RNS Number:0406N
EnCore Oil PLC
01 February 2008
Press Release
For immediate release: 1 February 2008
EnCore Oil plc ("EnCore" or "the Company")
Interim Results to 31 December 2007
EnCore Oil plc (LSE: EO.) announces its interim results for the six months ended
31 December 2007.
Highlights:
- Three successful wells drilled, flowing gas at excellent rates.
- Offshore gas storage feasibility study results confirmed the viability of
the Esmond and Gordon fields potential to form a 145 bcf gas storage facility.
- A placing with new and existing shareholders raising �12.5 million
(before expenses).
- Farm outs to three new joint venture partners - Revus Energy,
Wintershall and Challenger Minerals.
Commenting on the results, EnCore Chief Executive, Alan Booth said:
"Our strategy of building a broad portfolio of opportunities and associated
drilling activity is now starting to bear fruit. The strength of our share price
over the last three months shows the recognition in the market of the potential
value of our asset base.
The second half of 2007 saw success in our drilling programme at Old Head and
Schull in the Celtic Sea, but perhaps more importantly at Breagh in the UKCS
Southern Gas Basin. All three wells flowed gas at excellent rates.
We also had a positive outcome with our gas storage feasibility study at Esmond
and Gordon which highlighted the previously overlooked potential value of this
project.
It is my hope that by the end of 2008 we will have a smaller portfolio but with
greater overall value, positioned further along the E&P value chain. We will, of
course, continue to engage with others where we see strategic opportunity in
acquisitions, mergers or disposals from either an asset or a corporate
perspective."
For further information, please contact:
EnCore Oil plc www.encoreoil.co.uk
----------------------
Alan Booth, Chief Executive Officer +44 (0)20 7224 4546
Eugene Whyms, Chief Financial Officer
Aquila Financial Limited www.aquila-financial.com
--------------------------
Peter Reilly +44 (0)118 979 4100
Yvonne Fraser
Hanson Westhouse Limited
Tim Feather +44 (0)113 246 2610
KBC Peel Hunt
Jonathan Marren +44 (0)20 7418 8900
CHIEF EXECUTIVE'S REVIEW
Our strategy of building a broad portfolio of opportunities and associated
drilling activity is now starting to bear fruit. The strength of our share price
over the last three months shows the recognition in the market of the potential
value of our asset base.
The second half of 2007 saw success in our drilling programme at Old Head and
Schull in the Celtic Sea, but perhaps more importantly at Breagh in the UKCS
Southern Gas Basin. All three wells flowed gas at excellent rates.
We also had a positive outcome with our gas storage feasibility study at Esmond
and Gordon which highlighted the previously overlooked potential value of this
project.
2007 DRILLING PROGRAMME
Celtic Sea (offshore Ireland)
Old Head of Kinsale and Schull
In July, we announced that the 49/23-2z Old Head of Kinsale sidetrack well
successfully tested dry gas at a rate in excess of 18 million standard cubic
feet per day through a 56/64'" restricted choke size.
In the same month, the Schull gas appraisal well on Exploration Licence 5/05
successfully tested dry gas at a rate of 21 million standard cubic feet per day
through a 72/64" choke.
Island Oil & Gas plc, the operator of both discoveries, awarded a front end
engineering contract to Pegasus International UK Limited in September, to focus
on development options for the two fields.
Southern Gas Basin (North Sea)
Cirrus
July saw the results of the 48/22b-6 exploration well on the Cirrus prospect.
The well reached total depth and available electric log data indicated that a
hydrocarbon column was encountered. Analysis of the data indicated that the
potential size of the accumulation was likely to be sub-commercial and therefore
the well was plugged and abandoned following completion of the drilling
operations.
Breagh
The Breagh gas appraisal well on Southern North Sea block 42/13 successfully
tested dry gas at a maximum rate of 17.6 million standard cubic feet per day
through a 56/64" choke when it was drilled in November. This was ahead of our
pre-drill expectations. We have plans for further appraisal and development
drilling during 2008.
FRANCE
In January 2008, after the period end, we were formally awarded the 'Nimes'
onshore exploration licence in the south of France. We currently hold a 100 per
cent. interest in the licence and believe that this permit offers a low cost
route to evaluate and potentially drill a large undrilled closure within the
Nimes Graben System. This complements our lower risk 'Mairy' Permit in the Paris
basin, which contains an abandoned oil field, where we believe there may be
further unrealised potential.
UK ONSHORE
Activity on our onshore portfolio in 2007 has been slow. This is the nature of
UK onshore activity where planning issues can take considerable time and effort.
Our operator at Kirkleatham, Egdon Resources plc, continues to progress the
development of this discovery, and we are hopeful of further positive progress
in the near future on this project. We expect to be applying for a small number
of additional strategic onshore licences in the current licensing round.
WESTERN SAHARA (SADR)
We are, of course, pleased to see continuing dialogue between the SADR and the
Moroccan authorities brokered by the United Nations. As we have said before, we
will not pursue exploitation of the Western Sahara offshore resources until such
time as the current dispute is resolved. It is our hope that these discussions
will ultimately lead to a mutually satisfactory outcome for all parties.
GAS STORAGE
In November, we announced that the gas storage feasibility study, which was
conducted by Star Energy Group plc, had demonstrated that the Esmond and Gordon
fields show potential to form the basis of a 145 bcf gas storage facility.
Earlier in November, we announced our intention to demerge the Esmond and Gordon
gas storage business into a separate AIM quoted company. It is expected that
this demerger will take the form of a distribution of shares in a new company to
shareholders. We anticipate that completion of this process will take place in
late April or early May.
We view the Government's recent Energy Bill as positive news for our gas storage
business and support any legislation which simplifies and strengthens the
regulatory framework to give us more clarity in the areas of offshore gas
infrastructure, licensing and decommissioning.
FUNDRAISING
In December, we saw strong investor support for our ongoing business activities
through the success of a placing with both new and existing institutional
shareholders which raised �12.5 million (before expenses).
We placed 34,722,223 new ordinary shares of 5p each at a price of 36p per share
to raise these additional funds. The placing was undertaken to provide
additional capital for the Company's active exploration and development
programme and to provide initial funding for the newly quoted company which will
hold the gas storage assets on completion of the demerger.
DRILLING ACTIVITY IN 2008
In 2008, we have a full drilling programme of development, appraisal and
exploration wells at Barbarossa, Cobra, Bennett, Catcher, Bowstring East, and
Breagh.
Barbarossa Prospect on UKCS Block 47/9c (10 per cent., five per cent. of which
is subject to a buyback)
Following the operator's recent success at Channon, we agreed with Venture
Production plc that Barbarossa should be drilled as a development well and as a
potential joint development with Channon. Our costs will be carried on the
initial Barbarossa well bore and testing programme. On the horizontal
development section of the well bore, we will contribute at our working interest
level of 10 per cent. We expect the well to spud in February.
Cobra Prospect on UKCS Blocks 48/1b & 48/2c (20 per cent.)
Following the recently announced farm-out to Challenger Minerals Inc., we retain
a 20 per cent. interest and operatorship of this licence. We have contracted
Applied Drilling Technology International and the ENSCO 80 jack-up to drill this
appraisal well on behalf of the joint venture.
The main target of this well will be to establish if the reservoir is capable of
flowing at commercial rates from a vertical well bore. The well is being drilled
up dip of the 48/2-1 well, drilled in 1984, which flowed at approximately three
million cubic feet per day from a Rotleigendes reservoir. We believe that the
reservoir was damaged during the drilling of this well and that this flow rate
could be improved upon through the use of modern drilling and completion
techniques.
Bennett Prospect on UKCS Block 43/15a (70 per cent.)
Following the farm-out of 30 per cent. of this prospect to Wintershall in late
2007, we are discussing the potential for additional co-venturers to join us in
drilling the Bennett prospect. Bennett is a significant Carboniferous prospect
which sits beneath the depleted Gordon gas field. This is a higher risk, higher
reward exploration prospect which, if successful, could contain significant
volumes of gas. It is possible we may be able to utilise a drilling rig slot in
May 2008 to drill this well. However this will be dependent on successful
completion of the environmental impact assessment and the acquisition of a
satisfactory site survey.
Catcher Prospect on UKCS Blocks 28/9 & 28/10b (35 per cent.)
Catcher is an oil exploration prospect in the Central North Sea relatively close
to existing infrastructure. Our evaluation is that Catcher offers a modest risk
and reward opportunity with significant add-on low risk prospectivity in the
event of success. The operator, Oilexco Inc., has a number of rigs available and
we expect Catcher to be drilled in the second half of 2008, depending on finding
a suitable slot in Oilexco's drilling programme.
Bowstring East Prospect on UKCS Blocks 210/29 & 210/30 (26.6 per cent.)
Bowstring East is a high risk and high reward exploration prospect situated in
the Viking Graben oil province and operated by Sterling Resources. It is a
prospect that requires stratigraphic trapping within the proposed Upper Jurassic
sandstones to be successful. The co-venturers have farmed out an interest in
this licence to Revus Energy (UK) Limited. We expect in due course to farm-out
additional interests as we progress the drilling programme. We hope to drill
this well in late 2008 subject to rig availability.
Breagh Appraisal Drilling on UKCS Block 42/13 (15 per cent.)
We hope to return to Breagh later in 2008 to drill a number of wells to
understand both the potential of East Breagh and also undertake some development
drilling on West Breagh.
OUTLOOK
I believe we will have an even busier and eventful 2008.
We aim to build further shareholder value through success in our upcoming
drilling programme.
Additionally, a key element of our strategy has always been, and will continue
to be, to return value directly to shareholders where possible. Our plans to
demerge the gas storage business by way of a share distribution to shareholders
will accomplish this. As gas storage is fundamentally different to our E&P
business, a demerger will allow our shareholders to receive full market
recognition of its intrinsic value.
Our ability to turn opportunity into successful activity has now allowed us to
start to consider how we might best shape our portfolio in terms of materiality,
impact and potential returns. We continually review our asset base and where we
believe value can be better realised by another party, or where other parties
would value an asset as being of greater materiality or higher value, we will
seek to divest the asset.
It is my hope that by the end of 2008 we will have a smaller portfolio but with
greater overall value, positioned further along the E&P value chain. We will, of
course, continue to engage with others where we see strategic opportunity in
acquisitions, mergers or disposals from either an asset or a corporate
perspective.
I look forward to updating shareholders further on our progress in due course.
Alan Booth
Chief Executive Officer
31 January 2008
INDEPENDENT REVIEW REPORT TO ENCORE OIL PLC
We have been engaged by the company to review the condensed set of financial
statements in the half-yearly financial report for the six months ended 31
December 2007 which comprises the Group income statement, the Group balance
sheet, the Group cash flow statement, the Group statement of changes in equity
and related notes. We have read the other information contained in the
half-yearly financial report and considered whether it contains any apparent
misstatements or material inconsistencies with the information in the condensed
set of financial statements
This report is made solely to the company in accordance with the terms of our
engagement. Our review has been undertaken so that we might state to the company
those matters we are required to state to it in this report and for no other
purpose. To the fullest extent permitted by law, we do not accept or assume
responsibility to anyone other than the company for our review work, for this
report, or for the conclusions we have reached.
Directors' responsibilities
The half-yearly financial report is the responsibility of, and has been approved
by, the directors. The directors are responsible for preparing the half-yearly
financial report in accordance with the AIM Rules of the London Stock Exchange
As disclosed in note 1, the annual financial statements of the Group are
prepared in accordance with IFRSs as adopted by the European Union. The
condensed set of financial statements included in this half-yearly financial
report has been prepared using accounting policies consistent with those to be
applied in the next annual financial statements.
Our responsibility
Our responsibility is to express to the company a conclusion on the condensed
set of financial statements in the half-yearly financial report based on our
review.
Scope of review
We conducted our review in accordance with International Standard on Review
Engagements (UK and Ireland) 2410, "Review of Interim Financial Information
Performed by the Independent Auditor of the Entity" issued by the Auditing
Practices Board for use in the United Kingdom. A review of interim financial
information consists of making enquiries, primarily of persons responsible for
financial and accounting matters, and applying analytical and other review
procedures. A review is substantially less in scope than an audit conducted in
accordance with International Standards on Auditing (UK and Ireland) and
consequently does not enable us to obtain assurance that we would become aware
of all significant matters that might be identified in an audit. Accordingly, we
do not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that causes us to believe
that the condensed set of financial statements in the half-yearly financial
report for the six months ended 31 December 2007 is not prepared, in all
material respects, in accordance with the AIM Rules of the London Stock Exchange
.
PKF (UK) LLP
London, UK
31 January 2008
GROUP INCOME STATEMENT
Six months ended 31 December 2007
6 months ended 6 months ended Year ended
31.12.07 31.12.06 30.06.07
Unaudited Unaudited Audited
� � �
Impairment write down
- exploration costs (641,363) (22,444) (1,126,307)
Administrative expenses (1,213,953) (754,233) (1,719,179)
Operating loss (1,855,316) (776,677) (2,845,486)
Gain on sale of fixed asset
investments - - 287,980
Finance income 379,567 393,924 926,076
Finance costs (1,750) (1,308) (2,714)
Other gains and losses
- foreign currency losses (42,673) (31,810) (50,882)
Loss from continuing
activities before taxation (1,520,172) (415,871) (1,685,026)
Taxation - - 4,154
Net loss from continuing
activities (1,520,172) (415,871) (1,680,872)
Loss per ordinary share (pence)
- Basic (0.6) (0.2) (0.7)
- Diluted (0.6) (0.2) (0.7)
GROUP BALANCE SHEET
As at 31 December 2007
31.12.07 31.12.06 30.06.07
Unaudited Unaudited Audited
� � �
ASSETS
Non-current assets
Intangible exploration and appraisal
assets 33,686,378 9,043,083 24,191,869
Property, plant and equipment 49,232 33,680 25,925
Investments 50,000 425,125 50,000
33,785,610 9,501,888 24,267,794
Current Assets
Other receivables 683,364 428,006 1,319,706
Other investments - 2,000,000 -
Restricted cash 3,000,000 - 1,630,361
Cash and cash equivalents 19,782,200 21,857,759 17,967,096
23,465,564 24,285,765 20,917,163
TOTAL ASSETS 57,251,174 33,787,653 45,184,957
LIABILITIES
Current liabilities
Trade and other payables (2,492,165) (273,720) (1,186,607)
Non-current liabilities
Provisions (738,708) - (736,275)
Deferred taxation (3,591,511) (1,148,868) (3,590,472)
(4,330,219) (1,148,868) (4,326,747)
TOTAL LIABILITIES (6,822,384) (1,422,588) (5,513,354)
NET ASSETS 50,428,790 32,365,065 39,671,603
EQUITY
Equity attributable to equity holders
of the parent
Called up share capital 16,373,844 12,777,742 14,632,742
Share premium 37,474,257 20,663,159 27,215,923
Reserves (58,748) 8,848 (60,699)
Retained earnings (3,360,563) (1,084,684) (2,116,363)
TOTAL EQUITY 50,428,790 32,365,065 39,671,603
GROUP STATEMENT OF CHANGES IN EQUITY
For the six months ended 31 December 2007
Attributable to parent company equity holders
� Equity Share Other Foreign Retained Total
Share premium reserve Currency earnings
capital Translation
reserve
At 1 July 2006 11,319,409 15,417,355 266,908 24,673 (842,427) 26,185,918
Loss for the year - - - - (1,680,872) (1,680,872)
Currency translation - - - (352,280) - (352,280)
Total income and expenses
for the period - - - (352,280) (1,680,872) (2,033,152)
Shares issued to acquire
Virgo 1,850,000 6,567,500 - - - 8,417,500
Shares issued for cash 1,458,333 5,541,667 - - - 7,000,000
Expenses of share issue - (310,599) - - - (310,599)
New shares issued in
respect of employee share
options 5,000 - - - - 5,000
Share option expense - - - - 406,936 406,936
At 30 June 2007 14,632,742 27,215,923 266,908 (327,607) (2,116,363) 39,671,603
Loss for the period - - - - (1,520,172) (1,520,172)
Currency translation - - - 1,951 - 1,951
Total income and expenses
for the period - - - 1,951 (1,520,172) (1,518,221)
Share option expense - - - - 275,972 275,972
New shares issued in
respect of employee share
options 5,000 - - - - 5,000
Issued for cash 1,736,102 10,763,898 - - - 12,500,000
Expenses of share issue - (505,564) - - - (505,564)
At 31 December 2007 16,373,844 37,474,257 266,908 (325,656) (3,360,563) 50,428,790
GROUP CASH FLOW STATEMENT
Six months ended 31 December 2007
6 months ended 6 months ended Year ended
31.12.07 31.12.06 30.06.07
Unaudited Unaudited Audited
� � �
Cash flows from operating activities
Loss before taxation (1,520,172) (415,871) (1,685,026)
Depreciation 13,020 8,331 16,657
Share based remuneration charges 275,972 173,614 406,936
Exploration costs written off 641,363 22,444 1,126,307
Items shown as financing and
investing activities (335,144) (367,791) (1,211,342)
Operating cash flow prior to
working capital (924,961) (579,273) (1,346,468)
Corporation tax payments - - (18,033)
Working capital adjustments 1,659,502 (228,345) (48,573)
Cash generated/(used) in
operations 734,541 (807,618) (1,413,074)
Cash flows from investing activities
Purchase of intangible exploration
and evaluation assets (10,808,981) (373,092) (4,718,329)
Expenses of acquisition - - (433,769)
Restricted cash (1,369,639) - (1,630,361)
Purchase of property, plant and
equipment (36,327) (3,017) (3,587)
Island Oil and Gas option payment - (2,000,000) -
Interest received 392,078 397,761 907,359
Proceeds from sale of investments - - 663,105
Net cash used in investing
activities (11,822,869) (1,979,656) (5,215,582)
Cash flows from financing activities
Shares issued for cash 11,999,436 6,704,137 6,694,401
Proceeds from sale of oil and gas
assets 944,193 - -
Interest paid and bank charges (1,750) (1,308) (2,714)
Net cash generated by financing
activities 12,941,879 6,704,137 6,691,687
Net increase in cash and cash
equivalents 1,853,551 3,916,863 63,031
Cash and cash equivalents at
start of period 17,967,096 18,035,020 18,035,020
Translation difference (38,447) (94,124) (130,955)
Cash and cash equivalents at end
of period 19,782,200 21,857,759 17,967,096
NOTES TO THE INTERIM FINANCIAL STATEMENTS
Six months ended 31 December 2007
1. Basis of Accounting and Presentation of Financial Information
These condensed interim consolidated financial statements are for the six months
ended 31 December 2007. The Group's annual financial statements are prepared in
accordance with IFRSs adopted by the European Union. These interim financial
statements have been prepared using accounting policies and methods of
computation consistent with those to be applied in the Group's next annual
financial statements. The Group has not adopted IAS 34, Interim Financial
Statements.
The disclosed figures are not statutory accounts in terms of section 240 of the
Companies Act 1985. Statutory accounts for the period ended 30 June 2007, on
which the auditors gave an unqualified report, have been filed with the
Registrar of Companies.
2. Approval of Accounts
These interim accounts were approved by the Board of Directors on 31 January
2008.
3. Exploration costs
Exploration costs impaired in the six months to 31 December 2007 largely reflect
accumulated costs on licences which have or will be relinquished.
Analysis of intangible 6 months ended 6 months ended Period ended
exploration and appraisal 31.12.07 31.12.06 30.06.07
assets Unaudited Unaudited Audited
� � �
Net book value brought forward 24,191,869 8,906,391 8,906,391
Additions 10,047,604 717,039 6,374,822
Acquisitions - - 11,265,467
Impairment write down -
exploration costs (641,363) (22,444) (1,126,307)
Disposals - - (948,151)
Currency translation
adjustments 88,268 (557,903) (280,353)
Total net book value of
intangible exploration and
appraisal assets 33,686,378 9,043,083 24,191,869
4. Earnings per Share
The calculation of basic earnings per share is based on the loss for the period
after taxation of �1,520,172 (1H2006 - loss after taxation of �415,871) and a
weighted average number of shares in issue of 273,244,545 (1H2006 -
206,957,235). As there is a loss for all periods presented there is no
difference between the basic and diluted loss per share.
5. Share placing
In December 2007 34,722,223 ordinary 5 pence shares were placed at 36 pence
raising �12.5 million in cash before expenses of �505,564.
6. Restricted cash
Restricted cash at 31 December 2007 relates to amounts deposited by EnCore in an
interest bearing account with the Royal Bank of Scotland as security for a
Letter of Credit issued to GlobalSantaFe in December 2007 to secure a rig to
drill the Cobra prospect in early 2008. The cash was released from security in
January 2008. Restricted cash at 30 June 2007 reflected an amount held in Escrow
as assurance of funding for a future exploration work programme.
7. Trade and other payables
Trade and other payables at 31 December 2007 includes �1,862,649 of cash paid by
partners as security for a Letter of Credit that was issued by the Royal Bank of
Scotland in January 2008 to GlobalSantaFe in respect of the drilling contract
for the Cobra well which is due to be drilled in early 2008.
The cash from partners was included in cash and cash equivalents at 31 December
2007.
In January 2008 a total of approximately �4 million was deposited in an interest
bearing account with the Royal Bank of Scotland as security for this Letter of
Credit. These funds will remain as restricted cash until all amounts due under
the drilling contract have been paid whereupon the cash will be released from
security and the amount due to partners will be repaid. It is anticipated that
drilling activities will have been completed in early to mid 2008.
8. Dividend
The directors do not recommend the payment of a dividend.
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR FKDKNOBKDNDN
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