Star Energy Regulatory News (STAR)

21 Jun 2007 12:00

Star Energy Group PLC21 June 2007 Thursday 21 June 2007 Star Energy Group plc ("Star Energy" or "the Company") AGM Trading and Strategy Update First Half Performance In Line With Expectations Star Energy, the gas storage and onshore UK oil and gas E&P company, providesthe following trading update ahead of its AGM which will be held today at 12noon at the offices of Norton Rose, 3 More London Riverside, London SE1 2AQ. Trading Update Oil production averaged just below 4,000 bopd during the first half of 2007 andthe Company benefited from slightly higher than forecasted oil prices. Duringthe second half of the year, the Company will continue to increase itsexpenditure on gas storage development activities. The Company expects theout-turn for the full year to be in line with market expectations, adjusted forthe previously announced disposal of its Singleton oil field. Gas Storage • The mild winter and warm start to the second quarter resulted in relatively low levels of activity at the Humbly Grove gas storage facility. The annual maintenance shutdown is currently underway as planned. On future storage projects, there has been good progress on a number of fronts:- • Planning permission for the appraisal well at Bletchingley was received from Surrey County Council. Drilling of this well is expected to commence in Q4 of this year. • Hampshire County Council gave planning permission for the installation of a booster compressor and related equipment at the Humbly Grove wellsite A, an important step in the plan to expand storage capacity by up to 2 bcf over the next 12-18 months. • Progress on the offshore Forbes/Esmond project was further enhanced by the commissioning of a conceptual design study to be completed by September 2007. • A scoping report that covers the proposed location of all major elements of the Albury gas storage project (wellsite, plant and pipelines) has been published. A new site for the topside facilities for the Albury gas storage project has been acquired. This proposed plant site is in a well screened more remote area outside the Area of Outstanding Natural Beauty (AONB), and is close to the planned pipeline route to connect the store to the gas distribution network. Oil Production Oil production has been slightly lower than anticipated, but this has beencompensated for by better sales prices. Strategy At the announcement of the Company's preliminary results on 2 April 2007, theBoard stated that it was undertaking 'a strategic review to identify the optimumstructure and funding approach to developing the gas storage business.' With the help of external advisers, the Board has now completed that review andis implementing a number of changes to the structure, management and reportingof the Star Energy Group's activities. The key conclusions of the review were:- The Board remains firmly committed to the strategy of building a significantmulti-site European gas storage business. The Company currently has 5 onshoreprojects at various stages of development - Albury (Phases 1 and 2); Welton;Gainsborough; Bletchingley; and also the offshore Forbes/Esmond project. The successful delivery of operational facilities from these projects willinvolve substantial capital expenditure. The Board believes that the futurenature of these facilities as long-lived assets with full planning permits andsuitable capacity sales agreements should enable the Group to fund the projectspredominantly through debt facilities when required. The Board reviewed the potential for further non-core asset sales to contributeto future funding requirements. Whilst concluding that there was no immediatebenefit from such sales, they are clearly an important option for raising cashwhen needed, and will be considered at the appropriate time. The following changes will be made to ensure that the Group's resources areclearly focussed on gas storage development and that it can swiftly andefficiently commence work on projects once planning permissions are achieved:- • Two separate Business Units will be created - a Gas Storage Division and an Oil Production Division. With effect from 1 July 2007, each business will be reported segmentally. This move will provide shareholders with greater transparency. • Roger Pearson, currently Group Operations Director, will be appointed Managing Director of the Gas Storage Division. In recognition of the need to focus on planning applications, the position ofDirector of Planning has been established, reporting directly to Roger. The newposition, which is a non-Board appointment, has been successfully filled by anindividual with significant relevant experience. • The position of Managing Director of the Oil Production Division will be subject to a separate announcement in due course. This will be a non-Board appointment. • Melvyn Horgan will continue in his role as Technical Director whilst Adrian Fernando will now focus entirely on business development. Board Changes Following the AGM today, Charles Carter is stepping down as a Non-ExecutiveDirector. Charles has been on the Board since the IPO in 2004 and his input andexperience has been greatly valued, and the Board wishes him well for thefuture. We expect to make an announcement regarding a replacement for Charles inthe near future. Enquiries: Star Energy 020 7925 2121Roland Wessel, Chief ExecutiveFinancial Dynamics 020 7831 3113Ben Brewerton / Ed Westropp This information is provided by RNS The company news service from the London Stock Exchange