RNS Number:5207K
Energy Capital Investment Co.PLC
29 April 2003
ENERGY CAPITAL INVESTMENT COMPANY PLC
Chairman's Statement
Compared with the hectic activity of the previous year, largely prior to
September 2001, the investment disposal activity in 2002 was decidedly muted.
However, on the corporate front, the return of $30m (#19.5 million) capital to
shareholders in July was the highlight of the year.
As shareholders are aware, the Board has continued to review actively ways to
maximise shareholder value and shareholders have agreed to extend temporarily
the life of the Company until the Annual General Meeting to be held in 2003 when
the matter will be reconsidered. The primary reason for this extension was to
examine options which might be more attractive to shareholders than an orderly
winding up of the Company.
After adding back the return of Capital and the associated costs in connection
therewith totalling $30.3 million to the net assets at 31 December 2002, the
total of $86.7 million is much the same as the total of the net assets at 31
December 2001 ($86.8 million). The net assets at 31 December 2002 of $56.4
million are equivalent to 242.7c per share on the reduced number of 23.2 million
shares now in issue or 151.3p in sterling terms compared to 233.7c per share or
161.0p in sterling terms at 31 December 2001. Applying the current exchange rate
to the year end net asset value per share would increase the sterling equivalent
to approximately 152.6p as compared with a current share price of 87.5p
representing an approximate discount of 43%.
Portfolio transactions during 2002 were primarily limited to the sale of our
interest in First Permian to Energen Corporation providing ECIC with cash
proceeds of $1.3 million. However, significant progress has been made to improve
the realisation possibilities of our remaining investments. In the first quarter
of 2003, interests in CERES, Hilcorp Energy and Sierra 1996-1 were sold
resulting in ECIC receiving cash proceeds of $2.8 million. Further, the sale of
our interest in 3TEC to Plains Exploration is expected to close in the second or
third quarter of 2003 providing ECIC with cash proceeds of approximately $6.3
million and 472,000 shares of the acquirer, which represents an enhancement,
assuming the current price of Plains Exploration, of approximately $0.7 million
over the carrying value as at 31 December 2002. We continue to believe our
liquidation programme, supported by a favourable oil and gas pricing outlook,
will maximise remaining value to our shareholders. As a matter of policy we are
holding cash balances, currently totalling approximately $8 million, 50% in US
dollars and 50% in sterling.
Both oil and natural gas prices showed increasing strength throughout 2002.
After reaching a low near $18 per barrel during the first quarter of 2002, crude
oil steadily increased during 2002 to reach $31.23 per barrel by the year end.
Similarly, natural gas reached a low of near $2 per MCF during the first quarter
of 2002 but steadily increased to $4.75 per MCF by the year end. Both oil and
gas prices remain strongly supported to date in 2003 primarily due to near
historically low U.S. inventory levels present with both commodities. In
addition, continued geopolitical concerns related to oil and concerns over US
production decline rates, primarily associated with natural gas, have provided
ongoing pricing support to date in the current year.
In valuing our remaining project equity and certain private company investments
at 31 December 2002, consisting primarily of MPAC Energy, BreitBurn and
Cordillera, we have applied the NYMEX forward strip pricing at that date. Oil
prices applied in the valuation, before adjustment for price differentials, were
$27.35 per barrel for 2003 and averaged $23.80 per barrel for the subsequent 5
years. Natural gas prices applied were $4.54 per MCF for 2003 and averaged $4.10
per MCF for the subsequent 5 years. Consistent with prior years, such pricing
was applied to proved reserves as provided by third party engineers with the
resulting cash flow, net of all future development and operating costs,
discounted at 10% per annum. After taking into account adjustments for portfolio
companies' liabilities and other assets, the value of asset-based investments
was $27.9 million, or 52 % of our investment portfolio at 31 December 2002.
Investments valued at quoted securities' prices or at their realisable value, as
with loans and investments under existing sale agreements, totalled $25.8
million aggregating to a total investment value at 31 December 2002 of $53.7
million.
In order to expedite the liquidation of our remaining investments we have
recently revised, with the full cooperation of EnCap, the management agreement
to remove approximately $20 million of quoted investments from their management.
Hitherto, these investments were subject to various sale restrictions by virtue
of the fact that the Company was deemed to be an affiliate of EnCap in relation
to those investments.
We shall continue to keep under review ways to maximise shareholder value,
including share buy-backs in the market, and to return any significant surplus
capital to shareholders in a tax efficient manner. In this respect, as with last
year, it is deemed not to be in the interest of shareholders to recommend the
payment of a final dividend for the year ended 31 December 2002 or, indeed, to
pay dividends in the future whilst the Company is in its present wind-down mode.
Resolution 5 at the forthcoming Annual General Meeting proposes that the
Company's life should be extended for a further year until the conclusion of the
Annual General Meeting to be held in 2004. Your Directors continue to believe
that it is in the best interests of shareholders to remain with the Company in
its existing wind-down mode rather than to place the Company into voluntary
liquidation.
As reported at the interim stage, Gary Petersen, an executive director of EnCap,
did not stand for re-election at the Annual General meeting held on 27 June 2002
and also on that day, Leo Deschuyteneer resigned following Sidro S.A.'s sale of
their entire shareholding. On 21 November 2002 Andrew Pegge, who represents
Laxey Partners' significant interest in the Company, was appointed as a
non-executive director. I would like to take this opportunity to thank my fellow
directors and those who have resigned during the year, together with our
professional advisers, for continuing to assist the Company in enhancing the
value to shareholders in pursuance of our exit strategy.
Alan Henderson
Chairman
29 April 2003
ENERGY CAPITAL INVESTMENT COMPANY PLC
PRELIMINARY RESULTS (SUBJECT TO FINAL AUDIT)
for the year ended 31 December 2002
Statement of Total Return (incorporating the revenue account of the Group*)
for the year ended 31 December 2002
Revenue Capital Total
$'000 $'000 $'000
CAPITAL
Realised net losses on investments - (4,960) (4,960)
Increase in unrealised appreciation - 3,867 3,867
Foreign exchange gains - 1,389 1,389
- 296 296
REVENUE
Commitment and other fees 15 - 15
Interest on notes receivable 1,045 - 1,045
Interest receivable on short term deposits 504 - 504
Net profit from interests in associated undertakings 1,808 - 1,808
3,372 296 3,668
Administration expenses (769) (929) (1,698)
Interest payable (12) - (12)
Abortive transaction cost - (65) (65)
Return on ordinary activities before tax 2,591 (698) 1,893
Tax on ordinary activities (2,221) 2,062 (159)
Deferred tax - (1,840) (1,840)
Return on ordinary activities after tax 370 (476) (106)
attributable to ordinary shareholders
Dividend - - -
Transfers to/(from) reserves 370 (476) (106)
Return per Ordinary share:
- Basic 1.21c (1.56c) (0.35c)
- Diluted 1.21c (1.56c) (0.35c)
for the year ended 31 December 2001
Revenue Capital Total
$'000 $'000 $'000
CAPITAL
Realised net gains on investments - 44,155 44,155
Decrease in unrealised appreciation - (42,021) (42,021)
Foreign exchange gains - 355 355
- 2,489 2,489
REVENUE
Commitment and other fees 32 - 32
Interest on notes receivable 5,206 - 5,206
Interest receivable on short term deposits 970 - 970
Net profit from interests in associated undertakings 4,211 - 4,211
10,419 2,489 12,908
Administration expenses (1,178) (1,394) (2,572)
Provision for performance fee (1,897) (5,690) (7,587)
Interest payable (25) - (25)
Provision for abortive transaction cost - (1,100) (1,100)
Return on ordinary activities before tax 7,319 (5,695) 1,624
Tax on ordinary activities (4,070) (14,966) (19,036)
Deferred tax - 14,583 14,583
Return on ordinary activities after tax 3,249 (6,078) (2,829)
attributable to ordinary shareholders
Dividend - - -
Transfers to/(from) reserves 3,249 (6,078) (2,829)
Return per Ordinary share:
- Basic 9.13c (17.07c) (7.94c)
- Fully diluted 9.13c (17.07c) (7.94c)
*The Statements of Total Return presented above are in accordance with the
Statement of Recommended Practice for Financial Statements of Investment Trust
Companies.
The consolidated net assets of the Group as at 31 December 2002 were:
31 December 2002 31 December 2001
$'000 $'000
Associated undertakings - Project equity investments 4,039 4,853
- Other investments 15,252 15,077
19,291 19,930
Investments 34,382 34,582
53,673 54,512
Net current assets 4,574 32,344
Deferred taxation (1,881) (41)
Net assets 56,366 86,815
Called up share capital 8,792 14,112
Share premium account 22,672 22,672
Capital redemption reserve 5,320 -
Capital reserve - realised 13,139 17,031
Capital reserve - unrealised 6,904 3,488
Special reserve - 22,107
Revenue reserve (461) 7,405
Equity shareholders' funds 56,366 86,815
Net asset value per Ordinary share (cents) 242.74c 233.67c
Net asset value per Ordinary share (pence) 151.32p 160.98p
The exchange rate ruling at the balance sheet date was $1.6041/#1 (2001 -
$1.4515/#1).
Consolidated cash flow for the year ended 31 December 2002:
2002 2001
$'000 $'000
Net cash (outflow)/inflow from operating activities (8,914) 3,650
Taxation (7,768) (9,573)
(16,682) (5,923)
Purchase of investments (3) (1,682)
Sale of investments and distributions from 1,415 56,908
associated undertakings
Net cash inflow from distributions/disposals less acquisitions 1,412 55,226
(15,270) 49,303
Equity dividends paid - (4,707)
Net cash inflow before use of liquid resources (15,270) 44,596
Financing
Shares issued - warrants exercised less cost of buy-in of warrants - 3,951
Redemption of shares (30,343) -
(Decrease)/increase in net cash (45,613) 48,547
Reconciliation of operating profit to net cash flow from operating activities
for year ended 31 December 2002
2002 2001
$'000 $'000
Profit before taxation 2,591 7,319
Management fees and costs transferred to capital reserve - realised
(929) (8,184)
Net profit from interests in associated undertakings (1,808) (4,211)
Other non-cash investment income (365) (3,804)
(Increase)/decrease in debtors (2,623) 3,051
(Decrease)/increase in creditors (6,381) 7,137
Distributions from associated undertakings and other investments 601 2,342
Net cash flow from operating activities (8,914) 3,650
Notes
1. The basic revenue return and capital return per Ordinary share is based
on the net revenue on ordinary activities after taxation of $370,000
(2001 - $3,249,000) and net capital losses of $476,000 (2001 - losses
$6,078,000) on a weighted average of 30,549,567 Ordinary shares of 25p
each in issue for the period (2001 - 35,598,611).
2. The diluted net asset value per Ordinary share for 2002 is based on the
net assets of $56,366,000 on 23,220,726 Ordinary shares of 25p each in
issue at 31 December 2002 (2001 - $86,815,000 on 37,153,161 Ordinary
shares).
3. No final dividend is recommended to be paid (2001 - nil).
4. A share-buy-back of 37.5% of the issued share capital was approved by
shareholders at an Extraordinary General meeting held on 27 June 2002. On
12 July 2002 the Company purchased for cancellation 13,932,435
Ordinary shares, representing 37.5% of the Company's issued share
capital, at 140p per share for a total cost of $30,343,000 including
expenses.
5. As required by the Companies Act 1985, the equivalent of the nominal
value of the Ordinary shares cancelled has been transferred to a capital
redemption reserve.
6. The figures presented do not constitute full accounts. Full accounts for
the year ended 31 December 2001, on which the auditors gave an
unqualified report, have been delivered to the Registrar of Companies.
7. The Report and Accounts will be dispatched to shareholders by 31 May 2003
and the Annual General Meeting will be held on 23 June 2003.
29 April 2003
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