PPC.L Regulatory News (PPC)

16 Apr 2008 07:00

Meridian Petroleum PLC16 April 2008 16 April 2008 MERIDIAN PETROLEUM plc ("Meridian" or the "Company") Preliminary Results for the year to 31 December 2007 Meridian Petroleum (AIM: MRP), the US-focused oil and gas exploration andproduction company today announces its preliminary results for the year ended 31December 2007. Highlights • First gas production from Orion field in Michigan • 297 million cubic feet of gas produced (2006: Nil) • 4,200 barrels of NGLs produced (2006: Nil) • $2,440,000 gross revenue (2006: $8,000) • Operating loss (before impairment charges and depreciation) reduced to $1,086,000 (2006: $1,900,000) Post-Period Highlights • 87% rise in gross revenue from Q4 2007 to Q1 2008 • 40% increase in daily gas production rate at Orion from December 2007 to March 2008 • New monthly and daily production records reached at Orion • Exceptional operating performance at Orion with no production days lost in first quarter 2008 and 2 successful sulfatreat change-outs completed • Milford 36 well put on extended test Stephen Gutteridge, Chairman, said "The development of Orion has been a majorsuccess for us. We have also made significant improvements in our governance andcontrols, and this gives us a solid platform to plan a more aggressive growthstrategy for the business. Financial markets are not easy at present but ourpositive cash-flow and extensive experience in the US puts us in a strongposition relative to many similar companies. We will use that to add moreproduction and more potential to our US assets." The Company's preliminary financial statements follow, and are available onwww.meridianpetroleum.com. Ed Childers, the Company's Chief Operating Officer, who meets the criteria of aqualified person under the AIM guidance note for mining and oil and gascompanies, has reviewed and approved the technical information contained in thisannouncement. - ends - For further information contact: Meridian Petroleum PlcStephen Gutteridge, Chairman+44 (0) 20 7811 0140 Ambrian PartnersTim Goodman+44 (0) 20 7634 4711 Parkgreen CommunicationsErica Nelson+44 (0) 20 7851 7480 Meridian Petroleum plc2007 Preliminary Results Chairman's Statement For Meridian Petroleum, 2007 was a year which saw many changes: • Significant US gas production from Orion generating positive cash flow in Q4 • A re-assessment of our asset portfolio and a renewed focus on the US • A new management team and improved governance and control structures • Delivery of a solid foundation to take the Company forward in 2008 with a new vision, a new strategy and the resources to expand Production and Cash-flow In August the Company commenced gas production from its Orion 36 well inMichigan, only seven months after drilling commenced. This well has exceededinitial expectations and by the end of 2007, had produced nearly 300 millioncubic feet of gas (mmcf) and 4,200 barrels of natural gas liquids. Average dailygas production has risen steadily and by March 2008 had reached well over 4mmcf/day. A comprehensive report on Orion 36 is included below. In June the Company raised $3.4million through a share placing to continue tofund the development of the business. From the fourth quarter of 2007, thesuccess of the Orion 36 well, helped by strong US energy prices, moved theCompany into a positive cash flow position. In July, the Calvin 36-1 well began production, but in this case failed to meetexpectations. This well will now be plugged and abandoned and costs of around$2million have been written off. Although it is still producing small amounts ofgas, we have also written off the Victory 21 well. Asset Portfolio During the second half of the year, we began a review of our asset base todetermine the best way to create further value from the re-investment of thecash-flow from Orion. The Company's Australian Licences contain significant potential but requiresizeable work programmes which would be logistically difficult and costly forMeridian to develop alone. Consequently steps were taken to sell these assetswhilst retaining upside through a royalty or other form of interest. Heads ofAgreement were signed with a potential purchaser and these discussions areongoing. However, the exclusivity period with this purchaser has now expired andthe Company will now engage in discussions with other potentially interestedparties. We also decided to seek to divest our interests in Mississippi via a sale orfarm-out and placed the Coal Bed Methane project in Alabama on hold, as ourrelatively small acreage, plus the considerable cost of a pilot scheme, did notmake it a priority area in the short-term. The Company sought to make progress with the development of the Calvin Deepprospect, but our joint venture partner, Ensight, was heavily committedelsewhere and released their interest back to Meridian, yielding a profit to theCompany of $363,000. We are currently seeking a new partner to take this projectforward. Directors and Management In April 2007 I succeeded Don Caldwell as Chairman and in October Tony Masonstepped down as Chief Executive. Don left the Company in August and Tonydeparted at the end of the year. In December, Ed Childers joined as Chief Operating Officer and he has alreadymade a significant contribution overseeing our operations and progressing assetdeals. I would like to thank my fellow Board members and executives for theircontribution during the year. Strategy and Vision In 2008 the Company has begun to actively seek further assets in the US. Thecash-flow from Orion 36 provides us with an opportunity to expand and add assetsthat will contribute to short and medium term production growth, spread ourproduction risk, and bridge the gap in our portfolio between the success ofOrion and the potential for returns from larger assets such as Calvin Deep andthe upside from our Australian Licences. Our vision for the company is different from a year ago, but I believe it is nowclearer - a US producer with a strong focus on gas, a corporate base in theLondon market for funding and governance, a strong commitment to improvedinvestor relations and an asset portfolio which provides both low-cost, quick tomarket drilling opportunities and medium-term larger plays. During 2007 we madesignificant progress by creating a solid platform to deliver this vision and wenow intend to aggressively pursue a range of acquisitions and deals to take thecompany on to the next level. Stephen GutteridgeChairman 15 April 2008 Orion 36 Report August 2007 to March 2008 Production Report • Total gas production 645 mmcf • Average daily gas production 3.15 mmcfd. • Highest daily flow rate 4.56 mmcfd in March. • Total liquids production 9,271 bbls • 3 successful sulfatreat change-outs completed in November 2007, February and April 2008 Financial Report • The average price received for gas was $8.46/mcf increasing steadily from $6.5/mcf in September 2007 to over $10.25/mcf in March 2008. • The average gas net revenue received by Meridian was $5.81/mcf equivalent to just under 70% of the gross revenue recognised in the profit and loss account. Meridian's gross profit is after deducting cost of sales including severance taxes (5.65%), royalties and overrides (25% of the post-tax revenue) and a 3% minority interest. • Total operating costs were higher than anticipated, averaging $1.50/mcf. • Sulfatreat costs were in line with expectations at $0.45/mcf, but are likely to increase this year due to higher commodity prices for iron • During the 7 month period, the Company made further substantial investment in the Orion facility, primarily to enhance our environmental and safety performance and to improve our operational efficiency. • This investment totalled some $400,000, bringing our total investment to nearly $4 million as at the end of March 2008. • As at the end of March 2008, approximately $2.8 million of this investment had been recovered. • Under the terms of the agreement entered into with a third party, Meridian's working interest will reduce once costs associated with Orion have been recovered. At this point the Group's working interest in Orion will be 72%. The timing of this reduction in the working interest is uncertain at this stage but is anticipated to be later in 2008. Reserves Report In line with best practice, the Company has commissioned RPS Energy to producethe independent 2008 report on the Company's US Onshore Licence interests. Acopy of this report will be available on the Company's website. Orion Reserves • In this year's report on Orion, RPS estimate P50 Gas Initially in Place (GIIP) of 3.5bcf in a potential range of 2.9 to 4bcf. Proven and Probable (2P) gross recoverable Reserves are assessed as some 3bcf (prior to any production) with remaining 2P Reserves for the Orion 36 field at 1 January 2008 of 2.4bcf. • For natural gas liquids RPS assess total 2P recoverable Reserves for the Orion 36 field as 45,170 bbls with 35,580 bbls remaining at 1 January 2008. This is slightly lower than last year's assessment as recent production has confirmed a lower condensate yield per mmcf of gas than expected. • Meridian Petroleum net attributable 2P Reserves after economic cut-off, deduction of royalties and adjustment of working interest after payback of costs are 1.4 bcf of gas and 20,942 bbls of liquids. • This assessment of Orion Reserves is not materially different from last year's report reflecting that, with the well having been on continuous production since August 2007, the Company has not yet been able to provide new reservoir data for RPS to re-assess the position. • The better than expected production from the well might suggest potentially higher Reserves, but this cannot currently be determined without a meaningful shut-in to assess pressure build-up, and the Company will be considering the possibility of such a shut-in in the next few months. Total Reserves Total Reserves as at 1 January 2008 Reserve Classification Units Gross Net Interest Last Update Orion 36 Gas 2P recoverable bcf 2.37 1.396 April 2008 Condensate 2P recoverable bbls 35,580 20,942 April 2008 Calvin n/a n/a Nil Nil April 2008Shallow Calvin Gas Contingent - bcf 157.9 110.5 April 2008Deep 3C Milford Gas Prospective bcf 0.44 0.132* April 200736 Condensate Prospective bbls 175,457 52,637* April 2007 Australia- Gas Prospective bcf 432.0 432.0 Feb 2007Delores *Adjusted to 30% working interest The above table has been extracted from reports provided by RPS Energy. Theyhave reviewed the above summary and have approved its publication. GLOSSARYGIIP Volume of gas initially in placeP50 50% probability that value will be equal to or greater than stated value2P Proved plus Probable in accordance with SPE definitions3C High Estimate Contingent Resourcesbcf Billion cubic feetbbls BarrelsNGL Natural Gas Liquids (condensates) Preliminary Financial Statements for the year ending 31 December 2007 Consolidated Income StatementYear ended 31 December 2007 2007 2006 Note US $000 US $000 Revenue 2,441 8Cost of sales (1,618) (63) -------- --------Gross profit/(loss) 823 (55)Administrative expenses (2,727) (1,845)Other operating income 363 - -------- --------Operating loss before impairment (1,541) (1,900)chargeImpairment charge 2 (1,999) (4,065) -------- --------Operating loss (3,540) (5,965) -------- --------Investment income - interest on bank 42 21deposits -------- --------Loss before taxation (3,498) (5,944)Taxation - - ======== ========Loss for the year attributable to equity (3,498) (5,944)shareholders ======== ======== ======== ========Loss per share - basic and diluted 3 (3.9) (8.3)(cents) ======== ======== Consolidated balance sheet for the year ended 31 December 2007 2007 2006 Note US $000 US $000 Non-current assets Intangible assets 1,720 646Property, plant and equipment 2 3,332 2,020 --------- ----------- 5,052 2,666 --------- ----------- Current assets Trade and other receivables 541 234Cash and cash equivalents 295 2,332 --------- ----------- 836 2,556 --------- ----------- Total assets 5,888 5,232 --------- ----------- Current liabilities Trade and other payables 503 211 Non-current liabilities Provisions 95 --------- -----------Total liabilities 598 211 --------- ----------- --------- -----------Net assets 5,290 5,021 ========= =========== Equity Called up share capital 9,026 7,362Share premium 8,372 6,565Retained earnings (12,655) (9,157)Translation reserve 160 112Other reserves 387 139 ========= ===========Total equity attributable to the equity 5,290 5,021holders ========= =========== Statement of Recognised Income and Expense for the year ended 31 December 2007 2007 2006 Note US $000 US $000Total (expense)/income recogniseddirect in equity Currency translation differences - gain 48 105Loss for year (3,498) (5,944) ========== ==========Total recognised income and expense (3,450) (5,839)for the year ========== ========== Consolidated Cash Flow Statement for the year ended 31 December 2007 2007 2006 Note US $000 US $000 Cash flows from operating activities 4 (1,329) (1,955) Cash consumed by operationsInterest received 42 21 ---------- --------- (1,287) (1,934) ---------- --------- Cash flows from investing activities Expenditure on exploration and evaluation assets (711) (459)Expenditure on development and production assets (3,721) (450) ---------- --------- (4,432) (909) ---------- --------- Cash flows from financing activities Proceeds from issue of shares 3,471 4,686 ---------- --------- Net (decrease) /increase in cash and cash (2,248) 1,843equivalents Opening cash and cash equivalents at beginning of 2,332 370yearExchange gains/(losses) on cash and cash 211 119equivalents ---------- ---------Closing cash and cash equivalents 295 2,332 ========== ========= Notes 1. Accounting policies and basis of preparation The financial information set out in this announcement does not constitute theCompany's statutory accounts for the years ended 31 December 2007 or 2006 but isderived from the 2007 accounts. A copy of the statutory accounts for the year to 31 December 2006 has beendelivered to the Registrar of Companies, and are also available on the Company'sweb site. Statutory accounts for 2007 will be delivered in due course. Theauditors have reported on the accounts for both the year ended 31 December 2006and the year ended 31 December 2007; their reports were unqualified and did notcontain statements under s237(2) or (3) of the Companies Act 1985. Whilst the financial statements included in this preliminary announcement havebeen computed in accordance with International Financial Reporting Standards("IFRS") as adopted for use in the EU, this announcement does not itself containsufficient information to comply with IFRS. The Annual Report, containing fullfinancial statements that comply with IFRS, will be sent out to shareholders on15 May 2008 2. Property, plant and equipment - Impairment charge On the basis of consultation with the consultants RPS Energy, in conjunctionwith a review of other data available, the directors have taken the view thatthe Calvin Shallow and Victory 21 fields are impaired and that expending furtherresources on developing these assets will not be commercially viable.Accordingly an impairment charge of $1,999,000 has been made to reduce thecarrying value of these assets to nil. Depreciation charged during the year was$455,000 (2006: $nil) 3. Loss per Share 2007 2006 US $000 US $000 LossLoss for the purposes of basic 3,498 5,944earnings per share being net lossattributable to equity holders of theParent Company Number NumberNumber of sharesWeighted average number of ordinary 89,380,409 71,310,566shares for the purposes of basic anddiluted loss per share 4. Notes to the cash flow statement 2007 2006 US $000 US $000 Loss before taxation (3,498) (5,944) Adjustments for: Interest received (42) (21)Depreciation and impairment of property, plant 2,454 4,065and equipmentOther operating income (363) -Share based payment 248 139Foreign exchange difference (156) (13) --------- ---------- Operating cash flows before movements in (1,357) (1,774)working capital (Increase)/decrease in receivables (293) (80)Increase/ (decrease) in payables 321 (101) --------- ----------Net cash consumed by operating activities (1,329) (1,955) ========= ========== This information is provided by RNS The company news service from the London Stock Exchange