United Energy PLC - Final Results
30 Avril 1999 - 4:12PM
UK Regulatory
RNS No 5315f
UNITED ENERGY PLC
30 April 1999
UNITED ENERGY plc
Preliminary Results for Year Ended 31 December 1998
Production and Reserve Growth offset
by Collapse in World Oil Prices
SUMMARY
Production increased by 42% to 2,176 boepd.
Proved reserve base up 8% to 4.6 million boe.
Reserve additions more than replaced production for the seventh year in a row.
Operating costs reduced by 12% to US$4.57/boe.
Agrigen's planning appeal rejected resulting in exceptional provision of
#0.87 million.
AmBrit's US oil and gas assets sold for US$22 million subject to shareholder
approval.
The collapse in world oil prices resulted in received oil and gas prices
down 34% and 21% respectively resulting in a loss of #2.4 million after
exceptional items.
John F Billington, Chairman of United Energy plc said:
"1998 has been a very difficult year for small oil and gas companies with
the prospect of weak product prices in the near term. Your Board therefore
decided to seek a buyer for the US interests to crystallise the value of the
assets and avoid the attrition of worth within the Company over the next few
years."
An explanatory circular relating to the proposed disposal of assets to
Castle Energy Corporation announced on 13 April 1999 is being mailed to
shareholders.
Contact:
Nick Tamblyn, Chief Executive - 01242 253773
Derek Howard-Orchard, Group Technical Director - 01242 253773
Chairman's Statement
1998 has been a very difficult year. Despite continuing to build solid growth
in production and reserves, the severe erosion in world oil prices, from an
already weak position at the beginning of the year, has negated the
achievements of the past three years. I am, therefore, disappointed to have
to report a loss of #2.40 million after exceptional items amounting to #1.62
million. Had 1997 average oil and gas prices prevailed in 1998, excluding the
loss in Agrigen, the Company would have been able to report a profit of #1.7
million.
US Oil and Gas Operations
Despite strong production growth throughout the year and a significant
reduction in operating cost per boe the US$4.67 per boe fall in average oil
and gas prices reduced cash flows by US$3.7 million.
As a result of the nature of the business, the fall in product prices hits
upstream oil and gas companies in a variety of ways which compounds the
problems currently faced by AmBrit Energy. Not only are cash flows reduced,
but the proved reserve base is decreased as the economic limit is reached
earlier in the life of the field at lower prices. With a smaller reserve base
and reduced pricing, gearing is increased disproportionately as the base
against which funds are borrowed is worth less. Furthermore, depletion is
increased as costs are spread over a smaller reserve base.
Consequently, your Board determined at the end of last year to seek the sale
of either AmBrit or its oil and gas assets in order to safeguard future value
to shareholders as I refer to below.
Agrigen
As I mentioned in last year's Report and Accounts, in December 1997,
Northampton Borough Council rejected our revised planning application, despite
having passed a resolution to grant permission for a similar scheme in 1992
and having supported the scheme during the period that both the NFFO licence
and the Thermie grant were awarded. Two independent legal opinions from well
respected planning counsel confirmed that we had good grounds for appeal with
a better than average chance of success. On the basis of that advice we
prepared for an appeal hearing set for October 1998.
The Planning Inspector's decision to dismiss Agrigen's planning appeal for the
Nunn Mills Biomass Power Station was announced by your Company in early
February 1999. We are surprised that, in view of HM Government's objectives
for renewable energy, his decision failed to address the National and European
issues and was based on a parochial concern that the visual intrusion of the
building and emissions stack combined with the emission of an albeit harmless
visible water vapour plume, would be detrimental to Nene Valley and the
regeneration of the development area.
Planning approval was the last significant hurdle to be overcome to bring the
scheme to fruition. Early in 1999, marketing of the Nunn Mills Biomass Power
Station project was initiated resulting in a number of strong indications of
interest which confirmed your Board's view that the project had significant
value.
We have made a full provision against Agrigen Ltd amounting to #0.87 million
which is carried as an exceptional item. The provision takes into account the
proceeds received from the disposal of the Group's interest in the Nunn Mills
site for #250,000.
Outlook
At first quarter 1999 pricing levels, AmBrit is not profitable. Its asset
base is declining through production at around 20% per year and it is unlikely
to be able to generate sufficient free cash flow to maintain its asset base
over the medium term, either through acquisitions or drilling. AmBrit is under
pressure from its lending bank to reduce debt in line with a re-determined
loan facility by 1 July 1999, as are many other small US oil and gas
companies, which is likely to result in a proliferation of properties for sale
at the mid year. In view of the position predicated by the collapse in oil
prices and weakening gas prices your Board decided, at the time of the 1998
interim results announcement, to investigate the sale of AmBrit or its assets
in order to crystallise a value for shareholders rather than have the company
wither away by attrition. As more fully described in a circular which is
being sent to shareholders, AmBrit has received an offer of US$22 million from
Castle Energy Corporation, which after payment of bank borrowings amounting to
US$14.7 million and office closure costs net of working capital realisations
estimated at US$300,000 leaves around US$7 million to be repatriated to United
Energy. Failure to approve the proposed sale of the assets to Castle Energy
Corporation will put the Group at risk due to the high level of debt in
relation to the reduced value of the underlying security. In such an event,
your Board would seek alternative disposals although it would be necessary to
reach a new agreement with the bank. There is no guarantee that a successful
refinancing could be achieved in a timely manner or at all. If the bank does
not support the Group during negotiations of such a refinancing or such a
refinancing is not achieved in a timely manner, the Group would have
insufficient working capital.
Assuming the sale of AmBrit's oil and gas assets to Castle Energy Corporation
is completed without any material adjustment, United Energy should have net
liquid assets of approximately 10p per share and an ongoing London Stock
Exchange listing.
Your Board is actively pursuing alternative business opportunities, and will
report again to shareholders once a new business venture has been identified.
John F Billington
Chairman
30 April 1999
Consolidated Profit and Loss Account
for the Year Ended 31 December 1998
1998 1997
Before
ExceptionalExceptional
Items Items Total Total
#'000 #'000 #'000 #'000
Turnover 5,471 - 5,471 5,507
______________________________
Cost of sales:
Production costs (2,186) - (2,186) (1,760)
Depletion of oil and
gas interests (2,414) - (2,414) (1,665)
Impairment of oil and
gas interests - (750) (750) -
_______________________________
(4,600) (750) (5,350) (3,425)
_______________________________
Gross profit 871 (750) 121 2,082
Administrative expenses (910) - (910) (857)
_______________________________
Operating (loss)/profit (39) (750) (789) 1,225
Loss from interest in
associated undertaking (20) (870) (890) (26)
Interest receivable and
similar income 6 - 6 23
Interest payable and
other charges (729) - (729) (394)
________________________________
(Loss)/profit on ordinary activities
before taxation (782) (1,620) (2,402) 828
Taxation - - - (25)
________________________________
(Loss)/profit on ordinary activities
after taxation (782) (1,620) (2,402) 803
________________________________
(Loss)/earnings per share - basic (1) (6.2)p 2.1p
(Loss)/earnings per share - diluted (6.2)p 2.0p
___________________
All items dealt with in arriving at the operating (loss)/profit for 1998 and
1997 relate to operations which, while continuing in 1998 and 1997 are to be
discontinued.
The result as shown in the profit and loss account is not materially different
from the result on an unmodified historic cost basis.
Note:
1.The calculation of loss per share is based on the loss on ordinary
activities after taxation of #2,402,000 (1997: profit #803,000) and on the
weighted average number of 38,891,895 ordinary shares in issue during the year
(1997: 38,843,402). There is no dilutive effect in the current year. The
diluted earnings per share in 1997 is calculated on a profit of #803,000 on
39,130,915 shares, being the basic weighted average of 38,843,402 shares and
the dilutive potential ordinary shares of 287,513 shares relating to share
options.
Consolidated Balance Sheet at 31 December 1998
31 December 1998 31 December 1997
#'000 #'000
Fixed assets
Intangible exploration assets 111 188
Oil and gas interests 12,009 10,628
Other tangible assets 322 98
Investments - 389
____________________________________
12,442 11,303
Current assets
Debtors 1,453 1,137
Cash at bank 458 691
____________________________________
1,911 1,828
Creditors: amounts falling due
within one year (3,223) (1,008)
_____________________________________
Net current (liabilities)/assets (1,312) 820
_____________________________________
Total assets less current
liabilities 11,130 12,123
Creditors: amounts falling due
after more than one year (7,175) (5,683)
____________________________________
Net assets 3,955 6,440
____________________________________
Capital and reserves
Called up share capital 3,889 3,889
Share premium account 272 272
Other reserves: capital reserve 717 717
Profit and loss account (923) 1,562
___________________________________
Shareholders' funds-equity 3,955 6,440
___________________________________
Consolidated Cashflow Statement
for the Year Ended 31 December 1998
1998 1997
#'000 #'000
Net cash inflow from operating
activities 2,160 2,851
Returns on investments and servicing
of finance (704) (325)
Taxation 20 (45)
Capital expenditure and financial
investment (5,134) (4,630)
Acquisitions (2) (51)
__________ __________
Cash outflow before financing (3,660) (2,200)
Net cash inflow from financing 3,247 2,186
__________ __________
Decrease in cash in the period (413) (14)
__________ __________
Notes:
1. Under the existing arrangements with its banker, the Group is required to
repay #1.7 million by 1 July 1999. The Company's wholly owned
subsidiary, AmBrit Energy Corp., has entered into a conditional
agreement, to dispose of all of its oil and gas properties for
consideration of approximately #13.3 million. The proceeds of sale will
be used to settle the Group's bank loan facilities which totalled #8.9
million at 31 December 1998. In the event that the disposal does not
proceed it would be necessary for the Directors to reach a new agreement
with the bank, which might require continued property disposals if the
group is to continue as a going concern. There is a reference to the
going concern basis in the Auditors' Report but their opinion is not
qualified in this respect.
2. The financial information set out in this statement does not constitute
the Company's statutory accounts for the years ended 31 December 1997 or
1998 but is derived from those accounts. Statutory accounts for 1997
have been delivered to the Registrar of Companies, whereas those for 1998
will be posted to shareholders shortly. The auditor has reported on
those accounts; its reports were unqualified and did not contain a
statement under Section 237(2) or (3) of the Companies Act 1985.
3. The Annual General Meeting will be held at the offices of Nabarro
Nathanson, 50 Stratton Street, London W1X 6NX on 10 June 1999 at 11.00
am.
Oil and gas reserves
The Net Proved Oil and Gas Reserves Estimation as at 31 December 1998 was
performed by The Scotia Group Inc. on all the Group's properties. Oil prices
used for the evaluation were based on a 12 month average of West Texas
Intermediate posted prices of 11.95 US$/bbl adjusted by lease for gravity and
transportation fees. Similarly, gas prices were based on a 12 month average
price for Texas Gulf Onshore Spot of 2.05 US$/mmbtu, adjusted for heating
value, composition, gathering costs and regional differentials. Oil and gas
prices, operating costs and capital expenditure were held constant for the
economic life of the property.
The results are summarised below:-
Total Oil
Oil GasEquivalent
(mbbl) (mmcf) (mboe)
Total Proved Reserves at
31 December 1997(1) 2,550.7 9,946.2 4,208.4
Changes during the year:
Production (415.7) (2,270.3) (794.1)
Disposals (36.0) (26.8) (40.5)
Revisions - Existing properties (480.2) 2,186.4 (115.8)
Acquisitions (260.4) 39.5 (253.8)
Acquired during the year -
Drilling program 156.3 5,162.1 1,016.7
Acquisitions 453.3 483.2 533.9
Total Proved Reserves at
31 December 1998(2) 1,968.0 15,520.3 4,554.8
As at 31 December 1998, the appraised value of Net Proved Oil and Gas Reserves
which is estimated by the Group to be equal to the future net revenue
discounted at 10% per annum, was #14.7 million (1997:#17.4 million).
Notes:
1. These results are subject to the qualifications contained in a document
referenced SHB/WWE/8063 "Evaluation of the oil and gas properties of United
Energy plc Effective 31 December 1997."
2. These results are subject to the qualifications contained in a document
referenced SHB/WWE/9029 "Evaluation of the oil and gas properties of United
Energy plc Effective 31 December 1998."
END
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