RNS Number : 2809C
Dana Petroleum PLC
29 August 2008
DANA PETROLEUM plc
("Dana", "the Company" or "the Group")
Interim Results for the Six Months Ended 30 June 2008
Dana Petroleum, the independent oil and gas exploration and production company focused on
growth through international exploration and
the development of production in the North Sea and Egypt, reports its interim results for the
first half of 2008.
HIGHLIGHTS
Record levels of Production, Profits and Cashflow
* Record first half production of 43,147 boepd up 67%
* Turnover increased by 188% to a record high of £314.5 million
* Record Pre-tax Profit of £133.1 million up 138%, leading to Earnings Per Share of
69.95p
* More than threefold growth in cashflow from operations to a new high of £193.9
million
* Net debt further reduced to £9.0 million, lowering gearing to below 2%
Highly Successful Exploration Programme
* 7 wells drilled to date in 2008, yielding 4 new discoveries in North Sea and Egypt
* West and East Rinnes fields proved good quality sands and oil flow rates of 7,800
barrels per day. Rigs now contracted to drill
the South-East and South-West Rinnes structures
* First well on West El Burullus, offshore Nile delta, discovered gas with flow rates
up to 27 million cubic feet per day. Rig
contracted for 3 further wells in this PSC.
* Exciting 3 well Gulf of Suez drilling programme about to commence. Akhenaton-1 well
is first to drill, on the South October PSC
* Drilling site in preparation onshore Morocco at Bouanane, plan to spud by end of
year
* Norway drilling on Fulla target expected fourth quarter 2008
* Total of 17 wells to be drilled during 2008 with all rigs contracted
Development Programme on Schedule - Ensuring Further New Production Growth
* East Zeit oil production more than doubled through successful new drilling and
workovers
* Grouse oil field in Greater Kittiwake Area, first oil scheduled for early 2009
* Babbage gas field in UK Southern North Sea, first gas anticipated Q1 2010
* E18 gas field in Dutch North Sea, first production scheduled for Q3 2009
Outlook
* Group production for 2008 on target to average between 40,000 and 45,000 boepd,
representing more than a 30% growth over 2007
* 10 wells scheduled for second half of 2008
* Total of up to 20 wells expected to be drilled during 2009
* Awaiting results of extensive applications made in the UK 25th Licencing Round
* Evaluating licence applications for Norwegian APA and 20th Licencing rounds
* New production and exploration opportunities being actively pursued
* Company's un-hedged position maximises the benefits from continued commodity price
strength
Tom Cross, Chief Executive of Dana, commented:
"Dana's excellent operational performance in the first six months of 2008 has delivered
major increases in oil and gas production,
profits and cashflow which have all surged to new record highs. The Group is now producing
from 30 oil and gas fields and undertaking three
new field developments, which will come onstream from 2009. In addition, the Company is
working on a further 21 appraisal and potential
development projects.
2008 is the most active year of exploration in Dana's history. A total of 17 wells are
scheduled, focused on the UK, Norway and Egypt.Already this year there have been significant new oil discoveries at West Rinnes and East
Rinnes in the UK and an important gas discovery at
West El Burullus offshore Egypt. Rigs have now been secured to drill a number of additional
targets in these particular areas and overall 10
wells are planned in the second half of 2008.
The Company is in a very strong financial position, significantly benefiting from high
commodity prices and our unhedged position. With
a high quality and balanced portfolio of growth opportunities and an exciting drilling
programme ahead, we have every reason to look forward
to the future with confidence."
29 August 2008
Enquiries:
Dana Petroleum plc Tom Cross, Chief Executive 01224 652400
David MacFarlane, Finance Director 01224 652400
Stuart Paton, Technical & Commercial 01224 652400
Director
College Hill Associates Nick Elwes / Paddy Blewer 020 7457 2020
DANA PETROLEUM PLC
Interim Results for the Six Months Ended 30 June 2008
CHAIRMAN'S AND CHIEF EXECUTIVE'S STATEMENT
OVERVIEW
It is pleasing to report that excellent progress has been made across all the key areas of
the Company's business during the first half
of 2008. This has led to the delivery of record interim results which, on an underlying basis,
exceed the results achieved for the 2007 full
year.
Group production for the 2008 full year remains on target in the 40,000 to 45,000 boepd
range with solid contributions from across the
Group's portfolio of 30 producing fields in the North Sea and Egypt. This will represent
year-on-year growth of over 30%. Future production
growth will be assured by three new development projects, sanctioned during the reporting
period, which are all expected onstream from 2009.
2008 will be the most active year of exploration in Dana's history with 17 exploration and
appraisal wells planned for drilling this
year. Already in 2008, there have been significant oil discoveries at West Rinnes and East
Rinnes and an important gas discovery at West El
Burullus. The Company has accelerated the number of exploration wells being drilled whilst
remaining focused on building the breadth and
quality of its exploration portfolio. Delivery of the extensive exploration programme will
continue at the current rate through the rest of
2008 and 2009.
RESULTS
Average working interest production to Dana for the period was up 67% to 43,147 boepd,
which allied to the strong commodity price
environment resulted in a record Group turnover for the first half of 2008 of £314.5 million.This represented a growth of some 188% over
the same period in 2007, and also exceeded the full year out-turn for 2007. Liquids accounted
for 69% of total production and gas for 31%
which was higher than anticipated and reflects a stronger than expected contribution from the
Cavendish gas field in the Southern North Sea.
Profit before tax for the period was a record £133.1 million compared to £55.8 million
for the corresponding period last year, a 138%
improvement in the Company's earnings performance. This was after taking a £20.0 million
write-down in respect of unsuccessful exploration
expenditure. On an underlying basis the first half performance also outstripped the equivalent
earnings metric for the 2007 full financial
year.
The Group's effective tax rate for the period was 54.6% resulting in a profit after tax of
£60.4 million (1H07 : £27.2 million).
Consequently, first half 2008 earnings per share rose sharply to 69.95p (1H07 : 31.81p) an
increase of 120%.
Cash flow from operations increased more than three-fold to a new interim period high of
£193.9 million (1H07 : £62.7 million). After
investment and financing activity of £109.8 million and £36.2 million respectively, the
Group's cash and cash equivalents increased by £26.5
million over the first six months of the year. The Group closed the reporting period with cash
and cash equivalents of £142.5 million and
reported debt of £151.5 million. The resulting net debt position at the interim stage of just
£9.0 million reflects a significant
improvement of £62.3 million since the end of 2007 (£71.3 million) and a mid-year gearing
ratio of just under 2%. The Company is therefore
very well positioned to meet the future capital requirements of its expanding exploration and
development programme.
REVIEW OF OPERATIONS
Production
Average working interest production for the first half of 2008 was 43,147 boepd with 77.7%
delivered from the North Sea and the balance
from Egypt. This highlights the benefits of a portfolio approach, producing from a total of 30
fields. In the UK, strong contributions came
from the Otter and Hudson fields in the Northern North Sea and also from Dana's recently
completed developments, the Cavendish and Enoch
fields, which were brought onstream in 2007. These fields have exceeded production
expectations in the year to date. This mitigated
operational issues on the Mallard field in the Greater Kittiwake Area (GKA), which have
resulted in this field being shut-in for the past
few months pending a planned rig intervention, due to take place in November of this year. The
failure of a compressor on the Claymore
platform and lower well performance on Johnston also constrained production output from these
fields.
There was also excellent performance during this period from the Egyptian fields. Offshore
Gulf of Suez, Dana has recently completed
drilling the C2 well in the East Zeit field (Dana 100%). C2 was a new well targeting the
Nubia, Kareem and Nukhul reservoirs. Good quality
sands were found in each reservoir, with over 200 feet of net hydrocarbon bearing sands in the
primary Nubia target. The Company has just
completed the well and tied it into the production facilities on the East Zeit platform.Initial flowrates are around 5,000 bopd of working
interest production to Dana.
Following completion of C2, the IO3 jack-up rig was moved to workover the C1 well which
has successfully added about 2,000 boepd.Encouraged by the success of C2 and C1, Dana is working up opportunities for an extensive long
term work programme on the East Zeit field to
enhance future production.
The excellent operational performance on wells C2 and C1 is directly attributable to the
Dana Egypt team and its industry partners, who
working together are building a substantial and valuable business in Egypt.
Having completed C1 the IO3 jack-up rig has moved to drill the Dana operated Akhenaton-1
exploration well in the South October
concession (Dana 65%). It will then go on to drill the first well in the South East July
concession (Dana 40%). Taken together with further
exploration drilling in the Gulf of Suez and likely future infill potential in the East Zeit
field, Dana has identified sufficient work
opportunities for the IO3 rig in the Gulf of Suez for at least the next 18 months.
There has also been an active development programme in each of Dana's non-operated
production concessions in Egypt, which provide
attractive upside from low cost developments. In the Western Desert Qarun and East Beni Suef
concessions, some 13 workovers have been
undertaken so far this year. This is in addition to drilling two development wells and one
exploration well. This intensive campaign is
building production in each of these concessions. It has also added additional reserves and
provided encouragement for pursuing further
targets, all at a time of very high oil prices. Activity levels are expected to remain high in
the non-operated licences in Egypt for the
rest of 2008, with a total of six onshore development wells planned in the Western Desert at
the Qarun, East Beni Suef and West Abu el
Gharadiq concessions.
Group production for the 2008 full year continues to be on target in the 40,000-45,000
boepd range. The final out-turn production
average will be determined by field performance and operational uptime across the portfolio.The Company remains unhedged with respect to
its oil and gas sales and continues to gain maximum benefit from the strong commodity price
environment.
Development Projects
In 2007, the Enoch and Cavendish fields were brought onstream and production performance
to date has exceeded expectations. During the
first half of 2008, the Company has progressed three further new field developments :-
* The Grouse oil field in the UK Central North Sea (Dana 50%), with first oil
scheduled for early 2009. This project is progressing
well and is expected to deliver high value incremental production as a tie-back to the
Kittiwake platform.
* The Babbage gas field in the UK Southern North Sea (Dana 40%) has first gas sales
planned for Q1 2010. The GSF Labrador rig has
recently been contracted for development drilling, and the first of 3 development wells is
expected to commence in early 2009.
* The E18 gas field in the Dutch North Sea (Dana 5%) is being developed as a tie-back
to the F16-E platform with first production
targeted for Q3 2009. Although a relatively small equity participation, given the link of
Dutch gas prices to oil prices and the recent high
M&A prices paid for Dutch gas assets, this will nonetheless be a valuable addition to the Dana
portfolio.
In addition, Dana, as operator, continues to drive forward the joint Barbara/Phyllis gas
field development in UK Central North Sea.Engineering studies focused on host platform selection are progressing well with project
sanction expected in the first half of 2009 and
first gas scheduled for Q3 2011 to coincide with the expected ullage capacity in the
infrastructure systems.
A decision on appraisal of the Christian field in the GKA is expected during the second
half of 2008 and commitments have already been
made for the long lead items necessary for such drilling.
The Group is working hard to ensure that other potential development projects within its
existing portfolio are accelerated to augment
future production growth. In total, there are currently over 20 discovered oil and gas fields
being appraised for potential future
development.
Exploration and Appraisal
A substantial and balanced programme of drilling for new reserves is central to Dana's
business model. This has been achieved by
applying extensively for licences in government bid rounds as well as undertaking commercial
transactions or asset trades where appropriate
to leverage into additional drilling opportunities.
The Company has already drilled a total of seven exploration wells in 2008, with
significant discoveries at West Rinnes and East Rinnes
in the UK and at West El Burullus, offshore Egypt. A fourth, smaller oil discovery (at Azhar)
was recently made onshore Egypt and is being
tied in for production.
West Rinnes and East Rinnes in the Northern North Sea (Dana 100%) proved good quality
Brent reservoir sands, excellent quality oil and
high flow rates of 7,800 barrels per day. These discoveries are located just 5 kilometres from
the Dana operated Hudson producing oil field
and 2.5 kilometres from the Company's Melville oil field. The Rinnes discoveries, are now the
third and fourth oil fields under Dana's
operatorship in this prolific area of the North Sea. Technical evaluation is ongoing,
including re-mapping of the Rinnes area following the
two wells. Current estimates of the recoverable oil reserves in the Rinnes area are in the
range of 50-60 million barrels of oil, depending
on the assumptions on used for development scenarios.
Following this initial exploration success, the Company has identified further prospects
in this area and has now secured the Stena Spey
rig to drill South-East Rinnes in late 2008 and the Byford Dolphin rig to drill South-West
Rinnes in early 2009. These two structures each
have pre-drill reserve estimates of 10-15 million barrels and have been significantly derisked
following the successful drilling on West and
East Rinnes. Taking together the Rinnes discoveries, the Melville field, the two near term
Rinnes prospects and remaining reserves in the
Hudson field, the total reserves potential in this area, which is controlled by Dana, is in
the range 75-105 million barrels. Dana's partner
in this area has approved the accelerated exploration programme and will participate in the
forward drilling, as a result Dana's interests
in the SE and SW Rinnes wells will be 65%.
At West el Burullus, offshore Nile Delta (Dana 50%), the WEB-1X well was successfully
drilled to 2,403 metres, targeting a Pliocene
prospect consisting of a turbidite sandstone channel system. The well encountered good quality
gas bearing sands and an extensive set of
wireline logs were run to maximise the reservoir data acquired on this important discovery. A
comprehensive multi-flowrate drill-stem test
of the reservoir sequence was completed, which flowed at rates of up to approximately 27
mscfd. The well flowed very strongly with high
downhole pressures despite the limitations of the temporary well completion and test equipment
used on the jack-up drilling rig.
Following analysis of the well results and the licence area, the joint venture partnership
has identified further attractive targets in
West El Burrullus PSC area. A rig has now been secured to drill two further wells in West El
Burullus in 2009, most likely focused on the
Pliocene play tested by WEB-1X. Further drilling is planned in 2010, which may allow the Group
to test the prospectivity of the deeper
geological horizons, which has met with great success on adjacent acreage.
Of the remaining wells drilled in the first half of 2008, Bjorn in Norway, and West Gihan
in Egypt were dry, whilst Morgan in the UK
discovered oil, but volumes are currently considered to be non commercial.
Dana will be participating in a further 10 wells during the second half of 2008. One well
in each of the UK, Norway and Morocco and
seven wells in Egypt, where most are low cost onshore wells, which, in the case of success,
can be brought onstream very quickly. Important
operated wells include South-East Rinnes in the UK (Dana 65%), the Akhenaton prospect in the
South October concession (Dana 65%) in the Gulf
of Suez, to be followed by the South-East July-1 well in the Gulf of Suez (Dana 40%). These
three wells are all targeting significant
reserves upside for the Group.
The Company is also well advanced in its planning for drilling the large (1-1.5 tcf)
onshore Tafejjart gas prospect in the Bouanane
concession, onshore Morocco (Dana 50%). Key contracts have been agreed for the drilling rig
and road building to reach the drill site. Dana
will also participate in the Statoil operated Fulla prospect in Norway during the fourth
quarter (Dana 10%). Rigs are secured for all these
wells through the remainder of 2008.
Dana has entered into a Farm-in Option agreement with Eni Denmark BV in relation to
Licence 005 in the Faroe Islands. Dana will earn a
25% interest in the licence by paying certain of Eni's costs in relation to the Anne-Marie
well which will be drilled in mid 2009 and is
targeting a major prospect.
In total, Dana expects to drill between 15 and 20 wells in 2009 with some of the largest
targets being South-West Rinnes, the Tornado
and Anne-Marie prospects in the West of Shetland area, the Eitri prospect in the Jotun area of
Norway, the Trolla well in Norway and a
second well, Nefertitti in the South October concession in Egypt. These key wells, which are
all material to Dana in respect of potential
reserves additions, demonstrate the range of Dana's asset base and the ability of the Company
to develop the business across a portfolio of
proven petroleum basins. Drilling rigs have already been secured for these important 2009
wells.
Dana continues to build its exploration portfolio through licence round applications and
commercial transactions. The Company was
awarded seven blocks in Norway in January 2008, and is already committed to drilling the
Trolla prospect in 2009 on one of the newly awarded
blocks. The Group is currently acquiring seismic in a second recently awarded licence in the
Norwegian North Sea. The transaction with Det
Norske, announced in June 2008, added a new well in late 2008 on the Fulla prospect. Dana also
pre-qualified as operator in Norway early in
2008 and this enhanced status should allow access to further opportunities.
The Company has also recently bid for a significant number of blocks in the UK 25th
Offshore Round with results expected to be announced
later in 2008.
FINANCIAL COMMENTARY
Product Prices
The Group realised an average price of $107.26 per barrel of crude sold during the first
half of the year (1H07 : $62.33 per barrel) and
a gas price of 42.9p per therm (1H07 : 32.3p per therm). This compares to the average Brent
price in the period of $109.76 per barrel (1H07
: $63.22 per barrel) and an average NBP price of 56.3p per therm (1H07 : 29.3p per therm).Overall, the Group realised a revenue per boe
produced of $79.10 per barrel (1H07 : $46.00 per boe). This does however reflect a net
over-lift of production at the period end valued at
£8.9 million, (end 2007 : £18.9 million under-lift) which has increased revenue by $7.00 per
boe.
Operating Metrics
Cost of sales, excluding the £27.8 million charge (1H07 : £10.0 million benefit) for the
period movement in production inventories, was
£15.01 per boe (1H07 : £12.71 per boe). The opex component at £9.27 per boe (2007 : £9.30
per boe) was in line with expectations and the
guidance provided for the 2008 full year, as the Group realised the benefits of the lower cost
Egyptian assets mitigating the inflationary
pressures on operational budgets elsewhere. DD&A at £5.74 per boe was slightly higher than
the anticipated range of £5.40-5.60 per boe, but
this was due to a re-modelling of the fair value allocations for the 2007 acquisitions during
the period, which resulted in higher asset
values subject to DD&A (see Note 9 to the Financial Statements).
Administrative expenses at £1.29 per boe were higher than the £0.88 per boe anticipated
due principally to national insurance costs on
the exercise of share incentives and the requirement to accrue for cash-settled incentive
schemes on the basis of the share price at the end
of the reporting period of £19.00 per share (end 2007 : £13.92).
Taxation
The Group's effective tax rate for the period was 54.6% (1H07 : 51%) within the
anticipated range of 54-56% which continues to be the
expected range of taxation for the full year 2008, given the underlying portfolio mix.
Balance Sheet
The Group spent £92.1 million on capital investment during the period (1H07: £107.6
million). £73.3 million was spent on exploration
and appraisal activity, and £18.8 million on production and development projects. The Group
continues to project a 2008 full year capital
spend of approximately £200 million on its existing asset portfolio, including those
acquisitions previously announced.
A further £16.0 million was invested in a series of market purchases of the shares of
Faroe Petroleum plc, which increased the Group's
overall investment in that company to 27.5% (see Note 12 to the Financial Statements).
During the first half of the year the Group also re-paid a further $75 million of bank
debt, leaving $75 million of bank debt
outstanding. An additional $25 million has since been re-paid after the end of the reporting
period. The Group closed the reporting period
with cash and cash equivalents of £142.5 million and reported debt (bank debt plus
convertible bond) of £151.5 million. The resulting net
debt position of £9.0 million reflects a gearing ratio of just under 2%.
OUTLOOK
Dana has started 2008 very strongly by delivering exploration success, sanctioning new
field developments and achieving significant
production growth. This outstanding performance has been a direct result of the work done in
previous years through strategic new country
entries, commercial activity, new exploration licencing rounds, extensive in-house technical
work and new field developments.
We look forward to Dana's continued progress during the rest of this year through further
exploration drilling, new licence applications
in the UK, Norway and Egypt, an active work programme on existing fields and emerging
commercial opportunities.
Colin Goodall Tom Cross
Chairman Chief Executive
29 August 2008
DANA PETROLEUM plc
Interim Results
Group Income Statement for the six months to 30 June 2008
Restated
Audited
Unaudited Unaudited
Six months Six months Year to
to 30 June to 30 June 31 December
Note 2008 2007 2007
£'000 £'000 £'000
Revenue 314,498 109,149 311,499
Cost of Sales (145,679) (49,430) (155,081)
Gross Profit 168,819 59,719 156,418
Exploration & Evaluation: Gain - - 16,995
Exploration & Evaluation: Expense (19,977) (529) (14,689)
Foreign Exchange Gain/(Loss) 248 (1,026) (2,918)
Administrative Expenses (10,155) (2,607) (8,446)
Operating Profit on Ordinary
Activities before Interest and 138,935 55,557 147,360
Taxation
Interest Income 3,125 2,131 7,433
Finance Costs (8,991) (1,872) (11,733)
Profit on Ordinary Activities
before
Taxation 133,069 55,816 143,060
Taxation 8 (72,701) (28,662) (80,031)
Profit for the Financial Period 60,368 27,154 63,029
Attributable to:
Equity Holders of the Company 60,368 27,366 63,282
Minority Interests - (212) (253)
60,368 27,154 63,029
Earnings per Share - basic 6 69.95p 31.81p 73.55p
Earnings per Share - diluted 6 65.09p 31.42p 71.79p
DANA PETROLEUM plc
Interim Results
Group Balance Sheet as at 30 June 2008
Restated
At
At At
30 June 30 June 31 December
2008 2007 2007
Note £'000 £'000 £'000
Non-Current Assets
Intangible Assets 10 329,577 111,906 303,247
Property, Plant and Equipment 11 493,869 300,272 484,335
Deferred PRT/NPI 6,299 2,999 4,298
Investment in Associate 12 41,703 - -
Available-for-Sale Financial Assets - 15,911 30,032
Derivative Financial Instruments 383 1,915 1,149
871,831 433,003 823,061
Current Assets
Inventories 13,562 1,916 14,652
Trade and Other Receivables 117,557 50,194 79,293
Derivative Financial Instruments 1,532 1,532 1,532
Cash and Cash Equivalents 15 142,486 59,970 115,960
275,137 113,612 211,437
Total Assets 1,146,968 546,615 1,034,498
Current Liabilities
Trade and Other Payables 107,206 40,163 82,371
Borrowings and Financial Liabilities 14 37,685 - -
Current Tax 59,827 4,473 23,569
204,718 44,636 105,940
Non-current Liabilities
Trade and Other Payables 4,233 894 4,233
Borrowings and Financial Liabilities 113,822 - 187,257
Provision for Deferred Taxation 243,920 110,709 235,523
Provision for Liabilities and Charges 90,696 47,455 80,912
Accruals and Deferred Income 831 1,822 1,272
453,502 160,880 509,197
Net Assets 488,748 341,099 419,361
Equity
Equity Attributable to Equity Holders
Called-up Share Capital 13,032 12,907 12,907
Share Premium 80,986 79,369 79,369
Other Reserves 127,703 102,517 135,763
Cumulative Translation Reserve 12,163 (1,266) 7,852
Retained Earnings 254,864 145,521 183,470
488,748 339,048 419,361
Minority Interest - 2,051 -
Total Equity 488,748 341,099 419,361
DANA PETROLEUM plc
Group Statement of Changes in Equity for the six months to 30 June 2008
Cumulative
Share Capital Share Premium Other Reserves Translation
Reserve Retained Earnings Minority
Interests Total
Equity
(All Figures are in £'000)
Equity at 1 January 2007 12,901 79,301 101,351
(1,044) 117,177
2,316 312,002
Currency Translation - - -
(222) -
(53) (275)
Adjustments
Fair Value Movements on
Available-for-Sale Financial
Assets
- - 1,516
- -
- 1,516
Taxation thereon - - (350)
- -
- (350)
Total Income/(Expense)
Recognised Direct in Equity - - 1,166
(222) -
(53) 891
Profit/(Loss) for the
Financial Period - - -
- 27,366
(212) 27,154
Total Recognised Income and
(Expense) for the Period - - 1,166
(222) 27,366
(265) 28,045
Employee Share Scheme Credits - - -
- 653
- 653
Taxation thereon - - -
- 325
- 325
New Shares Issued 6 68 -
- -
- 74
Equity at 30 June 2007 12,907 79,369 102,517
(1,266) 145,521
2,051 341,099
Currency Translation - - -
9,118 -
10 9,128
Adjustments
Fair Value Movements on
Available-for-Sale Financial
Assets
- - 7,204
- -
- 7,204
Taxation thereon - - (1,934)
- -
- (1,934)
Minority Interest Released on
Impairment of Underlying Asset - - -
- -
(2,020) (2,020)
Total Income/(Expense)
Recognised Direct in Equity - - 5,270
9,118 -
(2,010) 12,378
Profit/(Loss) for the
Financial Period - - -
- 35,916
(41) 35,875
Total Recognised Income and
(Expense) for the Period - - 5,270
9,118 35,916
(2,051) 48,253
Employee Share Scheme Credits - - -
- 327
- 327
Taxation thereon - - -
- 1,706
- 1,706
Equity Component of
Convertible Bond Issue - - 28,613
- -
- 28,613
Convertible Bond Issue Costs - - (637)
- -
- (637)
Equity at 31 December 2007 12,907 79,369 135,763
7,852 183,470
- 419,361
Restated
DANA PETROLEUM plc
Group Statement of Changes in Equity for the six months to 30 June 2008 Continued
Cumulative
Share Capital Share Premium Other Reserves Translation
Reserve Retained Earnings Minority Interests
Total
Equity
(All Figures are in £'000)
Equity at 1 January 2008 12,907 79,369 135,763
7,852 183,470 -
419,361
Currency Translation
Adjustments - - -
4,311 - -
4,311
Fair Value Movements on
Available-for-Sale Financial
Asset transferred to
Investments - - (11,151)
- - -
(11,151)
Taxation thereon - - 3,091
- - -
3,091
Equity accounting adjustments
for associate - - -
- 6,843 -
6,843
Total Income/(Expense)
Recognised Direct in Equity - - (8,060)
4,311 6,843 -
3,094
Profit for the Financial - - -
- 60,368 -
60,368
Period
Total Recognised Income and
(Expense) for the Period - - (8,060)
4,311 67,211 -
63,462
Employee Share Scheme Credits - - -
- 1,640 -
1,640
Taxation thereon - - -
- 2,543 -
2,543
New Shares Issued 125 1,617 -
- - -
1,742
Equity at 30 June 2008 13,032 80,986 127,703
12,163 254,864 -
488,748
DANA PETROLEUM plc
Interim Results
Group Cash Flow Statement for the six months to 30 June 2008
Restated
Year to
Six months Six months
to 30 June to 30 June 31 December
2008 2007 2007
Note £'000 £'000 £'000
Operating Activities
Cash Generated from Operations 16 193,908 62,722 197,157
Taxation Paid (18,438) (5,314) (53,926)
Interest Received 3,125 2,131 7,433
Interest Paid (4,174) (327) (3,981)
Net Cash from Operating 174,421 59,212 146,683
Activities
Investing Activities
Expenditure on Intangible and
Property, Plant & Equipment (92,127) (107,607) (202,739)
Assets
Expenditure on Decommissioning (1,714) (26) -
Receipts on Sale of Intangible
and Property, Plant & Equipment - - 20,270
Assets
Payments to Acquire shares in
associate undertaking (15,979) - -
Payments to Acquire - - (7,744)
Available-for-Sale Assets
Payments to Acquire - - (161,124)
Subsidiaries
Net Cash Invested In Investing (109,820) (107,633) (351,313)
Activities
Financing Activities
Issue of Ordinary Share Capital 1,742 74 76
Drawdown of Borrowings - - 110,235
Repayment of Borrowings (37,932) - (36,163)
Proceeds on Issue of - - 138,346
Convertible Bonds
Net Cash Flow (used in)/from (36,190) 74 212,494
Financing Activities
Currency Translation (1,885) (1,561) (1,782)
Differences
Net Increase/(Decrease) in Cash 26,526 (49,908) 6,082
and Cash Equivalents
Cash and Cash Equivalents at 115,960 109,878 109,878
the Beginning of the Period
Cash and Cash Equivalents at 142,486 59,970 115,960
the End of the Period 15
DANA PETROLEUM plc
Notes to the Group Interim Financial Statements
1. Corporate information
Dana Petroleum plc is a public limited company incorporated in England and Wales and
domiciled in Scotland. The Company's shares are
publicly traded on the London Stock Exchange.
The principal activities of the Company and its subsidiaries are oil and gas exploration
and production.
2. Basis of preparation and accounting policies
Basis of preparation
This financial information comprises, the Group Balance Sheets as of 30 June 2008, 30 June
2007 and 31 December 2007 and related Group
Income Statements, Statements of Changes in Equity and Cash Flow Statements for the six months
ended 30 June 2008 and 30 June 2007 and for
the year ended 31 December 2007 and notes to the Group interim financial statements of Dana
Petroleum plc (hereinafter referred to as
'financial information').
The financial information has been prepared in accordance with the Listing Rules of the
Financial Services Authority and in accordance
with IAS34 - Interim Financial Reporting ('IAS34').
The financial information does not include all the information and disclosures required in
the annual financial statements, and should
be read in conjunction with the Group's financial statements for the year to 31 December
2007.
The financial information contained in this announcement does not constitute statutory
financial statements within the meaning of
Section 240 of the Companies Act 1985.
The comparative figures for the financial year ended 31 December 2007 have been restated
from those which were reported on by the
Company's auditors and were delivered to the registrar of companies. The auditors had issued
an unqualified opinion on those accounts. The
figures have been restated in accordance with IFRS 3 - Business Combinations whereby the Group
has restated the Goodwill and fair value
allocations on the acquisitions of Ener Petroleum ASA and Devon Energy, Egypt. See note 9 for
further detail.
Significant accounting policies
The financial information has been prepared in accordance with IAS34 for the first time
and the accounting policies adopted in the
preparation of the financial information are consistent with those followed in the preparation
of the Group's financial statements for the
year ended 31 December 2007, except for the adoption of the following new interpretation:
IFRIC 11 IFRS2 - Group and Treasury Share Transactions
This interpretation requires arrangements whereby an employee is granted rights to the
Group's equity instruments to be accounted for as
an equity-settled scheme, even if the entity buys the instruments from another party, or the
shareholders provide the equity instruments
needed. The adoption of IFRIC 11 had no impact on the Group.
3. Estimates
The preparation of the financial information requires management to make judgements,
estimates and assumptions that affect the
application of accounting policies and reported amounts of assets and liabilities, income and
expense. Actual results may differ from these
estimates.
In preparing the financial information, the significant judgements made by management in
applying the Group's accounting policies and
the key sources of estimation uncertainty were, unless otherwise disclosed, the same as those
that applied to the Group consolidated
financial statements as at and for the year ended 31 December 2007.
4. Financial risk management
The Group's financial risk management objectives and policies are consistent with those
disclosed in the Group consolidated financial
statements as at and for the year ended 31 December 2007.
5. Segment information
The group has one class of business, the exploration for and production of hydrocarbon
liquids and gas.
6. Earnings per share
The earnings per ordinary share of 69.95p (1H 2007 - 31.81p) is calculated on the profit
of £60,368,000 (1H 2007- £27,366,000) and on a
weighted average of 86,301,961 ordinary shares (1H 2007 - 86,026,777).
The diluted earnings per share of 65.09p (1H 2007 - 31.42p) is calculated on the profit
for the period of 60,368,000 (1H 2007 -
£27,366,000) plus the convertible bond interest (net of tax) of £2,719,000 (1H2007 - £Nil)
divided by 96,928,047 dilutive potential ordinary
shares (1H 2007 - 87,106,567), calculated as follows:
Six months to Six months to 30 June Year to
30 June 2007 31
2008 Decembe
r
2007
£000 £000 £000
Basic weighted average number 86,302 86,027 86,037
of shares
Dilutive potential ordinary
shares:
- Share option schemes 2,024 1,080 1,754
- Convertible bonds 8,602 - 3,936
96,928 87,107 91,727
7. Dividends paid and proposed
No dividend was paid or is proposed.
8. Income tax
The major components of income tax expense in the interim consolidated income statement
are:
Restated
Six months Six months Year to
to 30 June to 30 June 31 December
2008 2007 2007
£000 £000 £000
Current Taxation
PRT/NPI 9,059 3,068 8,846
Corporation tax 56,361 1,970 35,675
Current tax charge 65,420 5,038 44,521
Deferred Taxation
Deferred corporation tax 9,282 24,098 36,159
Deferred PRT/NPI (2,001) (474) (649)
Deferred tax charge 7,281 23,624 35,510
Total tax charge in the income 72,701 28,662 80,031
statement
9. Acquisition of Subsidiaries
a) Ener Petroleum ASA (subsequently renamed Dana Petroleum Norway AS)
The acquisition of Ener Petroleum ASA ('Ener') was completed in 2007 and the fair value
allocation was accounted for in 2007. The fair
value allocation of the former Ener assets was preliminary in nature and was reviewed in
accordance with the provisions of IFRS 3 - Business
Combinations and has been updated as a result of a detailed re-modelling review and for
revisions to tax provisions.
The changes to the fair value of the identifiable assets and liabilities of Ener are as
follows:
Revised fair values Initial fair value Increase to the
fair
recognised on value
recognised on
acquisition
acquisition
£000 £000
£000
Intangible exploration and 8,464 8,464
-
evaluation assets
Property, plant and equipment 61,254 51,179
10,075
Other current assets 10,184 10,184
-
Cash and cash equivalents 51,321 51,321
-
Trade and other payables (74,994) (78,465)
3,471
Deferred tax liabilities (60,613) (53,053)
(7,560)
included within goodwill
Provisions (24,712) (24,712)
-
Net Liabilities (29,096) (35,082)
5,986
Goodwill arising on 76,263 82,249
(5,986)
acquisition
Total Consideration satisfied 47,167 47,167
-
by cash
The income statement for the second half of 2007 was impacted, increasing profit for the
financial period by £1,189,000. The
corresponding comparatives have been restated accordingly.
b) Devon Energy, Egypt
The acquisition of Devon Energy, Egypt ('Devon') was completed in 2007 and the fair value
allocation was accounted for in 2007. The fair
value allocation of the former Devon assets was preliminary in nature and was reviewed in
accordance with the provisions of IFRS 3 -
Business Combinations and have been updated as a result of a detailed re-modelling review.
The changes to the fair value of the identifiable assets and liabilities of Devon are as
follows:
Revised fair values Initial fair value Increase to the
fair
recognised on value
recognised on
acquisition
acquisition
£000 £000
£000
Intangible exploration and 11,891 11,891
-
evaluation assets
Property, plant and equipment 121,556 92,838
28,718
Inventories 10,134 10,134
-
Other current assets 20,253 20,253
-
Cash and cash equivalents 4,683 4,683
-
Trade and other payables (3,478) (3,478)
-
Deferred tax liabilities (42,526) (30,881)
(11,645)
included within goodwill
Provisions (331) (331)
-
Net Assets 122,182 105,109
17,073
Goodwill arising on 46,451 63,524
(17,073)
acquisition
Total Consideration satisfied 168,633 168,633
-
by cash
There was no significant income statement impact for the year ended 31 December
2007.
10. Intangible assets
Exploration and evaluation assets
During the six months ended 30 June 2008, the Group incurred expenditure of £64,053,000
(2007 - £69,760,000 not including intangible
assets acquired through business combinations).
Foreign exchange movements
During the six months ended 30 June 2008, the intangible assets balance increased by
£7,008,000 (2007 - £9,650,000) due to movements in
foreign exchange.
Unsuccessful exploration and evaluation
During the six months ended 30 June 2008, following completion of geotechnical evaluation
activity, certain licences were declared
unsuccessful in line with the Group's accounting policy and accordingly the related licence
expenditures were expensed. The amount expensed
for the six months ended 30 June 2008 was £19,977,000 (2007 - £12,691,000).
11. Property, plant and equipment
Development and production assets
During the six months ended 30 June 2008, the Group incurred expenditure of £19,480,000
(2007: £125,296,000 not including intangible
assets acquired through business combinations).
Foreign exchange movements
During the six months the property, plant and equipment balance increased by £3,737,000
(2007 - £7,274,000) due to movements in foreign
exchange.
Abandonment asset recognition
Abandonment assets of £6,715,000 were recognised during the six months to 30 June 2008
for assets which received development sanction in
the period (2007 - £5,183,000).
12. Investment in associate
During the period, the Group increased its share in its available-for-sale asset, Faroe
Petroleum plc ('Faroes') through a series of
market purchases to 27.5% and as a result the asset was reclassified as an investment in
associate. The recognition of the investment in
associate was accounted for using the equity method and the value as at 30 June 2008 is as
follows:
Six months to 30 June Six months to 30 June Year to
2008 2007 31
December
2007
£000 £000 £000
Cost transferred from 29,217 - -
available-for-sale assets
Movements in fair value of net 6,843 - -
assets of Faroes
Additions 5,643 - -
41,703 - -
No share of associate profits or losses has been recognised in the Group's financial
statements for the six month period. The Group will
recognise it's share of the associate's profits or losses on a six month time lag basis, in
line with the publicly available financial
information of Faroes. This is deemed reasonable on the grounds of materiality.
13. Shared-based payments
There were no share option awards during the six months ended 30 June 2008.
14. Borrowings and financial liabilities
Borrowings of $75,000,000 (£37,932,000) were repaid on the ABN Amro bank debt during the
six months ended 30 June 2008. The ABN Amro
bank debt is now classified as short term as the facility matures on 13 March 2009.
15. Cash and cash equivalents
For the purpose of the interim consolidated cash flow statement, cash and cash equivalent
are comprised of the following:
Six months to 30 Six months to 30 June Year to
June 2007 31
2008 December
2007
£000 £000 £000
Cash at bank and in hand 80,472 29,285 32,632
Short term deposits 62,014 30,685 83,328
142,486 59,970 115,960
16. Net Cash Flows from Operating Activities for the Six Months to 30 June 2008
Restated
Six months Six months Year to
to 30 June to 30 June 31 December
2008 2007 2007
£'000 £'000 £'000
Profit for the financial period 60,368 27,154 63,029
Depreciation 45,505 18,810 54,528
Asset impairment - (5) 13,759
Deferred income (440) (550) (1,100)
Interest income (3,125) (2,131) (7,433)
Interest expense 8,991 1,871 11,733
Taxation 72,701 28,662 80,031
Employee share scheme charge 1,229 653 1,117
Egypt tax in kind (6,170) - (4,601)
Translation differences (248) 1,026 2,918
Exploration and evaluation 19,977 529 (2,306)
Fair value movements on derivatives 766 766 755
Movements in Working Capital:
Inventory movement 1,090 (779) (5,266)
Receivables movement (38,411) (8,970) (11,995)
Payables movement 31,675 (4,314) 1,988
Cash generated from operating 193,908 62,722 197,157
activities
17. Reconciliation of Net Cash Flow to Movement in Net Funds for the six months to 30
June 2008
Six months Six months Year to
to 30 June to 30 June 31 December
2008 2007 2007
£'000 £'000 £'000
Increase/(decrease) in cash and cash
equivalents 26,526 (49,908) 6,082
Cash inflow from drawdown of
borrowings - - (110,235)
Cash outflow from repayment of
borrowings 37,932 - 36,163
Cash inflow from issue of convertible
bonds - - (138,346)
Equity component of convertible loan
- - 27,976
Interest payable on convertible bonds
in current liabilities - - 2,051
Unwinding of convertible bond debt
component (3,884) - (3,670)
Cash outflow from repayment of
convertible bond financing 2,051 - -
Exchange losses on borrowings
(349) - (1,196)
Movement in net funds/(debt) 62,276 (49,908) (181,175)
Net (debt)/ funds at beginning of (71,297) 109,878 109,878
period
Net (debt)/funds at end of period (9,021) 59,970 (71,297)
18. Capital commitments
At 30 June 2008, the Group had capital commitments of £118,709,000 (2007 - £189,700,000)
which represent the Group's share of
obligations under existing Sale and Purchase contracts and Joint Ventures.
Principal risks and uncertainties
The Group's principal risks and uncertainties for the remaining six months of the year are
unchanged from those disclosed throughout the
Dana Petroleum plc Annual Report and Accounts 2007.
Statement of directors' responsibilities
The Directors confirm that, to the best of their knowledge, the Condensed Group financial
statements for the six months ended 30 June
2008 on pages 9 to 21 have been prepared in accordance with IAS 34 'Interim Financial
Reporting', and that the interim management report on
pages 1 to 8 includes a fair review of the information required by DTR 4.2.7 and DTR 4.2.8.
The Directors of Dana Petroleum plc are as listed in the Dana Petroleum plc Annual Report
and Accounts 2007, with exception of A M
Pelham Burn who retired from the Board on 24th July 2008.
By order of the Board
Thomas P Cross David A MacFarlane
Chief Executive Finance Director
Independent review report to Dana Petroleum plc
Introduction
We have been engaged by the Company to review the condensed set of financial statements in
the half-yearly financial report for the six
months ended June 30, 2008 which comprises Group Income Statement, Group Statement of Changes
in Equity, Group Balance Sheet, Group
Statement of Cash Flows and the related notes 1-18. We have read the other information
contained in the half yearly financial report and
considered whether it contains any apparent misstatements or material inconsistencies with the
information in the condensed set of financial
statements.
This report is made solely to the company in accordance with guidance contained in ISRE
2410 (UK and Ireland) "Review of Interim
Financial Information Performed by the Independent Auditor of the Entity" issued by the
Auditing Practices Board. To the fullest extent
permitted by law, we do not accept or assume responsibility to anyone other than the company,
for our work, for this report, or for the
conclusions we have formed.
Directors' Responsibilities
The half-yearly financial report is the responsibility of, and has been approved by, the
directors. The directors are responsible for
preparing the half-yearly financial report in accordance with the Disclosure and Transparency
Rules of the United Kingdom's Financial
Services Authority.
As disclosed in note 2, the annual financial statements of the group are prepared in
accordance with IFRSs as adopted by the European
Union. The condensed set of financial statements included in this half-yearly financial report
has been prepared in accordance with
International Accounting Standard 34, "Interim Financial Reporting", as adopted by the
European Union.
Our Responsibility
Our responsibility is to express to the Company a conclusion on the condensed set of
financial statements in the half-yearly financial
report based on our review.
Scope of Review
We conducted our review in accordance with International Standard on Review Engagements
(UK and Ireland) 2410, "Review of Interim
Financial Information Performed by the Independent Auditor of the Entity" issued by the
Auditing Practices Board for use in the United
Kingdom. A review of interim financial information consists of making enquiries, primarily of
persons responsible for financial and
accounting matters, and applying analytical and other review procedures. A review is
substantially less in scope than an audit conducted in
accordance with International Standards on Auditing (UK and Ireland) and consequently does not
enable us to obtain assurance that we would
become aware of all significant matters that might be identified in an audit. Accordingly, we
do not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that causes us to believe that the
condensed set of financial statements in the
half-yearly financial report for the six months ended 30 June 2008 is not prepared, in all
material respects, in accordance with
International Accounting Standard 34 as adopted by the European Union and the Disclosure and
Transparency Rules of the United Kingdom's
Financial Services Authority.
Ernst & Young LLP
Glasgow
28 August 2008
This information is provided by RNS
The company news service from the London Stock Exchange
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IR SEFSIUSASEFA
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