RNS Number:4165T
Europa Oil & Gas (Holdings) PLC
01 November 2005
EUROPA OIL & GAS (HOLDINGS) PLC
PRELIMINARY RESULTS FOR THE YEAR ENDED 31 JULY 2005
Europa Oil & Gas (Holdings) plc ("Europa" or the "Company"), the independent oil
& gas exploration and production group with assets in the UK and continental
Europe, today announces its preliminary results for the year ended 31 July 2005.
Financial Highlights
* Turnover of #2.399m (18 months to 31 July 2004 #1.952m)
* Operating profit of #0.842m (18 months to 31 July 2004 #0.694m)
* Profit after tax of #0.354m (18 months to 31 July 2004 #0.298m)
* Cash of #1.977m at 31 July 2005
* Net assets of #8.614m
* Earnings per share of 0.64p
Operational Highlights
* Production from the UK and Ukraine during the period averaged 288 barrels
of oil equivalent per day (boe/d)
* Successful drilling of Bilca-2 in Romania to prove up additional reserves
to the west of Bilca-1. Bilca-2 was retained for use as a future gas
producer
* Drilling of Fratauti-1 discovery well in Romania which tested an aggregate
12.7 million standard cubic feet per day (mmscf/d) (over 2,000 boe/d) from
several zones
* Approval by the Romanian government for the Bilca Area Gas Development
* Costisa-1 well in Romania spudded in early February 2005, currently
drilling at 4,034 metres as at 31 October
* Drilling of West Firsby-8 well, production currently suspended
* Quad 41 preliminary engineering and drilling studies undertaken
* Geochemical survey on UK onshore licence PEDL150 near the Whisby Field
Corporate
* During November 2004 Europa successfully floated on AIM and completed a
placing of 20,000,000 shares at 25p each that raised #4.3m after expenses.
At the time of the placing, one warrant for every two shares placed was also
issued
* Exercise of 1,065,000 warrants raising an additional #319,500 and
increasing the total ordinary shares in issue to 61,065,000
Recent Events
* Award of the Bilca Development construction contract and construction
start-up
* Farm-out of Whisby Exploration Area to Valhalla Oil & Gas Limited. The
agreement with Valhalla covers the seismic and the drilling of the first
exploration well at a cost of under 20p in the pound to Europa
* Approval by UK government as a UK Offshore Operator and two year extension
of Quad 41 North Sea licence
Chairman's Statement
I am very pleased to report Europa's first annual results as a quoted company
and to be able to demonstrate significant progress on a number of key projects.
Over the past year, the management has pursued an active exploration and
development programme, participating in the drilling of four new wells: two
exploration, one development and one appraisal. These included the discovery
well, Fratauti-1 and the successful appraisal well, Bilca-2, both of which are
in Romania. This drilling success further enhances Europa's strong drilling
track record.
Currently, the Company continues to benefit from its UK onshore oil production
operations with steady production and high oil prices. This distinguishes the
Company from many of its peers who are focused on exploration and lack
development and production activities.
The successful wells, Fratauti-1 and Bilca-2, now form part of the Bilca Area
Gas Development. This production is due onstream in 2006 and will add
significantly to Europa's daily production. At a time of high commodity prices
this production, combined with the UK onshore production, will generate
significant cashflows in the coming year to enable us to fulfil our current
exploration and development programme from existing cash reserves.
A third Romanian well, the Costisa-1 well, spudded in February 2005 is currently
drilling. The prospect remains well-defined at the main Badenian target with
other secondary potential.
Europa has an excellent acreage position in the Romanian Carpathians, an area
which has produced 5 billion barrels of oil and 3 trillion cubic feet (tcf) of
gas to date and is still relatively underexplored. The Company is planning to
acquire seismic data in 2006 to assess the southern extension of the proven
Bilca play. Further drilling in the second half of 2006 is anticipated.
The Company drilled the West Firsby Field WF8 development well in the UK in
March 2005, targeting an unproven area of the field. Due to operational
difficulties, the results were inconclusive and hence disappointing. The West
Firsby Field offers undeveloped reserves potential and management is working to
resolve this situation.
Elsewhere, work in the UK onshore is progressing apace. The Directors believe
that Holmwood is one of the strongest undrilled onshore prospects in the UK.
Work is ongoing on planning the drilling operation which we hope can go ahead in
2006. The recent farm-out of a proportion of the Company's interest in the
Whisby Area Exploration Acreage allows the work programme to be undertaken at a
significantly reduced cost to Europa. The excellent terms obtained on the
farm-out demonstrate the quality of the Whisby Area Exploration Acreage and work
has already begun to identify a drilling location.
The Company, now recognised as an offshore operator by the DTI, will be drilling
an appraisal well on the Quad 41 licence during the next two years. The Quad 41
discoveries produced at rates up to 35 mmscf/d (approximately 5,800 boe/d) and
development of these fields would put Europa firmly in a new peer group.
In Ukraine the Company continues to produce and sell gas and awaits the
transition to a full production licence. Further low risk but high reward
opportunities are being pursued in the region.
The Directors are committed to adding further assets to Europa's portfolio, with
both discovered and undiscovered resources. Currently, applications have been
lodged in two EU countries for new exploration acreage and a number of other new
venture and acquisition opportunities are actively being pursued in the region.
The Directors are very pleased with the results of the last year. The activity
has increased reserves with production set to increase significantly in 2006.
The Directors are confident that the coming year will be as successful and that
shareholder value will continue to grow.
Sir Michael Oliver
Chairman
1 November 2005
For further information, contact:
Europa Oil & Gas (00 33 563 33 18 97)
Paul Barrett
Westhouse Securities LLP (0161 838 9140)
Tim Feather
Also see www.europaoil.com
Operational Update
Romania
The Costisa-1 well, the culmination of over five years of exploration effort on
the EPI-3 Block, was spudded in February. Difficult drilling conditions have
led to much slower progress than originally envisaged and, as at 31 October, the
well was at a depth of 4,034 metres. The target is estimated to lie at around
4,250 metres. Nothing seen in the drilling data to date downgrades the primary
target prospectivity.
The Bilca Project, situated in the EIII-1 Brodina Block is on track to achieve
commercial gas production in the first half of calendar year 2006. In this
reporting period, Europa has participated in two wells, a successful appraisal
of the western part of the Bilca feature and the nearby Fratauti-1 discovery
well, the latter flowing at an aggregate rate of 12.7 mmscf/d from three zones.
As a consequence, there are three gas wells, including the Bilca-1 well drilled
in 2004, ready to supply the planned Bilca facilities.
In August 2005, the Romanian Government approved the construction of the Bilca
facilities and, following a tender process, the construction contract was
awarded in October 2005 to Condmag and Inspet. Construction of the facilities
began immediately following the contract award. In parallel, gas sales
arrangements are being finalised and will be announced shortly. The Brodina
Block consortium, in which Europa has a 28.75% interest, is committed to the
commencement of production in the first half of 2006 and maximising sales
volumes. To this end the consortium has obtained permission to drill a fourth
Bilca area well on a strong Bilca-style prospect.
On the Brodina Block 200km of seismic is planned in 2006 in order to evaluate a
large area devoid of seismic and well data between the Bilca area and the
producing Todiresti gasfield to the south.
A seismic acquisition programme is also planned in 2006 over the Bacau and
Cuejdui Blocks, to the south of the Brodina Block. These blocks are relatively
unexplored, though the limited data available indicates that the Bilca play
along with deeper plays are present. It is hoped the 2006 seismic programme
will define at least one drilling location for 2007.
UK North Sea
Europa holds 100% equity in licence P1131, containing the 41/24 and 41/25
discoveries, near shore gas condensate accumulations which flowed on test at
rates of up to 35mmscf/d (approximately 5,800 boe/d). The Company has recently
agreed terms with the DTI to move into the next phase of the licence. It is
anticipated that a high angle appraisal well will be drilled during the current
licence phase and if successful, it will be retained as a future producer in the
field development.
Onshore UK
In the East Midlands Oil Province, the W4 well on the Whisby field produced over
60,000 barrels (bbls) in the year with a continued low water cut, demonstrating
the long term durability of the production stream. On the surrounding Whisby
exploration licence (PEDL150), a geochemical survey undertaken in early 2005
highlighted areas of prospectivity for further work. This work will take the
form of 40 km of new 2D seismic in the second quarter of 2006 followed by an
exploration well. The Company has successfully farmed out a 50% interest to
Valhalla Oil & Gas Limited in return for funding the acquisition of the seismic
and 75% of the well cost.
Pre-planning work, including ecological, archaeological and engineering surveys,
has been undertaken on the Holmwood licence (PEDL143) in the Weald Basin.
Planning permission to drill a well on the Holmwood Prospect, a robust four-way
dip closure at Portland Sandstone level, is expected to be submitted in the
fourth quarter of 2005 and it is hoped that the well will be drilled in 2006.
During the financial year, Europa drilled the West Firsby field WF8 well, a
sidetrack of a watered-out producer. This sidetrack encountered significant
reservoir sands, but produced water when put onto production. Remedial work was
undertaken to shut off the water zone, but operational difficulties prevented
the work from being completed. Further remedial options are being evaluated.
Ukraine
The Europa-operated pilot production scheme on the Horodok gas field produced 80
million cubic feet (mmcf) over the period. The Company has applied to convert
the pilot production on the Horodok gas field to a full production licence
giving the right to operate the field for the next 15 years. The field is
currently producing 35 boe/d, net to Europa, and further drilling is planned to
realise the full potential of the field following granting of the long term
licence.
Forward Programme
The Company is looking forward to another active year, primarily in Romania and
the UK. We expect to be participating in at least two wells, and potentially as
many as four, in 2006, along with seismic surveys and other exploration
activity. A key milestone will be first gas from the Bilca Project, which is
expected to take the Company towards the 1,000 boe/d mark by the end of 2006.
The Company continues to pursue new venture opportunities. Currently
applications for new acreage have been lodged in several jurisdictions with more
pending. The Company is focused on the Europe/North Africa region for these new
venture opportunities.
Presented below are the Financial Review and Results.
Paul Barrett
Managing Director
1 November 2005
Financial Review
Results for the year
Turnover for the year was #2.399m (2004: #1.952m) mainly from UK onshore oil
production. UK sales barrels during 2005 were 92,510 bbls (253 bbls/d) achieving
an average price of $46.58/bbl (#25.10/bbl). Prices achieved have risen sharply
and during the month of September oil sales have averaged $62.08/bbl.
In Ukraine, Europa sold the equivalent of 12,787 boe (35 boe/d) during the year
achieving sales of #0.077m (#6.00/boe).
The results for the year to 31 July 2005 show a profit after tax of #0.354
million compared to #0.298 million for the 18 months to 31 July 2004. Total
production and sales volumes during the year were similar to the prior 18 month
period and consequently the increase in gross profit reflects improved commodity
prices particularly for oil. This improvement in the underlying performance of
the business has been offset by an increase in administrative expenses
reflecting the cost of becoming a quoted company. In addition increased
interest charges have been incurred under the terms of a loan from Gemini Oil &
Gas Limited in connection with the West Firsby licence. During the fourth
quarter of 2005 a trigger point will be achieved which will result in a
substantially reduced future interest charge on the loan.
Placing & AIM Admission
In November 2004 Europa successfully floated on AIM raising #4.29m net of
expenses through a placing of 20,000,000 shares at 25p each. At that time one
warrant for every two shares placed was also issued. The 10,000,000 warrants
are exercisable at 30 pence per share. During March 2005 1,065,000 of these
warrants were exercised raising an additional #319,500. Total shares currently
in issue are 61,065,000. Certain members of the board, management and employees
of the company have rights in respect of options totalling 1,065,000 shares
exercisable at 25p each.
Cash flow
Net cash inflow from oil and gas production operations after administrative
expenses was #953,631 (2004: #1,005,076).
The outflow from capital expenditure of #2,492,947 (2004: #3,379,586) relates
mainly to exploration and development activities in the UK and Romania.
Servicing of finance resulted in cash outflow of #454,074 (2004: #375,101) being
principally the net position of interest payments on a loan and interest earned
on cash deposits.
Taking into account the money received from the placing and subsequent exercise
of warrants, the net cash inflow during the year was #2,230,608 (2004: outflow
of #267,476).
The cash balance at the end of the year was #1,977,117 (2004: #48,789).
Financial Risk
Europa's activities are subject to a range of financial risks the main ones
being commodity prices, liquidity within the business and of counterparties,
exchange rates and loss of operational equipment or wells. These risks are
managed through ongoing review taking into account the operational, business and
economic circumstances at that time.
Commodity Price
With the rise in commodity prices, Europa has not considered it necessary to use
financial instruments to hedge sales generated by its oil or gas production
activities.
Liquidity
Cash forecasts are prepared frequently and reviewed by management and the board.
The board is keen to ensure that adequate financial headroom exists at least a
year ahead.
In order to ensure that funds remain liquid and available for operational
requirements or business opportunities, cash balances are put on short term
deposit.
Currency Risk
Sales revenue is generated primarily in US dollars and these funds have been
matched against capital expenditure and payments on the loan. Sterling
expenditure is provided from existing cash balances in this currency.
Operational Risk
Appropriate insurance cover is obtained annually for all of Europa's
exploration, development and production activities.
Accounting Policies
The accounting policies for the year remain unchanged from those used in 2004.
Europa in consultation with its advisors will prepare to report consolidated
financial statements in conformity with International Financial Reporting
Standards (IFRS) for the year ending 31 July 2008 at the latest.
Summary
The financial results for the year to 31 July 2005 are in line with the
Company's expectations.
Europa is well placed to continue the growth of its projects in the UK and
continental Europe.
Ewen Ainsworth
Finance Director
CONSOLIDATED PROFIT AND LOSS ACCOUNT
For the year ended 31 July 2005
18 Months
Ended 31
July
2005 2004
# #
Turnover 2,399,014 1,952,051
Cost of sales
- Operating costs (504,908) (476,745)
- Depletion and amortisation (754,441) (665,722)
1,259,349 1,142,467
Gross profit 1,139,665 809,584
Administrative expenses (297,337) (115,900)
Operating profit 842,328 693,684
Interest receivable 179,809 493
Interest payable and similar charges (666,011) (375,594)
Profit on ordinary activities before taxation 356,126 318,583
Tax on profit on ordinary activities (2,226) (20,539)
Retained profit for the financial year 353,900 298,044
Basic Earnings per share 0.64p 0.75p
Diluted Earnings per share 0.64p 0.75p
CONSOLIDATED STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES
For the year ended 31 July 2005
18 Months
Ended 31
July
2005 2004
# #
Profit on ordinary activities after taxation 353,900 298,044
Currency translation difference on foreign currency net investment 18,233 (2,462)
Total recognised gains and losses relating to the period 372,133 295,582
CONSOLIDATED BALANCE SHEET as at 31 July 2005
18 Months
Ended 31
July
2005 2004
# #
Fixed assets
Intangible assets 4,478,852 2,958,861
Tangible assets 3,256,512 3,019,071
7,735,364 5,977,932
Current assets
Debtors 580,218 284,433
Cash at bank and in hand 1,977,117 48,789
2,557,335 333,222
Creditors: amounts falling due within one year (525,037) (3,792,621)
Net current assets/(liabilities) 2,032,298 (3,459,399)
Total assets less current liabilities 9,767,662 2,518,533
Creditors: amounts falling due after more than one year (883,906) (1,191,158)
Provision for liabilities and charges (269,430) (300,000)
Net assets 8,614,326 1,027,375
Capital and reserves
Called up share capital 610,650 1,000
Share premium 4,406,560 669,425
Merger reserve 2,868,033 -
Profit and loss account 729,083 356,950
Shareholders' funds 8,614,326 1,027,375
CONSOLIDATED CASH FLOW STATEMENT
For the year ended 31 July 2005
18 Months
Ended 31
July
2005 2004
# #
Net cash inflow from operating activities 953,631 1,005,076
Returns on investments and servicing of finance
Interest received & similar income 88,003 493
Interest paid & similar charges (542,077) (375,594)
Net cash outflow from returns on investments and servicing of (454,074) (375,101)
finance
Taxation
Tax paid (3,180) (29,343)
Net cash outflow from taxation (3,180) (29,343)
Capital expenditure
Purchase of fixed assets (2,492,947) (3,379,586)
Net cash outflow from capital expenditure (2,492,947) (3,379,586)
Net cash outflow before financing (1,996,570) (2,778,954)
Financing
Loans (redeemed)/received (275,966) 2,511,478
Issue of share capital net of issue costs 4,503,144 -
Net cash inflow from financing 4,227,178 2,511,478
Increase/(decrease) in cash in the year 2,230,608 (267,476)
CONSOLIDATED CASH FLOW STATEMENT
For the year ended 31 July 2005
Reconciliation of operating profit to net cash outflow from operating activities
18 Months
Ended 31
July
2005 2004
# #
Operating profit 842,328 693,684
Depreciation 754,441 665,722
(Increase)/decrease in debtors (260,446) 93,391
Decrease in creditors (339,833) (747,721)
Increase/(decrease) in Provision (42,859) 300,000
Net cash inflow from operating activities 953,631 1,005,076
Reconciliation of net cash flow to movement in net (debt) /funds
# #
Increase/(decrease) in cash in the period 2,229,975 (267,476)
Net cash inflow/(outflow) from changes in debt 265,788 (2,577,362)
Change in net funds resulting from cash flows 2,495,763 (2,844,838)
Currency translation adjustment 10,810 251,548
Non cash movement 2,584,974 -
Net debt at 1 August 2004/1 February 2003 (4,237,032) (1,643,742)
Net funds/(debt) at 31 July 2005/31 July 2004 854,515 (4,237,032)
Analysis of changes in net debt Exchange
At 31 July Cash Non Cash Gain/ At 31 July
2004 Flow Movement (Loss) 2005
# # # # #
Cash at bank and in hand 48,789 1,927,695 - 633 1,977,117
Overdrafts (302,280) 302,280 - - -
(253,491) 2,229,975 - 633 1,977,117
Loans due within one year (2,792,383) (32,144) 2,584,974 857 (238,696)
Loans due after one year (1,191,158) 297,932 - 9,320 (883,906)
(3,983,541) 265,788 2,584,974 10,177 (1,122,602)
Net debt (4,237,032) 2,495,763 2,584,974 10,810 854,515
NOTES TO THE ACCOUNTS
For the year ended 31 July 2005
1. The results for the period are all derived from continuing operations.
2. The results have been prepared on the basis of the accounting policies
adopted in the annual accounts for the 18 month period ended 31 July 2004.
3. The preliminary report for the year to 31 July 2005 was approved by the
Directors on 1 November 2005.
4. The calculation of basic earnings per share is based on the weighted
average shares in issue throughout the 12 month period. The diluted earnings
per share include employee share options.
5. The summarised financial information has been extracted from the
unaudited accounts of the Group for the year ended 31 July 2005. The above
information does not amount to statutory accounts within the meaning of the
Companies Act 1985. The statutory accounts for the period ended 31 July 2004
have been delivered to the Registrar of Companies. The auditors reported on
those accounts; their report was unqualified and did not contain a statement
under either section 237 (2) or section 237 (3) of the Companies Act 1985. The
auditors have not reported on the accounts for the year ended 31 July 2005, nor
have any such accounts been delivered to the Registrar of Companies as at the
date of this announcement.
6. At the time of the placing and admission to AIM, the shareholders of
Europa Oil & Gas Limited exchanged their entire shareholding for 39,999,998
ordinary shares in Europa Oil & Gas (Holdings) plc. Merger accounting has been
adopted in respect of this transaction. Accordingly, the accounts have been
prepared as if Europa Oil & Gas (Holdings) plc had been in existence throughout
the period.
The comparative figures for the prior 18 month period are based on those
consolidated figures published for Europa Oil & Gas Limited. The profit and
loss account for the current 12 month period reflects the result of Europa Oil &
Gas (Holdings) plc from the date of its incorporation on 31 August 2004 and
those of its subsidiaries for the 12 month period to 31 July 2005.
7. The consolidated cash flow statement for the year to 31 July 2005
includes in the reconciliation of net cash flow to movement in net (debt)/funds
and analysis of changes in net debt a non cash movement of #2,584,974. This
represents loans and other funds due to directors which were converted to shares
at the time Europa Oil & Gas Limited exchanged their entire shareholding for
ordinary shares in Europa Oil & Gas (Holdings) plc.
This information is provided by RNS
The company news service from the London Stock Exchange
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