EPSOM, Surrey, U.K., Sept. 30, 2002 (PRIMEZONE) -- Emerald Energy Plc (LSE:EEN), the U.K.-based oil exploration company with production and exploration activities in South America, announces its Interim Results for the period ended 30 June 2002.
- Period of consolidation
- North American assets sold
- Resources Investment Trust take significant stake
- Llanos Basin to be drilled
- Loss for the period 2.4 million Pounds (2001H1: loss 614,000 Pounds; 2001 Year: loss 3.8m Pounds)
- Exceptional items: write down of assets totalling 973,000 Pounds
- Cost reduction programme underway
Graeme Elliot, Chairman, commented: "The period under review has been one of further consolidation. After a difficult year the prospects for the Group are improving. We are maximising cash generation and actively reviewing various opportunities to minimise the risk profile.
"Discussions regarding the provision of additional financing are continuing and the combination of cost reductions and strategic disposals gives the Board confidence that the Group retains the opportunity to develop its significant reserve position in Colombia and to take advantage of opportunities outside the region where appropriate."
CHAIRMAN'S STATEMENT
The period under review has been one of further consolidation. The sale of the North American assets has been completed for a sales price of 962,000 Pounds and cash flows were further boosted by the sale of 1,664,691 Resources Investment Trust shares, which produced cash proceeds of 1,527,000 Pounds during May 2002. A cost reduction programme is also being implemented.
The Company is actively seeking to farm out a stake in the Matambo block to an industry partner in return for a commitment to fund the drilling of Gigante No. 2. Data rooms have been established in both London and Bogota and visited by a number of interested parties. We are in active discussions with one of those parties. The Company has applied for commerciality on the Matambo block, which incorporates the Gigante Field and expects Ecopetrol to grant this in the near future. Once commerciality has been granted, the Company will not be at risk of losing the significant reserves in the Matambo Block, currently estimated to be of the order of 100 million barrels. Following several chemical treatments Gigante No. 1A is currently producing at around 750 bopd.
Over the past year the Company has discussed with Ecopetrol, the Colombian State Oil Company, ways in which it could adjust its exploration portfolio to reduce the level of risk and financial commitment. These discussions have been relatively successful to date and the Company has been awarded two new blocks in the highly prospective Llanos Basin. As part of these discussions the Vuelta Larga Association Contract has been relinquished to Ecopetrol. Negotiations with Ecopetrol to reconfigure commitments under other Association Contracts are continuing.
Subject to the availability of finance (see Note 1 in linked file) and the agreement of Ecopetrol the Company plans to drill two new wells on one of its recently acquired Llanos Basin blocks, Campo Rico. The first well will be a relatively low risk appraisal well, Centauro No. 2 and the second an exploration/appraisal well on a different structure within the block, Cimarron Sur No. 1.
The Centauro No. 2 well with a targeted total depth of 11,400ft will cost approximately US$3.2 million to drill and test. The well is expected to come on stream with a flow rate of around 1,000 barrels of oil per day. Initial studies on Campo Rico indicate that each of the structures within the block could contain up to 30 million barrels of recoverable reserves. Cimarron Sur No. 1 is expected to be equivalent to Centauro No. 1 in terms of design, cost, profile and prospectivity.
As a result of the economic disturbances in Argentina we have been unable to fulfil our obligations on the Nirihuau block and are currently in discussions with the Argentinean Government as to its future. In the light of the discussions to date, the Board consider it unlikely that we will retain this block. A review of our Danish block is also being conducted and again, it is likely that we will withdraw due to the lack of prospectivity. In both cases these exploration costs have been written off.
With oil prices considerably higher than expected during the period and with the prospect of a Middle East conflict, the attractiveness of oil reserves outside the Middle East is considerably enhanced. The Company is actively reviewing opportunities to acquire additional reserves.
The results of the Group for the half-year to 30 June 2002 show a loss of 2,381,000 Pounds, compared with a loss of 614,000 Pounds for the same period last year and a loss of 3,785,000 Pounds for the year ended 31 December 2001. The Group currently pays no UK corporation tax, having tax losses brought forward from previous years.
Group attributable production for the six months totalled 70,000 barrels of oil equivalent compared with 87,000 for the same period last year producing revenue of 1,003,000 Pounds compared with 1,571,000 Pounds. The average price received was US$22 per barrel. Gross loss was 867,000 Pounds (2001: Profit 561,000 Pounds) and arrived after cost of sales of 1,870,000 Pounds (2001: 1,010,000 Pounds). The exceptional item of 973,000 Pounds included in cost of sales relates to a write down of Colombian exploration expenses of 497,000 Pounds and the writing off of 410,000 Pounds and 66,000 Pounds in Argentina and Denmark respectively. The 364,000 Pounds exceptional item in Other Operating Expenses relates to the write off of the Business Interruption element of the insurance claim.
The Group's balance sheet at 30 June 2002 shows a net decrease in Tangible Fixed Assets of 1,885,000 Pounds in the six-month period largely represented by the sale of the USA assets. Debtors include 4,962,000 Pounds, being the net costs associated with the Matambo Association Contract to be recovered from Ecopetrol over time. All of the debtors due after more than one year relate to Ecopetrol.
Outlook
After a difficult year the prospects for the Group are improving. We are maximising cash generation and actively reviewing various opportunities to minimise the risk profile. We also remain positive regarding the farm out of a stake in the Matambo Block, which will enable Gigante No. 2 to be drilled.
Discussions regarding the provision of additional financing are continuing and the combination of cost reductions and strategic disposals gives the Board confidence that the Group retains the opportunity to develop its significant reserve position in Colombia and to take advantage of opportunities outside the region where appropriate.
The interim financial information is prepared on a going concern basis as discussed in more detail in Note 1 of the attached link.
Independent Review Report to Emerald Energy plc
Introduction
We have been instructed by the company to review the financial information for the six months ended 30 June 2002, which comprises the Profit and Loss Account, Balance Sheet, Cash Flow Statement, Statement of Total Recognised Gains and Losses and the related notes 1 to 6. We have read the other information contained in the interim report and considered whether it contains any apparent misstatements or material inconsistencies with the financial information.
Directors' Responsibilities
The interim report, including the financial information contained therein, is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the interim report in accordance with the Listing Rules of the Financial Services Authority which require that the accounting policies and presentation applied to the interim figures should be consistent with those applied in preparing the preceding annual accounts except where any changes, and the reasons for them, are disclosed.
Review work performed
We conducted our review in accordance with guidance contained in Bulletin 1999/4 `Review of interim financial information' issued by the Auditing Practices Board for use in the United Kingdom. A review consists principally of making enquiries of group management and applying analytical procedures to the financial information and underlying financial data and based thereon, assessing whether the accounting policies and presentation have been consistently applied unless otherwise disclosed. A review excludes audit procedures such as tests of controls and verification of assets, liabilities and transactions. It is substantially less in scope than an audit performed in accordance with United Kingdom Auditing Standards and therefore provides a lower level of assurance than an audit. Accordingly we do not express an audit opinion on the financial information.
Fundamental uncertainty
We have reviewed the disclosures made in the interim financial information concerning their preparation on a going concern basis. The validity of this basis depends on the successful outcome of negotiations to finance the Group and sufficient funds being raised. The interim financial information does not include any adjustments that would result from a failure to secure sufficient funds through the financing negotiations. Details of the circumstances relating to this fundamental uncertainty are described in Note 1.
Review conclusion
On the basis of our review we are not aware of any material modifications that should be made to the financial information as presented for the six months ended 30 June 2002.
Ernst & Young, Isle of Man, 27 September 2002
The entire text of this announcement, including the financial tables, can be found at the following link: http://reports.huginonline.com/875135/108436.pdf