Last checked at 25 Sep 2008 07:00
25th September 2008
Pan Andean Resources plc
Preliminary Results for Year Ended 31 March 2008
Highlights:
40% increase in pre-tax profits to £1.2 million
Three Peruvian exploration blocks farmed out on good terms. A fourth block won September 2008
Drillable targets identified on the Antorcha block in Colombia. Drilling possible early 2009
Danbury Dome deep well, onshore Texas, commenced September 2008
John Teeling, Chairman of Pan Andean Resources commented;
"This has been a year of significant achievement. We increased pre-tax profits by 40% and are operationally cash flow positive. We are now a major exploration ground holder in Peru. The quality of the ground is reflected in the fact that we have farmed out three blocks on good terms while we have recently won a fourth highly prized block.
In Colombia, we have 100% of Antorcha, a heavy oil play where our seismic work has identified structures which could contain significant quantities of oil. The first well will be shallow, 2,000 metres, costing about $1 million.
The US saw drilling success by Phoenix on our High Island 52 block, the restart of production on High Island 30, commercial deals with Phoenix and Hunt Oil, which relieved Pan Andean of $6 million of liabilities on High Island 52 and the Hunt deal on High Island 30, which gives a significant monthly rental for the use of the platform.
The deep Danbury Dome prospect, onshore Texas is being drilled by a consortium in which Pan Andean has a 20% carry and a 15% working interest.
In the present cash starved market, Pan Andean with production and cash is very well positioned. "
Contacts:
| Pan Andean | |
| David Horgan, Managing Director | + 353 87 292 3500 |
| John Teeling, Chairman | + 353 1 833 2833 |
| College Hill | |
| Paddy Blewer | +44 (0)20 7457 2020 |
| Nick Elwes | |
| Blue Oar Securities Plc | |
| John Wakefield | +44 (0)1179 330020 |
| Simon Moynagh |
www.panandeanresources.com
Pan Andean Resources plc - Statement Accompanying the Preliminary Results
This has been a time of numerous achievements;
Three large exploration blocks awarded in Peru. All three farmed out on good terms
Exploration block awarded in Colombia. Work to date suggests good prospects for drilling success
New highly sought after fourth block awarded in September 2008 Peruvian oil tender
Successful well drilled on block High Island 52, Gulf of Mexico by Phoenix. producing at up to 6mmcfd
Danbury Dome, Texas, deep drilling commenced September 2008
Pan Andean remains one of the few cash positive and profitable AIM listed oil and gas companies. In the period under review our pre-tax profit increased by 40%. The very large tax provision which drove down post tax profits is due to the release of a deferred tax asset in Bolivia. It is most unlikely to affect cash.
Pan Andean is an offshore and onshore oil and gas producer in the United States as well as having production in Bolivia. We are active in exploration onshore US (Danbury Dome), in Peru where we hold four prospective exploration blocks, and Colombia, where we are preparing to drill our Antorcha block.
The revenue stream from our US operations is used to leverage our 20 year experience in Latin American oil to obtain good exploration ground. We have been particularly successful in this, winning all of our blocks at tender. The quality of our exploration ground is verified by the fact that the three blocks currently held in Peru are all farmed out while the Colombian block has been the subject of numerous proposals. The fourth Peruvian block awarded in recent weeks is already the subject of an approach by potential partners.
United States
The highlights of our US activities were the restart of production on High Island 30 and the bringing on stream of the Phoenix well on High Island 52.
High Island 52 is the source of most Pan Andean income. Woodside is producing over 30 million cubic feet of gas a day (mmcfd) from three wells. Pan Andean holds a 1.32% royalty. Phoenix has been producing up to 6mmcfd from a single well on the block. Pan Andean holds a 2.15% royalty on this production. By selling the existing platform on High Island 52 to Phoenix, Pan Andean was relieved of abandonment liabilities of US$6 million.
High Island 30 (62.9% Pan Andean) operated by Hunt Oil was restarted in April 2008 at a rate of production of 70 barrels a day. This is lower than expected but it is still cash positive. Pan Andean also receives a significant monthly income from Hunt Oil for the platform on High Island 30 through which Hunt Oil pumps oil from an adjacent block.
While the focus is on production, I am pleased to report that the exploration potential of our US acreage is not being ignored. After many months of trying, a consortium was put together to drill our onshore Danbury Dome acreage. A deep well commenced in September 2008 targeted at a 3D seismic identified structure around a depth of 13,000 feet. Pan Andean has a 20 per cent carry and a 15 per cent working interest in the well. This is a frontier prospect. Both Hunt Oil on High Island 30 and Phoenix on High Island 52 have identified drillable targets.
Colombia
Pan Andean activities are increasingly focused on South America where political risk has decreased and fiscal terms improved. Colombia is an established oil and gas province yet large parts of the country remain unexplored. Pan Andean won 100 per cent of the 35,000 hectare Antorcha block in a 2007 bidding round. This is a heavy oil play in the Middle Magdalena basin. We have completed surface mapping, re-processing 70km of seismic, data acquisition, reintrepretation of well data and a 60km 2D seismic survey at a cost of $1.4 million. Potential unrisked reserves are estimated at 100 to 300 million barrels of oil. A well should be drilled in 2009.
Peru
Once the award of the fourth block, 161, to Pan Andean is finalised, we will be the fifth largest onshore ground holder in Peru. In successive bidding rounds, we have been awarded Block 114, then Blocks 131 and 141 and recently Block 161. There is a rigorous quality check on applicants so it is a credit to the expertise and skill of our local management that we have been so successful.
Pan Andean has farmed out the first three blocks, two to CEPSA of Spain and one to Reliance of India.
Block 114 is located in the Ucayali basin in central Peru. Four wells drilled in the 1970s and 1980s encountered oil and 2,000km of seismic were run. Pan Andean completed seismic processing and an environmental impact assessment prior to farming out to CEPSA. Under the terms of the farm-out, Pan Andean holds a 30 per cent interest with a full carry through the first well and a 50 per cent carry through the second. In addition, subsequent to year end, CEPSA paid $3 million of back costs. A 300km 2D seismic survey is planned for early 2009. An initial well is possible in late 2009.
CEPSA also farmed into Block 131 adjacent to Block 114 in the Ucayali on similar terms. There are known oil seeps on this block and 750km of existing seismic of which 500km have been reprocessed by Pan Andean. A 1,000km seismic survey is planned prior to drilling in 2011.
Reliance Industries of India has farmed into Block 141 in the Lake Titicaca area. Pan Andean retains a 10 per cent to 30 per cent interest through to commercial discovery. The percentage interest will depend on the size of any commercial discovery. Block 141 is a frontier prospect covering 22,000 sqkm. There is limited seismic on the block. Having undertaken geological studies, Pan Andean and Reliance are targeting gas at deeper levels where an unrisked P50 recoverable resource of 80 million barrels of oil equivalent is estimated. An aeromagnetic survey is planned for late 2008 to be followed with seismic in 2009 and a well in 2010. It is estimated that Reliance will spend $40 million on this phase of exploration.
In the Peruvian oil tender of September 2008, Pan Andean was awarded Block 161 in the Ucayali basin. This is a 492,000 hectare block with oil seeps, 925km of seismic and 5 wells. Three prospects have already been identified. This former Hess Corporation block is a prized asset for Pan Andean. The planned work schedule involves reprocessing the seismic, reinterpreting the well logs, running new seismic and drilling at least one well.
Bolivia
Pan Andean has operated in Bolivia since 1988. Political uncertainty and sub-economic commercial terms have made new investment unfeasible.
Together with Repsol (50%) and Petrobras (20%), we have a 30 per cent interest in the eleven well Monteagudo gas field in central Bolivia. It is not economic at present.
We hold a 10% interest (BP 90%) in the El Dorado gas discovery near Santa Cruz in the lowlands. This discovery is very well positioned close to the Brazil-Bolivia pipeline and to the power hungry city of Santa Cruz. Recent improvements in gas prices paid by the State may offer some commercial justification to develop El Dorado. A seven to nine well development programme is under consideration.
Other Countries
We continue to examine prospects in other parts of Central and South America but the rise of economic nationalism fuelled by high oil prices makes investment in many countries unattractive. We are holding a watching brief on projects in the Middle East and Africa.
Future
I must pay tribute to Pan Andean management, who have brought the Company to a position where it has assets, cashflow, partners and potential. Mauricio Gonzalez and David Horgan have been involved since foundation. To Mauricio goes the credit for our success in Peru. Ivan Sandrea, who joined in recent years, is responsible for Colombia while Jim Finn, also a founding director, laboured long and hard to put the Danbury Dome consortium together. Add to this team our partners, 7 overall, including some of the biggest oil companies in the world and you begin to share my confidence in the future.
Pan Andean has survived for more than two decades in the high risk business of frontier oil exploration. We have had setbacks, but we have built a profitable producing business with a high potential exploration portfolio supported by an array of world class partners.
John Teeling
Chairman
25th September 2008
CONSOLIDATED INCOME STATEMENT
FOR THE YEAR ENDED 31 MARCH 2008
| 2008 | 2007 | ||
| £ | £ | ||
| Continuing operations | |||
| REVENUE | 1,670,481 | 1,903,075 | |
| Cost of sales | (336,909) | (452,004) | |
| GROSS PROFIT | 1,333,572 | 1,451,071 | |
| Administrative expenses | (399,671) | (603,858) | |
| OPERATING PROFIT | 933,901 | 847,213 | |
| Investment revenue | 322,988 | 95,873 | |
| Finance costs | (53,101) | (82,516) | |
| PROFIT BEFORE TAXATION | 1,203,788 | 860,570 | |
| Tax | (736,144) | (258,171) | |
| PROFIT AFTER TAXATION FOR THE | |||
| FINANCIAL YEAR | 467,644 | 602,399 | |
| Earnings per share - basic | 0.39p | 0.51p | |
| Earning per share - diluted | 0.36p | 0.47p |
CONSOLIDATED BALANCE SHEET AS AT 31 MARCH 2008
| 2008 | 2007 | ||
| £ | £ | ||
| ASSETS: | |||
| NON CURRENT ASSETS | |||
| Intangible assets | 5,847,712 | 4,844,408 | |
| Property, plant and equipment | 13,707,868 | 10,145,851 | |
| Investments | 2,750 | 2,757 | |
| Deferred tax asset | - | 375,008 | |
| 19,558,330 | 15,368,024 | ||
| CURRENT ASSETS | |||
| Receivables | 1,370,722 | 1,289,825 | |
| Cash and cash equivalents | 1,880,243 | 3,779,044 | |
| 3,250,965 | 5,068,869 | ||
| TOTAL ASSETS | 22,809,295 | 20,436,893 | |
| LIABILITIES: | |||
| CURRENT LIABILITIES | |||
| Trade and other payables | (5,137,440) | (2,439,132) | |
| NET CURRENT (LIABILITIES)/ASSETS | (1,886,475) | 2,629,737 | |
| NON-CURRENT LIABILITIES | |||
| Provision for decommissioning costs | (417,545) | (1,151,623) | |
| Deferred tax liability | (1,695,546) | (1,334,410) | |
| (2,113,091) | (2,486,033) | ||
| NET ASSETS | 15,558,764 | 15,511,728 | |
| EQUITY: | |||
| Called-up share capital | 1,192,278 | 1,192,278 | |
| Share premium | 20,229,868 | 20,229,868 | |
| Share based payment reserve | 25,920 | 25,920 | |
| Translation reserve | (1,886,781) | (1,466,173) | |
| Retained earnings - (deficit) | (4,002,521) | (4,470,165) | |
| TOTAL EQUITY | 15,558,764 | 15,511,728 |
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 MARCH 2008
| Called-up | Share Based | |||||
| Share | Share | Payment | Translation | Retained | ||
| Capital | Premium | Reserve | Reserve | Earnings | Total | |
| £ | £ | £ | £ | £ | £ | |
| At 1 April 2006 | 1,192,178 | 20,229,168 | - | - | (5,072,564) | 16,348,782 |
| Share based payments | - | - | 25,920 | - | - | 25,920 |
| Shares issued for cash | 100 | 700 | - | - | - | 800 |
| Currency translation | ||||||
| adjustments | - | - | - | (1,466,173) | - | (1,466,173) |
| Profit for the year | - | - | - | - | 602,399 | 602,399 |
| At 31 March 2007 | 1,192,278 | 20,229,868 | 25,920 | (1,466,173) | (4,470,165) | 15,511,728 |
| Currency translation | ||||||
| adjustments | - | - | - | (420,608) | - | (420,608) |
| Profit for the year | - | - | - | - | 467,644 | 467,644 |
| At 31 March 2008 | 1,192,278 | 20,229,868 | 25,920 | (1,886,781) | (4,002,521) | 15,558,764 |
Share based payment reserve
The share based payment reserve arises on the grant of share options to employees and directors under the share option plan.
Translation reserve
The translation reserve includes movements that relate to the retranslation of undertakings whose functional currencies are not sterling pounds.
Retained earnings
Retained earnings comprises accumulated profit and losses in the current year and prior years.
CONSOLIDATED CASH FLOW STATEMENT
FOR THE YEAR ENDED 31 MARCH 2008
| 2008 | 2007 | ||
| £ | £ | ||
| CASH FLOW FROM OPERATING ACTIVITIES | |||
| Profit before tax | 1,203,788 | 860,570 | |
| Exchange movements | (355,044) | (516,097) | |
| Depreciation | 84,434 | 98,134 | |
| Share based payment | - | 25,920 | |
| Finance cost | 53,101 | 82,516 | |
| Interest received | (322,988) | (95,813) | |
| 663,291 | 455,230 | ||
| MOVEMENTS IN WORKING CAPITAL | |||
| Increase in trade and other payables | 2,751,190 | 319,666 | |
| Increase in trade and other receivables | (80,897) | (34,530) | |
| NET CASH FROM OPERATIONS | 3,333,584 | 740,366 | |
| Finance cost | (53,101) | (82,516) | |
| Investment revenue | 322,988 | 95,873 | |
| NET CASH FROM OPERATING ACTIVITIES | 3,603,471 | 753,723 | |
| CASH FLOWS FROM INVESTING ACTIVITIES | |||
| Payments for intangible assets | (1,039,703) | (445,191) | |
| Payments for property, plant and equipments assets | (4,486,606) | (1,228,987) | |
| NET CASH USED IN INVESTING ACTIVITIES | (5,526,309) | (1,674,178) | |
| CASH FLOW FROM FINANCING ACTIVITIES | |||
| Proceeds from issue of equity shares | - | 800 | |
| NET CASH GENERATED FROM | |||
| FINANCING ACTIVITIES | - | 800 | |
| NET DECREASE IN CASH AND | |||
| CASH EQUIVALENTS | (1,922,838) | (919,655) | |
| Cash and cash equivalents at beginning of the | |||
| financial year | 3,779,044 | 4,381,940 | |
| Effect of exchange rate changes on cash held in | |||
| foreign currencies | 24,037 | 316,759 | |
| Cash and cash equivalents at end of the financial year | 1,880,243 | 3,779,044 |
Notes:
1. Accounting Policies
The Group's transition date to IFRS is 1 April 2006. The comparative financial information for the year ended 31 March 2007 has been restated on a consistent basis with those accounting policies applied by the Group in preparing its first full financial statements in accordance with IFRS as at 31 March 2008, except where otherwise required or permitted by IFRS 1 "First Time Adoption of International Accounting Standards".
2. Earnings per Share
Basic earnings per share is computed by dividing the profit or loss after taxation for the year available to ordinary shareholders by the sum of the weighted average number of ordinary shares in issue and ranking for dividend during the year.
Diluted earnings per share is computed by dividing the profit or loss after taxation for the year by the weighted average number of ordinary shares in issue, adjusted for the effect of all dilutive potential ordinary shares that were outstanding during the year.
The following table sets forth the computation for basic and diluted earnings per share:
| 2008 | 2007 | ||
| £ | £ | ||
| Numerator | |||
| For basic and diluted EPS retained profit | 467,644 | 602,339 | |
| Denominator | Number | Number | |
| For basic EPS | 119,227,733 | 119,227,733 | |
| For diluted EPS | 128,241,733 | 128,241,733 | |
| Basic EPS | 0.39p | 0.51p | |
| Diluted EPS | 0.36p | 0.47p | |
3. Intangible Assets - Group
| 2008 | 2007 | ||
| Exploration and evaluation assets: | £ | £ | |
| Cost | |||
| Opening balance | 4,844,408 | 4,888,341 | |
| Exchange adjustments | (36,399) | (489,124) | |
| Additions | 1,039,703 | 445,191 | |
| Closing balance | 5,847,712 | 4,844,408 | |
| Net book value | |||
| Opening balance | 4,844,408 | 4,888,341 | |
| Closing balance | 5,847,712 | 4,844,408 | |
| Segmental Analysis - Group | 2008 | 2007 | |
| £ | |||
| Bolivia | 4,523,835 | 4,229,635 | |
| Peru | 934,038 | 614,773 | |
| Colombia | 389,839 | - | |
| 5,847,712 | 4,844,408 |
Exploration and evaluation assets relates to expenditure incurred in hydrocarbon exploration and related expenditure in Bolivia, Colombia and Peru.
All present indications are that exploration projects will have a value in excess of the accumulated costs to date. No impairment provision has been made in respect of these intangible assets.
The Group's activities are subject to a number of significant potential risks including:
- Price fluctuations;
- Uncertainties over development and operational costs;
- Political and legal risks, including arrangements with governments for licences, profit sharing and taxation; and
- Funding requirements.
The realisation of this intangible asset is dependent on the successful discovery and development of economic reserves which is affected by these risks outlined above. Should this prove unsuccessful the value included in the balance sheet would be written off to the income statement.
The directors are aware that by its nature there is an inherent uncertainty in such exploration and evaluation expenditure as to the value of the asset. Having reviewed the exploration and evaluation expenditure at 31 March 2008, the directors are satisfied that the value of the intangible asset is not less than carrying value.
Included in the above is an amount of £Nil (2007: £12,960) of capitalised expenses relating to equity - settled share based payments transactions during the year.
4. Property, Plant and Equipment
| Group | |||||
| Plant & | Oil and Gas | ||||
| Equipment | Interests | Total | |||
| £ | £ | £ | |||
| Cost: | |||||
| At 1 April 2006 | 28,376 | 14,145,427 | 14,173,803 | ||
| Exchange adjustments | (1,955) | (1,047,581) | (1,049,536) | ||
| Additions | 2,051 | 1,226,936 | 1,228,987 | ||
| At 31 March 2007 | 28,472 | 14,324,782 | 14,353,254 | ||
| Exchange adjustments | (145) | (83,455) | (83,600) | ||
| Additions | 4,179 | 4,482,427 | 4,486,606 | ||
| Disposals | - | (778,154) | (778,154) | ||
| At 31 March 2008 | 32,506 | 17,945,600 | 17,978,106 | ||
| Depreciation: | |||||
| At 1 April 2006 | 15,472 | 4,365,662 | 4,381,134 | ||
| Exchange adjustments | (1,146) | (270,719) | (271,865) | ||
| Charge for year | 1,129 | 97,005 | 98,134 | ||
| At 31 March 2007 | 15,455 | 4,191,948 | 4,207,403 | ||
| Exchange adjustments | 1,464 | (23,063) | (21,599) | ||
| Charge for the year | - | 84,434 | 84,434 | ||
| At 31 March 2008 | 16,919 | 4,253,319 | 4,270,238 | ||
| Net book value: | |||||
| At 31 March 2008 | 15,587 | 13,692,281 | 13,707,868 | ||
| At 31 March 2007 | 13,017 | 10,132,834 | 10,145,851 |
The disposals relate to the discharge of the provision for abandonment provision.
| Segmental Analysis - Group | |||
| 2008 | 2007 | ||
| £ | £ | ||
| United Kingdom | 5,961 | 5,961 | |
| Bolivia | 5,598 | 5,709 | |
| Peru | 1,830 | 1,347 | |
| Colombia | 2,198 | - | |
| USA | 13,692,281 | 10,132,834 | |
| 13,707,868 | 10,145,851 |
5. General Information
The financial information set out above does not constitute the Company's financial statements for the year ended 31 March 2008. The financial information for 2007 is derived from the financial statements for 2007 which have been delivered to the Registrar of Companies. The auditors have reported on 2007 statements; their report was unqualified with an emphasis of matter in respect of considering the adequacy of the disclosures made in the financial statements concerning the valuation of intangible assets, and did not contain a statement under section 237(2) or (3) of the Companies Act 1985. The financial statements for 2008 will be delivered to the Registrar of Companies following the Company's Annual General Meeting.
A copy of the Company's Annual Report and Accounts for 2008 will be mailed to all shareholders shortly and will also be available for collection from the Company's registered office, 20-22 Bedford Row, London WC1R 4JS. The Annual Report and Accounts may also be viewed on Pan Andean Resources plc's website at www.panandeanresources.com