PTR.L Regulatory News (PTR)

12 Sep 2007 07:01

Petroneft Resources PLC12 September 2007 PetroNeft Resources plc Interim Results for the Half Year Ended 30th June 2007 PetroNeft Resources plc ('PetroNeft' or 'the Company'), the oil exploration andproduction company with assets in the Tomsk Oblast, Western Siberia, Russia, ispleased to report its results for the half year ended 30 June 2007. Operational Highlights • Successful 2006/2007 three well drilling and seismic programmes: o Lineynoye No. 6 appraisal well intersected 11.2 metres of net oil pay and has been successfully tested at an unstimulated stabilised flow of 100 bopd. The well will be put on pilot production/long term flow test this winter. o Tungolskoye No. 4 appraisal well intersected 15 metres of net oil pay. The well is now being sidetracked to fully test the relevant reservoir interval. Results are expected in mid to late October. o Lineynoye No. 7 exploration well confirmed 2 metres of net oil pay at West Lineynoye which will become our third field with proved reserves. This interval is currently being flow tested. o Acquisition of 540 line kms of new high resolution 2D seismic data completed March 15, 2007. Fulfills the Licence obligation to acquire 1,000 kms of 2D seismic data. • Preliminary Development Feasibility Study, including planned pipeline development and funding requirements on the Lineynoye and Tungolskoye Oil Fields completed in February 2007. Financial Highlights • Natixis Bleichroeder appointed as joint broker on May 21, 2007. Davy continues to act as joint broker and nominated adviser and IEX adviser. • Cash balance of US$6.38 million as at 30 June 2007. • US $15.26 million (gross) fund raising from international institutional investors was completed on 11 July 2007. The offering was oversubscribed with four Directors participating. • The net proceeds of the Placing will be used to finance the Company's 2007/08 exploration, delineation, pre-development project activities and for corporate and administration expenses. Outlook • The export pipeline survey from the Lineynoye and Tungolskoye fields to the Transneft pipeline at the Raskino pumping station is currently underway. PetroNeft remains committed to first production date in 2009. • 2007/2008 three well winter drilling programme will seek to further delineate the newly discovered West Lineynoye Oil Field and to drill two exploration prospects. These two prospects, Korchegskaya and West Korchegskaya, are estimated to contain about 50 million barrels of possible reserves. • The Company has appointed Mr. Paul Dowling as Chief Financial Officer effective 1st October. Mr. Dowling was most recently a Partner in the firm of LHM Casey McGrath and will be located in Dublin. • New acquisitions are actively being examined. Dennis Francis, CEO of PetroNeft Resources plc commented: "We are delighted with the results of this year's three well drilling programme.Not only have we further delineated the Lineynoye and Tungolskoye Oil Fields,but we have made an exciting new oil field discovery at West Lineynoye. Whilewe will need to sidetrack the Tungolskoye No. 4 well in order to get arepresentative flow test, we are confident in the oil interval and anticipate apositive result in due course. Each of these results represents a significantstep forward in the commercialisation of Licence 61 and are an importantcomponent of PetroNeft's long term strategy. The drilling results have further enhanced our understanding of the reservoirdistribution in Licence 61 and have already been factored into next year'sthree well drilling programme in order to reduce risk. We are also delighted in the appointment of Mr. Paul Dowling as CFO ofPetroNeft. Paul is well known to the management team and will be able to makeimmediate and long term contributions to our activities" September 12, 2007 For further information please contact: Dennis Francis, CEO, PetroNeft Resources plc (Houston)+1 713 988 2500 Desmond Burke, Director Investor Relations, PetroNeft Resources plc (Ireland)+353 52 53226 John Frain / Brian Garrahy, Davy+353 1 679 6363 Damien Mauvais, Natixis Bleichroeder+44 207 220 5184 Nick Elwes/Paddy Blewer, College Hill (UK)+44 207 457 2020 Chairman's Statement It is almost a year since PetroNeft gained admission to the London AIM andDublin IEX Markets. At time of admission the Company clearly set out itsprogramme and objectives to achieve export oil production from Licence 61, inthe Tomsk Oblast of Russia. This programme included the drilling of twodelineation wells in known oil fields to confirm reserves there, the drilling ofan exploration well to expand the known 2P oil reserves and a wide range ofeconomic, environmental and development studies. These studies were designed toensure that the necessary reserve base, design engineering and approvals are inplace to secure suitable financing. With the major proportion of the programmecompleted, it is an opportune time to evaluate progress and to assess theCompany's position. Delineation wells have confirmed substantial oil reservoirs at both Lineynoyeand Tungolskoye. Oil flow tests have been successfully achieved on the LineynoyeNo. 6 well and are in progress on the Tungolskoye No. 4 well. The explorationwell on the West Lineynoye prospect is currently being tested and hasestablished a substantial oil column within the structure. When all testing iscompleted the results of all three wells will be incorporated into a FinalFeasibility Study which will be used for approval of the project and to assistin seeking development finance. Whereas Ryder Scott, our external consultant,will not report on the revised reserve position until completion of theprogramme we anticipate that the discovery at West Lineynoye and the 10 metrelower oil water contact found at Lineynoye will result in a significant increasein our P1 and P2 reserves from those reported last year. Work on infrastructure development, including all-weather roads, a major riverbridge and an oil export pipeline are well advanced. In all its activitiesPetroNeft seeks to operate in full compliance with its licence terms and allother Russian regulatory requirements. On the exploration front, a further three well programme has been approved forthe 2007/2008 season. Work will begin on this as soon as the three existingrigs, can be moved to the new drilling sites when the ground freezes and winterroads are in place. The potential reserve increase from two exploration wells,Korchegskaya and West Korchedskaya, in this programme is about 50 millionbarrels. The third well will seek to further delineate the newly discoveredWest Lineynoye Oil Field. New acquisitions are actively being examined. We are comitted to diversifyingand strengthening the Company's portfolio of projects in Russia. Activity on the corporate side includes the appointment in May 2007 of Natixisas the Company's Joint Broker with Davy. Funds are in place to carry out nextseason's exploration and evaluation programme, following a placing of ordinaryshares of the Company in July raising approximately US$14.5 million afterexpenses. I am also very pleased to report that Mr. Paul Dowling will becomeChief Financial Officer for the Company commencing in October. Paul brings awealth of experience that will be a welcome addition to the management team aswe continue to grow the Company. Overall it has been a very productive first half for the Company and progress isexpected to continue apace toward development and reserve expansion for theremainder of 2007 and into the future. We look forward to continued shareholdersupport in building the Company. G. David Golder Chairman Overview of Operations General PetroNeft Resources plc, through its wholly owned Russian subsidiary OOOStimul-T, holds a 100% interest in Licence 61, covering 4991 sq. kms, in theTomsk Oblast in Western Siberia. Licence 61 contains three proven oil fields,Lineynoye, West Lineynoye and Tungolskoye, The Company views the Licence as a "Core Area", with oil production potential from both proven oil fields andnumerous identified exploration prospects. Reserves Since acquiring the Licence the Company has reprocessed and reinterpreted 2,650line kms of previous 2D seismic data using modern technology. In addition, thewell logs from 14 previous wells drilled on Licence 61 have been digitised andreinterpreted. The Company also acquired 515 line kms of 2D seismic data in thewinter season 2005/2006. Based on this data, US petroleum consultants' RyderScott Company estimated that Licence 61 contained the following oil reserves andexploration resources as of 1st September 2006; • Lineynoye and Tungolskoye Oil Fields; Proved (P1) + Probable (P2) = 33.5 million barrels Possible (P3) = 37.1 million barrels Total (P1+P2+P3) = 70.6 million barrels • Twenty Prospects and Five Potential Prospects (Leads); Possible (P3) = 253 million barrels Exploration Resources (P4) = 100 million barrels The results of this year's drilling and seismic programmes will now be used byRyder Scott to prepare a new reserve report for the Licence area. The twoexploration prospects, Korchegskaya and West Korchegskaya are included in thepossible reserves (P3) above. 2006/07Exploration and Appraisal Drilling Programme The two key objectives of the Company, with regard to Licence 61, are tocommercialise the existing discoveries and to determine the full upside reservepotential of the area as timely as possible. The work programmes completed in2006 and commencing in the winter season of 2006/2007 were designed to meetthese objectives. • The Lineynoye No. 6 appraisal well has 11.2 metres of net oil pay andhas been successfully tested at a stabilised flow of 100 bopd on a 1/8th inchchoke. This well will be put on pilot production/long term flow test thiswinter with the oil being sold to a local Tomsk refinery. The well also loweredthe oil water contact (owc) for the Lineynoye Field at least 10 metres which islikely to lead to a modest reserve upgrade for the field. • The Tungolskoye No. 4 appraisal well has 15 metres of net oil paybased on the core data and independent log interpretations. This represents thebest reservoir interval encountered of the 17 wells drilled in the block todate. However, the Company has not to date achieved a representative flow testof this interval due to mechanical problems. The well will now be sidetrackedto re-access and fully test the relevant reservoir interval. This processshould take about 60 days including mobilisation of necessary equipment andmaterials. Based on the wire line log and core data from this well, and thehistoric data from the Tungolskoye No. 1 well which tested 332 bopd from thesame interval in 1973, we are confident of a positive result. • The Lineynoye No. 7 exploration well on the West Lineynoye Prospectwas a new oil field discovery. Based on the core and initial log interpretationtwo metres of net oil pay was confirmed in the Upper Jurassic J1 interval. Thedata indicates a 22 metre gross oil column in the J1 interval at this locationand indicates that the structure is filled with oil to the spill point. Thisinterval is currently being flow tested. Seismic Programme The 2006/2007 winter seismic programme, to acquire an additional 540 kms of highresolution 2D seismic data, was completed on schedule on 15 March 2007. Thisprogramme was designed to upgrade the definition of known prospects on theLicence. The results will be used in designing the 2007/2008 winter drillingprogramme and in the Final Development Feasibility Study. The Company has nowacquired 1,055 kms of 2D seismic data which fulfills the seismic obligation inrespect of the Licence. Development Feasibility Study A Preliminary Feasibility Study for the development of the Lineynoye andTungolskoye Oil Fields has now been completed by a Russian Institution(SNIIGGMS). The purpose of the study was to evaluate the oil reserves and theeconomics of the oil fields, and it will be used as part of the approval processrequired for development in the Tomsk Oblast and the Russian Federation. The Company intends to finalise and sanction the development plan for theLineynoye and Tungloskoye fields by early 2008. A primary objective of theCompany is to commence year round oil production via an export pipeline from theLicence 61 "Core Area" in 2009. 2007/08 Exploration and Appraisal Drilling Programme The results of this year's drilling programme, along with the seismic programmesundertaken over the last two years have already been taken into account inplanning next year's three well drilling programme. This three well programme,which is expected to commence in February/March 2008, will seek to furtherdelineate the newly discovered West Lineynoye Oil Field and to drill twoexploration prospects in the Tungolskoye-Lineynoye oil productive fairway.These two prospects, Korchegskaya and West Korchegskaya, are estimated tocontain about 50 million barrels of possible reserves. These wells will bedrilled under a turnkey contract utilising the three drilling rigs currentlyactive or located in Licence 61. The necessary materials for these wells arecurrently being moved to the Negotka staging area by river barge and will bemoved to the well locations when winter roads are in place later this year. Business Development While the Company's primary focus is developing the Licence 61 "Core Area",other business opportunities that can meet the Company's strict technical andlegal screening process are also being sought. The Company's long term businessstrategy is to leverage its current resources and knowledge base to add reservesto its existing Core Area and to create other Core Areas within the RussianFederation. Overview of Financial Activities PetroNeft's principal financial achievement during 2007 was the raising ofUS$15.26 million from international institutional investors. Davy and NatixisBleichroeder acted as Joint Brokers to the Placing. One of the priorities of PetroNeft's management has been careful management ofthe Company's financial resources. Consequently, the three-well 2007/08 drillingprogramme has been undertaken via a turnkey contract, similar to the 2006/07drilling programme, a decision which has been highly effective given thechallenging weather conditions and delays encountered in December and January.The group has also entered into a number of hedge contracts this past year tolimit its exposure to fluctuations in the Ruble exchange rate. This willcontinue to be reviewed as part of the Company's risk management policies as thebusiness expands over the coming years. Over the remainder of 2007, the Company will continue to build its finance teamand seek to secure the necessary funding to allow the objective of first oilproduction to be achieved in 2009. Conclusion 2007 has been an exciting year for the Company, with positive delineationdrilling results and a new field discovery. The Company is building a strongteam with a clear strategy. We are committed to developing both Tomsk Oblast andthe wider Russian hydrocarbons industry. PetroNeft seeks to operate in fullcompliance with its licence terms and all other Russian regulatory requirements,including environmental and reserves reporting. Considering the explorationupside of Licence 61, the existing proved and probable reserves, and theCompany's strong international and local management team, the future ofPetroNeft looks very bright. PetroNeft Resources plc Consolidated Income StatementSix months ended 30 June 2007 (unaudited) (unaudited) (audited) 6 months ended 6 months ended Year ended 30 June 2007 30 June 2006 31 December 2006 US$ US$ US$Turnover - - - Administrative expenses (780,043) (543,279) (1,188,952)Foreign currency gain/(loss) 151,478 (889) 337,199Share based payments (450,975) - (219,197)Other income - 25,262 25,262Operating loss (1,079,540) (518,906) (1,045,688) Interest receivable 135,069 - 66,249Interest payable and similar charges - (13,720) (13,905) Retained loss for the period (944,471) (532,626) (993,343) Loss per share:Basic -0.53 c -0.49 c -0.75 cDiluted -0.51 c -0.49 c -0.53 c PetroNeft Resources plc Consolidated Balance Sheetas at 30 June 2007 (unaudited) (unaudited) (audited) 30 June 2007 30 June 2006 31 December 2006 US$ US$ US$Non-Current AssetsProperty, plant and equipment 654,260 263,997 328,521Other intangible assets 20,267,520 8,334,052 10,639,292Other assets - - 3,689,480 20,921,780 8,598,049 14,657,293 Current AssetsTrade and other receivables 28,565 1,980,116 43,792Cash and cash equivalents 6,384,348 2,836,407 12,872,316 6,412,913 4,816,523 12,916,108 Total Assets 27,334,693 13,414,572 27,573,401 Equity and Liabilities Capital and ReservesCalled up share capital 2,132,436 1,605,845 2,132,436Share premium account 26,048,130 12,137,364 26,048,130Share based payments reserve 670,172 - 219,197Profit and loss account (2,198,210) (793,040) (1,253,757) Equity attributable to equity holders of the 26,652,528 12,950,169 27,146,006parent Current LiabilitiesTrade and other payables 682,165 464,403 427,395 Total Liabilities 682,165 464,403 427,395 Total Equity and Liabilities 27,334,693 13,414,572 27,573,401 PetroNeft Resources plc Cash Flow StatementSix months ended 30 June 2007 (unaudited) (unaudited) (audited) 6 months ended 6 months ended Year ended 30 June 2007 30 June 2006 31 December 2006 US$ US$ US$Net loss before interest and income tax (1,079,540) (518,906) (1,045,688) Adjustments for:Share based payments charge 450,975 - 219,197Depreciation for - Property, plant and equipment 19,037 5,451 17,725 Operating profit before working capital changes (609,528) (513,455) (808,766) Increase in trade receivables 15,227 (1,528,792) 407,531(Decrease)/Increase in trade payables 254,770 (852,996) (890,004) Cash generated from operations (339,531) (2,895,243) (1,291,239) Interest received/(paid) 135,069 (13,720) 52,344 -Net cash flow from operating activities (204,462) (2,908,963) (1,238,894) Investing activitiesPurchase of property, plant and equipment (231,570) (99,510) (176,309)Purchase of other intangible assets (6,051,936) (2,240,396) (4,545,653)Payment for other assets - (3,689,480)Net cash used in investing activities (6,283,506) (2,339,906) (8,411,442) Cash flows from financing activitiesProceeds from issue of share capital - 7,829,068 22,266,426 Net cash received from financing activities - 7,829,068 22,266,426 Net increase in cash and cash equivalents (6,487,968) 2,580,199 12,616,090 Cash and Cash equivalents at the beginning of the 12,872,316 256,208 256,208period Cash and cash equivalents at the end of the period 6,384,348 2,836,407 12,872,316 Forward Looking Statements This announcement contains forward-looking statements. These statements relateto the Company's future prospects, developments and business strategies.Forward-looking statements are identified by their use of terms and phrases suchas "believe", "could", "envisage", "potential" "estimate", "expect", "may", "will" or the negative of those, variations or comparable expressions, includingreferences to assumptions. The forward-looking statements in this announcement are based on currentexpectations and are subject to risks and uncertainties that could cause actualresults to differ materially from those expressed or implied by thosestatements. These forward-looking statements speak only as at the date of thisannouncement. September 12, 2007 This information is provided by RNS The company news service from the London Stock Exchange