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RNS Number:3062P
Melrose Resources PLC
03 September 2003
For Immediate Release 3 September 2003
MELROSE RESOURCES PLC
Unaudited Interim Results to 30 June 2003
Melrose Resources plc, the oil and gas exploration and production company with
interests in Egypt, Bulgaria and the USA, today announces its interim results
for the six months to 30 June 2003.
Highlights
Financial Summary
* 68% increase in turnover on continuing activities to #3,502,000 (H1 2002 -
#2,086,000);
* 352% increase in EBITDA to #1,736,000 (H1 2002 - #384,000);
* reduction in net loss for the period to #311,000 (H1 2002 - #1,680,000
loss);
* capital expenditure during the period of #16,324,000 (H1 2002 - #3,785,000);
Operational Developments
Egypt
* 3 gas discoveries on the El Mansoura concession;
* South Batra field reserves estimated to be in excess of 600 Bcf;
* in excess of 12 MMboe (net) of reserves added since 1 January 2003;
* current production of 480 boepd (net) expected to increase to over 2,000
boepd (net) by year end;
Bulgaria
* Galata Gas Field development on schedule for first gas delivery in
January 2004 at 40 MMcfpd;
* encouraging results from current seismic programme;
USA
* development activity is being stepped up over the next 18 months with
20 new wells scheduled to be drilled;
* secondary recovery projects to commence on all three principal leases;
* current production of 800 boepd is expected to increase to 1,000 boepd
by year end, with a target of 3,000 boepd by 2006.
Completion of 2 Share Issues provided additional working capital and reduced
indebtedness
* Rights Issue completed in March 2003 raising #13.5m net of expenses;
* Placing and Open Offer completed in August 2003 raising #18.1m net of
expenses;
* reduction in corporate debt and broadening of shareholder base.
Commenting on the results, Robert Adair, Chairman said:
"I am delighted by the run of exploration success we have achieved on the El
Mansoura concession. Following the successful share issues, we now look forward
to an active period in our three areas of operation, in each of which we expect
to achieve a dramatic increase in production levels and operating profits in
2004. The prospects for the Company are very exciting."
For further information:
Melrose Resources
Robert Adair, Chairman 0131 225 6678
David Curry, Chief Executive 0131 225 6678
Munro Sutherland, Finance Director 0131 225 6678
Chris Thomas, Corporate Development Officer 0207 462 1603
Buchanan Communications
Tim Thompson/ Ben Willey 0207 466 5000
Sophie Morton 01943 883990
I am delighted to be able to report that we have continued to make very good
progress this year in all areas of operations and that the prospects for the
Company look very exciting.
Egypt
The exploration drilling programme in Egypt resulted in commercial discoveries
on all three wells drilled during the first half of this year on the El Mansoura
concession - the South Mansoura, the Mansouriya and the South Batra wells. These
wells have established two highly prospective exploration plays on the El
Mansoura concession, the shallow Pliocene and the deeper Miocene Abu Madi
channel system.
Of these discoveries, the South Batra is the most significant, both in terms of
size and potential. The South Batra structure has been mapped over a much larger
area than the initial drilling prognosis and has the potential for in excess of
600 Bcf of gas in place. We expect that the existing well will be brought onto
production later this year at 30 MMcfpd gross plus 600 bcpd (approximately 6
MMcfepd net). Production from this field is expected to increase to 110 MMcfepd
gross (18 MMcfpd net) in 2005 with a further increase expected in 2006. An
appraisal well, the South Batra No.2, is planned for later this year and an
extensive 3-D seismic survey has just started and will continue into 2004.
Initially the survey will cover the west-central area of the concession, which
includes the South Batra discovery. Full development of the South Batra Field
will commence once the interpreted data from this survey is available. If the
3-D survey yields good results, it will be extended to cover the whole of the
western half of the concession during 2004.
The two discoveries made in the shallower Pliocene section at locations to the
west and south of the South Batra well are also now being developed and should
be on production later this year at a combined rate of around 20 MMcfpd gross,
adding around 4 MMcfpd net to Melrose.
After further interpretation of the 3-D seismic on the Qantara concession, we
now have a better understanding of the geology of this concession and a number
of Pliocene and Miocene prospects and leads have been mapped. In the deeper
horizons, the Qantara No.7 has just been drilled to test an extension of the
Qantara field. Unfortunately, the well did not reach the main Qantara horizon
due to technical difficulties and it was not successful in two shallower
horizons which were tested. A further well, the Qantara No.8, is scheduled to be
drilled later this month.
We anticipate that we will have a very active drilling programme in Egypt over
the next 18 months with upwards of 10 wells being drilled of which 5 could be
exploration wells.
Bulgaria
The Galata Gas Field development is well underway with first production targeted
for the end of January 2004. The platform is at an advanced stage of
construction and will be ready for tow-out at the end of September. Construction
of the onshore pipeline is underway. Preparations for the construction of the
offshore gas pipeline are complete and construction will start in October.
On the exploration front, the operators of the two deepwater licences to the
east and south of Block Kaliakra 99 have just shot extensive seismic surveys and
we took advantage of the availability of the seismic boat to shoot 460 km of
infill 2-D seismic over Block 91-III and Block Kaliakra 99. The award of three
new concessions and the recent seismic acquisition has added new impetus to
exploration activity in this area of the Black Sea which is very encouraging and
should increase our options with our existing exploration acreage. We expect to
drill at least one exploration well next year, possibly on a large Oligocene
channel prospect which lies in the south of Block 91-III and which has been
upgraded by initial processing of recent seismic.
USA
In the first half of the year we drilled 2 new wells on the Jalmat Unit and
participated in a further 10 wells on the State D lease (in which we have a 13%
working interest) in the Artesia field. We have recently announced a major
step-up in the pace of our development activity with plans to drill at least a
further 12 wells on the Jalmat Unit over the next eighteen months and 8 new
wells on the Artesia Unit over the same period. We also intend to commence
secondary recovery projects on all three of our principal leases: the Jalmat,
Artesia and Turner Gregory Units. We believe that our reserves in the USA are
conservatively stated, particularly on the waterflood projects, and that the
Group's assets in the USA have the potential to add significant value with
minimum risk. Our target is to raise production in the USA to around 3,000 boepd
by the end of 2006.
Reserves
Proven and probable reserves Bulgaria Egypt USA Total
Mboe Mboe Mboe Mboe
As at 1 January 2003 12,297 2,247 14,257 28,801
Reserve additions - 12,120 276 12,396
Production - (90) (121) (211)
--------- --------- --------- ---------
As at 30 June 2003 12,297 14,277 14,412 40,986
--------- --------- --------- ---------
Share issues
In March 2003 the Company completed a Rights Issue of 27.8 million new ordinary
shares which raised #13.5 million (net of expenses) to provide additional funds
for our exploration activities in Egypt and Bulgaria and to reduce debt. In
August 2003 the Company raised #18.1 million (net of expenses) through a Placing
and Open Offer of 18.4 million new ordinary shares. The proceeds of this issue
provided funds to finance the Group's exploration and development activities in
Egypt, for development drilling in the USA, repayment of the Adair Loan Notes
and for general working capital purposes. The effect of the Placing and Open
Offer is illustrated by the pro forma balance sheet set out below.
Results for the six months ended 30 June 2003
In the six months ended 30 June 2003 the Group benefited from high oil and gas
prices and increased production but the results have been adversely affected by
the weakness in the US dollar. The results show a loss after interest and
taxation of #311,000 (six months ended 30 June 2002 - loss of #1,680,000). The
operating profit from the Group's oil and gas activities was #1,888,000 (2002,
profit of #379,000).
Net daily production in the six months ended 30 June 2003 averaged 1,166 boepd
(7.0 MMcfepd) which compares with 828 boepd (5.0 MMcfepd) during last year.
Production was split between 506 bopd and 979 Mcfpd in the USA and 22 bcpd and
2,852 Mcfpd in Egypt. Average net production during 2002 was 511 bopd and 1,055
Mcfpd in the USA and 49 bcpd and 554 Mcfpd in Egypt. The increased production in
Egypt derived from the South Bilqas field which went on production in December
2002. Average prices received during the period were $28.79 per barrel and $3.38
per Mcf compared with $23.78 and $3.19 in 2002.
Administrative expenses include realised exchange losses of #454,000 resulting
from the weakening US dollar over the period and the re-translation of US dollar
denominated monetary assets and liabilities. The comparative figure for the
first half of 2002 was a loss of #729,000. Before taking into account the
exchange losses, Group EBITDA was #1,736,000 (2002 - #384,000). Capital
expenditure during the period amounted to #16,324,000 (2002 - #3,785,000).
Capital expenditures were split between Egypt - #2.6 million, Bulgaria - #12.6
million and USA - #1.1 million.
Outlook
Current production in Egypt is at approximately the same level as in the first
half but this is expected to increase significantly before the year-end as the
recent discoveries go on production. Following our recent success in Egypt, we
have already embarked upon a programme which has dramatically increased our
commitment to exploration, appraisal and development activity on our Egyptian
concessions in 2003 and into 2004. In Bulgaria over the next few months we
anticipate first production from Galata and we have high hopes for the
exploration well planned for 2004. In the USA we have also stepped up
development activity. Current production has increased to approximately 800
boepd and a further steady increase is anticipated this year. By the end of 2005
our Group production target is around 16,000 boepd (net), split between Bulgaria
40%, Egypt 45% and the USA 15%.
Completion of the two share issues substantially increased the capital base of
the Company and I am also very pleased to welcome a number of new shareholders
to the Company.
We look forward to an active period in each of the three areas of operation. In
all three areas we expect to achieve a dramatic increase in production levels
and operating profits, the impact of which will be seen clearly in our results
for 2004. We also expect to make some further major reserve additions.
Robert F M Adair
Chairman
2 September 2003
Consolidated profit and loss account
6 months ended 6 months ended Year ended
30 June 2003 30 June 2002 31 December
2002
#000 #000 #000
Note Unaudited Unaudited Audited
------------------ ----- ---------- ----------- -----------
Turnover
Continuing activities 3,502 2,086 4,375
Discontinued activities - 2,877 2,749
---------- ----------- -----------
3,502 4,963 7,124
Cost of sales (884) (3,465) (4,135)
Depletion (526) (520) (958)
---------- ----------- -----------
Gross profit 2,092 978 2,031
Administrative expenses (1,349) (2,017) (2,642)
---------- ----------- -----------
Operating profit/(loss)
Continuing activities 743 (876) (437)
Discontinued activities - (163) (174)
---------- ----------- -----------
743 (1,039) (611)
Net interest payable (653) (638) (1,465)
---------- ----------- -----------
Profit/(loss) on ordinary
activities
before taxation 90 (1,677) (2,076)
Taxation on profit on ordinary (401) (3) (156)
activities
---------- ----------- -----------
Loss for the period transferred (311) (1,680) (2,232)
to reserves ---------- ----------- -----------
Loss per share (p) 3 (0.98) (10.25) (13.62)
---------- ----------- -----------
Consolidated balance sheet
Pro forma 6 months ended 6 months ended Year ended 31
30 June 2003 30 June 2002 December 2002
#000 #000 #000
Unaudited Unaudited Unaudited Audited
------------------- -------- ---------- ---------- ----------
Fixed assets
Intangible 6,110 6,110 4,295 5,297
Tangible 54,028 54,028 42,636 40,410
Investments - - 10 7
-------- ---------- ---------- ----------
60,138 60,138 46,941 45,714
-------- ---------- ---------- ----------
Debtors: Amount
falling due after
more than one year 2,196 2,196 - 2,181
Current assets
Stock - - 180 -
Debtors 2,535 2,535 1,067 900
Cash at bank and in 16,244 1,202 194 460
hand -------- ---------- ---------- ----------
18,779 3,737 1,441 1,360
Creditors: amounts
falling due
within one year (3,051) (3,051) (8,406) (9,257)
-------- ---------- ---------- ----------
Net current assets/ 15,728 686 (6,965) (7,897)
(liabilities) -------- ---------- ---------- ----------
Total assets less 78,062 63,020 39,976 39,998
current
liabilities
Creditors: amounts
falling due
after more than one (25,635) (28,651) (15,153) (17,875)
year
Provision for - - (118) -
liabilities and
charges
-------- ---------- ---------- ----------
52,427 34,369 24,705 22,123
-------- ---------- ---------- ----------
Capital and
reserves
Called up share 6,260 4,419 1,639 1,639
capital
Share premium 48,630 32,413 21,660 21,660
account
Other reserves (779) (779) 2,227 197
Profit and loss (1,684) (1,684) (821) (1,373)
account
-------- ---------- ---------- ----------
Equity 52,427 34,369 24,705 22,123
shareholders' -------- ---------- ---------- ----------
funds
Note:
The pro forma balance sheet has been included to show the effect of the Placing
and Open Offer (as referred to in the Chairman's statement) that was completed
on 21 August 2003 on the consolidated balance sheet of the Group as at 30 June
2003. The pro forma balance sheet has been prepared for illustrative purposes
only and, because of its nature, it may not give a true picture of the financial
position of the Group as at date of this Interim Statement. The pro forma
balance sheet does not take into account the trading results of the Group since
30 June 2003 or any capital expenditure or other movements in working capital
since that date.
Group cash flow statement
6 months ended 6 months ended Year ended 31
30 June 2003 30 June 2002 December 2002
#000 #000 #000
Note Unaudited Unaudited Audited
------------------------- ---------- ---------- ---------
Net cash inflow from 4 882 120 461
operating activities ---------- ---------- ---------
Returns on investments
and servicing of
finance
Interest paid (657) (624) (1,163)
Interest paid by - (19) (22)
discontinued activity
Interest received 4 5 27
---------- ---------- ---------
Net cash outflow from
returns on investments
and servicing of (653) (638) (1,158)
finance ---------- ---------- ---------
Tax paid (401) (3) (156)
---------- ---------- ---------
Capital expenditure and
financial investment
Purchase of intangible (2,843) (1,036) (2,184)
fixed assets
Purchase of tangible (13,481) (2,706) (5,385)
fixed assets
Purchase of tangible
fixed assets by
discontinued
activity - (43) (41)
Disposal of tangible - - 122
fixed assets
Disposal of 12 - -
investments ---------- ---------- ---------
Net cash outflow from
capital expenditure
and financial (16,312) (3,785) (7,488)
investment ---------- ---------- ---------
Financing
Issue of ordinary share 13,899 - -
capital
Share issue costs (366) - -
Borrowings raised 15,035 3,302 12,382
Repayment of (11,275) (182) (4,956)
borrowings
---------- ---------- ---------
Net cash inflow from 17,293 3,120 7,426
financing ---------- ---------- ---------
Increase/(decrease) in 5 809 (1,186) (915)
cash ---------- ---------- ---------
Statement of total recognised gains and losses
and reconciliation of movements in shareholders' funds
6 months ended 6 months ended Year ended 31
30 June 2003 30 June 2002 December 2002
#000 #000 #000
Statement of total recognised Unaudited Unaudited Audited
gains and losses ---------- ---------- ---------
-------------------------
Loss for the period (311) (1,680) (2,232)
Currency translation
difference on foreign
currency
net investment (976) (1,435) (3,465)
---------- ---------- ---------
(1,287) (3,115) (5,697)
---------- ---------- ---------
6 months ended 6 months ended Year ended 31
30 June 2003 30 June 2002 December 2002
Reconciliation of movements #000 #000 #000
in shareholders' funds Unaudited Unaudited Audited
------------------------- --------- ---------- -----------
Loss for the period (311) (1,680) (2,232)
Dividends paid and proposed - - -
---------- ---------- ---------
(311) (1,680) (2,232)
Other recognised gains and (976) (1,435) (3,465)
losses relating to the
period
---------- ---------- ---------
(1,287) (3,115) (5,697)
New shares issued 13,533 - -
---------- ---------- ---------
Net increase/(decrease) in 12,246 (3,115) (5,697)
shareholders' funds
Opening shareholders' funds 22,123 27,820 27,820
---------- ---------- ---------
Closing shareholders' funds 34,369 24,705 22,123
---------- ---------- ---------
Notes to the interim accounts
1 Accounting policies and basis of presentation
The interim financial information has been prepared on the basis of accounting
policies consistent with those set out in the Group's statutory accounts for the
year ended 31 December 2002. The interim financial information has not been
audited nor has it been reviewed under Bulletin 99/4 of the Auditing Practices
Board. The above unaudited financial information does not amount to full
accounts within the meaning of Section 240 of the Companies Act 1985. Full
accounts for the year ended 31 December 2002, which included an unqualified
auditors' report, have been filed with the Registrar of Companies.
2 Taxation
The taxation charge for the period has been estimated from the expected taxable
results of the Group after taking into account losses brought forward and other
available reliefs and takes into account overseas taxes deducted at source under
the terms of the production sharing agreements.
3 Earnings per share
Loss per share has been calculated by dividing the loss after taxation for the 6
months ended 30 June 2003 of #311,000 (2002 - loss #1,680,000) by the weighted
average number of shares in issue during the period of 31,594,778 (2002 -
16,390,765). Diluted earnings per share is not calculated as the share options
are anti-dilutive for earnings.
4 Reconciliation of operating profit to net cash flow from
operating activities
6 months ended 6 months ended Year ended 31
30 June 2003 30 June 2002 December 2002
#000 #000 #000
Unaudited Unaudited Audited
-------------------------- ---------- ---------- ------------
Operating profit/(loss) 743 (1,039) (611)
Depletion 526 520 958
Depreciation 13 174 173
Non-cashflow from disposal of - - 2,780
subsidiary
Changes in working capital (400) 465 (2,839)
and other non-cash items
---------- ---------- ----------
Net cash inflow from 882 120 461
operating activities ---------- ---------- ----------
5 Reconciliation of net cash flow to movement in net debt
6 months ended 6 months ended Year ended 31
30 June 2003 30 June 2002 December 2002
#000 #000 #000
Unaudited Unaudited Audited
-------------------------- ---------- ---------- ------------
Increase/(decrease) in cash 809 (1,186) (915)
in the period
Cash flow from movement in (3,760) (3,120) (7,426)
debt
---------- ---------- -----------
Change in net debt resulting (2,951) (4,306) (8,341)
from cash flows
Non cashflow from disposal of - - 328
subsidiary
Foreign exchange movement 55 626 1,046
---------- ---------- -----------
Movement of net debt in the (2,896) (3,680) (6,967)
period
Net debt at 1 January 2003 (24,674) (17,707) (17,707)
---------- ---------- -----------
Net debt at 30 June 2003 (27,570) (21,387) (24,674)
---------- ---------- -----------
Glossary of terms
bbl barrel of oil or condensate
Bcf billion cubic feet of gas
bcpd barrel of condensate per day
boe barrel of oil equivalent
boepd barrel of oil equivalent per day
bopd barrel of oil or condensate per day
EBITDA earnings before interest, taxation, depletion, depreciation and
amortisation
Mbbl thousand barrels of oil or condensate
Mboe thousand barrels of oil equivalent
Mcf thousand cubic feet of gas
MMbbl million barrels of oil or condensate
MMboe million barrels of oil equivalent
MMcf million cubic feet of gas
MMcfpd million cubic feet of gas per day
MMcfepd million cubic feet of gas equivalent per day
This information is provided by RNS
The company news service from the London Stock Exchange
END
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