946(2004: $2,565,555) for the year ended 31 December 2005. All amounts relate to continuing operations. GROUP BALANCE SHEETAt 31 December 2005 2005 2004 (unaudited) (audited) $000 $000FIXED ASSETSIntangible assets 2,049 1,221Tangible assets 70,587 57,170 --------- ---------- 72,636 58,392 CURRENT ASSETSStocks 451 474Debtors 5,697 2,005Cash at bank and in hand 8,212 2,857 --------- ---------- 14,360 5,336Creditors: amounts falling due within one year (3,772) (5,107) --------- ---------- NET CURRENT ASSETS 10,588 229 --------- ---------- TOTAL ASSETS LESS CURRENT LIABILITIES 83,224 58,620 Convertible Loan Notes (12,500) -Provision for liabilities and charges (575) (529) --------- ---------- 70,149 58,091 --------- ----------CAPITAL AND RESERVESCalled up share capital 537 406 Capital reserve 210,844 210,844Share premium account 26,288 18,740Profit and loss account (167,520) (171,899) --------- ---------- 70,149 58,091 --------- ---------- GROUP CASH FLOW STATEMENTYear ended 31 December 2005 2005 2004 (unaudited) (audited) $000 $000 Net cash inflow from operating activities 4,729 8,196 RETURNS ON INVESTMENT AND SERVICING OF FINANCEInterest received 79 18Interest paid (87) - TAXATION (715) (65) CAPITAL EXPENDITURE AND FINANCIAL INVESTMENTExpenditure on intangible and tangible fixed assets (18,603) (8,700) --------- ---------- NET CASH OUTFLOW BEFORE FINANCING (14,597) (551) --------- ----------FINANCINGIssue of share capital 7,677 5Convertible Loan Notes issued 12,500 - --------- ---------- INCREASE/(DECREASE) IN CASH 5,580 (546) --------- ---------- CASH AT BEGINNING OF YEAR 2,632 3,178 --------- ---------- CASH AT END OF YEAR 8,212 2,632 --------- ---------- NOTES TO THE FINANCIAL STATEMENTS 1. COST OF SALES AND OPERATING EXPENSES 2005 2004 $000 $000 Production costs 5,396 2,538Depletion of oil properties 3,672 2,664Depletion of other tangible fixed assets 687 423 --------- ---------- Total cost of sales 9,755 5,625 --------- ---------- General and Administrative 4,364 2,241 --------- ---------- Total Cost of Sales and Administration 14,119 7,866 --------- ---------- 2. TANGIBLE FIXED ASSETS Oil & Gas Facilities Office Total Properties and Equipment Pipelines & OtherGroup $000 $000 $000 $000 Cost:At 1 January 2005 182,673 15,740 1,182 199,595Additions 15,098 2,374 304 17,776 -------- -------- -------- -------- At 31 December 2005 197,771 18,114 1,486 217,371 -------- -------- -------- --------Depreciation:At 1 January 2005 (136,300) (5,349) (776) (142,425)Provided during the year (3,672) (494) (193) (4,359) -------- -------- -------- -------- At 31 December 2005 (139,972) (5,843) (969) (146,784) -------- -------- -------- -------- Net book value at 31 December 57,799 12,271 517 70,5872005 -------- -------- -------- -------- Net book value at 31 December 46,373 10,391 406 57,1702004 3. RECONCILIATION OF MOVEMENTS ON SHAREHOLDERS' FUNDS 2005 2004 $000 $000 Total recognised gains and losses 4,379 2,566New share capital subscribed less issue costs 7,679 5 -------- -------- Total movements during the year 12,058 2,571Shareholders' funds at 1 January 58,091 55,520 -------- -------- Shareholders' funds at 31 December 2005 70,149 58,091 -------- -------- 4. NOTES TO THE STATEMENT OF CASH FLOWS 2005 2004 $000 $000Reconciliation of operating profit to net cash inflow fromOperating activities Operating profit 5,102 3,132Depreciation and decommissioning 4,412 3,087Decrease in debtors and prepayments (3,494) (2,070)Increase/(Decrease) in creditors (1,334) 4,039Loss on sale of fixed assets - 34Increase/(Decrease) in inventory 43 (26) -------- -------- Net cash inflow from operating activities 4,729 8,196 -------- -------- 5. RECONCILIATION OF NET CASH OUTFLOW TO MOVEMENTS IN NET FUNDS 2005 2004 $000 $000 Increase /(Decrease) in cash in the year 5,580 (546)Opening net funds 2,632 3,178 -------- -------- Closing net funds 8,212 2,632 -------- -------- SUPPLEMENTARY OIL AND GAS INFORMATION (Unaudited) Oil and gas reserves Proven and probable oil and gas reserves are estimated quantities ofcommercially producible hydrocarbons which the existing geological, geophysicaland engineering data show to be recoverable in future years from knownreservoirs. The proved reserves included herein conform to the definitionapproved by the Society of Petroleum Engineers (SPE) and the World PetroleumCongress (WPC). The probable reserves included herein conform to definitions ofprobable reserves approved by the SPE/WPC using the deterministic methodology. The following tables show estimates of the Group's net proved and probablereserves of crude oil and natural gas at 1 January and 31 December 2005. ( Source: Ryder Scott Petroleum Consultants) ESTIMATED NET PROVED AND PROBABLE RESERVES OF CRUDE OIL. PROVED PROBABLE TOTAL LATIN LATIN ALL AMERICA AMERICA (Thousands of barrels)2005Subsidiary undertakingsAt 1 JanuaryDeveloped 1,582 468 2,050Undeveloped 2,617 10,552 13,169 _______ _______ 4,199 11,020 15,219 _______ _______ _______Changes in year attributable toRevision of previous estimates 1,285 (195) 1,090Production (451) - (451) At 31 December 2005 5,033 10,825 15,858 _______ _______ _______ Developed 2,248 62 2,310Undeveloped 2,785 10,763 13,584 _______ _______ _______ 5,033 10,825 15,858 _______ _______ _______ ESTIMATED NET PROVED AND PROBABLE RESERVES OF NATURAL GAS. PROVED PROBABLE TOTAL LATIN LATIN ALL AMERICA AMERICA (Millions of cubic feet)2005Subsidiary undertakingsAt 1 JanuaryDeveloped - - -Undeveloped - 7,377 7,377 _______ _______ _______ - 7,377 7,377 _______ _______ _______Changes in year attributable toProduction - 2,313 2,313 _______ _______ _______ At 31 December 2005 - 9,690 9,690 _______ _______ _______ Developed - - -Undeveloped - 9,690 9,690 _______ _______ _______ - 9,690 9,690 _______ _______ _______ - Ends - This information is provided by RNS The company news service from the London Stock Exchange