RPT.L Regulatory News (RPT)

28 Sep 2005 07:03

Regal Petroleum PLC28 September 2005 For Immediate Release Wednesday 28th September 2005 REGAL PETROLEUM PLC INTERIM RESULTS FOR THE SIX MONTHS ENDED 30 JUNE 2005 Regal Petroleum plc ("Regal", "the Company" or "the Group"), the oil and gasexploration and production company, today announces its results for the sixmonths ended 30 June 2005. Operational highlights include: Greece • A period of industrial unrest has led to changed operational management arrangements being put in place. No further Regal cash injections to Greece are envisaged in the immediate term.• Independent reserves auditors McDaniel's confirms Greece proved and probable reserves for Prinos, Prinos North and Epsilon of 22MMbbls.• Completion of drilling of Kallirachi 2 well - discovery of hydrocarbons, yet poor permeability made the well uncommercial.• Average production of 2,294 bopd during the period.• Increased economic interest in Kavala Oil to 95%. Ukraine • Average production was 501 barrels of condensate and 5,648 thousand cubic feet of gas per day (total equivalent of 1,507 boepd) with 4 wells in production: MEX102, MEX3, GOL1 and GOL2.• Operations remain cashflow positive and profitable during the period.• Conclusion of independent audit of reserves by Ryder Scott is imminent.• Peak Resources - discussions with Peak Resources are still "open", however the Board believes any likely outcome of these negotiations would not be in the best interest of shareholders.• There is an on-going appeal process in Ukraine surrounding the distribution of the rights to property which were developed in the Joint Venture between the Company and Chernihivnaftogasgeology (CNGG). A value has been determined for these property rights by the Court, but this is currently being appealed by CNGG and the hearing is scheduled for Wednesday 5 October 2005. This legal process is not connected in any way to the Company's licence rights in Ukraine, which are not in question. Romania • Suceava Block: successful completion of exploration well SE-1 in April 2005 which produced dry gas (99.4% methane) on a stable flow rate of 1.2 million standard cubic feet per day at a depth of approximately 550 metres.• Barlad Block: 200km new infill seismic shot in second quarter and licence ratified in the first quarter. Egypt • Proposal for initial exploration well accepted by the Government and the Company is currently pursuing potential farm-out opportunities. Board appointments • Dr Rex Gaisford CBE appointed Chief Executive Officer on 9 June 2005.• Richard Hardman CBE appointed Exploration Director on 15 June 2005.• Sir Peter Heap appointed Non-Executive Chairman on 15 June 2005.• Resignation of Frank Timis as Chairman, Bill Humphries as Non-Executive Director and Christopher Green as Director of Exploration. Financial highlights • Turnover increased to $16.7m (30-Jun-04: $13.4m).• Loss for the period of $21.7m (30-Jun-04: loss of $2.5m), with loss per share of 19.0 cents (30-Jun-04: loss per share of 2.3 cents).• The loss includes write downs of $9.5 million resulting principally from the King Alexander Rig and foreign exchange losses of $7.8 million.• Average production of 3,800 boepd during the period (30-Jun-04: 4,800 boepd).• Placing of shares which raised £42.6 ($80.6) million net of expenses during the period.• Net cash of $54.0m (30-Jun-04: $65.7m) at period end and net assets of $181.0m (30-Jun-04: $131.5m). At the date of this announcement the Company had net cash of approximately $42.0 million. TRADING STATEMENT Earnings for Second Half of 2005 The Directors of Regal Petroleum plc advised on 2 September 2005 that, due tolower than expected production of oil from their Greek operations, earnings forthe second half of 2005 will be substantially lower than previously forecast. The lower than expected production in Greece has been caused by a period ofindustrial unrest at the Kavala Oil site and disappointing results from the wellwork-over programme. The industrial unrest has been resolved and production willcontinue at a level necessary to support on-going costs. However, as reportedbelow the well workover program is suspended whilst its economic value is beingre-assessed. Similarly, no exploration or development capital expenditure iscurrently contemplated on these licences in the near term. Peak Resources The Company advises that it is continuing discussions with Peak ResourcesLimited of Hong Kong ("Peak Resources") in connection with the possible sale ofits subsidiary company which holds the Company's Ukraine assets. Whilst thediscussion with Peak Resources could be described as "open" the Board believesthese negotiations would not be in the best interest of the shareholders. TheCompany has never regarded a complete "sell out" of 100% of its assets in theUkraine to be the right course of action and remains keen to pursue its originaland preferred course of carrying out the full field development and productionof this asset. The Company continues to receive legal advice and considers theoption and any further extensions to be invalid and unenforceable. Greece (working interest 95%) Following recent industrial unrest the Company has agreed that the operationalmanagement of Kavala Oil SA, including the economics of operations, shall beundertaken by Greek local management, with the assistance of the unionisedworkforce with the aim of making the operation economic and successful. Regal'sparticipation will continue as the majority shareholder of Kavala Oil SA. The Kavala Oil SA Board has asserted that it will continue its productionoperations on the Prinos field as previously and without incurring operationallosses. Regal is not intending to fund any well work-over programme at present,and will consider the economic viability of further investment in Kavala Oil SAincluding development of currently undeveloped but discovered oil, and pursuingexploration potential, once the economics of the operation under Greek localmanagement have been assessed. A positive relationship has been maintained with the Greek Government throughoutthis difficult period. Average production in Greece for the first six months was 2,294 bopd and currentproduction is approximately 1,900 bopd. Reserves Report - Greece Updated from 1 July 2005, auditors McDaniel & Associates Consultants Ltd ("McDaniel's") have now completed the scope of their audit for the Greece licenceareas, which consist of the three fields: Prinos, Prinos North and Epsilon andthe Directors are able to provide the following results: Details of the McDaniel's report are summarised as follows: PrinosPrinos North Proven +and Epsilon Proven Probable ProbableOil MMbbls 7 15 22Total MMbbls 7 15 22 The Company believes that this report compares with the previously producedreserves estimate prepared by Troy Ikoda and published in June 2003. The resultsof the audit by Troy Ikoda were used in the 2004 Annual Report and Accountsreserves table and are summarised below. Between June 2003 and the issue of theMcDaniel's report approximately 2MMbbl of production has occurred. PrinosPrinos North Proven +and Epsilon Proven Probable ProbableOil MMbbls 11 13 24Total MMbbls 11 13 24 Ukraine (working interest 100%) The Ukraine "pilot production" operations continue to be profitable and generatepositive cashflow for the Group. The Company holds a 100% interest in two concession areas in Ukraine. These are20 year production and development licences for the concessions which wereawarded to Regal in June 2004. The liquidation of the Company's previous JointVenture, with its partner ChernigivNaftoGazGeologiya (CNGG) is being determinedby a court process in Ukraine. This court process was initiated by the Companyand the Court has initially found in Regal's favour. This ruling has beenappealed by CNGG and the hearing has been adjourned to Wednesday 5 October 2005. Average production in Ukraine for the first six months was 5,648 thousand cubicfeet of gas per day and 501 barrels per day of condensate, the currentproduction in Ukraine is 5,500 thousand cubic feet of gas per day and 550barrels per day of condensate from four wells on production: MEX102, MEX3, GOL1and GOL2. Regal will continue to increase production by exploiting western oiltechnology and by performing well simulations on the MEX/GOL field. Regal engaged the independent reserve auditors Ryder Scott Company, L.C. ("RyderScott") to estimate the remaining reserves in its Ukraine licence. On 1 July2005 the Company announced that the 'B' reservoir had proved and probablereserves of 174 MMboe. Ryder Scott is completing the work on the 'T'reservoirs, as well as more accurately modelling the development plan around thecurrently producing wells. The Company has been advised that the work will befinalised in a few days as the progress of the report has been disrupted by theeffect of Hurricane Rita on the operations of Ryder Scott. Romania (working interest 100%) Suceava Block A full seismic interpretation of the Suceava Block has been carried out on 800kmof 2D seismic shot in 2004 identifying a number of lead and prospect areas. Thefirst commitment well (SE-1) was completed in the north-west of the Suceavablock in April 2005 as a shallow biogenic gas discovery in the Sarmatianinterval. This well resulted in the discovery of dry gas (99.4% methane) on astable flow rate of 1.2 million standard cubic feet per day at a depth ofapproximately 550 metres. Following this discovery a second prospect was identified in the D lead area,along trend from the SE-1 well at a distance of 45km. A further 200km of 2Dseismic was shot in second quarter of 2005 over the lead D area to furtherdelineate this prospect. Regal's second commitment well is due to spud fourthquarter of 2005 to test this D prospect. This is planned to be a shallow welltargeting Sarmatian plays and investigating Eocene and Cretaceous prospectivity.Surface geochemical analysis is being undertaken over the lead E area (SE-1well locality) to aid investigation of further prospectivity in this area. Barlad Block Since ratification of the Barlad Block in January 2005 Regal has reprocessed a1,000km grid of 1980's and 1990's vintage seismic and shot 200km new infillseismic in second quarter of 2005. The interpretation of this data to identifylead areas is currently underway and should be completed in the fourth quarterof 2005. Surface geochemical analysis is underway in the north of the blockwhere no seismic data exists. The results of the seismic interpretation andsurface geochemical analysis will aid positioning of 800km seismic to beacquired in 2006 as part of Regal's commitment on the block. Egypt (working interest 100%) The Company's preferred well location has been approved by the Egyptian GeneralPetroleum Corporation, drilling materials have been purchased and the Company iscurrently co-operating with other operators to secure long-term use of adrilling rig. It is anticipated that drilling will commence toward the end ofthe first quarter of 2006. The dry hole cost of the well is expected to be lessthan $4 million. In accordance with the Company's asset rationalisation policy, the Company isconsidering whether to reduce its working interest in its present acreage, andexpand into further concessions. Liberia (working interest 25%) The Production Sharing Contracts for Blocks 8 and 9 were finalised and signed bythe National Oil Company of Liberia in June 2005. The Production SharingContracts are now awaiting ratification by the Liberian Government. Definitions:MMcf Millions of cubic feetMMbbls Millions of barrelsMMboe Millions of barrels oil equivalentBopd Barrels of oil per dayBoepd Barrels of oil equivalent per day For further information, please contact: Regal Tel: 020 7408 9500Roger Phillips, Group Finance Director Buchanan Communications Tel: 020 7466 5000Bobby Morse / Ben Willey Attached Chairman's Statement Consolidated Profit and Loss Account Consolidated Balance Sheet Consolidated Cash Flow Statement Notes to the Accounts CHAIRMAN'S STATEMENT Dear Shareholder The first half of 2005 saw a significant turning point in the affairs andmanagement of Regal Petroleum plc. In the first months of the year considerableresources and management effort were focused on the drilling of the Kallirachi 2well in the Company's licence area in Greece. During this period a successfulshare placing, in April, significantly increased the capital available to theCompany. When in May the Kallirachi 2 well proved unsuccessful (a common enoughexperience in the oil industry, but in this case expectations had been raised toa high level) the Company's share price plummeted. It was clear that radicalchanges were urgently required for the Company to retain its equilibrium. MrFrank Timis, the then CEO and Chairman of the Company, stepped down, as didother executive and Non-Executive directors. Mr Timis was replaced by Dr RexGaisford as CEO and by myself as Non-Executive Chairman, and other new directorsand senior management were brought in, all experienced oil industryprofessionals. The new management team at once began the process ofre-evaluating and planning the development of the Company's assets in Greece,the Ukraine, Romania, Egypt and Liberia. Progress and developments in theseareas in the following months are summarised in the attached Trading Statement. Notwithstanding the remaining commercial and industrial uncertainties associatedwith our operations in Greece and Ukraine which have absorbed an enormous anddisproportionate amount of management time, the Company now looks ahead to aperiod of consolidation. Whereas production results in Greece have so far beendisappointing, other areas continue to look promising, with drilling starting orcontinuing in the Ukraine, Romania and, next year, in Egypt. In all these areasthe Company will explore the possibility of bringing in new partners to sharerisks and costs, as is normal practise in the oil industry. We will also belooking for new opportunities in other areas. The consolidation period is likelyto last into 2006, after which we confidently expect to move forward withenhanced oil and gas production and greater profitability in our existing andpossibly also new concession areas. The purported option of Peak Resources overour Ukraine assets remains unresolved, but the Board still believes thesenegotiations not to be in the best interests of shareholders. Review of Results The financial results for the six months ended 30 June 2005 are lower than ourearlier expectations and reflect largely the problems encountered in Greece asdescribed in the accompanying Trading Statement. In April 2005 Regal successfully placed 11.5 million new ordinary shares andraised £42.6 ($80.6) million (net of expenses) to develop assets in Greece,Romania and Egypt. Turnover for the six months was $16.7 million (30-Jun-04: $13.4 million) whichis mainly attributable to oil sales in Greece and gas and condensate sales inUkraine. During the first six months of 2005 the Group achieved an averagedaily production of 3,800 boepd at an average sales price of $28/boe. The operating loss after minority interests for the six months was $21.7 million(30-Jun-04: $2.5 million). Included in this operating loss: • In cost of sales is the write down of the King Alexander Rig of $7.8 million, as its value is not certain. Also included in cost of sales is increased depreciation in relation to Greece and Ukraine of $3.0 million; due to the write down of reserves in Greece earlier in the year and revised future capital expenditure plans for the Ukraine at year end. • Included in Administration expenses are write offs, due to their uncertainty, of unrecoverable VAT in the Ukraine of $0.9 million, feasibility studies and consultancy fees connected with energy projects of $0.8 million and unrealised foreign exchange losses of $7.8 million. As at 30 June 2005 the Group had no external borrowings. Total interestreceivable for the six months was $0.5 million (30-Jun-04: $0.8 million)reflecting successful cash management for the period. The net capital expenditure and financial investment outflow of $36.4 million(30-Jun-04: $22.8 million) represented the aggressive investment towarddevelopment and exploration, particularly in Greece. Board appointments On 1 May 2005 Dr Rex Gaisford CBE was appointed to the Regal Board of Directorsas a Non-Executive Director and on 9 June 2005 Dr Gaisford was appointed ChiefExecutive Officer. Dr Gaisford is a qualified mechanical engineer with over 30years experience in the oil and gas industry, where he specialised in largescale project development, operations and business development, including 12years at Amerada Hess Corporation, where he was Executive Vice-President andDirector before retiring in 2000, 3 years as Managing Director of BeatriceResources Limited and 7 years as General Manager of Britoil PLC. On 15 June 2005 I was appointed Non-Executive Chairman and Richard Hardman wasappointed Exploration Director. I have worked as an adviser to numerouscompanies including HSBC Investment Bank, Amerada Hess plc and the BOC Groupafter a career in the Foreign Office. Richard Hardman is an renownedexplorationist and one of the industry's foremost geologists with over 40 yearsindustry experience with oil majors including 10 years at BP, 11 years at AMOCO,3 years at Superior Oil and 18 years at Amerada Hess. Outlook During the second half of 2005 Regal will concentrate its exploration anddevelopment efforts in Romania and the Ukraine, and will be monitoring closelythe performance of its subsidiary, Kavala Oil SA, in Greece. Exploration anddevelopment in the Ukraine will be subject to the resolution one way or theother of the approach from Peak Resources described in the attached TradingStatement; the Company recognises that the uncertainty that this approach hascaused is delaying the proper development of its assets in the Ukraine, and isdetermined to see this matter resolved as rapidly as possible. The drilling ofan exploratory well in Egypt, earlier forecast for later this year, is nowlikely to be delayed until 2006, because of the difficulty of obtaining adrilling rig. With strong and experienced new management, a healthy cash balance, and goodquality in-the-ground assets, the Company believes that it can look forward tothe future with confidence. Sir Peter HeapChairman Regal Petroleum plc Consolidated profit and loss account for the six months ended 30 June 2005 Six months Six months Year ended ended ended 30-Jun-05 30-Jun-04 31-Dec-04 (unaudited) (unaudited) (audited) Note $000 $000 $000 Turnover 2 16,743 13,433 42,459Cost of sales (21,044) (7,518) (48,371)Gross profit (4,301) 5,915 (5,912)Other income 995 41 3,386Administrative expenses (18,117) (9,378) (15,517)Operating Loss (21,423) (3,422) (18,043) Interest receivable 517 840 1,244Loss on sale of fixed assets -continuing operations (106) - (36)Interest payable and similarcharges (144) (33) (325)Loss on ordinary activities beforetaxation (21,156) (2,615) (17,160)Tax on profit on ordinaryactivities (567) - (884)Minority interest - 117 4,363Loss for the financial period (21,723) (2,498) (13,681) Loss per ordinary share (cents)Basic 3 (19.0c) (2.3c) (12.4c)Diluted (19.0c) (2.3c) (12.4c) All amounts for the six months ended 30 June 2005 and 2004 relate to continuingactivities. The notes on pages 13 to 15 form part of these interim accounts Regal Petroleum plc Consolidated balance sheet at 30 June 2005 30-Jun-05 30-Jun-04 31-Dec-04 (unaudited) (unaudited) (audited) Note $000 $000 $000 Fixed assetsIntangible assets 11,178 2,754 6,183Tangible assets 108,877 56,081 97,877Investments 431 576 - 120,486 59,411 104,060 Current assetsStocks 20,669 14,241 10,166Debtors 17,895 10,171 14,919Investments 359 3,000 3,342Cash at bank and in hand 54,016 65,739 25,643 92,939 93,151 54,070 Creditors: amounts fallingdue within one year (29,605) (15,912) (30,777) Net current assets 63,334 77,239 23,293 Total assets less currentliabilities 183,820 136,650 127,353 Creditors: amounts fallingdue after more than one year (605) - (682)Provisions for liabilities and charges (2,170) (1,302) (1,854) Minority interest - (3,831) - Net assets 181,045 131,517 124,817 Capital and reservesCalled up share capital 10,827 9,568 9,678Share premium 216,125 131,417 134,254Other Reserves 630 4,273 5,036Profit and loss account deficit (46,537) (13,741) (24,151)Shareholders' funds - equity 181,045 131,517 124,817 The notes on pages 13 to 15 form part of these interim accounts Regal Petroleum plc Consolidated cash flow statement for the six months ended 30 June 2005 Six months Six months Year ended ended ended 30-Jun-05 30-Jun-04 31-Dec-04 (unaudited) (unaudited) (audited) Note $000 $000 $000 Net cash outflow fromoperatingactivities 4 (15,482) (10,325) (5,901)Returns on investments andservicing of financeInterest received 510 840 1,241Interest paid (50) (100) (324) Net cash inflow from returns oninvestments and servicing offinance 460 740 917Taxation (567) - (771)Capital expenditure andfinancial investmentPurchase of tangible fixed assets (36,440) (22,825) (71,586)Net cash inflow from expenditureand financial investment (36,440) (22,825) (71,586) Acquisition and disposals (1,186) (58) - Cash outflow before use of liquidresources and financing (53,215) (32,468) (77,341) Management of liquidresources and financingPurchase of current asset investments (179) - (119)Sale of current asset investments 3,000 - - 2,821 - (119) FinancingProceeds from borrowings - 21 1,080Repayment of borrowings (1,080) (724) -Issues of ordinary share capital 83,020 70,404 73,350 81,940 69,701 74,430 Increase/(decrease) in cash 31,546 37,233 (3,030) Regal Petroleum plc Consolidated statement of total recognised gains and lossesfor the six months ended 30 June 2005 Six months Six months Year ended ended ended 30-Jun-05 30-Jun-04 31-Dec-04 (unaudited) (unaudited) (audited) restated $000 $000 $000 Loss for the financial year (21,723) (2,498) (13,681)Gross exchange differences on theretranslation of net investments (5,069) (389) 1,147Total recognised gains and lossesrelating to the financial year (26,792) (2,887) (12,534) Reconciliation of movements in shareholders' fundsfor the six months ended 30 June 2005 Six months Six months Year ended ended ended 30-Jun-05 30-Jun-04 31-Dec-04 (unaudited) (unaudited) (audited) restated $000 $000 $000 Retained loss for thefinancial period (21,723) (2,498) (13,681)Other recognised gains and lossesrelating to the year (5,069) (389) 1,147New share capital subscribed(net of issue costs) 83,020 70,404 73,351Net addition to shareholders' funds 56,228 67,517 60,817 Opening shareholders' funds -previously reported 124,817 64,203 64,203Prior year adjustment - (203) (203) Opening shareholders' funds -restated 124,817 64,000 64,000Closing shareholders' funds 181,045 131,517 124,817 Regal Petroleum plc Notes forming part of the financial statements for the six months ended 30 June2005 1 Basis of preparation The interim financial information set out on pages 9 to 15 has been prepared onthe same basis and using the same accounting policies as were applied inpreparing the Group's statutory financial statements for the year ended 31December 2004. The financial information for the six months ended 30 June 2005 and 30 June 2004is unaudited. In the opinion of the directors the financial information forthese periods present fairly the financial position, results of operations andcash flows for the periods in conformity with generally accepted accountingprinciples consistently applied. These interim financial statements do not constitute statutory accounts withinthe meaning of section 240 of the Companies Act 1985. Those accounts have beenreported on by the Group's auditors and delivered to the Registrar of Companies.The auditor's report on those accounts was unqualified and did not contain anystatement under section 237(2) or (3) of the Companies Act 1985. There have been no changes to the Group's accounting policies during the period.The accounting polices are set out in the Annual Report and Accounts for theyear ended 31 December 2004, a copy of which has been filed with the Registrarof Companies at Companies House in the United Kingdom. 2 Turnover Six months Six months Year ended ended ended 30-Jun-05 30-Jun-04 31-Dec-04 (unaudited) (unaudited) (audited) $000 $000 $000 Analysis of turnover by activity:Oil sales 9,342 9,527 33,420Gas sales 3,721 1,616 2,968Condensate sales 3,215 1,596 4,665Other 465 694 1,406 16,743 13,433 42,459 Analysis of turnover by geographical origin:Greece 9,807 10,221 34,826Ukraine 6,936 3,212 7,633 16,743 13,433 42,459 Regal Petroleum plc Notes forming part of the financial statements for the six months ended 30 June2005 3 Loss per ordinary share The calculation of basic and diluted loss per ordinary share has been based onthe loss for the period and 114,129,877 ordinary shares, being the averagenumber of shares in issue for the period to 30 June 2005. 4 Reconciliation of operating loss to operating cash flow Six months Six months Year ended ended ended 30-Jun-05 30-Jun-04 31-Dec-04 (unaudited) (unaudited) (audited) $000 $000 $000 Operating loss (21,423) (3,422) (18,043)Depreciation and amortisation 5,343 902 7,696Exchange differences 6,641 2,017 (349)Movement in provisions 316 49 601(Increase)/decrease in stocks (10,503) (10,615) (6,541)(Increase)/decrease in debtors (2,976) (2) (4,750)Decrease/(increase) in creditors (93) 471 14,256Loss on gift of shares to minority interest 682Impairment of fixed assets 7,213Current asset investment -expiration of oil hedge put options 275 547 Net cash outflow from operatingactivities (15,482) (10,325) (5,901) Regal Petroleum plc Notes forming part of the financial statements for the six months ended 30 June2005 5 Reconciliation of net cash flow to movement in net funds Six months Six months Year ended ended ended 30-Jun-05 30-Jun-04 31-Dec-04 (unaudited) (unaudited) (audited) $000 $000 $000 Increase / (Decrease) in cash inthe period 31,546 (37,233) (3,030)Cash inflow/(outflow) fromincrease/(decrease)in funds and lease financing 1,080 703 (1,080)Cash outflow from increase inliquid resources (2,821) - 119Change in net funds resulting fromcash flows 29,805 37,936 (3,991)Translation differences (3,173) (6) 134Other non-cash movements (85) (268) (1,229)Movements in net funds in theperiod 26,547 37,662 (5,086)Net funds at the start of the period 27,223 32,309 32,309Net funds at the end of the period 53,770 69,971 27,223 6 Analysis of net funds At Other non At beginning Cash cash Exchange end of of period flow movements movements period $000 $000 $000 $000 $000 Cash in hand and atbank 25,643 31,546 (3,173) 54,016Overdrafts (1,080) 1,080Current assetinvestments 3,342 (2,821) (162) 359Debt due after one year (682) 77 (605)Total 27,223 29,805 (85) (3,173) 53,770 Independent review report by KPMG Audit Plc to Regal Petroleum plc. Introduction We have been engaged by the Company to review the financial information set outon pages 9 to 15 and we have read the other information contained in the interimreport and considered whether it contains any apparent misstatements or materialinconsistencies with the financial information. This report is made solely to the company in accordance with the terms of ourengagement. Our review has been undertaken so that we might state to the Companythose matters we are required to state to it in this report and for no otherpurpose. To the fullest extent permitted by law, we do not accept or assumeresponsibility to anyone other than the Company for our review work, for thisreport, or for the conclusions we have reached. Directors' responsibilities The interim report, including the financial information contained therein, isthe responsibility of, and has been approved by, the directors. The directorsare responsible for preparing the interim report in accordance with the AIMRules which require that the interim report must be presented and prepared in aform consistent with that which will be adopted in the Company's annual accountshaving regard to the accounting standards applicable to such annual accounts. Review work performed We conducted our review having regard to the guidance contained in Bulletin 1999/4: Review of interim financial information issued by the Auditing PracticesBoard for use in the United Kingdom. A review consists principally of makingenquiries of management and applying analytical procedures to the financialinformation and underlying financial data and, based thereon, assessing whetherthe accounting policies and presentation have been consistently applied unlessotherwise disclosed. A review is substantially less in scope than an auditperformed in accordance with Auditing Standards and therefore provides a lowerlevel of assurance than an audit. Accordingly we do not express and auditopinion on the financial information. Review conclusion On the basis of our review we are not aware of any material modifications thatshould be made to the financial information as presented for the six monthsended 30 June 2005. KPMG Audit PlcChartered AccountantsLondon This information is provided by RNS The company news service from the London Stock Exchange