Pensana Regulatory News (PRE)

26 Sep 2007 07:01

Pan Andean Resources PLC26 September 2007 Pan Andean Resources plc Results for the year ending 31st March 2007 Highlights • Profit of £860,570 Gulf of Mexico • Commercial discovery and enhanced exploration potential • Recent commercial discovery on HI 52 • Recommencement of production on HI 30 imminent Improved exploration potential on both blocks: additional wells expected in 2008 Latin America • Significant progress in Peru: seventh largest exploration land holder • New blocks acquired: 131 and 141 • 11 targets identified on Block 114 • Rio Caco structure could contain as much as 90 million barrels of oil • In discussions with 3 companies re potential joint ventures • Re-emergence of Columbia as an exploration province • Significant opportunities identified • Late stage exploration licence applied for John Teeling, Chairman of Pan Andean commented; "This has been a year of substantial progress. The gas discovery in the Gulfand the re-start of oil production will significantly enhance our cashgeneration, while the release of substantial abandonment liabilities on HI 52and the extension of the life of HI 30 strengthen our assets. Winning tenders for blocks 131 and 141 in Peru, puts Pan Andean in a very strongland position. While we continue to work our ground, we have commenceddiscussions with potential partners. We expect an early decision on our licence application in Colombia." Contacts: David Horgan, Managing Director + 353 87 292 3500John Teeling, Chairman + 353 1 833 2833 College HillPaddy Blewer +44 (0)20 7457 2020Nick Elwes Blue Oar Securities PlcJohn Wakefield +44 (0) 1179 330020Simon Moynagh www.panandeanresources.com Chairman's Statement Pan Andean is a profitable, cash positive oil and gas producer in the US, theGulf of Mexico and Bolivia. We are exploring in both the Gulf and Peru. In theperiod under review we made a profit before tax of £861,000, which is a declineof £63,000 on last year due to the fall in the Dollar/Sterling rate. A rise inhydrocarbon prices was offset by higher operating costs as we boosted ourexploration activities. The strategy being followed by Pan Andean is clear; to utilise our producingassets in the Gulf, to exploit exploration opportunities in our US assets and toleverage our cash, experience and expertise, to build a strong ground positionin South America. We are making significant progress toward our objectives, assisted by high oiland gas prices. But high prices are a double edged sword. We earn more moneyon what we produce but everything in the oil industry now costs more and/or isin scarce supply. A surge in oil exploration means that rigs, skills andsupplies are simply hard to get. Exploration acreage is now highly sought afterwhile producing assets are bought on the assumption of everlasting high prices. In the US, we have two offshore blocks in the Gulf, and a small interest in athird, as well as two producing assets onshore Texas. The saga of the HI 30Lshut-in has been uppermost in our shareholders' minds but the real gem in thecrown is HI 52 where we have a regular royalty income, currently over $150,000 amonth, and a recent successful discovery, which will be worth up to $75,000 amonth to Pan Andean. An agreement with the discoverer absolves us of majorabandonment liabilities and virtually guarantees additional wells in 2008. TheGryphon royalty (1.3% Pan Andean) on the block comes from 3 wells producing over35 million cubic feet of gas a day. Phoenix has successfully completed an 8,000 foot well, finding 160 feet of gasbearing sands. It is important to understand the deal with Phoenix. Our one well production onHI 52 is declining. Our share of platform costs (50%) was $500,000 a year andrising. We had drilled a dry well with our partner Sterling and were reluctantto drill again. Abandonment was staring us in the face at a cost in excess of$6m. We negotiated a royalty deal (2.1%) with Phoenix whereby they drilled ashallow well. If the well was successful Phoenix would take over the platform,become operator and assume all liabilities. This is what has happened. Phoenixare tie-ing in the well to our existing pipelines and platform. They willbecome operator in late September 2007. Production will start shortly at anestimated 5m cubic feet of gas a day and is expected to rise significantly. The HI 30L shut-in has lasted for over 2 years. It is difficult for frustratedinvestors and directors to accept that the delay in restarting production hasproduced significant benefits for Pan Andean. During the closedown, oil priceshave doubled increasing the in situ value of our estimated 300,000 barrels ofrecoverable oil by $12m. In addition, discoveries on an adjacent block in 2006resulted in Hunt Oil becoming operator of HI 30L, paying Pan Andean a monthlyrent to process oil and gas from their discoveries through our platform. HuntOil, as operator, opened the log jam on supply boats and finished repairs to HI30L and completed new pipelines. It is a simple, stark and unfortunate fact oflife that Pan Andean, as a small independent, lacked the ability to get boats inthe Gulf. We had contracts and promises, but the majors called the shots. Ourpartner, Hunt, have their own boats. Hunt have completed the repairs andrefurbishments. Tammany, the operators of HI 24, have completed their work andpipeline testing is underway. HI 30L is expected to produce 300 barrels of oila day. At current prices the net income to Pan Andean is $250,000 a month. An unexpected benefit of taking Hunt on as operator is that they reviewed theexploration potential on the block. With adjacent discoveries Hunt had specificcompany knowledge. They have identified a target which they estimate couldcontain 1 million barrels of recoverable oil. It will cost a minimum of $6m todrill. In the coming months we will discuss options with Hunt, who are a 12%holder in HI 30L, but would like more. We continue to work on our onshore US assets where the main focus is in findinga partner to drill Danbury Dome. We are also drilling the Estaban field andworking with a range of partners to produce options for the North Bob West Fieldin Southern Texas. Turning to Latin America, we have made substantial progress in Peru to the stagethat we are now the seventh largest independent exploration land holder. Wehave three blocks, two in Ucayali and one near Lake Titicaca. We obtained twonew blocks, 131 and 141, in the face of intense competition because we areworking on the ground in Peru on Block 114. We have 20 years experienceexploring in similar environments in Bolivia and have a very strong andexperienced technical staff led by Mauricio Gonzalez. We have been actively working our way through the licensing requirements onBlock 114 where we have identified 11 targets. One in particular, the Rio Caco,has a structure with the potential to contain up to 90 million barrels of oil.Environmental considerations are rightly a top priority in Peru. We have spentthe past year producing the required reports and communicating with localcommunities. That work is almost complete. Seismic and well logreinterpretation is finalised. The remote location of Rio Caco and weatherwindows, mean that necessary roads and campsites can only be constructed incertain months. This indicates that the earliest time to have a rig on site isQ1 2009. Our ground position in Peru and the growing attractiveness of the country as anoil province, have produced a selection of interested partners. We are indiscussions with three companies. Bolivia, where Pan Andean started in 1988, is frustrating. The country has muchhydrocarbon promise in terms of geology and location. The vast gas reserves inthe country are needed in neighbouring Argentina and Brazil. The politicaluncertainty produced by the nationalisation decree deters investment. PanAndean (30%), in partnership with Repsol (40%) and Petrobras (30%), produces oiland gas at Monteagudo in Central Bolivia. There is a significant deep gas playon the site. In the east of the country, close to the city of Santa Cruz, PanAndean (10%), in partnership with BP (90%), has a large gas discovery, ElDorado, which was declared commercial in 2004. New contracts have been signedfor both fields. We are hopeful that in the not too distant future, El Doradowill be developed and market incentives offered to drill Monteagudo. In themeantime, we maintain our on the ground position in Bolivia and our contactswith the administration. The re-emergence of Colombia as a destination for oil prospectors is one of thesuccess stories in Latin America. It is a highly prospective country with goodeconomic terms. Civil and political uncertainty is at acceptable levels. PanAndean is building a presence in the country with the objective of investing inlate stage exploration plays and small producers with exploration potential. Wehave a strong in-country team and a series of projects under evaluation. Wehave applied for a licence over one late stage exploration project. Outside of Latin America and the US we continue to maintain a weather eye onopportunities in the Middle East, though our focus is clearly on Peru andColombia. Future Pan Andean is in a strong position to benefit from high oil prices. Our Gulf ofMexico assets are cash cows. We have exploration potential on HI 30L and on HI52. At this stage, I am reluctant to commit to a start up date on HI 30L, butit should be imminent. The value of the ground we hold in Peru has not yet beenrecognised by investors but has been understood by the industry. Currentdiscussions could lead to a joint venture. Pan Andean is very well positioned with excellent partners and excitingpotential. John J TeelingChairman26th September 2007 CONSOLIDATED PROFIT AND LOSS ACCOUNTFOR THE YEAR ENDED 31 MARCH 2007 2007 2006 £ £ TURNOVER 1,903,075 2,023,369 Cost of sales (452,004) (443,849) GROSS PROFIT 1,451,071 1,579,520 Administrative expenses (603,858) (617,601) OPERATING PROFIT 847,213 961,919 Interest receivable and similar income 95,873 82,694 Interest payable and similar charges (82,516) (120,875) PROFIT ON ORDINARY ACTIVITIESBEFORE TAXATION 860,570 923,738 Tax on profit on ordinary activities (258,171) (325,452) PROFIT ON ORDINARY ACTIVITIESAFTER TAXATION FOR THE FINANCIAL YEAR 602,399 598,286 Earnings per share 0.51p 0.50p Earning per share - diluted 0.47p 0.49p All income arises from continuing operations. CONSOLIDATED BALANCE SHEET AS AT 31 MARCH 2007 2007 2006 £ £FIXED ASSETS Intangible assets 4,844,408 4,888,341Tangible assets 10,145,851 9,792,669Investments 2,757 2,857 14,993,016 14,683,867 CURRENT ASSETS Debtors 1,664,833 1,630,303Cash at bank 3,779,044 4,381,940 5,443,877 6,012,243 CREDITORS: (Amounts falling duewithin one year) (2,439,132) (2,063,535) NET CURRENT ASSETS 3,004,745 3,948,708 TOTAL ASSETS LESS CURRENT LIABILITIES 17,997,761 18,632,575 PROVISION FOR LIABILITIESAND CHARGES (2,486,033) (2,283,793) NET ASSETS 15,511,728 16,348,782 CAPITAL AND RESERVES Called-up share capital 1,192,278 1,192,178Share premium account 20,229,868 20,229,168Share based remuneration reserves 25,920 -Profit and loss account - (deficit) (5,936,338) (5,072,564) EQUITY SHAREHOLDERS' FUNDS -ALL EQUITY 15,511,728 16,348,782 CONSOLIDATED CASH FLOW STATEMENTFOR THE YEAR ENDED 31 MARCH 2007 2007 2006 £ £ NET CASH INFLOW FROMOPERATING ACTIVITIES 1,057,125 2,231,864 RETURNS ON INVESTMENTS ANDSERVICING OF FINANCE Interest received 95,873 82,694Interest paid (82,516) (120,875) NET CASH INFLOW/(OUTFLOW) FROMRETURNS ON INVESTMENTS AND SERVICING OF FINANCE 13,357 (38,181) TAXATION - 3,642 CAPITAL EXPENDITURE AND FINANCIAL INVESTMENT Payments to acquire intangible fixed assets (445,191) (246,082)Payments to acquire tangible fixed assets (1,228,987) (1,359,670) NET CASH OUTFLOW FROMCAPITAL EXPENDITURE ANDFINANCIAL INVESTMENT (1,674,178) (1,605,752) NET CASH (OUTFLOW)/INFLOW BEFORE FINANCING (603,696) 591,573 FINANCING Issue of ordinary share capital 800 - NET CASH INFLOW FROM FINANCING 800 - (DECREASE)/INCREASE IN CASH (602,896) 591,573 CONSOLIDATED STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSESFOR THE YEAR ENDED 31 MARCH 2007 2007 2006 £ £ Profit for the financial year 602,399 598,286 Currency translation adjustments (1,466,173) 852,000 Total recognised (losses)/gains since lastannual report and financial statements (863,774) 1,450,286 RECONCILIATION OF MOVEMENT IN EQUITY SHAREHOLDERS' FUNDSFOR THE YEAR ENDED 31 MARCH 2007 2007 2006 £ £ Profit for the financial year 602,399 598,286 Currency translation adjustments (1,466,173) 852,000 Share based remuneration reserves 25,920 - New share capital subscribed 800 - Net change in equity shareholders' funds (837,054) 1,450,286 Opening equity shareholders' funds 16,348,782 14,898,496 Closing equity shareholders' funds 15,511,728 16,348,782 Notes: The financial information set out above does not constitute the Company'sfinancial statements for the year ended 31 March 2007. The financialinformation for 2006 is derived from the financial statements for 2006 whichhave been delivered to the Registrar of Companies. The auditors have reportedon 2006 statements; their report was unqualified and did not contain a statementunder section 237(2) or (3) of the Companies Act 1985. The financial statementsfor 2007 have been audited and will be delivered to the Registrar of Companiesfollowing the Company's Annual General Meeting. The auditors have reported onthe 2007 statements; their report was unqualified and did not contain astatement under section 237(2) or (3) of the Companies Act 1985. A copy of the Company's annual report and accounts for 2007 will be mailed toall shareholders shortly and will also be available for collection from theCompany's registered office, 20-22 Bedford Row, London WCIR 4JS. This information is provided by RNS The company news service from the London Stock Exchange