Preliminary Results (6991I)

TIDMCOP

RNS Number : 6991I

Circle Oil PLC

20 June 2011

20 June 2011

Circle Oil Plc

(The "Company") and its Subsidiaries ("Circle" or the "Group")

Preliminary results for the year ended 31 December 2010

Circle Oil Plc (AIM: COP), the international oil and gas exploration, development and production company, is pleased to announce its results for the year ended 31 December 2010.

-- Circle records first full year Operating Profit of US$12.58 million (2009 Operating Loss: US$0.34 million)

-- Net Profit of US$10.36 million (2009 Loss: US$13.51 million)

-- Revenue from oil and gas sales of US$44.39 million, an increase of 194% on 2009 (2009: US$15.09 million)

-- Successful placing to raise US$66.4 million

-- 100% success in five well Egyptian drilling campaign

-- 100% success rate from tested Moroccan wells in second exploration drilling campaign

-- Independent Resource Assessment increases Egyptian recoverable resource estimate by 65.10%

-- Independent Resource Assessment increases Moroccan recoverable resource estimate by 83.50%

-- New pipeline infrastructure installation currently underway to increase Moroccan production

Thomas Anderson, Chairman of Circle, said:

"2010 was a milestone year for Circle as we moved into profitability. We have made considerable progress in our licence areas. Our model of moving rapidly from exploration and discovery to early production has proved to be highly successful and is allowing us to work with our partners to develop existing assets and to put in place the funding for future development."

For further information contact:

Circle Oil Plc ([phone])

Professor Chris Green, CEO

Brendan McMorrow, CFO

Evolution Securities ([phone])

Chris Sim

Neil Elliot

Fox-Davies Capital ([phone])

Daniel Fox-Davies

Philip Davies

David Porter

Citigate Dewe Rogerson ([phone])

Martin Jackson

Kate Lehane

Murray Consultants ([phone])

Joe Murray

Joe Heron

Chairman's Statement

The Company has enjoyed another successful year. Further progress has been made in consolidating our position as a significant explorer and producer of oil and gas in Egypt and Morocco. Independent assessment has shown a considerable growth in our asset base in our Egyptian and Moroccan licences. Our producing assets in Egypt and Morocco provide a balanced portfolio of current revenue delivery and future opportunities for growth. Careful resource management and improvement of facilities, which are already being implemented, are helping us to maximise the resources that we have already discovered. There is also significant upside potential in our other assets, which will be instrumental in providing further upside for Circle's shareholders into the future.

Circle's acreage position and remarkable drilling success rate can be considered as an industry stand-out. I believe that the Company will continue to perform at this level throughout 2011 and into 2012, bolstered by the strong history of its drilling results and the experience of its management team.

The Company conducted an extensive drilling campaign in Morocco and Egypt throughout 2010. The drilling campaign was completed in Morocco in April 2011, whilst in the NW Gemsa Concession in Egypt, the ongoing appraisal and development drilling programme continues apace. To date, throughout 2010, and into early 2011 a total of nine wells have been completed and commercial hydrocarbons have been discovered and tested in eight of these wells, with one well in Morocco, which intersected gas, yet to be re-drilled as a result of encountering mechanical problems. In addition, one well in Egypt has been drilled as a water injector.

The entire Circle team warrants recognition for their skill and efforts in achieving this noteworthy drilling success rate. Although this could not have been achieved without the skill and expertise of Circle's technical team, it is the diligence and dedication of all our staff, associates and partners that has underpinned Circle's capacity to achieve such excellent results.

Operations

Morocco

Despite having to cope with heavy rainfall and intermittent flooding in Morocco, a five well campaign was finished in April 2011 with four tested commercial discoveries and well DRJ-6 from the 2009 drilling campaign also being successfully tested. Well KAB-1, although encountering gas shows, experienced mechanical problems and is planned to be re-drilled during the next drilling campaign.

On the production front, ONZ-4 and ONZ-6 continued in production in 2010. Wells KSR-8 and KSR-9 were also put into intermittent production for long-term testing and to supply local energy requirements with the combined rate of flow from both wells varying between 1.5 to 2.5 MMscfd. Negotiations are close to finalisation with additional gas users in the area and we expect to increase our customer base as soon as the new gas pipeline is completed in 2H 2011. This should see gas off-take increasing from today's levels up to 7 to 8 MMscfd in the latter part of 2011. The addition of a small diameter link from the existing infrastructure to a new client is also close to completion and this will see an immediate uplift in production of another 1MMscfd in the next few weeks.

An updated resource report was compiled by RPS Energy at the start of this month and the new estimate of most likely (P50) URR of gas is 30.6 bcf. This, together with our own internal estimate of gas production and resources remaining to be produced, in areas not included in the report, of 1.5 bcf, gives a total of 32.1 bcf URR for the Sebou Block. This represents an increase of gas resources of 83.5% over the 2010 figure of 17.5 bcf URR.

We are presently acquiring more 3D seismic over our Moroccan acreage and plan to start our next Rharb drilling campaign in early 2012.

Egypt

In Egypt, we have continued with successful appraisal and development wells on the NW Gemsa block. Three oil producers and one water injection well were drilled in 2010 and further development drilling is ongoing for 2011. New facilities, including gas production and water injection, are being progressed to maximise production and recovery efficiency and these should be completed by the end of 2011. The successful implementation of these measures should see significant increases in production levels in 2012. Daily production currently between 7,000 and 8,000 bopd is being managed in accordance with good oil field practice and through to the end of December 2010, total gross production was 4.1 MMBO.

The recent political unrest in Egypt had little impact on the Company's operational activities. Production continued as normal and suffered no delay while drilling was suspended for a couple of days due to a delay in getting necessary supplies from Cairo.

The situation in Egypt has, however, resulted in delays in receiving payment for our oil sales to EGPC (Egyptian General Petroleum Company). At year-end the amount past due was US$10.78 million and since year-end this has increased further. We are currently in discussions with EGPC with a view to resolving this matter and reducing these receivables to more normalised levels.

The updated resource report compiled by RPS Energy took into account the results of the drilling and development activity up to, but not including Geyad-3. The report estimates total most likely (P50) URR at 33.2 MMBO and 38.1 bcf of gas, which together equates to 39.8 MMBOE URR. This constitutes a 65.1% increase over the 2010 figure of 24.1 MMBOE URR.

We are delighted with the success on our NW Gemsa block as drilling progresses and new facilities are installed to maximise both reserves and the long-term uplifted production capability of the field.

Tunisia

In Tunisia, we have been conducting work in planning for exploration wells on the onshore Grombalia and Ras Marmour permits. This drilling activity is likely to be conducted in 2H 2011. In addition, legacy 2D seismic data has been obtained on the offshore Mahdia permit and incorporated into our prospect evaluation. Drilling plans are in progress with mobilisation costs likely to be shared with another area operator for 2012.

Oman

In Oman, we commenced a 900 sq km 3D seismic campaign over the southern portion of our Block 49 onshore. This has been processed and is currently undergoing interpretation as further work is completed to improve our evaluation of prospectivity and reduce the risk for potential drilling locations.

In Block 52 offshore, we started a 2D marine seismic survey in December 2010 which acquired some 5,000 additional kms of 2D. The survey was completed in early 2011 and submitted for processing. Work in 2011 will concentrate on interpretation of the survey together with legacy data, to refine the leads into drillable prospects and then completing a farm-out proposal on the acreage.

Corporate

In March 2011, in accordance with EU regulations relating to events in Libya, the Company froze the shareholding of Libya Oil Holdings (17.75% holding) until further notice. As of the date of this report the shareholding remains frozen.

Outlook

In 2011 and into 2012, Circle intends to further its exploration and production programmes with continued drilling in Egypt through additional appraisal wells and injector support drilling.

In Morocco, we will complete the recently started 3D survey, prepare to commence a further drilling campaign and also enjoy the value added to our country operations due to our new pipeline, which is being laid initially between our Sebou permit and Kenitra.

The coming year will see more operational activity in Tunisia with the drilling of two commitment wells in our land permits in Grombalia and Ras Marmour and we also look forward to more operational progress in Oman .

The Company continues to seek out new projects to increase its exploration and production base by acquiring development, redevelopment projects or producing assets or fiscally and regionally attractive exploration assets. This is a difficult task but we are determined to uphold our stringent technical and commercial requirements, which we believe have evidenced themselves throughout our present portfolio.

I reiterate my confidence and enthusiasm that we remain on track to repeat our success going forward and in doing so praise our teams in all countries for their professionalism and valued contributions to the continuing evolution of the Company.

I am delighted once again, to thank you our shareholders, for your support and to sincerely thank all our staff, associates and partners for their continuing good work and commitment during the past year.

Thomas Anderson

Chairman

Financial Review

Results for the year

Revenues for 2010 from oil and gas sales were significantly up at US$44.39 million, an increase of over 194% from 2009 revenues. This increase in sales revenue was due to both an increase in volume of oil sales (up by 221% compared to the previous year) and gas sales (up by 37% compared to the previous year) and an increase in both the oil and gas price achieved over 2009. The average oil price achieved for 2010 was US$75.74 per BO versus US$65.90 per BO in 2009 while the average gas price achieved was US$7.43 per Mscf as against US$7.19 per Mscf in 2009.

Gross profit for the year was US$16.90 million as against US$7.37 million for 2009, an increase of 129%.

Operating costs, including exploration expenditure written-off, amounted to US$4.32 million and was down by US$3.40 million on the previous year which resulted in an operating profit for 2010 of US$12.58 million (2009: operating loss of US$0.34 million).

After net finance costs for the year amounting to US$2.18 million (2009: US$13.13 million) the Group recorded a net profit before tax of US$10.40 million for 2010 (2009: net loss of US$13.48 million).

Fundraising

Circle announced on 3 August 2010 that it had successfully raised gross proceeds of US$66.40 million (GBP42.50 million) through a placing of 141,666,667 new ordinary shares with both existing and new institutional investors. The proceeds raised were targeted to accelerate the Groups exploration activities, fund capital expenditure in both Morocco and Egypt and fund new ventures. Evolution Securities acted as sole book-runner while Fox Davies Capital acted as co-lead manager.

Cash flow

Net cash inflow from operating activities for 2010 amounted to US$8.98 million (2009: US$1.38 million).

Net cash used in investing activities relating to oil and gas assets amounted to US$49.01 million (2009: US$37.57 million) and comprised mainly of US$19.31 million invested in exploration and evaluation assets in Morocco and Oman while US$29.70 million was invested in production and development assets in Morocco and Egypt.

Net cash generated from financing activities totalled US$64.84 million (2009: US$24.42 million) and comprised mainly US$66.40 million from the share placing noted above, US$3.67 million from the exercise of share options less share issue costs of US$3.43 million and interest paid of US$1.8 million.

Group cash balances at year-end amounted to US$47.11 million (2009: US$22.33 million) of which US$ 2.25 million was in restricted accounts leaving US$44.86 million available for use. Current cash balances amount to US$28.60 million of which US$27.35 million is available for use.

Consolidated statement of financial position

Total assets for the Group at 31 December 2010 amounted to US$203.87 million (2009: US$130.04 million) and comprised mainly oil and gas assets of US$137.12 million, cash at bank of US$47.11 million and US$19.35 million of trade and other receivables.

Net assets amounted to US$158.87 million at year end (2009: US$80.95 million) while working capital was US$59.11 million (2009: US$21.40 million).

The significant strengthening in the Groups statement of financial position was due mainly to the August 2010 capital raising and net profits generated for the year.

Brendan McMorrow

Chief Financial Officer

Circle Oil PLC

CONSOLIDATED INCOME STATEMENT

FOR THE YEAR ENDED 31 DECEMBER 2010

 
                                          2010       2009 
                                        US$000     US$000 
 Revenue                                44,391     15,093 
 
 Cost of sales                        (27,490)    (7,721) 
 
 Gross profit                           16,901      7,372 
 
 Administrative expenses               (3,093)    (2,315) 
 
 Share option expense                    (576)    (1,496) 
 
 Pre-licence costs                       (300)          - 
 
 Exploration costs written-off           (281)    (4,932) 
 
 Foreign exchange (loss)/gain             (68)      1,027 
 
 Operating profit/(loss)                12,583      (344) 
 
 Finance revenue                         2,328        134 
 
 Finance costs                         (4,512)   (13,265) 
 
 Profit/(loss) before taxation          10,399   (13,475) 
 
 Taxation                                 (37)       (34) 
 
 Profit/(loss) for the year             10,362   (13,509) 
 
 Basic earnings/(loss) per share         2.19c    (3.66c) 
                                     =========  ========= 
 
 Diluted earnings/(loss) per share       2.18c    (3.66c) 
                                     =========  ========= 
 

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

FOR THE YEAR ENDED 31 DECEMBER 2010

 
                                                          2010       2009 
                                                        US$000     US$000 
 Profit/(loss) for the year                             10,362   (13,509) 
 
 Total income and expense recognised in other 
  comprehensive income                                       -          - 
 
 Total comprehensive income for the year - 
  entirely attributable to equity holders               10,362   (13,509) 
                                                ==============  ========= 
 

Circle Oil PLC

CONSOLIDATED statement of financial position AT 31 DECEMBER 2010

 
                                          2010       2009 
                                        US$000     US$000 
 Assets 
 Non-current assets 
 Exploration and evaluation assets      39,733     20,965 
 Production and development assets      97,384     74,767 
 Property, plant and equipment             140        210 
                                     ---------  --------- 
                                       137,257     95,942 
                                     ---------  --------- 
 
 Current assets 
 Inventories                               145         91 
 Trade and other receivables            19,350     11,675 
 Cash and cash equivalents              47,114     22,334 
                                        66,609     34,100 
                                     ---------  --------- 
 
 Total assets                          203,866    130,042 
                                     =========  ========= 
 
 Equity and liabilities 
 Capital and reserves 
 Share capital                           8,084      5,730 
 Share premium                         167,083    103,336 
 Other reserves                          6,658      5,999 
 Retained deficit                     (22,958)   (34,118) 
 
 Total equity                          158,867     80,947 
                                     ---------  --------- 
 
 Non-current liabilities 
 Convertible loan - debt portion        24,374     21,562 
 Derivative financial instruments       12,246     14,403 
 Decommissioning provision                 879        446 
 
 Total non-current liabilities          37,499     36,411 
                                     ---------  --------- 
 
 Current liabilities 
 Trade and other payables                7,463     12,650 
 Current tax                                37         34 
 
 Total current liabilities               7,500     12,684 
                                     ---------  --------- 
 
 Total liabilities                      44,999     49,095 
                                     ---------  --------- 
 
 Total equity and liabilities          203,866    130,042 
                                     =========  ========= 
 
 

Circle Oil PLC

CONSOLIDATED cash flow statement

FOR THE YEAR ENDED 31 DECEMBER 2010

 
                                                       2010       2009 
                                                     US$000     US$000 
 Operating activities 
 Net cash generated by operations                     8,979      1,377 
 Taxes paid                                            (40)       (21) 
 
 Net cash inflow from operating activities            8,939      1,356 
                                                  ---------  --------- 
 
 Cash flows from investing activities 
 Payments to acquire exploration and 
  evaluation assets                                (19,307)   (12,372) 
 Payments to acquire production and development 
  assets                                           (29,703)   (25,202) 
 Payments to acquire property, plant 
  and equipment                                        (84)       (51) 
 Interest received                                      165        480 
 
 Net cash used in investing activities             (48,929)   (37,145) 
                                                  ---------  --------- 
 
 
 Cash flows from financing activities 
 Issue of ordinary share capital                     70,070     28,177 
 Share issue costs                                  (3,432)    (1,958) 
 Interest paid                                      (1,800)    (1,800) 
 
 Net cash from financing activities                  64,838     24,419 
                                                  ---------  --------- 
 
 Increase/(decrease) in cash and cash 
  equivalents                                        24,848   (11,370) 
 
 Cash and cash equivalents at beginning 
  of year                                            22,334     32,670 
 
 Effect of foreign exchange rate changes               (68)      1,034 
 
 Cash and cash equivalents at end of 
  year                                               47,114     22,334 
                                                  =========  ========= 
 

Circle Oil PLC

STATEMENT OF CHANGES IN EQUITY

FOR THE YEAR ENDED 31 DECEMBER 2010

 
                                     Share-based 
                   Share     Share       payment   Translation   Retained      Total 
                 capital   premium       reserve       reserve    deficit     equity 
 Consolidated     US$000    US$000        US$000        US$000     US$000     US$000 
 
 At 1 January 
  2009             4,799    78,393         3,186           (3)   (20,621)     65,754 
 
 Issue of 
  share 
  capital            931    24,943             -             -          -     25,874 
 
 Share-based 
  payment              -         -         2,828             -          -      2,828 
 
 Reserve 
  transfer             -         -          (12)             -         12          - 
 
 Net loss for 
  the year             -         -             -             -   (13,509)   (13,509) 
 
 At 31 
  December 
  2009             5,730   103,336         6,002           (3)   (34,118)     80,947 
                ========  ========  ============  ============  =========  ========= 
 
 Issue of 
  share 
  capital          2,354    63,747             -             -          -     66,101 
 
 Share-based 
  payment              -         -         1,457             -          -      1,457 
 
 Reserve 
  transfer             -         -         (798)             -        798          - 
 
 Net profit 
  for the 
  year                 -         -             -             -     10,362     10,362 
 
 At 31 
  December 
  2010             8,084   167,083         6,661           (3)   (22,958)    158,867 
                ========  ========  ============  ============  =========  ========= 
 
 

NOTES TO THE FINANCIAL STATEMENTS

Basis of preparation

The financial statements have been prepared in accordance with International Financial Reporting Standards (IFRSs) and International Financial Reporting Interpretations Committee (IFRIC). They have also been prepared in accordance with the Companies Acts, 1963 to 2009 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.

The 2010 Annual Report will be available on the Company's website (www.circleoil.net) on 21 June 2011 and will then be posted to shareholders.

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 dates on which control over financial and operating policies and decisions is obtained. All intercompany transactions, balances, income and expenses have been eliminated in full on consolidation.

Basic and diluted earnings/(loss) per share

The calculation of the basic earnings/(loss) per share attributable to the ordinary equity holders of the parent is based on the following data:

 
                                                  2010       2009 
                                                US$000     US$000 
 Earnings 
 Profit/(loss) for the year attributable 
  to equity holders of the parent               10,362   (13,509) 
                                              ========  ========= 
 
 Number of shares                                 '000       '000 
 Weighted average number of ordinary shares 
  for the purposes of basic earnings per 
  share                                        473,689    368,825 
                                              ========  ========= 
 
 

Diluted earnings/(loss) 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 dilutive for the year ended 31 December 2010, which resulted in a decrease in earnings per share. The Group had total potential ordinary shares outstanding of 104,714,949 at 31 December 2010 (2009: 122,770,279).

Regrouping of comparatives

Certain comparative figures stated in this report have been regrouped to reflect current year figures.

In accordance with the guidelines of the AIM Market of the London Stock Exchange, Professor Chris Green, Chief Executive Officer of Circle Oil plc, an explorationist and geophysicist with over thirty years oil & gas industry 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.

Glossary of terms

 
 bcf      Billion cubic feet 
 BO       Barrels of oil 
 bopd     Barrels of oil per day 
 kms      Kilometres 
 MMBO     Millions of barrels of oil 
 MMBOE    Millions of barrels of oil equivalent 
 Mscf     Thousand standard cubic feet 
           of gas 
 MMscfd   Million standard cubic feet of 
           gas per day 
 Sq km    Square kilometres 
 URR      Ultimate Recoverable Resources 
 2D       Two dimensional 
 3D       Three dimensional 
 

Notes to Editors

Circle Oil Plc (AIM: COP) is an international oil & gas exploration, development and production Company with an expanding portfolio of assets in Morocco, Tunisia, Oman and Egypt with a combination of low-risk near-term production and significant exploration upside potential. The Company listed on AIM in October 2004.

Internationally, the Company has continued to expand its portfolio over the past 2 years and now has assets in the Rharb Basin, Morocco; the Ras Marmour Permit in southern Tunisia; the Mahdia Permit offshore Tunisia; the Grombalia Permit in northern Tunisia and the Zeit Bay area of Egypt. Circle also has the largest licence holding of any company in Oman. In addition to its prospective Block 52 offshore, Circle also has an ongoing exploration program in Block 49 onshore.

Circle's strategy is to locate and secure additional licenses 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 itself opt to use its own expertise to appraise reserves and bring assets into production, generating 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

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