Last checked at 17 Dec 2009 07:00
Interim Results for the Six Months Ended 30th September 2009
As I write this, Pan Andean is subject to an offer which, if successful, will result in the Company delisting from AIM. Let me remind shareholders of the terms of the offer.
Petrominerales, a Canadian listed oil and gas producer, focused on South America, is offering:
| ● | 15p cash for each Pan Andean share, plus |
| ● | One Hydrocarbon Exploration Co Ltd share for every one Pan Andean share. |
Hydrocarbon Exploration is currently owned 100% by Pan Andean and holds the Company's Bolivian and American assets. It will be spun off to existing shareholders on a one for one basis.
In effect, existing Pan Andean shareholders are being offered 15p a share cash for the Peruvian and Colombian exploration assets; whilst retaining the same percentage in Hydrocarbon Exploration as they currently own in Pan Andean. Shareholders will continue to have the exposure to the potential upside in the US and Bolivian assets.
In recent years, the directors of Pan Andean have found it difficult to persuade investors of the value in our assets. Our share price lacked the advances made by a peer group. With a large shareholder base of over 6,000 shareholders, many of whom invested years ago at higher prices, there was always a seller. In recent years, we have been one of the few profitable cash generative junior oil companies on the AIM. We assembled a top class ground portfolio in Peru, which we farmed out on good terms; despite this our share price still lagged.
We had high hopes for our heavy oil block in Antorcha, Colombia, yet we failed to get a satisfactory farm out. The option of drilling ourselves was mooted strongly by some, but while we could have drilled one hole from our existing resources, a five hole programme would cost in the region of US$10 million. This would have required a deeply discounted funding, diluting existing holders. The final straw was a collapse in the US gas prices, which saw a dramatic drop in our income. As you will see from the accompanying financials, we report a small loss for the past six months - the Company's first loss in a decade.
With great reluctance and considerable discussion among top management, we expect to sell off our prime exploration properties in Peru and Colombia, and return cash to shareholders. The remaining assets in Bolivia and in the US generate cash flow, but have their own problems; nationalisation in Bolivia and litigation on Block High Island 30 in the Gulf, where there is a dispute over a decision to clean up capped wells.
Turnover in the six months to the 30th September 2009 was £468,000, a drop of over 60% on the equivalent period in 2008. This was due almost entirely to a fall in US gas prices. Costs were strictly controlled, particularly administrative charges, which were reduced by £40,000. The overall result was a loss of £37,000.
We believe that there remains great potential in our US and Bolivian assets. Once the Petrominerales deal closes in early 2010, we will focus on extracting value from these assets.
Over the 20 year life of Pan Andean, we raised approximately £20 million. We drilled high risk holes in the Bolivian jungle and deep holes in Texas. They were unsuccessful. By selling our Peruvian and Colombian portfolio, we are able to hand back £18 million to investors, while there is significant potential value in the remaining assets. As David Horgan, the long time Managing Director commented using football parlance, "We got a draw". In the high risk world of oil exploration, and in the current economic climate, that is a result.
| Pan Andean Resources plc | |||||||||||
| Financial Information (Unaudited) | |||||||||||
| Condensed Consolidated Income Statement | Six Months Ended | Year Ended | |||||||||
| 30 Sep 09 | 30 Sep 08 | 31 March 09 | |||||||||
| unaudited | unaudited | audited | |||||||||
| £'000 | £'000 | £'000 | |||||||||
| REVENUE | 468 | 1,145 | 1,848 | ||||||||
| Cost of sales | (224) | (219) | (371) | ||||||||
| GROSS PROFIT | 244 | 926 | 1,477 | ||||||||
| Administrative expenses | (263) | (307) | (477) | ||||||||
| OPERATING PROFIT | (19) | 619 | 1,000 | ||||||||
| Investment revenue | 0 | 13 | 18 | ||||||||
| Finance costs | (18) | (14) | (38) | ||||||||
| PROFIT/(LOSS) BEFORE TAXATION | (37) | 618 | 980 | ||||||||
| Taxation | 0 | (185) | (294) | ||||||||
| PROFIT/(LOSS) AFTER TAXATION | (37) | 433 | 686 | ||||||||
| Earnings per share - basic | (0.03p) | 0.36p | 0.58p | ||||||||
| Earnings per share - diluted | (0.03p) | 0.34p | 0.53p | ||||||||
| Condensed Consolidated Balance Sheet | 30 Sep 09 | 30 Sep 08 | 31 March 09 | ||||||||
| unaudited | unaudited | audited | |||||||||
| £'000 | £'000 | £'000 | |||||||||
| ASSETS: | |||||||||||
| NON CURRENT ASSETS | |||||||||||
| Investments | 3 | 3 | 3 | ||||||||
| Intangible assets | 9,409 | 6,525 | 10,027 | ||||||||
| Property, plant & equipment | 16,817 | 15,019 | 17,963 | ||||||||
| 26,229 | 21,547 | 27,993 | |||||||||
| CURRENT ASSETS | |||||||||||
| Receivables and prepayments | 1,318 | 1,528 | 1,973 | ||||||||
| Cash and cash equivalents | 1,466 | 3,047 | 2,231 | ||||||||
| 2,784 | 4,575 | 4,204 | |||||||||
| TOTAL ASSETS | 29,013 | 26,122 | 32,197 | ||||||||
| LIABILITIES: | |||||||||||
| CURRENT LIABILITIES | |||||||||||
| Trade and other payables | (6,048) | (5,574) | (6,936) | ||||||||
| NET CURRENT LIABILITIES | (3,264) | (999) | (2,732) | ||||||||
| NON CURRENT LIABILITIES | |||||||||||
| Provisions and deferred liabilities | (3,161) | (2,170) | (3,282) | ||||||||
| NET ASSETS | 19,804 | 18,378 | 21,979 | ||||||||
| EQUITY: | |||||||||||
| Share capital | 21,422 | 21,422 | 21,422 | ||||||||
| Reserves | (1,618) | (3,044) | 557 | ||||||||
| TOTAL EQUITY | 19,804 | 18,378 | 21,979 | ||||||||
| Condensed Consolidated Statement of Changes in Shareholders Equity | |||||||||||
| Share based | |||||||||||
| Share | Share | Payment | Translation | Retained | Total | ||||||
| Capital | Premium | Reserves | Reserves | Losses | Equity | ||||||
| £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | ||||||
| As at 1 April 2008 | 1,192 | 20,230 | 26 | (1,887) | (4,002) | 15,559 | |||||
| Currency translation adjustments | 2,386 | 2,386 | |||||||||
| Profit for the period | 433 | 433 | |||||||||
| As at 30 September 2008 | 1,192 | 20,230 | 26 | 499 | (3,569) | 18,378 | |||||
| Currency translation adjustments | 3,349 | 3,349 | |||||||||
| Profit for the period | 252 | 252 | |||||||||
| As at 31 March 2009 | 1,192 | 20,230 | 26 | 3,848 | (3,317) | 21,979 | |||||
| Currency translation adjustments | (2,138) | (2,138) | |||||||||
| Profit for the period | (37) | (37) | |||||||||
| As at 30 September 2009 | 1,192 | 20,230 | 26 | 1,710 | (3,354) | 19,804 | |||||
| Condensed Consolidated Cash Flow | Six Months Ended | Year Ended | |||||||||
| 30 Sep 09 | 30 Sep 08 | 31 March 09 | |||||||||
| unaudited | unaudited | audited | |||||||||
| £'000 | £'000 | £'000 | |||||||||
| CASH FLOW FROM OPERATING ACTIVITIES | |||||||||||
| Profit before tax | (37) | 618 | 980 | ||||||||
| Depreciation | 87 | 132 | 110 | ||||||||
| Finance cost | 18 | 14 | 38 | ||||||||
| Investment revenue | 0 | (13) | (18) | ||||||||
| Exchange Movements | 668 | 616 | (251) | ||||||||
| 736 | 1,367 | 859 | |||||||||
| MOVEMENTS IN WORKING CAPITAL | |||||||||||
| Increase/(Decrease) in trade and other payable | (888) | 308 | 49 | ||||||||
| (Increase)/Decrease in trade and other receivables | 655 | (158) | (603) | ||||||||
| CASH USED BY OPERATIONS | 503 | 1,517 | 305 | ||||||||
| Finance cost | (1) | (14) | (1) | ||||||||
| Investment revenue | 0 | 13 | 18 | ||||||||
| NET CASH GENERATED IN OPERATING ACTIVITIES | 502 | 1,516 | 322 | ||||||||
| CASH FLOW FROM INVESTING ACTIVITIES | |||||||||||
| Payment for intangible assets | (531) | - | (1,895) | ||||||||
| Payment for property, plant & equipment | (437) | (497) | (659) | ||||||||
| Re-imbursements of payments | 0 | 0 | 1,930 | ||||||||
| NET CASH USED IN INVESTING ACTIVITIES | (968) | (497) | (624) | ||||||||
| NET DECREASE IN CASH AND CASH EQUIVALENTS | (466) | 1,019 | (302) | ||||||||
| Cash and cash equivalents at beginning of the period | 2,231 | 1,880 | 1,880 | ||||||||
| Effect of foreign rate changes on cash held | (299) | 148 | 653 | ||||||||
| CASH AND CASH EQUIVALENT AT END OF THE PERIOD | 1,466 | 3,047 | 2,231 | ||||||||
| Notes: | |
| 1 | INFORMATION |
| The financial information for the six months ended September 30th, 2009 and the comparative amounts for the six months ended September 30th, 2008 are unaudited. The financial information above does not constitute full statutory accounts within the meaning of section 240 of the Companies Act 1985. | |
| The Interim Financial Report has been prepared in accordance with IAS 34 Interim Financial Reporting as adopted by the European Union. The accounting policies and methods of computation used in the preparation of the Interim Financial Report are consistent with those used in the Group 2009 Annual Report, which is available at www.panandeanresources.com. | |
| The interim financial statements have not been audited or reviewed by the auditors of the Group pursuant to the Auditing Practices board guidance on Review of Interim Financial Information. | |
| 2 | No dividend is proposed in respect of the period. |
| 3 | Earnings per share |
| Basic earnings or loss per share is computed by dividing the net 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 or loss per share is computed by dividing the net 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 (EPS): | |
| 30 Sep 09 | 30 Sep 08 | 31 Mar 09 | ||||
| £ | £ | £ | ||||
| Net profit/(loss) for the period | (36,994) | 432,732 | 685,881 | |||
| Weighted average number of ordinary shares | ||||||
| For basic EPS | 119,227,733 | 119,227,733 | 119,227,733 | |||
| For diluted EPS | 119,227,733 | 128,244,733 | 128,244,733 | |||
| Basic EPS Diluted EPS | (0.03p) (0.03p) | 0.36p 0.34p | 0.58p 0.53p | |||
| Basic and diluted loss per share as at 30 September 2009 is the same as the effect of the outstanding share options are anti-dilutive and is therefore excluded. | |
| There have been no other transactions involving ordinary shares or potential ordinary shares between the reporting date and the date of completion of these financial statements. |
| 4 | Intangible Assets | |||||
| 30 Sep 09 | 30 Sep 08 | 31 Mar 09 | ||||
| Exploration and evaluation assets: | £'000 | £'000 | £'000 | |||
| Cost | ||||||
| Opening balance | 10,027 | 5,848 | 5,848 | |||
| Exchange adjustments | (1,149) | 677 | 2,037 | |||
| Additions | 531 | - | 4,072 | |||
| Re-imbursements received under farm-out agreement | - | - | (1,930) | |||
| Closing balance | 9,409 | 6,525 | 10,027 | |||
| The directors are aware that by its nature there is an inherent uncertainty in exploration and evaluation, and therefore inherent uncertainty in relation to the carrying value of capitalised exploration and evaluation assets. | ||||||
| There were no facts or circumstances indicating that the carrying amount of intangible assets, other than those relating to Bolivia, may exceed their recoverable amount, and thus no impairment review was deemed necessary by the Directors. | ||||||
| The realisation of these intangible assets is dependent on the successful discovery and development of economic oil and gas reserves and is 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. |
| There are a number of fundamental uncertainties relating to exploration and evaluation assets in Bolivia. As these uncertainties indicate that the carrying value of assets in Bolivia may exceed their recoverable amount, an impairment review has been carried out by the Board | |
| The recoverable amount is the higher of the asset's fair value less costs to sell and value-in-use. Given the nature of the Group's current activities in Bolivia, the recoverable amount was based on its value-in-use. | |
| The value-in-use is determined at the cash generating unit level, in this case being geographical segments. A risk-based valuation is used which combines an assessment of the expected chance of commercial success and likely development cost, and discounting the expected cash flows estimated by the directors over the life of the project. | |
| The key assumptions for its calculation are as follows: |
| - | Likely production reserves | |
| - | Cash Costs | |
| - | Oil & Gas prices | |
| - | Years until production can commence |
| Likely production reserves are based on the best data available to management from seismic analysis carried out to date. Oil and gas prices are based on management's best estimate using current and future industry trends. Discount rates are calculated considering management's estimate of the risk attached to the projects. The years until production can commence is determined by management. | |
| The directors believe that any likely change in any of these assumptions would not cause the recoverable amount to exceed carrying value. | |
| Having reviewed exploration and evaluation assets relating to Bolivia at 30 September 2009, the directors are satisfied that the value-in-use of the intangible assets is not less than carrying value. The realisation of the exploration and evaluation assets in Bolivia is dependent on the successful discovery and development of economic reserves which is affected by the risks outlined. Should this prove unsuccessful the value included in the balance sheet would be written off to the income statement. |
| 5 | Property, Plant & Equipment | ||||||
| Plant & Equipment | Oil & Gas Interest | Total | |||||
| £'000 | £'000 | £'000 | |||||
| Cost | |||||||
| At 1 April 2008 | 32 | 17,946 | 17,978 | ||||
| Exchange adjustments | 1 | 1,161 | 1,162 | ||||
| Additions | - | 497 | 497 | ||||
| At 30 September 2008 | 33 | 19,604 | 19,637 | ||||
| Exchange adjustments | 7 | 3,266 | 3,273 | ||||
| Additions | 2 | 160 | 162 | ||||
| At 31 March 2009 | 42 | 23,030 | 23,072 | ||||
| Exchange adjustments | (3) | (1,789) | (1,792) | ||||
| Additions | - | 437 | 437 | ||||
| At 30 September 2009 | 39 | 21,678 | 21,717 | ||||
| Depreciation | |||||||
| At 1 April 2008 | 17 | 4,253 | 4,270 | ||||
| Exchange adjustments | - | 216 | 216 | ||||
| Additions | - | 132 | 132 | ||||
| At 30 September 2008 | 17 | 4,601 | 4,618 | ||||
| Exchange adjustments | 6 | 506 | 512 | ||||
| Additions | - | (21) | (21) | ||||
| At 31 March 2009 | 23 | 5,086 | 5,109 | ||||
| Exchange adjustments | (2) | (294) | (296) | ||||
| Additions | - | 87 | 87 | ||||
| At 30 September 2009 | 21 | 4,879 | 4,900 | ||||
| Net Book Value | |||||||
| At 30 September 2009 | 18 | 16,799 | 16,817 | ||||
| Included within oil and gas interests is £3,957,876 in relation to Danbury Dome which is in the development stage. The realization of the carrying amount is dependent on the successful development of economic reserves and the Group's ability to raise sufficient finance to develop the project. | |||||||
| 6 | The Interim Report for the six months to 30th September 2009 was approved by the Directors on 17th December 2009. | ||||||
| 7 | Copies of this announcement will be sent to shareholders and will be available for inspection at the Companies Registered Office at 20-22 Bedford Row, London WC1R 4JS. The Interim Report may also be viewed at Pan Andean Resources plc's website at www.panandeanresources.com. | ||||||