🕐28.09.09 - 08:12 Uhr
PET RNS 280909 Interim Results 2009
28th September 2009
Interim Results for the Six Month Period to 30th June 2009
Iraq remains the focus of Petrel.
The country has the best natural resources play worldwide, but it is a complicated place to do business.
No one has more recent practical experience or understands the potential and challenges of the country better than Petrel.
The position of the Petrel/Makman contract on the Subba and Luhais oilfield development has not changed in recent months.
There is ongoing contact between the partners, but agreements accepted by Petrel are not being implemented.
There is a solution to this problem.
We will continue to talk to the parties involved and to new parties who believe that they can broker a settlement.
In the meantime, development at Subba and Luhais is at a standstill, while nothing is happening on our other interests; Block 6 and Merjan.
Meanwhile, progress is being made in Jordan, where protracted farm out discussions continue.
Our technical and geological analysis has been accepted by the potential partner.
The challenging capital market conditions of the past twelve months have made capital raising difficult for the partner.
Let me once again try to explain the current situation in Iraq.
Iraqi oil output has fallen since 1990.
But State producing companies have done well to stabilise output at c.
2.5 million barrels per day.
While well below pre-2003 levels, this has to be seen in terms of decades of strife, sanctions and under-investment.
Security continues to improve.
Gradual withdrawal of international forces helps re-establish Iraqi sovereignty and legitimacy.
Regional tensions have reduced with the new US Administration.
Neighbours are now working more closely with the Iraqi authorities.
As of September 2009, no one is sure how the laws, contracts and general government will evolve.
The understandable preference of the Iraqi authorities is to drive the best bargain for their citizens.
For historical reasons, there is public suspicion of the super-major oil companies.
Hence, the attempts to develop the oil industry by means of service contracts.
Such an approach is normal in the region, but not suitable for a country that has Iraq’s recent history.
The Oil Ministry has been active.
Several deals have been announced, but none have gone smoothly.
In the recent bid round, the lowest bids were from emerging National Oil Companies.
But these enterprises do not have the technology and have not demonstrated the performance that Iraq rightly demands and needs.
The bid round process was off to a shaky start this June when the bids deviated widely from Ministry expectations.
Only a BP-led consortium concluded a deal, and it is unlikely that this will be implemented to the satisfaction of both parties.
Service contracts do not align the interests of the players or guarantee access to the best technology to maximise recovery from reservoirs.
The recent bid round did provide valuable information.
The majors submitted bids based on increased production.
The targets proposed by the majors were impressive.
The BP consortium expected to increase output by nearly 2 million barrels daily on the Rumaila field alone – effectively doubling Iraqi exports through just one project! This confirms Petrel’s long held belief that Iraqi oil potential is world class, but it needs modern technology, international capital and skilled management to unlock the potential.
Persuading the Iraqi authorities that 80% of a big cake is better than 95% of a smaller cake is the challenge.
The forthcoming second round will face similar difficulties to the first.
Iraq remains a challenging location.
Companies will only invest when returns are adequate.
The current legal situation is further complicated by attempts of regional authorities in Iraq to extend their influence into areas properly belonging to the central Government.
This exacerbates nationalism and complicates matters.
Attempting to bypass the legitimate sovereign authorities is not a sensible or ethical way to invest.
This leads to political sensitivities that impede the cutting of pragmatic deals that would rapidly boost production.
We expect most issues to clarify in the coming months.
Divisions among the policy-making parties probably require democratic endorsement in the upcoming elections in January.
It remains unclear how these negotiations will play out.
The opportunities in Iraq and the position of Petrel encouraged UK institutions to invest in Petrel.
In May, some £1,840,500 was subscribed at 45p a share.
The opportunity in Iraq is greater than ever.
Iraqi oil is low risk and low cost.
Reservoirs are large and infrastructure is extensive.
OPEC quotas are not a constraint.
Petrel is determined to stay in Iraq to participate in the growth.
We must resolve the current impasse and move on.
Efforts continue.
Petrel has survived through all the challenges, demonstrated its commitment and resilience, and expects to share in the rewards.
John Teeling
Chairman
25th September 2009
Petrel Resources plc
Financial Information (Unaudited)
CONDENSED CONSOLIDATED INCOME STATEMENT
Six Months Ended
Year Ended
30 June 09
30 June 08
31 Dec 08
unaudited
unaudited
audited
€000
€000
€000
REVENUE
0
8,370
8,233
Cost of sales
0
(8,370)
(8,233)
GROSS PROFIT
0
0
0
Operating costs
(280)
(246)
(568)
Foreign exchange (Loss) / Profit
48
(224)
(286)
OPERATING LOSS
(232)
(470)
(854)
Investment revenue
4
53
92
LOSS BEFORE TAXATION
(228)
(417)
(762)
Income tax expense
0
0
0
LOSS FOR THE PERIOD
(228)
(417)
(762)
LOSS PER SHARE - basic and diluted
(.31c)
(.58c)
(1.05c)
CONDENSED CONSOLIDATED BALANCE SHEET
30 June 09
30 June 08
31 Dec 08
unaudited
unaudited
audited
€000
€000
€000
NON-CURRENT ASSETS
Intangible assets
4,937
4,611
4,782
CURRENT ASSETS
Construction contracts
7,097
2,623
5,316
Trade and other receivables
38,153
35,300
38,685
Cash and cash equivalents
1,337
1,606
559
46,587
39,529
44,560
TOTAL ASSETS
51,524
44,140
49,342
CURRENT LIABILITIES
Project advance payments
(13,721)
(12,315)
(13,932)
Bank borrowings
(22,940)
(18,247)
(21,560)
Trade and other payables
(974)
(1,052)
(1,807)
(37,635)
(31,614)
(37,299)
NET CURRENT ASSETS
8,952
7,915
7,261
TOTAL ASSETS LESS CURRENT LIABILITIES
13,889
12,526
12,043
EQUITY
Share capital
18,742
16,596
16,596
Reserves
(4,853)
(4,070)
(4,553)
TOTAL EQUITY
13,889
12,526
12,043
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Six Months Ended 30 June 09
Share
Share
Other
Translation
Retained
Total
Capital
Premium
Reserves
Reserves
Losses
Equity
€000
€000
€000
€000
€000
€000
As at 1 January 2008
903
15,693
214
0
(3,867)
12,943
Loss for the period
(417)
(417)
As at 30 June 2008
903
15,693
214
0
(4,284)
12,526
Loss for the period
(139)
(344)
(483)
As at 31 December 2008
903
15,693
214
(139)
(4,628)
12,043
Shares issued
55
2,137
2,192
Share issue expenses
(46)
(46)
Loss for the period
(72)
(228)
(300)
As at 30 June 2009
958
17,784
214
(211)
(4,856)
13,889
CONDENSED CONSOLIDATED CASH FLOW
Six Months Ended
Year Ended
30 June 09
30 June 08
31 Dec 08
unaudited
unaudited
audited
€000
€000
€000
CASH FLOW FROM OPERATING ACTIVITIES
Loss for the period
(228)
(417)
(762)
Investment revenue recognised in loss
(4)
(53)
(92)
Exchange movements
(357)
(779)
273
(589)
(1,249)
(581)
Movements in Working Capital
(2,293)
(5,479)
(9,184)
CASH USED IN OPERATIONS
(2,882)
(6,728)
(9,765)
Investment revenue
4
53
92
NET CASH USED IN OPERATING ACTIVITIES
(2,878)
(6,675)
(9,673)
INVESTING ACTIVITIES
Payments for intangible assets
(227)
(421)
(731)
NET CASH USED IN INVESTING ACTIVITIES
(227)
(421)
(731)
FINANCING ACTIVITIES
Proceeds from issue of equity shares
2,192
0
0
Share issue costs
(46)
0
0
NET CASH GENERATED BY FINANCING ACTIVITIES
2,146
0
0
NET DECREASE IN CASH AND CASH EQUIVALENTS
(959)
(7,096)
(10,404)
Cash and cash equivalents at beginning of the period
(21,001)
(10,324)
(10,324)
Effect of exchange rate changes on cash held
357
779
(273)
CASH AND CASH EQUIVALENT AT THE END OF THE PERIOD
(21,603)
(16,641)
(21,001)