Pensana Plc Regulatory News (PRE)

29 Sep 2006 07:02

Pan Andean Resources PLC29 September 2006 Pan Andean Resources plc Statement and Results for the year ending March 31st 2006 Highlights • Profits before tax: £923,000 - an increase of 37% on 2005 (£674,000). • Cash balances in excess of £4m: Pan Andean remains cash generative. • The restart of a 300 barrel a day oil production in the Gulf of Mexico, delayed by the hurricanes, is due shortly. • Discussions are advanced to farm out further exploration on block High Island 52 in the Gulf. • Exploration work has commenced on the prospective oil block 114 in Peru. • Early stage negotiations on entering Middle East hydrocarbons projects. John Teeling, Chairman commented: "This has been a year of slow but sure progress. While we are waiting for thesituation in the Gulf of Mexico to return to the status quo ante hurricanesKatrina and Rita, our North American portfolio is providing a strong cash flowwhich is enabling us to build an exploration programme in Latin American, theMiddle East and the US. Pan Andean's future is looking bright: our recruitment of Ivan Sandrea to theBoard, along with the acquisition of an exploration block in Peru are both verypositive moves. We believe that there is considerable potential in Latin Americafor a flexible independent player with the correct experience and contacts. Weare therefore confident and look forward to updating the market on our progressthroughout the year." Contacts: John Teeling +353 1 833 2833David Horgan College HillPaddy Blewer +44 (0) 20 7457 2020Nick Elwes Corporate SynergyIan Rice +44 (0) 117 933 0020Craig Howie +44 (0) 207 448 4400 Statement Accompanying the Results for year ended March 31st 2006 In the year under review Pan Andean made a profit, before tax, of over £923,000,up 37% on 2005. This profit derives mainly from our US operations which made $2mprofit. Bolivian operations broke even and the majority of explorationexpenditure was farmed out. On the exploration front, we completed negotiations and commenced work on Lot114 in Peru, a large highly prospective oil block. A thorough review of our USassets identified exploration potential onshore and offshore. We expect a dealon block High Island 52 in the Gulf of Mexico. We continued to examine newstrategic directions in South America, the Middle East and in parts of Africa. In the coming months we should see the restart of oil production in the Gulf,additional exploration on High Island 52 while our exploration in Peru hasalready attracted interest. All of this at a time of near record oil and gasprices. Why then has our share price seriously under performed the market? Investors arehard taskmasters. We promised the restart of production of 300 barrels of oilper day from High Island 30L. Due to circumstances outside of our control, wehave not yet restarted. It is due to commence within 60 days. We participated intwo small dry wells onshore Texas, while political uncertainty in Boliviathreatens the value of our investment. Since we acquired our US acreage in 2000, profits have increased each year. Theprincipal current source of profit is a royalty on offshore block High Island52. I am pleased to report that there is current exploration interest in thisblock. We are hopeful that ongoing negotiations will lead to furtherexploration. We will be a royalty participant. High Island 30L, in which we are operator and hold a 62.91% interest, has been asource of great frustration. Capable of producing 300 barrels of oil a day, thefield has been closed in since March 2004. At an oil price of $50 a barrel, theclose in represents a loss of over $5m a year in revenue. We shut downproduction in 2004 to refurbish the platform and to allow gas lift from well 1to well 2. There was also a need to find a new pipeline to shore. The platformrepairs have been complete since early 2005 and most of a new logistics systeminstalled. When hurricane Katrina devastated the Gulf, US authoritiescommandeered all available supply and repair/lift boats to secure production andto minimise environmental threats. Pan Andean and logistics partners, Sterling/Goldking, were unable to obtain a suitable boat until early September 2006.Final pipeline and pumping installation is now underway with a projected startup date in Q4 2006. It is important to clarify the situation in regards to High Island 30L. We arenot losing income, merely deferring it. In fact, it is possible that Pan Andeanwill profit from the delay due to higher oil prices. Danbury Dome remains our principal US onshore exploration asset. The geology isright, the seismic is encouraging but the target is deep and expensive to drill.In the past year we have reworked the data. We have some interest from apotential farm in partner who is a specialist in onshore drilling. What can I say about our Bolivian operations? We have been in Bolivia since thelate 1980s. We produce oil and gas at Monteagudo; we have a large gas discoveryat El Dorado near Santa Cruz, while there is a very substantial gas target belowour current production strata at Monteagudo. We have excellent partners, BP,Petrobras and Repsol, and we have an experienced oil and gas team. The decision by the authorities in La Paz, in 2005, to drastically increase taxand royalties, followed by a decision to expropriate the assets, has createdmajor uncertainty. Expropriation has not yet happened. Recent statements by theAuthorities suggest a future partnership with the State. Given the relativelysmall size of our operations we are hopeful of obtaining "marginal" status whichmay allow us to continue to operate at lower tax levels. International companies operating in Bolivia have been very successful infinding gas. There are now reserves of 60 trillion cubic feet. Bolivia can bethe hub of a gas network supplying Southern Latin American countries. Thecountry will not be able to achieve this without the financial and technicalsupport of international oil companies. But, as we know politicians, do notalways make purely economic decisions. Politicians rarely realise thatexploration dollars are orphans - they go where they are wanted, respected andrewarded. Uncertainty is likely to continue in Bolivia for some time yet. Waiting for Bolivia to become an attractive investment location is not an optionfor Pan Andean so we took steps to use our knowledge and experience elsewhere inSouth America. Peru was an obvious location. It has a long tradition in oilproduction, has good geology and attractive fiscal terms. Lot 114 is in a knownoil and gas area. It has over 2,000 kms of seismic and 4 wells. Of particularinterest is the Rio Caco structure which has 350 kms of seismic lines. Work hasbegun to reinterpret the seismic and the well logs. We are also undertaking anenvironmental assessment. The first well is targeted for Q3 2007. We are inearly stage discussions with a potential partner in the project. Future Strategy As well as investing in Peru, we are examining other possible projects in SouthAmerica. I was delighted to welcome Ivan Sandrea to the Board. As a Venezuelancitizen, with nine years major oil company experience and now with OPEC, hebrings a wealth of industry and regional experience to the Board. Whileopportunities in Venezuela will be a focus they will not be the only target. As has been previously announced, we are also examining the possibility ofstarting operations in the Middle East. The management team has valuableexperience in the region, currently working on separate projects in Iraq, Iranand Jordan. During the past year we have maintained slow progress in the region.Whilst we are closer to a firm proposal than we were twelve months ago it isstill early days. We are very conscious of the need to monetise the value of our assets. Theresumption of oil production on High Island 30L, together with the currentroyalty on High Island 52, both in the Gulf of Mexico, should provide healthyadditions to our cash holdings. Our profits, cash balances, low marketcapitalisation and US assets make us an attractive partner for junior oilexploration companies. During the year we have had initial contacts with anumber of companies of this type. We welcome such approaches but believe thatshareholders will obtain greater benefits by building the existing business. Hydrocarbons exploration is a risk business, as is investing in developingcountries yet the rewards can be substantial. I am confident that our contacts,experience and persistence will pay off. John J TeelingChairman29th September 2006 www.panandeanresources.com CONSOLIDATED PROFIT AND LOSS ACCOUNTFOR THE YEAR ENDED 31 MARCH 2006 2006 2005 £ £ TURNOVER 2,023,369 2,133,186 Cost of sales (443,849) (613,832) GROSS PROFIT 1,579,520 1,519,354 Administrative expenses (617,601) (837,975) OPERATING PROFIT 961,919 681,379 Interest receivable and similar income 82,694 64,618 Interest payable and similar charges (120,875) (72,328) PROFIT ON ORDINARY ACTIVITIESBEFORE TAXATION 923,738 673,669 Tax on profit on ordinary activities (325,452) (202,101) PROFIT ON ORDINARYACTIVITIES AFTER TAXATIONFOR THE FINANCIAL YEAR 598,286 471,568 Earnings per share 0.50p 0.41p Earning per share - diluted 0.49p 0.39p All income arises from continuing operations. CONSOLIDATED BALANCE SHEETAS AT 31 MARCH 2006 2006 2005 £ £FIXED ASSETS Tangible assets 14,681,010 12,393,150Investments 2,857 2,789 14,683,867 12,395,939 CURRENT ASSETS Debtors 1,630,303 1,900,473Cash at bank 4,381,940 3,790,367 6,012,243 5,690,840 CREDITORS: (Amounts falling duewithin one year) (2,063,535) (1,433,772) NET CURRENT ASSETS 3,948,708 4,257,068 TOTAL ASSETS LESSCURRENT LIABILITIES 18,632,575 16,653,007 PROVISION FOR LIABILITIES (2,283,793) (1,754,511) NET ASSETS 16,348,782 14,898,496 CAPITAL AND RESERVES Called-up share capital 1,192,178 1,192,178Share premium account 20,229,168 20,229,168Profit and loss account - (deficit) (5,072,564) (6,522,850) EQUITY SHAREHOLDERS' FUNDS -ALL EQUITY 16,348,782 14,898,496 CONSOLIDATED CASH FLOW STATEMENTFOR THE YEAR ENDED 31 MARCH 2006 2006 2005 £ £ NET CASH INFLOW FROMOPERATING ACTIVITIES 2,231,864 1,220,246 RETURNS ON INVESTMENTS ANDSERVICING OF FINANCE Interest received 82,694 64,618Interest paid (120,875) (72,328) NET CASH OUTFLOW FROMRETURNS ON INVESTMENTS ANDSERVICING OF FINANCE (38,181) (7,710) TAXATION 3,642 (55,409) CAPITAL EXPENDITURE ANDFINANCIAL INVESTMENT Payments to acquire tangible fixed assets (1,605,752) (1,549,718) NET CASH OUTFLOW FROMCAPITAL EXPENDITURE ANDFINANCIAL INVESTMENT (1,605,752) (1,549,718) NET CASH INFLOW/(OUTFLOW)BEFORE FINANCING 591,573 (392,591) FINANCING Issue of ordinary share capital - 2,840,442Costs associated with shares issued duringthe year - (108,242) NET CASH INFLOW FROMFINANCING - 2,732,200 INCREASE IN CASH 591,573 2,339,609 STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSESFOR THE YEAR ENDED 31 MARCH 2006 2006 2005 £ £ Profit for the financial year 598,286 471,568 Currency translation adjustments 852,000 (240,075) Total recognised gains recognised since lastannual report and financial statements 1,450,286 231,493 RECONCILIATION OF MOVEMENT IN SHAREHOLDERS' FUNDS 2006 2005 £ £ Profit in the financial year 598,286 471,568 Currency translation adjustments 852,000 (240,075) New share capital subscribed - 2,732,200 Net change in equity shareholders' funds 1,450,286 2,963,693 Opening equity shareholders' funds 14,898,496 11,934,803 Closing equity shareholders' funds 16,348,782 14,898,496 Notes The financial information set out above does not constitute the Company'sfinancial statements for the years ended 31 March 2006. The financialinformation for 2005 is derived from the financial statements for 2005 whichhave been delivered to the Registrar of Companies. The auditors have reported on2005 statements; their report was unqualified and did not contain a statementunder section 237(2) or (3) of the Companies Act 1985. The financial statementsfor 2006 have been audited and will be delivered to the Registrar of Companiesfollowing the Company's Annual General Meeting. The auditors have reported onthe 2006 statements; their report was unqualified and did not contact astatement under section 237 (2) or (3) of the Companies Act 1985. A copy of the Company's annual report and accounts for 2006 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