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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Circle Oil | LSE:COP | London | Ordinary Share | IE00B034YN94 | ORD EUR0.01 |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 0.625 | 0.00 | 01:00:00 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| 0 | 0 | N/A | 0 |
From Jul 2019 to Jul 2024
TIDMCOP
RNS Number : 7343O
Circle Oil PLC
01 June 2015
1 June 2015
Circle Oil Plc
(The "Company") and its Subsidiaries ("Circle" or the "Group")
Preliminary results for the year ended 31 December 2014
Operational Highlights
-- Continuing strong production levels achieved in both Egypt and Morocco
o Gross production averaged 10,026 bopd and 10.60 MMscf/d (net to Circle 4,010 bopd and 4.24 MMscf/d) in Egypt
o Average gross gas production of 6.46 MMscf/d (net to Circle 4.84 MMscf/d), (1,183 boepd (net to Circle 887 boepd) in Morocco through 2014
-- Increase in reserves and resources in both Egypt and Morocco
o In Egypt, 2P Remaining Reserves are estimated to be 12.49 MMboe net to Circle, a 5% increase over the prior year
o In Morocco, 2P Remaining Reserves are estimated to be 21.71 bcf (3.74 MMboe) net to Circle, an increase of 19% on the prior year
-- Third drilling programme in Morocco underway; three successful wells drilled so far -- 133 metre light oil section encountered in the Mahdia well, offshore Tunisia
Financial Highlights
-- Revenue for 2014 of US$84.62 million was down 9% (2013: US$93.34 million) principally reflecting lower oil prices
-- Group operating profit, before write-offs and impairments was down 28% to US$23.31 million (2013: US$32.35 million)
-- Rise in capex to US$103.10 million (2013: US$41.25 million) reflecting increased drilling activity, with US$86.44 million impacting the 2014 cashflow
-- Cash generated from operations was US$54.71 million (2013: US$53.37 million) -- Successful negotiation of reserve based lending facility of up to US$100 million with IFC
-- At year end, available cash was US$34.51 million (2013: US$26.16 million). Net debt was US$38.69 million. As at end May 2015, net debt has increased to US$59.16 million
-- Egypt receivables significantly reduced
Post Period End
-- Mitch Flegg has been appointed CEO of the Group with effect from today, 1 June 2015. Susan Prior was appointed Group Finance Director from 12 January 2015
-- The drilling campaign in Morocco continues with drilling in both Sebou and Lalla Mimouna
-- Reduced oil prices continue to impact cash flows. With a view to underpin profitability in a lower oil price environment, a strategic review of the cost base and funding options is underway
-- The Convertible Loan Agreement of US$30 million with KGL is partially repaid and the term extended
Chairman's Statement
2014 has been a year of transition. Operationally, Circle has continued its exploration success by drilling four successful wells (three in Morocco and one in Tunisia). In addition to finding new reserves, Circle continued to deliver strong production from our licences in Morocco and Egypt. In Morocco, gross gas production levels at 6.46 MMscf/d are similar to last year, although gross oil production has declined marginally from 10,443 bopd to 10,026 bopd from the maturing NW Gemsa fields in Egypt.
The impact of oil price volatility has been felt across the industry and Circle has not been immune from these effects. This industry backdrop combined with the cost overruns on both the Mahdia Block and on Block 49 in Oman, have resulted in Circle undertaking a thorough review of its cost base and capital expenditure commitments. The objective of this review is to ensure that the Group is able to operate profitably in a lower oil price regime.
At a corporate level, there has been significant change, with the addition of two new Non-Executive Directors, a new Finance Director and most recently, a new Chief Executive Officer. These appointments have demonstrably strengthened and broadened the skill set of the Board.
Operations
The Group's existing producing assets have continued to perform well and I am pleased to report that the independent Competent Person's Report (CPR) has revealed increased reserves and resources in both Morocco and Egypt, despite robust production in Egypt and record production levels in Morocco.
Given the stable gas price in Morocco we remain keen to continue to boost our reserves, through our ongoing drilling programme thus increasing our capacity for higher gas sales both to our existing and potential new customers in the Atlantic Freeport, near Kenitra. Two discoveries in the Sebou Concession added considerably (over 6.50 bcf) to our reserves and these wells will be put in production shortly. Circle's 2015 drilling/testing campaign in both the Sebou and Lalla Mimouna Blocks is well under way. The XCD rig moved to Lalla Mimouna after the third 2014 well, SAH-W1, was tested and completed.
In Egypt, gross oil production through 2014 averaged 10,026 bopd with gas and associated liquid adding a further 2,011 boepd totaling 12,037 boepd (4,815 boepd net to Circle). Two further producers and one water injector were drilled during 2014 to arrest the inevitable decline in the production from the mature Al Amir SE and Geyad fields.
In terms of the Group's exploration assets, in Tunisia the successful well (EMD-1) was drilled on the offshore Mahdia Block encountering a 133 metre column of light oil in the Cretaceous, Ketatna carbonates. Disappointingly, the hole became unmanageable due to mud losses preventing logs from being run and costs were significantly higher than expected; the well was subsequently suspended. In light of the lower oil price environment, Circle continues to monitor developments in Tunisia and we await Government approval to proceed to the next exploration phase when we will continue our farm-out discussions of this significant easterly extension of the prolific Gulf of Gabes petroleum system.
In Oman however, the onshore exploration well, Shisr-1, drilled in Q1 2015 in the south-west area of Block 49, was plugged and abandoned due to drilling difficulties. In light of this and coupled with insufficient interest in the farm-in on Block 52 and Circle's unwillingness to sole-risk shallow water wells, the Group will be exiting Oman, relinquishing both blocks and is no longer bidding for new acreage in the country. As a result, the Group's investment in Oman has been written-off. I would especially like to thank our Country Manager (Hassan Al Lawati) and his staff for all their efforts throughout our tenure in Oman.
Financial
The benefit of continuing drilling success was somewhat negated by the turmoil in international oil markets, which saw a halving of oil prices. The impact of this rapid decline has been felt by the whole industry and has led to a strategic refocussing by most oil and gas companies. Although Circle's 2014 revenues are lower than the previous years, Circle has to an extent, been partially insulated compared to its peers due to both the low lifting costs in Egypt and strong gas production at stable prices in Morocco.
Oil and gas revenues were down by 9% to US$84.62 million despite Circle's robust production in both Morocco and Egypt. There was an operating loss of US$48.02 million compared to an operating profit of US$32.35 million in 2013. This was caused primarily by write-offs of both blocks in Oman and the Grombalia Block in Tunisia, following the expiration of the license in the latter. These write-offs exceeded US$57.40 million. Additionally, our assets in Egypt have been impaired by US$13.94 million, primarily reflecting the impact of the lower oil price environment.
The fall in the oil price has caused us to seek better value in services provided to our operations in Morocco in particular necessitating both local management and contract changes with our suppliers. This pursuit of value and increased efficiency is ongoing in both Circle's operated and non-operated ventures.
Cash generated from operations at US$54.71 million was up 3% on the previous year as a result of increased cash receipts from EGPC, which were up 10% compared to 2013. The receivable from EGPC is now back to the levels it was at before the Arab Spring, and we would expect it to stay around this level for the foreseeable future. Our finance team and local management have worked tirelessly to manage this situation over a number of years and we are pleased that we have returned this to a more normal footing.
In March 2014, we signed a four and a half year reserve based debt facility with IFC, providing up to US$100 million and the first drawdown from this facility took place in April 2014. Post year end, in April 2015, we also amended and extended the convertible loan agreement with Circle Link S.ar.l, a subsidiary of Kuwait based KGL Investment Company.
Full details of the above noted matters are presented in the Financial Review Report section of this announcement.
Corporate
During the year Chris Green submitted his resignation as Chief Executive Officer. He departed the Group in March 2015. The Board is delighted to have appointed Mitch Flegg, who is joining Circle as Chief Executive Officer from 1 June 2015. Mitch was formerly the Chief Operating Officer of Serica Energy. He is an operationally focussed executive with experience spanning a wide variety of E&P projects at all scales; from frontier exploration through appraisal, development and production. He will bring a strong operational focus to the Group. The Board is also very pleased to welcome Susan Prior, a chartered accountant, formerly of PwC, as Group Finance Director. Susan joined in January 2015 and is already proving to be a very capable and dynamic Director. Initially, her key areas of focus are cost control and evolving the finance function to better serve the Group in the increasingly uncertain industry environment.
I am also particularly pleased to welcome two new appointments to the Board, who bring significant operational and financial experience; Antony Maris, a petroleum engineer, currently Chief Operating Officer of SOCO International plc and David MacFarlane, the former Finance Director of Dana Petroleum, who both bring considerable expertise to Circle.
Outlook
In light of the lower oil price environment, Circle aims to reduce its costs further, whilst maintaining oil and gas production in Egypt and increasing resources and gas sales in Morocco. We will continue to evaluate opportunities to expand our portfolio within North Africa whilst carefully considering developments in Tunisia.
To this end, we will be drilling three new production wells in Egypt during 2015 that will minimise the decline in production rates. These wells will be positioned using the results of the updated dynamic reservoir model which is improving our understanding of reservoir behaviour.
In Morocco, the drilling campaign in both Sebou and Lalla Mimouna concessions will continue with at least three wells being drilled in the Lalla Mimouna concession during 2015, in the area covered by the recent 3D seismic. Following the successful result of the drilling campaign to date we are aiming to increase gas sales this summer.
Timing of the further appraisal of the EMD-1 discovery is dependent on receiving Government approval of an extension for a further three years on the Mahdia Block and securing a farm-out partner to pursue further appraisal/exploration of this very prospective block.
While we have seen a modest recovery in oil prices, the turmoil of the last year has impacted heavily on the oil and gas industry. Circle needs to ensure that it is lean enough to profitably explore, develop and produce hydrocarbons in a market where $60 / bbl prices may prove to be a more common occurrence.
Political
Political changes have continued in the MENA region over the past year; however Circle has remained, both operationally and financially, on track. We sincerely thank our teams in all countries and our partners for their professionalism and valued contributions to the continuing evolution of Circle.
I again acknowledge the contributions of Circle's staff, associates and partners and would also like to thank all our shareholders for their support during the last year and in the current challenging environment for the sector.
Stephen Jenkins
Chairman
Operations Review
Introduction
2014 was a very active year for the Group's operations, with the start of the third drilling campaign in Morocco and the drilling of the offshore well EMD-1 on the Mahdia Block in Tunisia. Appraisal, production and water injection have continued at the Al Amir SE (AASE) and Geyad fields in the NW Gemsa Permit in Egypt. In Oman, we drilled a commitment well on Block 49 in early 2015. A programme of additional 2D seismic in the nearshore Sawqirah Bay area of Block 52 was acquired in Q2 2014 and interpretation completed for delineation of the leads previously recognised there.
The 2015 Competent Person's Report (CPR) on the 2014 reserves, has recently been completed by Bayphase, an independent consultancy specialising in petroleum and gas reservoir evaluation, resulting in 2P Gross Estimated Ultimate Recovery for the Egyptian NW Gemsa and Moroccan Sebou and Oulad N'Zala onshore concessions of 58.56 MMboe (25.60 MMboe net to Circle, a 16% increase over the prior year report). 2P Gross Remaining Reserves are estimated to be 36.26 MMboe (16.23 MMboe net to Circle, an 8% increase over the prior year report).
Movements in the Groups 1P and 2P reserves are listed in the tables below:
Hot Features
Premium
Oil and gas reserves (Proved
and probable - 2P)
Egypt - NW Gemsa Morocco - Morocco - Oulad
Sebou N'Zala
Gross Gross Gross Gross Gross Gross
Oil Gas Oil Gas Oil Gas Total
MMbo bcf MMbo bcf MMbo bcf MMboe
31 December
2013 24.36 31.26 - 23.46 - 1.13 33.99
Revisions 5.52 1.64 - 0.15 - 0.23 5.87
Discoveries - - - 6.63 - - 1.14
Production (3.69) (3.73) - (2.36) - (0.03) (4.75)
31 December
2014 26.19 29.17 - 27.88 - 1.33 36.26
================= ========= ======== ====== ======= ======== ======== =======
Oil and gas reserves
(Proved - 1P)
Egypt - NW Gemsa Morocco - Morocco - Oulad
Sebou N'Zala
Gross Gross Gross Gross Gross Gross
Oil Gas Oil Gas Oil Gas Total
MMbo bcf MMbo bcf MMbo bcf MMboe
31 December
2013 8.05 10.44 - 14.65 - 0.76 12.51
Revisions 6.90 5.93 - 0.99 - 0.14 8.12
Discoveries - - - 4.13 - - 0.71
Production (3.69) (3.73) - (2.36) - (0.03) (4.75)
31 December
2014 11.26 12.64 - 17.41 - 0.87 16.59
================= ========= ======== ====== ======= ======== ======== =======
Oil and gas reserves (Proved
and probable - 2P)
Working Interest
Egypt - NW Gemsa Morocco - Morocco - Oulad
Sebou N'Zala
Net Net Net Net Net Net
Oil Gas Oil Gas Oil Gas Total
MMbo bcf MMbo bcf MMbo bcf MMboe
31 December
2013 9.74 12.50 - 17.60 - 0.68 15.05
Revisions 2.21 0.66 - 0.11 - 0.14 2.36
Discoveries - - - 4.97 - - 0.86
Production (1.48) (1.49) - (1.77) - (0.02) (2.04)
31 December
2014 10.48 11.67 - 20.91 - 0.80 16.23
===================== =========== ======== ====== ======= ======= ========= =======
Oil and gas reserves
(Proved - 1P)
Working Interest
Egypt - NW Gemsa Morocco - Morocco - Oulad
Sebou N'Zala
Net Net Net Net Net Net
Oil Gas Oil Gas Oil Gas Total
MMbo bcf MMbo bcf MMbo bcf MMboe
31 December
2013 3.22 4.18 - 10.99 - 0.46 5.91
Revisions 2.76 2.37 - 0.74 - 0.08 3.31
Discoveries - - - 3.10 - - 0.53
Production (1.48) (1.49) - (1.77) - (0.02) (2.04)
31 December
2014 4.50 5.06 - 13.06 - 0.52 7.72
===================== =========== ======== ====== ======= ======= ========= =======
Gas conversion rate used is 1MMscf =
5,800 barrels of oil
The working interest percentages for
each permit are as follows:
NW Gemsa 40%
Sebou 75%
Oulad N'Zala 60%
Entitlement
Reserves
The Company's entitlement reserves in Egypt (after Egyptian
Government share) is 46.1% of Working Interest.
In Morocco, entitlement reserves are the same
as working interest.
Morocco
In Morocco, gross gas production averaged 6.46 MMscf/d (1,183 boepd) through 2014, supplying three companies in the Kenitra industrial zone. Gas sales in Morocco continue to be buoyant with the two larger customers regularly taking more gas than the minimum contracted. Preparations for the third drilling campaign were completed with the start of well SAH-W1 in May 2014. The wells in this campaign are planned to add additional reserves with a view to progressively increasing and/or extending our gas supply contracts.
Production start up from Sebou was in October 2008 and gross production through end December 2014 was 7.90 bcf (1.36 MMboe).
The latest CPR reserve estimates take account of the results of the drilling and development/production activity up to the KSR-12 well. This was successfully drilled into a seismic anomaly adjacent to the KSR-8 Main Hoot production and tested a separate accumulation in a downthrown fault panel at a significantly different pressure. This independent gas reservoir has added additional reserves. Also, CGD-12 well was drilled through and successfully tested another separate accumulation in the south-western area of the Sebou concession. In well SAH-W1, three gas bearing zones were encountered at the anticipated depths. For technical reasons, the rig was released from this site prior to testing and completion. Consequently, the accumulation identified from this well has not been included in the 2015 reserves calculation in the tables noted above. However, testing and completion has been undertaken in April 2015 enabling the well to be added to the production system in 2015. Following this well completion, the rig was moved to the Lalla Mimouna Block to commence drilling an initial three well programme.
For the Sebou and Oulad N'Zala concessions, the 2P value of Gross Estimated Ultimate Recoverable Gas Reserves is 37.14 bcf (6.40 MMboe), 27.50 bcf (4.74 MMboe) net to Circle, a23% increase over the prior year report. The 2P Gross Remaining Reserves are estimated to be 29.21 bcf (5.04 MMboe), 21.71 bcf (3.74 MMboe) net to Circle, a 19% increase over the previous report.
In the Sebou permit, Circle has a 75% share and ONHYM, the Moroccan State oil company, has a 25% share. In the Oulad N'zala concession, Circle has a 60% share and ONHYM has a 40% share. Discoveries made within the permits have the right, in the event of proven commerciality, of conversion to production concessions of up to 25 years with extensions in the event of remaining production after that period.
Egypt
The NW Gemsa concession contains the AASE and Geyad fields, where gross production averaged 10,026 bopd and 10.60 MMscf/d through 2014. In addition to 10 workovers, development drilling continued to May 2014 with two producers and one injector in AASE. The gas export line to the SUCO facilities in Zeit Bay has allowed for produced wet gas to be processed as dry gas, with the additional benefit of extracted condensate and liquefied petroleum gas (LPG) at the terminal. This has been ongoing since February 2013.
Appraisal production well AASE-19 and infill production well AASE-21, plus the water injector AASE-22 were successfully drilled and completed during the year. This concluded the initial field development programme in AASE and Geyad fields and the Sino-Tharwa drilling rig was farmed out to another operator for about one year.
Gross production from start-up in February 2009 through end December 2014 was 17.63 MMbo and 7,411 MMscf of gas. Fluid offtake from the Geyad and AASE fields continues to be managed in the light of good oil field practice and the waterflood has proven effective to maximise recovery.
Field operatorship changed from Vegas to North Petroleum during the year with significant core staff continuity within the Petro-Amir partnership team, Petro-Amir being the joint operating company. Development drilling is planned to resume on NW Gemsa during the second half of 2015.
The CPR reserve estimates take account of the results of the drilling and development activity up to year end. For the 2015 CPR by Bayphase, the NW Gemsa Concession 2P Gross Estimated Ultimate Recovery is estimated to be 52.16 MMboe of oil and raw gas (20.86 MMboe net to Circle, a 14% increase over the 2014 CPR).
The 2P Gross Remaining Reserves are estimated to be 31.22 MMboe of oil, gas and recoverable liquids (12.49 MMboe net to Circle, a 5% increase over the prior years CPR).
The minor change in Initial Oil Reserves is due to additional infill well data and to the remapping of the reprocessed 3D seismic that resulted in modifications to the field interpretation, particularly in the north-eastern area of the AASE field.
Average daily production to May 2015 is 8,236 bopd (3,294 bopd net to Circle) and 9.32 MMscf/d Gas (3.73 MMscf/d net to Circle).
Tunisia
At the start of 2014, the Group had interests in two exploration licences in Tunisia: the offshore Mahdia permit and the onshore Ras Marmour permit. An application for an exploration permit for the Takelsa permit (formerly a part of the expired Grombalia permit) was also submitted and is under negotiation. Additionally an agreement with Exxoil, the operator of the Beni Khalled production concession, made Circle a partner in this lease subject to fulfilment of an agreed work programme of seismic and a well. Activity during 2014 included the drilling of an offshore exploration well in the Mahdia Block, as well as seismic survey planning in Beni Khalled.
The El Mediouni well, in the Mahdia permit commenced in June, and was suspended in September, encountering light oil shows through a 133 metre section of Ketatna carbonates. Massive mud losses occurred in the Ketatna, and despite multiple attempts to restore circulation, the hole conditions deteriorated and no open-hole logging was possible. A decision was ultimately taken to terminate further efforts and suspend the well and although it was a disappointing result, the well proved both a petroleum system and a reservoir on block. At the time of writing an application to enter the next exploration phase awaits formal Government approval and efforts to farm-out an interest in the block will re-commence in 2015.
The Ras Marmour permit in the south-east of Tunisia covers 1,564 sq km and is located in an area with several onshore oil fields. The Group holds a 23% interest and the operator is Exxoil. A well on the Isle of Djerba, originally planned to be drilled in 2014, has been postponed to 2015.
Planning for a 3D survey on the Beni Khalled concession is in progress. The Bir Drassen gas discovery on this concession tested at 23.50 MMscf/d of gas and 28 bcpd. The Beni Khalled field, initially producing at 550 bopd in 2005 is now producing less than 100 bopd.
In the current cash constrained environment, the Board will continue to evaluate its commitments in Tunisia.
Oman
Circle operated onshore exploration Block 49 and offshore exploration Block 52 in Southern Oman.
The infill 2D marine seismic survey of 855 kilometres acquired between April and May 2014 was processed and interpreted for the inshore area of Sawqirah Bay in Block 52. The Group also drilled onshore exploration well Shisr-1 in Q1 2015 in the south-west area of Block 49. The decision was taken to plug and abandon the well, due to drilling difficulties. The Ministry approved the early abandoning of the well and no hydrocarbons were detected.
As part of the review of its cost base, given the insufficient interest in the farm-in on Block 52 and Circle being unwilling to sole-risk the shallow water wells, Circle has decided to relinquish both Blocks and exit Oman completely. Circle's exit from Oman has been approved by the Ministry of Oil and Gas in Oman. Once the restoration of the drill site on Block 49 is complete and all relevant data has been submitted to the Ministry, Circle will proceed to close its offices in Oman. A consequence of the decision to exit is that the Group is no longer bidding for new acreage in Oman.
Outlook
In Egypt, Circle's dynamic reservoir model was completed in 2014 and we have been monitoring the production data to ensure we have a sound basis to review the operator's field management ahead of more infill drilling in 2015.
In our Moroccan acreage, we plan to continue the drilling programme on the Sebou and Lalla Mimouna permits.
In Tunisia, we await Government approval to proceed to the next exploration phase on the Mahdia permit and will re-commence our farm-out efforts. The drilling of Sedouikech well in the Ras Marmour permit is likely to be undertaken, but the final decision will be taken in light of an overall review of Circle's capital expenditure commitments.
Circle's primary area of focus remains the MENA region and we will continue to monitor projects and opportunities to grow the Group. We hope to further increase our gas reserves in Morocco and sustain oil production in Egypt in 2015.
Stephen Jenkins
Director
Financial Review
Financial results summary
%
2014 2013 Increase/
US$000 US$000 (decrease)
Group revenue 84,624 93,343 (9)
Group operating (loss)/profit (48,019) 32,348 -
Group operating profit before write-offs
and impairment 23,313 32,348 (28)
Cash generated from operations 54,706 53,365 3
Available cash 34,508 26,155 32
Bank and other debt 75,000 42,500 76
Results for the year
Oil and gas revenues amounted to US$84.62 million in 2014 a decrease of 9% for the year. This reduction is primarily due to the fall in oil prices for the year along with a small decline in the volume of oil sold from the NW Gemsa permit in Egypt. Revenues generated in Egypt in 2014 were US$66.74 million, down 12%, while revenues from gas sales in Morocco were US$17.88 million representing a 1% increase.
The average gross oil price achieved in Egypt for 2014 was US$94.80/bbl versus US$104.40/bbl in 2013, while the average gas price achieved in Morocco was US$10.12/Mscf as against US$10.34/Mscf in 2013.The reduction in gas price achieved in Morocco was due to the weakening of the Moroccan Dirham versus the US Dollar. Circle's share of volume of oil sold from the NW Gemsa permit in Egypt was 1.46 million barrels (2013: 1.52 million barrels) a 4% decrease while the volume of gas sold from the Sebou permit in Morocco was 1.77 bcf a 4% increase over the 1.70 bcf sold in 2013.
Gross profit achieved for the year was US$30.86 million (2013: US$36.95 million), a decrease of 16% on prior year.
As a result of the decision to relinquish both permits in Oman (Blocks 49 and 52) along with the expiration of the Grombalia permit in Tunisia, a write-off of exploration and evaluation costs amounting to US$57.40 million was incurred. In addition to this, and as a result of the fall in oil prices during 2014, an impairment charge amounting to US$13.94 million for the NW Gemsa permit in Egypt was also recognised.
As a consequence of the write-offs and impairment charge outlined above and the drop in oil prices during the second half of 2014, the Group recorded an operating loss for the year of US$48.02 million (2013: operating profit of US$32.35 million).
Finance revenue for the year amounted to US$0.36 million (2013: US$0.72 million) and consisted mainly of non-cash income.
Finance costs for the year amounted to US$6.25 million (2013: US$4.21 million) and reflect an increase in interest charges and transaction costs associated with a new reserve based lending facility provided by International Finance Corporation (IFC), partly offset by an increase in capitalised interest to exploration and evaluation assets.
The Group recorded a loss after tax of US$53.92 million (2013: US$28.82 million profit).
Cash flow
Net cash generated from operations (after working capital changes) for 2014 amounted to US$54.71 million (2013: US$53.37 million) an increase of US$1.34 million over the previous year. The increase was due mainly to improved cash receipts from EGPC.
In relation to EGPC receivables, regular payments continued to be received throughout 2014 along with a special payment in December 2014, resulting in the receivable balance at year end being significantly lower than the prior year.
Net cash used in investing activities relating to oil and gas assets amounted to US$86.44 million (2013: US$45.93 million) and comprised of US$60.74 million invested in exploration and evaluation assets in Morocco, Tunisia and Oman (2013: US$17.78 million) while US$25.70 million was invested in production and development assets in Egypt and Morocco (2013: US$28.15 million).
Net cash generated from financing activities totalled US$30.15 million (2013: US$10.30 million) and related to drawdowns of US$45 million on the new IFC reserve based lending facility put in place in March 2014 less US$12.50 million repaid under the working capital facility with Ahli United Bank in Egypt and interest paid amounting to US$2.35 million (2013: US$2.20 million interest paid).
Group cash balances at year-end amounted to US$36.31 million (2013: US$37.93 million) of which US$1.80 million was in restricted accounts leaving US$34.51 million available for corporate use.
Statement of financial position
Total assets for the Group at 31 December 2014 amounted to US$314.21 million (2013: US$307.90 million) and comprised mainly oil and gas assets of US$246.06 million, US$31.16 million of trade and other receivables and cash at bank of US$36.31 million.
Net assets amounted to US$192.76 million at year end (2013: US$244.80 million) a decrease of US$52.04 million due mainly to the write-off of exploration and evaluation assets in both Oman and Tunisia and the impairment charge in Egypt all detailed above.
Working capital for the Group at 31 December 2014 amounted to a deficit of US$7.88 million (2013: US$47.26 million - surplus) due to the convertible loan repayment obligation (US$30 million principal amount) being categorised as a current liability. Subsequent to the year-end the convertible loan was amended with Circle agreeing to repay US$10 million before 19 July 2015 (as at end May 2015 US$6 million of this amount had been repaid), whilst extending the remaining US$20 million until 19 July 2017 at a revised conversion price of GBP0.136 per ordinary share with a right for Circle to further extend the date until 19 July 2018 and 19 July 2019 on amended terms. Additionally the coupon of 6% per annum will increase to 8% per annum and a payment-in-kind fee payable in either cash or Circle shares will apply to the loan amount calculated at the rate of 1.5% per annum in respect of the period up to 19 July 2017. This fee is payable as soon as is reasonably practicable after 19 July 2017. Circle has also granted the loan provider options over 30 million shares in the Company at an exercise price of GBP0.136 per ordinary share. These options replace the existing options over 30 million shares which the loan provider previously had in place. Excluding the extended portion of the convertible loan, working capital for the Group at 31 December 2014 was US$11.15 million.
In March 2014, Circle announced the signing of a reserve based lending facility of up to US$100 million with IFC with a maturity date in June 2018. The facility is secured primarily over the Group's producing assets in both Egypt and Morocco and contains representations, warranties and covenants which are usual for a facility of this nature. In addition, the facility is subject to bi-annual re-determinations. At 31 December 2014 the total loan amount committed was US$75 million, the maximum available amount was US$66 million while the total amount drawndown was US$45 million. Subsequent to year-end a further US$12.50 million was drawndown under this facility.
The Group had net debt at end of 2014 of US$38.69 million and a net debt to equity ratio of 20%. As at end May 2015, net debt had increased to US$59.16 million.
Outlook
The Group's cash position has been negatively affected by both oil price volatility and cost overruns on the wells on the Mahdia and Block 49 permits. In light of both the unanticipated overspend and the lower oil price environment, the Group is now undergoing a review of its cost base and its operational and other commitments. This may result in the Group exploring potential funding options, including but not limited to financing opportunities or farm-outs. These actions are directed at ensuring that the Group is able to remain profitable in a sustained lower oil price environment.
To date, our efforts to exert greater control over the cost base have resulted in a change in local management and the re-negotiation of numerous local supplier contracts in our operations in Morocco. The Group will continue its efforts to reduce cost and improve operational efficiency in all its interests.
As part of the efforts to enhance the overall internal control framework and to ensure all relevant controls and processes are in place to support the Group's operations going forward, the finance function will re-locate to London in 2015.
Susan Prior
Group Finance Director
Circle Oil PLC
CONSOLIDATED INCOME STATEMENT
FOR THE YEAR ENDED 31 DECEMBER 2014
Notes 2014 2013
US$000 US$000
Revenue 84,624 93,343
Cost of sales (53,764) (56,394)
Gross profit 30,860 36,949
Administrative expenses (5,866) (4,719)
Share option expense (975) -
Exploration costs written-off (57,396) -
Impairment (13,936) -
Foreign exchange (loss)/gain (706) 118
Operating (loss)/profit (48,019) 32,348
Finance revenue 358 720
Finance costs (6,254) (4,211)
(Loss)/profit before taxation (53,915) 28,857
Taxation (6) (34)
(Loss)/profit for the year (53,921) 28,823
Basic (loss)/earnings per share 1 (9.56)c 5.12c
========= =========
Diluted (loss)/earnings per share 1 (9.56)c 4.66c
========= =========
CONSOLIDATED STATEMENT OF OTHER COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 DECEMBER 2014
2014 2013
US$000 US$000
(Loss)/profit for the year (53,921) 28,823
Total income and expense recognised in other - -
comprehensive income
Total comprehensive (expense)/income for
the year - entirely attributable to equity
holders (53,921) 28,823
=========== =========
Circle Oil PLC
CONSOLIDATED statement of financial position AT 31 DECEMBER 2014
Notes 2014 2013
US$000 US$000
Assets
Non-current assets
Exploration and evaluation assets 97,411 81,353
Production and development assets 148,647 146,188
Property, plant and equipment 270 133
246,328 227,674
-------- --------
Current assets
Inventories 408 23
Trade and other receivables 31,164 42,260
Cash and cash equivalents 2 36,308 37,938
67,880 80,221
-------- --------
Total assets 314,208 307,895
======== ========
Equity and liabilities
Capital and reserves
Share capital 8,125 8,084
Share premium 167,953 167,083
Other reserves 8,051 11,260
Retained earnings 8,634 58,371
Total equity 192,763 244,798
-------- --------
Non-current liabilities
Trade and other payables 1,062 2,064
Bank borrowings 43,427 -
Convertible loan - debt portion - 26,763
Derivative financial instruments - 134
Decommissioning provision 1,193 1,159
Total non-current liabilities 45,682 30,120
-------- --------
Current liabilities
Trade and other payables 46,714 20,442
Bank borrowings - 12,499
Convertible loan - debt portion 29,025 -
Derivative financial instruments 10 -
Current tax 14 36
Total current liabilities 75,763 32,977
-------- --------
Total liabilities 121,445 63,097
-------- --------
Total equity and liabilities 314,208 307,895
======== ========
Circle Oil PLC
CONSOLIDATED cash flow statement
FOR THE YEAR ENDED 31 DECEMBER 2014
Notes 2014 2013
US$000 US$000
Operating activities
Net cash generated from operations 54,706 53,365
Taxes paid (25) (27)
Net cash inflow from operating activities 54,681 53,338
--------- ---------
Cash flows from investing activities
Investments in exploration and evaluation
assets (60,737) (17,780)
Investments in production and development
assets (25,703) (28,152)
Payments to acquire property, plant
and equipment (260) (99)
Interest received 9 18
Net cash used in investing activities (86,691) (46,013)
--------- ---------
Cash flows from financing activities
Working capital facility - amounts drawndown - 23,161
Working capital facility - amounts repaid (12,499) (10,662)
Reserve based lending facility - amounts 45,000 -
drawndown
Interest paid (2,349) (2,203)
Net cash from financing activities 30,152 10,296
--------- ---------
(Decrease)/increase in cash and cash
equivalents (1,858) 17,621
Cash and cash equivalents at beginning
of year 37,938 20,391
Effect of foreign exchange rate changes 228 (74)
Cash and cash equivalents at end of
year 2 36,308 37,938
========= =========
Reconciliation to net cash generated from operations
Group 2014 2013
US$000 US$000
(Loss)/profit before taxation (53,915) 28,857
Finance revenue (358) (720)
Finance costs 6,254 4,211
Exploration costs written-off 57,396 -
Impairment of production and development 13,936 -
assets
Increase in trade and other payables 3,256 3,834
Decrease/(increase) in trade and other
receivables 9,548 (1,819)
Increase in inventory (385) (2)
Foreign exchange (gain)/loss (228) 74
Depreciation 19,202 18,930
Net cash generated from operations 54,706 53,365
========= =========
Circle Oil PLC
STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2014
Consolidated Share Share Share-based Convertible Translation Retained Total
capital premium payment loan - reserve earnings/ equity
US$000 US$000 reserve equity US$000 (deficit) US$000
US$000 portion US$000
US$000
At 1 January
2013 8,084 167,083 6,661 6,259 (3) 27,891 215,975
Reserve
transfer - - (1,657) - - 1,657 -
Net profit for
the
year - - - - - 28,823 28,823
At 31 December
2013 8,084 167,083 5,004 6,259 (3) 58,371 244,798
========= ========= ============= ============= ============= =========== =========
Share options
exercised 41 870 - - - - 911
Share option
expense - - 975 - - - 975
Reserve
transfer - - (4,184) - - 4,184 -
Net loss for
the year - - - - - (53,921) (53,921)
At 31 December
2014 8,125 167,953 1,795 6,259 (3) 8,634 192,763
========= ========= ============= ============= ============= =========== =========
Basis of preparation
The financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) and International Financial Reporting Interpretations Committee (IFRIC) interpretations adopted for use by the European Union. They have also been prepared in accordance with the Companies Acts, 1963 to 2013 and are compliant with the rules of the Alternative Investment Market (AIM) of the London Stock Exchange.
The financial statements have been prepared on the historical cost basis, as modified by the recording of certain financial instruments at fair value through profit or loss.
Basis of consolidation
The consolidated financial statements include the financial statements of the Company and all of its subsidiaries made up to the end of the financial year. Subsidiaries are consolidated in the Group financial statements from the date on which control is obtained over financial and operating policies and decisions. Control is recognised where an investor is exposed, or has rights, to variable returns from its investment with the investee and has the ability to affect these returns through its power over the investee. All intercompany transactions, balances, income and expenses have been eliminated in full on consolidation.
1. Basic and diluted earnings per share
The calculation of the basic earnings per share attributable to the ordinary equity holders of the Company is based on the following data:
2014 2013
US$000 US$000
(Loss)/profit for the year attributable
to equity holders of the parent (53,921) 28,823
============ ============
The basic weighted average number of
ordinary shares in issue is calculated
as follows:
Number of ordinary shares in issue at
start of year 563,353,486 563,353,486
Adjustment for shares issued during 758,192 -
the year
Weighted average number of ordinary
shares 564,111,678 563,353,486
============ ============
Basic (loss)/earnings per share (9.56)c 5.12c
============ ============
Diluted (loss)/earnings per share (9.56)c 4.66c
============ ============
Diluted (loss)/earnings per share is calculated using the weighted average number of ordinary shares assuming the conversion of its potential dilutive equity derivatives outstanding. All of the Group's potential ordinary shares were anti-dilutive for the year ended 31 December 2014 which resulted in no change between the basic and diluted loss per share. The Group had total potential ordinary shares outstanding of 105,976,440 at 31 December 2014 (2013: 127,846,041).
2. Cash and cash equivalents at year-end
The Group cash balances at 31 December 2014 comprises the following:
Group 2014 2013
US000 US$000
Cash at bank 34,508 24,801
Cash held by JV Partners - 1,354
Restricted cash relating to the Working
Capital Facility - 10,983
Restricted cash relating to work
programmes in Morocco 1,800 800
Total cash and cash equivalents 36,308 37,938
========= =========
Glossary of terms
bcf Billion cubic feet
bbl Barrel of oil
bcpd Barrels of condensate
per day
bopd Barrels of oil per
day
boepd Barrels of oil equivalent
per day
CPR Competent Persons Report
EGPC Egyptian General Petroleum
Company
IAS International Accounting
Standards
IFRS International Financial
Reporting Standards
MENA Middle-East North Africa
MMbo Millions of barrels
of oil
MMboe Millions of barrels
of oil equivalent
Mscf Thousand standard cubic
feet of gas
MMscf Million standard cubic
feet of gas
MMscf/d Million standard cubic
feet of gas per day
ONHYM Office National des
Hydrodarbures et des
Mines
Sq km Square kilometres
2D Two dimensional
3D Three dimensional
1P Probability of success
of 90%
2P Probability of success
of 50%
For further information contact:
Circle Oil Plc (+44 20 7638 9571)
Steve Jenkins, Chairman
Susan Prior, Group Finance Director
Investec (+44 20 7597 5970)
Chris Sim
George Price
James Rudd
Liberum Capital Limited (+44 20 3100 2222)
Clayton Bush
Citigate Dewe Rogerson (+44 20 7638 9571)
Martin Jackson
Shabnam Bashir
Murray Consultants (+353 1 498 0300)
Joe Heron
Pat Walsh
In accordance with the guidelines of the AIM Market of the London Stock Exchange, Dr Stuart Harker, VP Geology, with over 40 years experience, is the qualified person as defined in the London Stock Exchange's Guidance Note for Mining and Oil and Gas companies, who has reviewed and approved the technical information contained in this announcement. Dr. Harker holds a BSc (Hons) in Geology from the University of London (UK) and an MSc and PhD from the University of Saskatchewan, Canada. He is also a Fellow of the Geological Society of London and a Chartered Geologist.
Notes to Editors
Circle Oil Plc (AIM: COP) is an international oil & gas exploration, development and production company holding a portfolio of assets in Morocco, Tunisia, and Egypt with a combination of producing assets, low-risk, near-term production opportunities, and significant upside exploration potential. The Company listed on AIM in October 2004.
Internationally, the Company has continued to expand its portfolio over the past years and now has assets in the Rharb Basin, Morocco; the Ras Marmour Permit in southern Tunisia; the Mahdia Permit offshore Tunisia, and the Zeit Bay area of Egypt. Circle's strategy is to locate and secure additional licences in prospective hydrocarbon provinces and, through targeted investment programmes, monetise the value in those assets for the benefit of shareholders. This could be achieved through farm-outs to selected partners who would then invest in and continue the development of the asset into production, or Circle may opt to use its own expertise to appraise reserves and bring assets into production. Through either route the objective would be generation of sustained cash flow for further investment.
Further information on Circle is available on its website at www.circleoil.net.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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