Parkmead Group (The) PLC Parkmead Preliminary Results Statement 2015 (4034G)

TIDMPMG

RNS Number : 4034G

Parkmead Group (The) PLC

20 November 2015

20 November 2015

The Parkmead Group plc

("Parkmead", "the Company" or "the Group")

Preliminary Results for the year ended 30 June 2015

Parkmead, the UK and Netherlands focused oil and gas group, is pleased to report its preliminary results for the year ended 30 June 2015.

HIGHLIGHTS

Successful exploration leading to increased gas production

-- First commercial gas production achieved at the Diever West gas field in the Netherlands, following a successful fast-track development

-- The Diever-2 discovery well was flow tested at 29 million cubic feet per day (approximately 5,000 barrels of oil equivalent per day)

-- Further production enhancement work planned on Parkmead's low operating cost Netherlands portfolio, including a new well at the Geesbrug gas field to maximise gas production, serving as a natural hedge to the current low oil price environment

-- Awarded nine new oil and gas licences in the UKCS 28th Licensing Round, covering a total of 12 offshore blocks

   --      Awards include significant new acreage and proven oil fields in the vicinity of the major Parkmead-operated Perth Dolphin Lowlander (PDL) oil hub development 

-- Detailed technical work undertaken this year has allowed Parkmead to release non-core acreage, significantly reducing licence costs

Continued progress on valuable development projects

-- Entered into a Heads of Agreement outlining the structure of a joint development of the Perth, Dolphin and Lowlander fields after detailed technical analysis and development planning work

-- The PDL project has been fully appraised, with a combined total of 13 wells drilled, and has expected recoverable reserves of approximately 80 million barrels of oil, double the initial recoverable reserves of a standalone Perth development

-- Platypus gas field development advancing well, with the draft Field Development Plan (FDP) submission expected in the coming months

Reserves and resources increasing

   --      Considerable 2P reserves of 26.1 million barrels of oil equivalent as at 30 June 2015 

-- Contingent resources increased by 129% to 41.9 million barrels of oil equivalent as at 30 June 2015 (18.3 million barrels of oil equivalent at 30 June 2014)

Strategically positioned for further acquisitions

-- Six acquisitions, at both asset and corporate level, have been completed since positioning Parkmead as a new independent oil and gas company

-- Parkmead is well capitalised with over US$60 million (GBP41.1 million) of total cash resources at June 2015

-- The Parkmead team is evaluating further acquisition opportunities to take advantage of the current low oil price environment

Financial Strength

-- Revenue during the period remained relatively strong at GBP18.6 million (2014: GBP24.7 million)

   --      Total assets stood at GBP105.6 million at 30 June 2015 (GBP127.4 million at 30 June 2014) 

-- Raised approximately US$21.1 million (GBP13.4 million) in May 2015 to accelerate opportunities

   --      Substantial cash balances of GBP41.1 million as at 30 June 2015 

Parkmead's Executive Chairman, Tom Cross, commented:

"I am pleased to report another important year of progress for Parkmead, despite the challenges of the low oil price environment. Parkmead discovered and has now brought onstream a new gas field at Diever West, in the Netherlands. This will deliver profitable gas production and important additional cash flow to the Group. We have successfully brought this new gas field onstream within 14 months of discovery, which is an outstanding achievement.

Parkmead is increasing the Group's net gas production in the Netherlands through a low-cost, onshore work programme. This will act as a natural hedge to the very low global oil prices.

Our major new licence awards in the UKCS 28th Round were an impressive result for Parkmead, with 12 new offshore oil and gas blocks awarded to the Group. We were delighted with the awards located close to Parkmead's PDL development, as they have the potential to add significant value to our assets in this area.

Parkmead is well positioned to take advantage of the lower oil price environment and the opportunities that are arising from this. We have excellent regional expertise, significant cash resources, and a growing low-cost gas portfolio. The Group will continue with its licensing and acquisition-led growth strategy, securing opportunities that maximise long-term value for our shareholders."

For enquiries please contact:

 
 The Parkmead Group plc 
 Tom Cross (Executive Chairman)                  [phone] 
 Ryan Stroulger (Chief Financial Officer)        [phone] 
 
 Panmure Gordon (UK) Limited (Financial Adviser, NOMAD and Corporate 
  Broker to Parkmead) 
 Mark Taylor                                     [phone] 
 Karri Vuori                                     [phone] 
 James Greenwood                                 [phone] 
 
 Instinctif Partners Limited (PR Adviser to Parkmead) 
 David Simonson                                  [phone] 
 Anca Spiridon                                   [phone] 
 

CHAIRMAN'S STATEMENT

2015 has been an important year of progress for Parkmead, despite the challenging low oil price environment. Building on the excellent momentum generated in 2014, the Company discovered a new gas field at Diever West in the Netherlands. The field was flow tested at 29 million cubic feet per day (approximately 5,000 barrels of oil equivalent per day) and was tied into existing onshore facilities, with first commercial gas production achieved in November 2015.

Parkmead has also enjoyed a highly successful period of exploration activity through the recent UK 28th Licensing Round awards, winning nine new oil and gas licences spanning 12 attractive offshore North Sea blocks. These awards include significant new acreage and proven oil fields within the vicinity of the Parkmead operated Perth Dolphin Lowlander (PDL) oil hub development.

Operations and Portfolio Growth

The Group has made considerable progress towards building an independent oil and gas company of significant scale, by developing its current portfolio and adding new assets through the licensing round process.

Major progress has been made this year across Parkmead's licence portfolio in the Netherlands. In September 2014, a new onshore gas field was discovered at Diever West. The Diever-2 well found gas in a good quality Rotliegendes age sandstone reservoir. A 157 foot gas column was encountered, with both net pay and porosity values exceeding pre-drill expectations. The well was flow tested after the successful discovery and recorded an excellent flow rate of 29 million cubic feet per day (approximately 5,000 barrels of oil equivalent per day). Diever West has been tied into existing production facilities under a fast-track and low-cost development, and first commercial gas production was achieved in November 2015. Parkmead has worked closely with the field operator, Vermilion Energy, on the fast-track development of the field and the joint-venture group successfully brought the field onstream within just 14 months of discovery. This is an outstanding achievement.

Parkmead's gas assets in the Netherlands continue to provide a robust revenue stream and net cash flows to the Company. A number of enhanced production opportunities are available across Parkmead's existing Netherlands portfolio which the Company intends to capitalise on, with the aim of significantly increasing our net gas production. These include a new low-cost infill well at Geesbrug, and a further exploration target at De Mussels. The new production from Diever West and the additional Geesbrug well are forecast to more than treble Parkmead's net gas production in the Netherlands. This gas derived revenue will act as a natural hedge against low and volatile oil prices.

Parkmead also enjoyed a highly successful year of licensing round awards. In November 2014, the Group was awarded six new licences covering a total of nine offshore blocks in the first tranche of awards under the UKCS 28th Licensing Round. These new licences contain opportunities across the Central and Southern North Sea areas, and are all operated by Parkmead. Three of the new licence awards significantly increase Parkmead's asset base in the vicinity of the Company's major PDL oil hub development project, which is one of the largest undeveloped oil projects in the North Sea. This newly awarded acreage also contains exploration prospects in addition to sizeable proven oil accumulations, such as the Buzzard sandstone discoveries at Polecat and Marten. Polecat was discovered in 2005 and appraised in 2010. The 2010 appraisal well was flow tested at 4,373 barrels of oil per day. The Marten discovery was made in 1984, encountering three oil bearing sandstones of Upper Buzzard age. Three additional blocks were awarded to Parkmead in the PDL vicinity, one situated adjacent to the Perth oil field, and two further blocks located approximately 12km north of Perth containing the exciting Upper Jurassic Piper Formation oil prospects, Fynn and Penny. These new strategically positioned licences have the potential to add significant value to the PDL project.

(MORE TO FOLLOW) Dow Jones Newswires

November 20, 2015 02:01 ET (07:01 GMT)

In July 2015, Parkmead was awarded a further three new licences as part of the 28th Licensing Round covering three offshore blocks. Two of the new licences are located in the highly prospective West of Shetland area adjacent to existing Parkmead blocks. Detailed mapping of these blocks indicate two new exploration targets, Sanda North and Sanda South, as well as an extension of Parkmead's large Cretaceous Eddystone prospect. The third licence award in this suite of awards is located in the Southern Gas Basin, an area where the Company has a deep technical knowledge of the exploration plays, and is building a valuable portfolio of targets. Parkmead has already enjoyed significant success in the Southern Gas Basin with the gas discoveries at Platypus and Pharos. Seven prospects and leads have been identified on the new Southern North Sea licence with Lower Leman targets, the most important of which is a prospect called Selene.

Parkmead's experienced team of geoscientists have already begun several work programmes across these licences, with detailed petrophysics and mapping work underway. Parkmead will continue to invest heavily in licensing round applications, both in the UK and overseas, and views this as a key component in the Group's strategy to build an attractive and balanced portfolio that offers significant exploration upside.

Key progress has been made during the year towards a joint development of the Perth, Dolphin and Lowlander fields. A Heads of Agreement was signed in August 2014 to progress the future joint development of the PDL fields. The agreement provides the framework needed to bring the enlarged project together, and outlines partner cooperation with regards to equity alignment and the future work programme. Parkmead, as the Perth-Dolphin operator, continues to work closely with its PDL project partners to maximise oil reserves and financial returns from the project, and from the wider regional area. The three fields are fully appraised, with a combined total of 13 wells drilled, and contain oil in place of over 400 million barrels. It is expected that recoverable reserves from the PDL oil hub development will be over 80 million barrels of oil, double the initial recoverable reserves of Perth as a standalone project.

Results

The Group's revenue for the year to 30 June 2015 was GBP18.6m (2014: GBP24.7m). As expected, the significant reduction in global oil prices has in turn reduced the Group's revenue during the period. During this time, the price of oil has fallen from near US$110 per barrel, to seven-year lows of below US$50 per barrel. This has severely impacted the revenues and cash flows of oil and gas producers globally. Parkmead and its co-venturers have worked hard to reduce operating costs across the entire asset portfolio to reflect the substantially altered macro environment. The higher cost of sales during the period principally reflected Parkmead's increased working interest in the Athena oil field, acquired through the purchase of an additional 20 per cent. interest in Athena from EWE VERTRIEB GmbH in April 2014. Against the backdrop of lower oil prices and therefore declining revenues compared to the relatively fixed Athena cost base, the contract for the BW Athena FPSO was re-negotiated and the new, improved terms became effective from June 2015, substantially reducing operating expenditure from this point forward. Administrative expenses provided a credit of GBP1.2m (2014: GBP5.7m expense), arising principally from the lower share price impacting the non-cash share based payment charge. The Group recorded a post-tax loss of GBP31.4 million, which includes a non-cash impairment charge of GBP12.9 million recorded in the period, which relates to the impact on the Athena field of the collapse in global oil prices.

Parkmead's total assets at 30 June 2015 were GBP105.6m (2014: GBP127.4m). Available-for-sale financial assets were GBP3.3m (2014: GBP4.8m). Cash and cash equivalents at year end were GBP41.1m (2014: GBP46.3m) and Parkmead has minimal debt. The Group's net asset value was GBP80.5m (2014: GBP99.7m). Parkmead is therefore well positioned to withstand the current market conditions, and indeed views the current macro environment as an opportunity for further growth. This is as a result of experienced portfolio management and a strong focus on capital discipline.

In line with its strategy, Parkmead has shown a strong track record for value-adding transactions, at both the asset and corporate level. The Group's acquisitions to date have expanded its oil and gas asset portfolio significantly, which now covers the entire asset life cycle from exploration through to development and production. In May 2015, the Group raised approximately US$21.1 million through a successful placing of 11,200,000 new ordinary shares, to accelerate work programmes and offer the Company greater flexibility to take advantage of opportunities that are becoming available as a result of lower oil prices.

Following this successful placing, the Group's total ordinary shares in issue increased to 98,929,160 (2014: 87,729,160).

Due to Parkmead's ongoing growth and investment programme, the Board is not recommending the payment of a dividend in 2015 (2014:GBPnil).

Investments

The Group's principal available-for-sale investment is its shareholding in Faroe Petroleum plc ("Faroe") (LSE AIM: FPM.L). As at 30 June 2015, the value of this investment was GBP3.3m (30 June 2014: GBP4.8m). Faroe's closing share price at 30 June 2015 was 85.25 pence per share.

Outlook

The Directors of Parkmead are pleased with the Group's continuing progress in building an independent oil and gas company of increasing scale. With a balanced asset base, new oil and gas licences and a strong balance sheet, we believe Parkmead is well positioned to build further on the progress to date and to capitalise on new opportunities. In addition, we are excited by Parkmead's new gas production at Diever West and the new licence awards in the vicinity of the major PDL project, which increase our strategic position in the region.

As we move towards 2016, Parkmead maintains its appetite for acquisitions and will also seek to add shareholder value through a dynamic work programme. The Group has built a strong platform from which to become a key E&P player in the North Sea, and we look forward to updating shareholders as we make further progress.

Tom Cross

Executive Chairman

19 November 2015

Notes:

1. Dr Colin Percival, Parkmead's Technical Director, who holds a First Class Honours Degree in Geology and a Ph.D in Sedimentology and has over 30 years of experience in the oil and gas industry, has reviewed and approved the technical information contained in this announcement. Parkmead's evaluation of reserves and resources was completed in accordance with the 2007 Petroleum Resources Management System prepared by the Oil and Gas Reserves Committee of the Society of Petroleum Engineers and reviewed and jointly sponsored by the World Petroleum Council, the American Association of Petroleum Geologists and the Society of Petroleum Evaluation Engineers.

Group statement of profit or loss

for the year ended 30 June 2015

 
                                             Note       2015       2014 
                                                     GBP'000    GBP'000 
 Continuing operations 
 Revenue                                              18,639     24,656 
 Cost of sales                                      (39,418)   (21,426) 
 Impairment of property, plant and 
  equipment                                   2     (12,905)          - 
------------------------------------------  -----  ---------  --------- 
 Gross profit / (loss)                              (33,684)      3,230 
 Exploration and evaluation expenses                   (266)      (507) 
 Administrative expenses                      3        1,237    (5,668) 
 Gain on bargain purchase                     4            -      5,003 
------------------------------------------  -----  ---------  --------- 
 Operating profit / (loss)                          (32,713)      2,058 
 
 Finance income                                        4,074        835 
 Finance costs                                       (2,193)    (1,856) 
 Profit / (loss) before taxation                    (30,832)      1,037 
 Taxation                                              (529)        200 
------------------------------------------  -----  ---------  --------- 
 Profit /(loss) for the year attributable 
  to the equity holders of the Parent               (31,361)      1,237 
------------------------------------------  -----  ---------  --------- 
 
 Profit / (loss) per share (pence) 
 Continuing operations 
  Basic                                       5      (35.22)       1.62 
 Diluted                                             (35.22)       1.59 
 
 

Group and company statement of profit or loss and other comprehensive income

for the year ended 30 June 2015

 
 
                                           Group                 Company 
                                        2015       2014       2015       2014 
                                     GBP'000    GBP'000    GBP'000    GBP'000 
 Profit / (loss) for 
  the year                          (31,361)      1,237   (14,451)    (8,257) 
 
 Other comprehensive 
  income 
 Items that may be reclassified 
  subsequently to profit 
  or loss 
 Fair value (loss) / 
  gain on available-for-sale 
  financial assets                   (1,506)        428    (1,506)        427 
---------------------------------  ---------  ---------  ---------  --------- 
                                     (1,506)        428    (1,506)        427 
 
 Other comprehensive 
  (loss) / income for 
  the year, net of tax               (1,506)        428    (1,506)        427 
---------------------------------  ---------  ---------  ---------  --------- 
 Total comprehensive 
  (loss) / income for 
  the year attributable 
  to the equity holders 

(MORE TO FOLLOW) Dow Jones Newswires

November 20, 2015 02:01 ET (07:01 GMT)

  of the Parent                     (32,867)      1,665   (15,957)    (7,830) 
---------------------------------  ---------  ---------  ---------  --------- 
 

Group and company statement of financial position

as at 30 June 2015

 
                                           Group                 Company 
                                        2015       2014       2015         2014 
                                     GBP'000    GBP'000    GBP'000    GBP'000 
 Non-current assets 
 Property, plant and equipment: 
  development & production            18,717     29,902          -          - 
 Property, plant and equipment: 
  other                                  139        181        135        168 
 Goodwill                              2,174      2,174          -          - 
 Other intangible assets                   -          -          -          - 
 Exploration and evaluation 
  assets                              33,630     31,225          -          - 
 Investment in subsidiary 
  and joint ventures                       -          -     16,640     28,017 
 Available-for-sale financial 
  assets                               3,315      4,821      3,315      4,821 
 Deferred tax assets                     242      1,235          -          - 
 Total non-current assets             58,217     69,538     20,090     33,006 
---------------------------------  ---------  ---------  ---------  --------- 
 
 Current assets 
 Trade and other receivables           5,978     11,560     45,024     26,091 
 Current tax assets                      243          -          -          - 
 Cash and cash equivalents            41,121     46,346     26,069     41,589 
---------------------------------  ---------  ---------  ---------  --------- 
 Total current assets                 47,342     57,906     71,093     67,680 
---------------------------------  ---------  ---------  ---------  --------- 
 
 Total assets                        105,559    127,444     91,183    100,686 
---------------------------------  ---------  ---------  ---------  --------- 
 
 Current liabilities 
 Trade and other payables           (14,634)    (7,973)    (4,821)    (8,016) 
 Interest-bearing loans 
  and borrowings                       (412)    (2,071)          -          - 
 Current tax liabilities                   -      (361)          -          - 
 Other provisions                          -      (107)          -      (107) 
---------------------------------  ---------  ---------  ---------  --------- 
 Total current liabilities          (15,046)   (10,512)    (4,821)    (8,123) 
---------------------------------  ---------  ---------  ---------  --------- 
 
 Non-current liabilities 
 Interest-bearing loans 
  and borrowings                           -    (4,178)          -    (2,000) 
 Other liabilities                     (278)    (2,140)      (276)    (2,140) 
 Deferred tax liabilities            (1,284)    (1,593)          -          - 
 Decommissioning provisions          (8,482)    (9,305)          -          - 
---------------------------------  ---------  ---------  ---------  --------- 
 Total non-current liabilities      (10,044)   (17,216)      (276)    (4,140) 
---------------------------------  ---------  ---------  ---------  --------- 
 
 Total liabilities                  (25,090)   (27,728)    (5,097)   (12,263) 
---------------------------------  ---------  ---------  ---------  --------- 
 
 Net assets                           80,469     99,716     86,086     88,423 
---------------------------------  ---------  ---------  ---------  --------- 
 
 Equity attributable to 
  equity holders 
 Called up share capital              19,533     19,365     19,533     19,365 
 Share premium                        87,805     74,967     87,805     74,967 
 Merger reserve                       27,187     27,187     27,187     27,187 
 Revaluation reserve                 (2,710)    (1,204)    (2,710)    (1,204) 
 Retained deficit                   (51,346)   (20,599)   (45,729)   (31,892) 
---------------------------------  ---------  ---------  ---------  --------- 
 Total Equity                         80,469     99,716     86,086       88,423 
---------------------------------  ---------  ---------  ---------  ----------- 
 

Group statement of changes in equity

for the year ended 30 June 2015

 
                              Share      Share     Merger   Revaluation    Retained      Total 
                            capital    premium    reserve       reserve    earnings 
                            GBP'000    GBP'000    GBP'000       GBP'000     GBP'000    GBP'000 
 
 At 1 July 2013              18,970     30,448     12,631       (1,632)    (23,074)     37,343 
 
 Profit for the 
  year                            -          -          -             -       1,237      1,237 
 Fair value gain 
  on available-for-sale 
  financial assets                -          -          -           428           -        428 
------------------------  ---------  ---------  ---------  ------------  ----------  --------- 
 Total comprehensive 
  income for the 
  year                            -          -          -           428       1,237      1,665 
 Issue of new 
  ordinary shares               276     43,883          -             -           -     44,159 
 Issue of new 
  ordinary shares 
  on acquisition 
  of subsidiary                 115          -     14,556             -           -     14,671 
 Issue of new 
  ordinary shares 
  on asset acquisition            4        636          -             -           -        640 
 Share-based 
  payments                        -          -          -             -       1,238      1,238 
------------------------  ---------  ---------  ---------  ------------  ----------  --------- 
 At 30 June 2014             19,365     74,967     27,187       (1,204)    (20,599)     99,716 
------------------------  ---------  ---------  ---------  ------------  ----------  --------- 
 
 Loss for the 
  year                            -          -          -             -    (31,361)   (31,361) 
 Fair value loss 
  on available-for-sale 
  financial assets                -          -          -       (1,506)           -    (1,506) 
------------------------  ---------  ---------  ---------  ------------  ----------  --------- 
 Total comprehensive 
  loss for the 
  year                            -          -          -       (1,506)    (31,361)   (32,867) 
 Issue of new 
  ordinary shares               168     12,838          -             -           -     13,006 
 Gains arising 
  on repayment 
  of employee 
  share based 
  loans                           -          -          -             -         271        271 
 Share-based 
  payments                        -          -          -             -         343        343 
------------------------  ---------  ---------  ---------  ------------  ----------  --------- 
 At 30 June 2015             19,533     87,805     27,187       (2,710)    (51,346)     80,469 
------------------------  ---------  ---------  ---------  ------------  ----------  --------- 
 
 
 
 

Company statement of changes in equity

for the year ended 30 June 2015

 
                              Share      Share     Merger   Revaluation    Retained      Total 
                            capital    premium    reserve       reserve    earnings 
                            GBP'000    GBP'000    GBP'000       GBP'000     GBP'000    GBP'000 
 
 At 1 July 2013              18,970     30,448     12,631       (1,631)    (24,872)     35,546 
 
 Loss for the 
  year                            -          -          -             -     (8,257)    (8,257) 
 Fair value gain 
  on available-for-sale 
  financial assets                -          -          -           427           -        427 
------------------------  ---------  ---------  ---------  ------------  ----------  --------- 
 Total comprehensive 
  income (loss) 
  for the year                    -          -          -           427     (8,257)    (7,830) 
 Issue of new 
  ordinary shares               276     43,883          -             -           -     44,159 
 Issue of new 
  ordinary shares 
  on acquisition 
  of subsidiary                 115          -     14,556             -           -     14,671 
 Issue of new 
  ordinary shares 
  on asset acquisition            4        636          -             -           -        640 
 Share-based 
  payments                        -          -          -             -       1,237      1,237 
------------------------  ---------  ---------  ---------  ------------  ----------  --------- 
 At 30 June 2014             19,365     74,967     27,187       (1,204)    (31,892)     88,423 
------------------------  ---------  ---------  ---------  ------------  ----------  --------- 
 
 Loss for the 
  year                            -          -          -             -    (14,451)   (14,451) 
 Fair value loss 
  on available-for-sale 
  financial assets                -          -          -       (1,506)           -    (1,506) 
------------------------  ---------  ---------  ---------  ------------  ----------  --------- 
 Total comprehensive 
  loss for the 
  year                            -          -          -       (1,506)    (14,451)   (15,957) 
 Issue of new 
  ordinary shares               168     12,838          -             -           -     13,006 
 Gains arising 
  on repayment 
  of employee 
  share based 
  loans                           -          -          -             -         271        271 
 Share-based 
  payments                        -          -          -             -         343        343 
------------------------  ---------  ---------  ---------  ------------  ----------  --------- 
 At 30 June 2015             19,533     87,805     27,187       (2,710)    (45,729)     86,086 
------------------------  ---------  ---------  ---------  ------------  ----------  --------- 
 
 
 
 

Group and company statement of cashflows

(MORE TO FOLLOW) Dow Jones Newswires

November 20, 2015 02:01 ET (07:01 GMT)