Last checked at 12 Aug 2009 07:00
12 August 2009
SOCO International plc
("SOCO" or the "Company")
HALF YEAR RESULTS
SOCO is an international oil and gas exploration and production company, headquartered in London, traded on the London Stock Exchange and a constituent of the FTSE 250 Index. The Company has interests in Vietnam, Thailand, the Republic of Congo (Brazzaville), the Democratic Republic of Congo (Kinshasa) and Angola.
Highlights
Financial - Record first half turnover and after tax profit from continuing operations
Revenues of $66.6 million
After tax profit for the period of $31.6 million
Strong cash and liquid investment balance of $294 million
Operational
Production of 6,734 BOEPD from CNV and Bualuang fields
Marine XIV seismic concluded and Marine XI drilling to commence in days
Outlook
Commencing extensive exploration and appraisal programme in Africa and Vietnam targeting over 600 million barrels of mean, unrisked recoverable reserves
Accelerating TGT field development programme with first oil targeted mid-2011
Operations fully funded and supported by increased cash flow from producing assets
Ed Story, Chief Executive commented:
"In the first six months of the year SOCO has continued to perform strongly, progressing its key development projects, increasing production and setting the stage for the most extensive exploration campaign in the Company's history. Our Africa portfolio is an exciting opportunity to create a significant new growth story. The drilling in Congo will begin this month and with Vietnam development projects only awaiting final regulatory approval SOCO is well positioned to continue to deliver growth and value to shareholders."
SOCO INTERNATIONAL PLC
HALF YEAR REPORT FOR
THE SIX MONTHS ENDED 30 JUNE 2009
SOCO is pleased to announce record first half turnover of $66.6 million and after tax profit from continuing operations of $31.6 million. Additionally, SOCO retains a very strong balance sheet and has not needed to secure additional funding. Both are significant achievements, particularly when taken in the context of the recent industry and economic environment.
The Company has also made good progress in lining out production projects in Vietnam and Thailand, gained national oil company approval of the development area on the Te Giac Trang (TGT) field, the largest field discovery in the Company's history, received an award for an extremely prospective appraisal area in Vietnam and added to its attractive portfolio of exploration assets in its newest core area in Africa.
Not only have we had a notable first six months of the year, over the next 12 to 18 months we will be involved in one of the most active exploration campaigns in our history, targeting mean, unrisked exploration potential upwards of 600 million barrels of recoverable crude oil.
In Vietnam, we completed the initial phase of the development programme on the Ca Ngu Vang (CNV) field. We are assessing the results, which indicate that the eastern lobe of the Basement field has less intensive fracturing, before deciding how to progress further development. On 1 July 2009, Petrovietnam became a full paying participant on its 41% share of the TGT field development after approving the TGT Field Development Area, which is targeted for first oil in mid-2011.
In Africa, as operator, we conducted a seismic programme in Marine XIV offshore Congo (Brazzaville), after receiving governmental approval of our farm-in earlier this year. Also in Congo (Brazzaville), preparations for a two well drilling campaign in Marine XI have been nearly completed as the first well is expected to spud in mid-August. Initial interpretation on seismic acquired last year in the Nganzi Block onshore Congo (Kinshasa) is underway and several interesting leads have already been identified with early indications of 100 million barrel plus potential. Seismic acquisition is due to recommence this month in Angola in the Cabinda North province.
With a full period of production, averaging 6,734 barrels of oil equivalent per day (BOEPD) combined from the CNV project and the Bualuang project in Thailand, the Group reported record first half after tax profit of $31.6 million. After capital expenditures of just over $36 million in the first half, cash and liquid investment balances as at 30 June 2009 were $294 million. With consideration for the upcoming exploration and development programme and the one time early redemption option for the convertible bonds in May of next year, the Directors do not recommend a dividend.
OPERATIONS
SOUTH EAST ASIA
VIETNAM
The Company's interests in the Cuu Long Basin are held through two companies, SOCO Vietnam Ltd (SOCO Vietnam), its 80% owned subsidiary, and its wholly owned subsidiary, OPECO, Inc. SOCO Vietnam holds a 25% working interest in Block 9-2, which is operated by the Hoan Vu Joint Operating Company (HVJOC) and holds a 28.5% working interest in Block 16-1, which is operated by the Hoang Long Joint Operating Company (HLJOC). OPECO, Inc. holds a 2% working interest in Block 16-1.
The Cuu Long Basin is a shallow water, near shore, oil rich basin defined by several high profile producing oil fields, the largest of which has been the Bach Ho field, which lies adjacent to both Block 9-2 and Block 16-1. Bach Ho has produced more than one billion barrels of oil to date.
Block 16-1
Te Giac Trang
The HLJOC received approval from Petrovietnam of the Field Development Area for the TGT field in May of this year. Subsequently Petrovietnam assumed funding of its 41% share of development costs as of 1 July. The Field Development Plan (FDP) has been submitted for Governmental approval, the final hurdle in the regulatory process. Preparation of the FDP for submission has been an interactive process in conjunction with the appropriate regulatory and review committees and approval is anticipated to be relatively straightforward.
First oil is targeted for mid-2011. Tenders for a number of long lead items have been issued. Bids from the potential floating, production, storage and offloading vessel providers are currently under review. To date, seven exploration/appraisal wells have been drilled in the TGT field, with an average oil and gas flow of approximately 11,300 BOEPD from each well.
Appraisal Areas
In April, the Company was informed by the HLJOC that the Vietnamese Government had approved, with agreed work programmes, the application for the Te Giac Den (TGD) and Voi Trang (VT) Appraisal Areas within Block 16-1.
The TGD Appraisal Area encompasses an area of 150 square kilometres including the high pressure, high temperature (HPHT) discovery well TGD-1X-ST1 on Prospect E, and the analogous E South Prospect. This area borders the southern boundary of the TGT field. Seismic reprocessing over the TGD appraisal area and the TGT field is currently underway with final results expected in September/October 2009. Initial preparation has begun for drilling a TGD appraisal well in the second/third quarter of 2010.
Following an assessment of the commerciality of the previous discoveries in the awarded area in the VT Appraisal Area, the HLJOC opted to relinquish this area. Petrovietnam issued a formal approval of the relinquishment in July.
Block 9-2
Ca Ngu Vang
With the drilling and suspension of the CNV-6P development well, the initial phase of the development drilling programme of this field, which was brought on production in July of 2008, has been concluded. Based on the wells drilled thus far, the fracturing in the eastern lobe of the field of the Basement reservoir is not as intense as that indicated by wells drilled in other parts of the structure.
It is premature to speculate as to any impact on recoverable reserves or ultimate lined out production rates. The HVJOC will continue to analyse results of the drilling and performance to date before commencing water injection and considering further drilling options later in the year.
Production net to the Group's working interest has averaged 3,083 BOEPD for the first six months of 2009.
THAILANDBualuang field
SOCO's 99.93% owned Thailand subsidiary, SOCO Exploration (Thailand) Co. Ltd. (SOCO Thai), holds a 40% interest in the Bualuang oilfield located offshore in the Gulf of Thailand.
In the second quarter of this year, the operator drilled two horizontal attic wells in the field. The purpose was to maximise oil production from the strong water driven reservoir, whilst minimising production of water. Production net to the Group's working interest averaged 2,663 barrels of oil per day (BOPD) prior to drilling these wells, increasing to 4,412 BOPD for the 15 days preceding this report and subsequent to bringing the two new wells on production. For the full period, production net to the Group's working interest averaged 3,651 BOPD for the first half of 2009.
In the first half of 2009, the operator reported a reserves upgrade in the field, rising from 20 million gross proven and probable barrels of oil to 26.3 million gross proven and probable barrels of oil recoverable. Under the terms of the farm-out to the operator, within 12 months of the end of the Phase II period, the Farmee will engage an independent reservoir engineer to perform an analysis of the proven reserves contained in the Bualuang field. The Farmee will pay SOCO Thai an amount equal to one dollar for each barrel of proven reserves over 10.4 million barrels.
AFRICA
REPUBLIC OF CONGO (BRAZZAVILLE)
SOCO Exploration and Production Congo SA (SOCO EPC), which is held through the Company's 85% owned subsidiary SOCO Congo Limited, holds an interest in and is the designated operator of the Marine XI and Marine XIV Blocks offshore the Republic of Congo (Brazzaville).
Marine XI
SOCO EPC has finalised the terms of a rig contract for a two well drilling programme in the Marine XI Block that is expected to commence within days of this report as the rig is now in transit to the location to commence the Liyeke well on the S1 prospect. The Liyeke well is targeting a Sendji prospect above the salt layer. A follow-up well will appraise the existing sub-salt Viodo oil field at a location approximately one kilometre from the field discovery well.
Marine XIV
In March, SOCO EPC received Governmental approval for its farm-in to the Marine XIV Block. Since that time, SOCO EPC, as operator, has completed a 100 square kilometre multi-azimuthal 3D seismic programme. The seismic is currently being processed and a well is planned for 2010.
DEMOCRATIC REPUBLIC OF CONGO (KINSHASA)
SOCO DRC Limited (SOCO DRC), the Company's 85% owned subsidiary holds 99.9% of SOCO Exploration and Production DRC Sprl (SOCO E&P DRC), the designated operator with an 85% working interest in the 800 square kilometre Nganzi Block, onshore the Democratic Republic of Congo (Kinshasa). Cohydro, the state owned oil company, holds the remaining 15% interest.
SOCO E&P DRC completed a 360 kilometre 2D seismic survey late last year over the coastal Nganzi Block. Initial interpretation of the processed seismic has been very encouraging as several large structures have been identified. Interpretation will continue with drilling likely to commence in the second half of 2010.
The Group's applications for licences elsewhere in the country are pending a Presidential Decree on Block 5 in the Albertine Graben and the finalisation of a production sharing agreement on a large interior block.
ANGOLA Cabinda NorthSOCO Cabinda Limited (SOCO Cabinda) holds a 17% participating interest in the Production Sharing Agreement (PSA) for the Cabinda Onshore North Block. SOCO holds 80% of the interest in SOCO Cabinda. Sonangol P&P, the Angolan state owned oil company, holds a 20% interest in the PSA and is operator.
The same contractor that conducted the seismic programme on the Nganzi Block has been mobilised to acquire both 2D and 3D seismic in Cabinda North. Acquisition of the 2D seismic began earlier this month.
FINANCIAL RESULTSStart up of production operations in the Group's CNV field in Vietnam in July 2008 was shortly followed by production from the Bualuang field in Thailand in August 2008. Accordingly, these interim results report the first return to a full six months of production operations since the sale of the Group's Yemen asset in April 2008.
INCOME STATEMENT
Operating results
Group oil and gas revenues from continuing operations in the first half of 2009 were $66.6 million compared with $55.3 million in the second half of 2008 following the start-up of production operations in Vietnam and Thailand. During the first six months of 2009, the Group realised a price of $47.48 per barrel of oil compared to $55.27 per barrel in the period from start up of operations in South East Asia to year end 2008. The Group's working interest share of production from continuing operations during the period was 6,734 BOEPD up from 2,533 BOEPD averaged over 2008 (6,415 BOEPD averaged over the period from start up to year end 2008).
Cost of sales on continuing operations in the period was $19.1 million for the six month period to 30 June 2009 up from $18.9 million in the second half of 2008, which included approximately five months of operations from the CNV field and four months from the Bualuang field. On a per barrel basis, excluding inventory, operating costs were approximately $10.70 per barrel compared to $13.50 per barrel in the second half of 2008. Higher operating costs in the initial months of production during 2008 were anticipated as it is common with start-up operations that production levels during the first few months can be erratic due to initial testing of well flow capability and minor operational interruptions. As production levels have stabilised, operating costs per barrel have reduced.
Depreciation, depletion and decommissioning costs (DD&A) on continuing operations included in cost of sales was $9.9 million compared to $7.9 million in the second half of 2008 consistent with greater production. On a per barrel basis, DD&A remained at approximately $6.00 per barrel (as compared to the second half of 2008).
Administrative costs relating to continuing operations for the first six months increased from $3.2 million in 2008 to $3.5 million in 2009. Although offset by the effects of the weaker GB Pound and reduced payroll costs, the increase is primarily associated with a greater proportion of the Group's overhead being attributed to the Company's corporate activities.
Operating profit for the period was $44.0 million arising from the Group's continuing production operations in Vietnam and Thailand.
Non-operating results
Investment income reduced from $2.7 million in the first half of 2008 to $1.7 million for the current period, despite a higher average cash balance following the completion of the Yemen sale in April 2008, reflecting lower interest rates as a result of the deteriorating economic climate.
The increase in other gains and losses from $0.6 million in the first half of 2008 to $0.9 million in the first half of 2009 is primarily due to a higher gain in the period on the change in fair value of the financial asset (associated with the subsequent payment amount tied to future oil production from the Group's divested Mongolia interest) mainly due to revision of the risk free interest rate.
Cash AND LIQUID invESTMENTSSOCO's cash, cash equivalents and liquid investments at 30 June 2009 was $294.0 million (31 December 2008 - $303.4 million and 30 June 2008 - $410.2 million). This reduction is a result of the Group's capital development programmes in Vietnam and Thailand and exploration activity in Africa offset by cash inflows from the new production operations in Vietnam and Thailand.
As the Group has a strong financial position it has purchased short term liquid investments of over six months maturity in order to maximise investment revenues. As at 30 June 2009 the Group had liquid investments of $102.1 million (31 December 2008 and 30 June 2008 - $nil) and cash and cash equivalents of $191.9 million (31 December 2008 - $303.4 million and 30 June 2008 - $410.2 million).
DEBT
As at 30 June 2009 the Group's only debt was the convertible bonds issued in 2006 at a par of $250 million, further details of which are in Note 23 to the 2008 Annual Report and Accounts. The liability component of the bonds has been reclassified as a current liability on the balance sheet as at 30 June 2009 as the bonds may be redeemed at par at the option of each bondholder on 16 May 2010.
Capital expenditure
Capital expenditure of $36.2 million in the first half of 2009 was lower than the $120.7 million spend in the first half of 2008 following the successful hook up and completion of the majority of the Group's construction and development activities on the CNV field in Vietnam and the Bualuang development in Thailand in 2008. During the current period certain development activities continued on these projects including the drilling of two additional development wells in Thailand and the completion of a development well and a capital workover in Vietnam. In addition, there was exploration activity in the Group's Africa region where in Marine XIV a seismic acquisition programme was conducted and in Marine XI preparations for the drilling campaign commenced.
Production
During the first half of 2009 the Group's production, net to the Group's working interest, of 6,734 BOEPD was sourced from its CNV field in Vietnam (3,083 BOEPD) and its Bualuang field in Thailand (3,651 BOPD). This is up, on a pro rata basis, from 6,501 BOEPD in the equivalent period last year from its Yemen interest prior to its disposal in April 2008. This is also an increase from 4,464 BOEPD produced in 2008 from both continuing and discontinued operations.
Related party transactions
There have been no material related party transactions in the period and there have been no material changes to the related party transactions described in Note 33 to the Consolidated Financial Statements contained in the 2008 Annual Report and Accounts.
Risks and Uncertainties
There are a number of potential risks and uncertainties which could have a material impact on the Group's performance over the remaining six months of 2009 and could cause actual results to differ materially from expected and historical results. Risks and uncertainties that remain unchanged from those published in the 2008 Annual Report and Accounts are summarised below:
Credit risk - in respect of the Group's financial asset at fair value through profit or loss arising on the Group's disposal of its Mongolia interest and short term financial assets.
Foreign currency risk - associated with cash balances held in non-US dollar denominations.
Liquidity risk - associated with meeting the Group's cash requirements.
Interest rate risk - applicable to the Group's cash balances, debt and financial asset.
Commodity price risk - associated with the Group's sales of oil and gas.
Capital risk management - in relation to Group financing.
Political risk - arising in countries where the Group has an interest.
Reserves risk - associated with inherent uncertainties in the application of standard recognised evaluation techniques to estimate proven and probable reserves.
Further information on the above principal risks and uncertainties of the Group is included in the Financial Review section of the 2008 Annual Report and Accounts and in Note 3 to the Consolidated Financial Statements in that report.
GOING CONCERN
The Group has a strong financial position and, after making enquiries and taking into account the potential redemption of the convertible bond in May 2010, the Directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. Consequently the Directors believe that the Group is able to manage its financial and operating risks and, accordingly, they continue to adopt the going concern basis in preparing the Half Year Report.
CORPORATE
Board
As previously reported, John Snyder, a Director since the Company's initial listing on the London Stock Exchange, resigned from the Board at the 2009 Annual General Meeting. In June, SOCO announced the appointment of Ambassador António Monteiro as a Non-executive Director. Ambassador Monteiro is also expected to be appointed to two of the Board's Committees. Ambassador Monteiro's extensive experience in the countries in which SOCO has built its newest core area in Africa is expected to be a significant and complementary skill to the Board.
Corporate Broker
In June, SOCO announced the appointment of J.P. Morgan Cazenove as its joint Corporate Broker alongside Merrill Lynch.
OUTLOOK
This month the Group will initiate the most extensive exploration/appraisal drilling campaign of any 12 month period in its history. During this period, we expect exposure to our share of more than 600 million barrels of mean, unrisked recoverable barrels of crude oil. Add to this the acceleration into the second development in Vietnam at the TGT field development, the largest development operation in the Company's history, and the future looks very promising.
SOCO has significant assets in each part of the oil and gas cycle of exploration, development and production and continues to move each project forward to identify and capture their potential while, at the same time, searching for new opportunities. The Company has the experience, resources and financial capability to maintain its momentum to maximise its value for its shareholders.
Rui de Sousa Ed Story
Chairman President and Chief Executive
Responsibility statement
We confirm to the best of our knowledge:
The condensed set of financial statements has been prepared in accordance with IAS 34 Interim Financial Reporting;
The interim management report includes a fair review of the information required by DTR 4.2.7R (indication of important events during the first six months and description of principal risks and uncertainties for the remaining six months of the year); and
The interim management report includes a fair review of the information required by DTR 4.2.8R (disclosure of related parties' transaction and changes therein).
By order of the Board
Roger Cagle
Chief Financial Officer
11 August 2009
DISCLAIMER
This Half Year Report has been prepared solely to provide additional information to shareholders to assess the Group's strategies and the potential for those strategies to succeed. The Half Year Report should not be relied on by any other party or for any other purpose.
The Half Year Report contains certain forward-looking statements. These statements are made by the Directors in good faith based on the information available to them up to the time of their approval of this report and such statements should be treated with caution due to the inherent uncertainties, including both economic and business risk factors, underlying any such forward-looking information.
INDEPENDENT REVIEW REPORT TO SOCO INTERNATIONAL PLC
We have been engaged by the Company to review the condensed set of financial statements in the half year financial report for the six months ended 30 June 2009 which comprises the condensed consolidated income statement, the condensed consolidated balance sheet, the condensed consolidated statement of comprehensive income, the condensed consolidated statement of changes in equity, the condensed consolidated cash flow statement and related notes 1 to 7. We have read the other information contained in the half year financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.
This report is made solely to the Company in accordance with International Standard on Review Engagements (UK and Ireland) 2410 "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board. Our work has been undertaken so that we might state to the Company those matters we are required to state to them in an independent review report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company, for our review work, for this report, or for the conclusions we have formed.
Directors' responsibilities
The half year financial report is the responsibility of, and has been approved by, the Directors. The Directors are responsible for preparing the half year financial report in accordance with the Disclosure and Transparency Rules of the United Kingdom's Financial Services Authority.
As disclosed in note 2, the annual financial statements of the Group are prepared in accordance with IFRSs as adopted by the European Union. The condensed set of financial statements included in this half year financial report has been prepared in accordance with International Accounting Standard 34, "Interim Financial Reporting," as adopted by the European Union.
Our responsibility
Our responsibility is to express to the Company a conclusion on the condensed set of financial statements in the half year financial report based on our review.
Scope of Review
We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410 "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that causes us to believe that the condensed set of consolidated financial statements in the half year financial report for the six months ended 30 June 2009 is not prepared, in all material respects, in accordance with International Accounting Standard 34 as adopted by the European Union and the Disclosure and Transparency Rules of the United Kingdom's Financial Services Authority.
Deloitte LLP
Chartered Accountants
London, United Kingdom
11 August 2009
Condensed consolidated income statement
| (unaudited) six months ended 30 Jun 09 | (unaudited) six months ended 30 Jun 08 | year ended 31 Dec 08 | ||
|
| Notes | $000's | $000's | $000's |
| Continuing operations | ||||
| Revenue | 66,599 | - | 55,340 | |
| Cost of sales | (19,135) | - | (18,948) | |
| Gross profit | 47,464 | - | 36,392 | |
| Administrative expenses | (3,489) | (3,249) | (6,201) | |
| Other operating expenses | - | (13) | (19) | |
| Operating profit (loss) | 3 | 43,975 | (3,262) | 30,172 |
| Investment revenue | 1,677 | 2,717 | 7,175 | |
| Other gains and losses | 850 | 622 | 1,488 | |
| Finance costs | (766) | (682) | (1,447) | |
| Profit (loss) before tax | 45,736 | (605) | 37,388 | |
| Tax | 4 | (14,129) | (125) | (6,815) |
| Profit (loss) for the period from continuing operations | 31,607 | (730) | 30,573 | |
| Discontinued operations | ||||
| Operating profit from discontinued operations | - | 36,419 | 36,419 | |
| Investment revenue from discontinued operations | - | 107 | 107 | |
| Finance costs of discontinued operations | - | (1) | (1) | |
| Profit on disposal | - | 356,688 | 356,688 | |
| Profit before tax from discontinued operations | - | 393,213 | 393,213 | |
| Tax | 4 | - | (12,726) | (12,726) |
| Profit for the period from discontinued operations | - | 380,487 | 380,487 | |
| Profit for the period | 31,607 | 379,757 | 411,060 | |
| Earnings (loss) per share (cents) | 5 | |||
| From continuing operations | 43.1 | (1.0) | 42.8 | |
| From discontinued operations excluding profit on disposal | - | 33.7 | 33.3 | |
| From profit on disposal | - | 504.6 | 499.2 | |
| Basic | 43.1 | 537.3 | 575.3 | |
| From continuing operations | 38.2 | (0.9) | 37.9 | |
| From discontinued operations excluding profit on disposal | - | 30.0 | 28.7 | |
| From profit on disposal | - | 450.3 | 430.5 | |
| Diluted | 38.2 | 479.4 | 497.1 |
Condensed consolidated statement of comprehensive income
| (unaudited) six months ended 30 Jun 09 $000's | (unaudited) six months ended 30 Jun 08 $000's | year ended 31 Dec 08 $000's | ||
| Profit for the period | 31,607 | 379,757 | 411,060 | |
| Transfer from other reserves | 2,096 | 1,640 | 3,196 | |
| Unrealised currency translation differences | 73 | 15 | (884) | |
| Total comprehensive income for the period | 33,776 | 381,412 | 413,372 |
Condensed consolidated balance sheet
| Note | (unaudited) 30 Jun 09 $000's | (unaudited) 30 Jun 08 $000's | 31 Dec 08 $000's | |
| Non-current assets | ||||
| Intangible assets | 399,681 | 301,216 | 363,958 | |
| Property, plant and equipment | 240,122 | 215,532 | 235,497 | |
| Financial asset | 35,272 | 33,341 | 34,383 | |
| Deferred tax assets | 1,549 | 119 | 1,251 | |
| 676,624 | 550,208 | 635,089 | ||
| Current assets | ||||
| Inventories | 9,015 | - | 3,911 | |
| Trade and other receivables | 37,553 | 6,920 | 31,813 | |
| Tax receivables | 988 | 490 | 172 | |
| Liquid investments | 102,121 | - | - | |
| Cash and cash equivalents | 191,853 | 410,164 | 303,433 | |
| 341,530 | 417,574 | 339,329 | ||
| Total assets | 1,018,154 | 967,782 | 974,418 | |
| Current liabilities | ||||
| Trade and other payables | (19,973) | (26,598) | (22,512) | |
| Tax payables | (9,498) | (251) | (1,773) | |
| Convertible bonds | 6 | (230,413) | - | - |
| (259,884) | (26,849) | (24,285) | ||
| Non-current liabilities | ||||
| Convertible bonds | 6 | - | (226,131) | (228,245) |
| Deferred tax liabilities | (7,818) | - | (3,219) | |
| Long term provisions | (7,297) | (5,455) | (8,283) | |
| (15,115) | (231,586) | (239,747) | ||
| Total liabilities | (274,999) | (258,435) | (264,032) | |
| Net assets | 743,155 | 709,347 | 710,386 | |
| Equity | ||||
| Share capital | 24,428 | 23,580 | 24,322 | |
| Share premium account | 70,980 | 68,410 | 70,369 | |
| Other reserves | 12,973 | 48,319 | 14,697 | |
| Retained earnings | 634,774 | 569,038 | 600,998 | |
| Total equity | 743,155 | 709,347 | 710,386 |
Condensed consolidated statement of changes in equity
| Called up share capital | Share premium account | Other reserves | Retained earnings | Total | |
| $000's | $000's | $000's | $000's | $000's | |
| As at 1 January 2008 | 23,549 | 68,355 | 49,437 | 187,626 | 328,967 |
| Changes in equity | 31 | 55 | (1,118) | 381,412 | 380,380 |
| As at 1 July 2008 | 23,580 | 68,410 | 48,319 | 569,038 | 709,347 |
| Changes in equity | 742 | 1,959 | (33,622) | 31,960 | 1,039 |
| As at 1 January 2009 | 24,322 | 70,369 | 14,697 | 600,998 | 710,386 |
| Shares issued | 106 | 611 | - | - | 717 |
| Share-based payments | - | - | 418 | - | 418 |
| Transfer relating to share-based payments | - | - | (396) | 396 | - |
| Transfer relating to convertible bonds | - | - | (1,700) | 1,700 | - |
| Profit for the period | - | - | - | 31,607 | 31,607 |
| Unrealised currency translation differences | - | - | (46) | 73 | 27 |
| As at 30 June 2009 | 24,428 | 70,980 | 12,973 | 634,774 | 743,155 |
Condensed consolidated cash flow statement
|
| Note | (unaudited) six months ended 30 Jun 09 $000's | (unaudited) six months ended 30 Jun 08 $000's | year ended 31 Dec 08 $000's |
| Net cash from operating activities | 7 | 25,804 | 23,885 | 45,056 |
| Investing activities | ||||
| Purchase of intangible assets | (13,945) | (68,105) | (128,361) | |
| Purchase of property, plant and equipment | (22,267) | (52,605) | (89,252) | |
| Increase in liquid investments | (102,121) | - | - | |
| Proceeds of disposal of subsidiary | - | 438,505 | 438,505 | |
| Net cash (used in) from investing activities | (138,333) | 317,795 | 220,892 | |
| Financing activities | ||||
| Share-based payments | - | - | (30,040) | |
| New bank loans raised | - | 20,000 | 20,000 | |
| Repayment of borrowings | - | (20,000) | (20,000) | |
| Proceeds on issue of ordinary share capital | 717 | 86 | 86 | |
| Net cash from (used in) financing activities | 717 | 86 | (29,954) | |
| Net (decrease) increase in cash and cash equivalents | (111,812) | 341,766 | 235,994 | |
| Cash and cash equivalents at beginning of period | 303,433 | 68,337 | 68,337 | |
| Effect of foreign exchange rate changes | 232 | 61 | (898) | |
| Cash and cash equivalents at end of period | 191,853 | 410,164 | 303,433 |
Notes to the condensed consolidated financial statements
1 General information
The information for the year ended 31 December 2008 does not constitute statutory accounts as defined in section 240 of the Companies Act 1985 (the Act). A copy of the statutory accounts for that year has been delivered to the Registrar of Companies. The auditors' reported on those accounts; their report was unqualified, did not draw attention by way of emphasis and did not contain a statement under section 237(2) or (3) of the Act.
The half year financial report is presented in US dollars because that is the currency of the primary economic environment in which the Group operates.
The Directors do not recommend the payment of a dividend.
The half year financial report for the six months ended 30 June 2009 was approved by the Directors on 11 August 2009.
2 Significant accounting policies
The half year financial report, which is unaudited, has been prepared in accordance with the recognition and measurement criteria of International Financial Reporting Standards (IFRS) as adopted by the European Union and the disclosure requirements of the Listing Rules and using the same accounting policies and methods of computation as applied by the Company in its 2008 Annual Report and Accounts for the year ended 31 December 2008. During the period ended 30 June 2009 the Group adopted IFRS 8 Operating Segments and International Accounting Standard 1 (revised 2007) Presentation of Financial Statements. The condensed set of financial statements included in this half year financial report has been prepared on a going concern basis of accounting for the reasons set out in the Financial Results section of this report and in accordance with International Accounting Standard 34 Interim Financial Reporting, as adopted by the European Union, and the requirements of the UK Disclosure and Transparency Rules of the Financial Services Authority in the United Kingdom as applicable to interim financial reporting.
3 Segment information
The Group has one principal business activity being oil and gas exploration and production. The Group's operations are located in South East Asia and Africa and form the basis on which the Group reports its segment information. Revenue by destination does not materially differ from revenue by origin. There are no inter-segment sales. Segment results and total assets are presented below:
| Continuing operations | Discontinued operations | |||||||
| SE Asia | Africa | Unallocated | Total | Middle East 1 | Group | |||
| $000's | $000's | $000's | $000's | $000's | $000's | |||
Six months ended 30 June 2009 (unaudited)
| Oil sales | 66,599 | - | - | 66,599 | - | 66,599 | ||
| Operating profit (loss) | 47,464 | - | (3,489) | 43,975 | - | 43,975 | ||
| Total assets | 601,604 | 87,989 | 328,561 | 1,018,154 | - | 1,018,154 |
Six months ended 30 June 2008 (unaudited)
| Oil sales | - | - | - | - | 43,984 | 43,984 | ||
| Operating profit (loss) | - | - | (3,262) | (3,262) | 36,419 | 33,157 | ||
| Total assets 2 | 474,477 | 48,316 | 444,989 | 967,782 | - | 967,782 |
Year ended 31 December 2008
| Oil sales | 55,340 | - | - | 55,340 | 43,984 | 99,324 | ||
| Operating profit (loss) | 36,392 | - | (6,220) | 30,172 | 36,419 | 66,591 | ||
| Total assets 2 | 562,819 | 73,981 | 337,618 | 974,418 | - | 974,418 |
1 In April 2008, the Group completed the sale of its Middle East segment which comprised its Yemen interest.
2 Previously, under IAS 14, tax assets were recorded as unallocated. Under IFRS 8 tax assets are now recorded to their applicable segment consistent with internal reporting.
4 Tax
| (unaudited) six months ended 30 Jun 09 $000's |
| (unaudited) six months ended 30 Jun 08 $000's |
| year ended 31 Dec 08 $000's | ||
| Continuing operations | ||||||
| Current tax | 9,828 | 125 | 4,728 | |||
| Deferred tax | 4,301 |
| - |
| 2,087 | |
| 14,129 | 125 | 6,815 | ||||
| Discontinued operations | ||||||
| Current tax | - | 8,689 | 8,689 | |||
| Deferred tax | - |
| 4,037 |
| 4,037 | |
| - | 12,726 | 12,726 | ||||
| Group | ||||||
| Current tax | 9,828 | 8,814 | 13,417 | |||
| Deferred tax | 4,301 |
| 4,037 |
| 6,124 | |
| 14,129 |
| 12,851 |
| 19,541 |
UK corporation tax is calculated at 30% to 31 March 2008, thereafter at 28%, of the estimated assessable profit for each period. Taxation in other jurisdictions is calculated at the rates prevailing in the respective jurisdictions. During each period both current and deferred taxation have arisen in overseas jurisdictions only.
5 Earnings per share
The calculation of the basic and diluted earnings per share is based on the following data:
| (unaudited) six months ended 30 Jun 09 $000's |
| (unaudited) six months ended 30 Jun 08 $000's |
| year ended 31 Dec 08 $000's | |
| Earnings (loss) from continuing operations | 31,607 | (730) | 30,573 | ||
| Effect of dilutive potential ordinary shares: Interest on convertible bonds | 593 |
| - |
| 794 |
| Earnings (loss) for the purposes of diluted earnings per share on continuing operations | 32,200 | (730) | 31,367 | ||
| Earnings from discontinued operations | - | 380,487 | 380,487 | ||
| Earnings for the purposes of diluted earnings per share on continuing and discontinued operations | 32,200 |
| 379,757 |
| 411,854 |
| Number of shares | |||||
| (unaudited) six months ended 30 Jun 09 | (unaudited) six months ended 30 Jun 08 | year ended 31 Dec 08 | |||
| Weighted average number of ordinary shares for the purposes of basic earnings per share | 73,355,607 | 70,686,542 | 71,446,122 | ||
| Effect of dilutive potential ordinary shares: | |||||
| Share options and warrants | 2,927,657 | 6,330,379 | 3,065,499 | ||
| Ordinary shares of the Company held by the Group | 1,787,561 | 2,193,280 | 2,113,936 | ||
| Convertible bonds | 6,238,000 | - | 6,238,000 | ||
| Weighted average number of ordinary shares for the purposes of diluted earnings per share | 84,308,825 |
| 79,210,201 |
| 82,863,557 |
At 30 June 2008 up to 6,238,000 potential ordinary shares in the Company that are underlying the Company's convertible bonds and that may dilute earnings per share in the future were not included in the calculation of diluted earnings per share because they were antidilutive for that period.
6 Convertible bonds
As at 30 June 2009 the Group's only debt was the convertible bonds issued in 2006 at a par of $250 million, further details of which are in Note 23 to the 2008 Annual Report and Accounts. The liability component of the bonds has been reclassified as a current liability on the balance sheet as at 30 June 2009 as the bonds may be redeemed at par at the option of each bondholder on 16 May 2010.
7 Reconciliation of operating profit to operating cash flows
| (unaudited) six months ended 30 Jun 09 $000's |
| (unaudited) six months ended 30 Jun 08 $000's |
| year ended 31 Dec 08 $000's | |
| Operating profit (loss) from continuing operations | 43,975 | (3,262) | 30,172 | ||
| Operating profit from discontinued operations | - |
| 36,419 |
| 36,419 |
| 43,975 | 33,157 | 66,591 | |||
| Share-based payments | 418 | 517 | 971 | ||
| Depreciation, depletion and amortisation | 9,922 |
| 728 |
| 8,733 |
| Operating cash flows before movements in working capital | 54,315 | 34,402 | 76,295 | ||
| (Increase) decrease in inventories | (5,105) | 11 | (3,900) | ||
| (Increase) decrease in receivables | (12,998) | 1,555 | (18,940) | ||
| (Decrease) increase in payables | (3,466) | (2,350) | 5,453 | ||
| Cash generated by operations | 32,746 | 33,618 | 58,908 | ||
| Interest received | 2,501 | 2,073 | 6,692 | ||
| Interest paid | (5,669) | (6,110) | (11,808) | ||
| Income taxes paid | (3,774) |
| (5,696) |
| (8,736) |
| Net cash from operating activities | 25,804 |
| 23,885 |
| 45,056 |
| Cash generated from operating activities comprises: | |||||
| Continuing operating activities | 25,804 | (7,072) | 14,099 | ||
| Discontinued operating activities | - |
| 30,957 |
| 30,957 |
|
| |||||
| 25,804 |
| 23,885 |
| 45,056 |
Cash and cash equivalents (which are presented as a single class of asset on the balance sheet) comprise cash at bank and other short term highly liquid investments that are readily convertible to a known amount of cash and which are subject to an insignificant risk of change in value.