RNS Number:2676Q
Dragon Oil PLC
29 September 2003
FOR IMMEDIATE RELEASE 29 SEPTEMBER 2003
DRAGON OIL PLC ("DRAGON")
2003 INTERIM RESULTS
Dragon, an international oil and gas exploration and production company, today
announced its Interim Results for the period ended 30 June 2003.
HIGHLIGHTS
* Profit after tax of US$15.1 million (1H 2002: US$1.2 million) was due to
increased production, improved oil prices and prudent cost control, despite
higher debt servicing and insurance costs.
In summary, the results for the six months to 30 June 2003 compared with the
same period last year were:
o Turnover US$40.1 million +152%
o Operating profit US$20.0 million +721%
o Profit before tax US$15.1 million +1,121%
o Basic earnings per share 4.17 cents +1,126%
* The average gross production from the Cheleken Contract Area during the
period was 14,069 barrels of oil per day ("bopd") (1H 2002: 8,732 bopd) with
9,048 bopd (1H 2002: 4,329 bopd) attributable to Dragon.
* In line with its marketing strategy to use alternative routes for crude
exports, Dragon sold 787,954 barrels through Baku. Exports through Neka amounted
to 820,000 barrels under the Iranian swap agreement.
* During the period, Dragon repaid US$10 million of loan principal to
Emirates National Oil Co Ltd (ENOC) LLC ("ENOC"). Subsequent to the period end,
Dragon repaid US$ 3.1million of loan principal to the European Bank for
Reconstruction and Development ("EBRD").
* A jack up rig contract was signed to enable Dragon to re-commence its
drilling programme from early November 2003, for a period of 8 months. A
contract for the engineering and upgrade of LAM 21 platform was also concluded.
* The latest estimate by an independent consultant puts the total
remaining gross recoverable proven and probable reserves at 645 million barrels
of oil ("bbls").
Mr Hussain Sultan, Chairman, commented:
"We are pleased to report a robust performance in challenging circumstances.
Dragon's production levels were in keeping with forecasts.
Under the existing loan agreement and draw down criteria, further funding may be
available from the EBRD, however, Dragon is seeking to raise additional funding
to support its long term field development programme and therefore the Board is
continuing to look at all appropriate financing opportunities.
From November 2003 up to June 2004, Dragon will drill 3 wells with a jack-up rig
from the LAM 21 platform as part of our continuous drilling programme."
Enquiries:
Dragon Oil plc (+353 1 676 6693)
Hussain Sultan, Chairman & Chief Executive Officer
Citigate Dewe Rogerson (+44 20 7638 9571)
Martin Jackson / Sara Batchelor
DRAGON OIL PLC
2003 INTERIM RESULTS
CHAIRMAN'S STATEMENT
Interim Performance
Increased sales resulting from higher production, with a higher average price
realised, resulted in a turnover of US$40.1 million against US$15.9 million for
the corresponding period last year.
The average gross production from the Cheleken Contract Area during the period
was 14,069 bopd (1H 2002: 8,732 bopd) with 9,048 bopd (1H 2002: 4,329 bopd)
attributable to Dragon.
The oil sales quantity increased to 1,607,954 bbls from 669,065 bbls compared
with the same period last year. During the period, Dragon sold 820,000 barrels
through Neka using the Iranian swap agreement, and 787,954 barrels through Baku,
an alternative route.
Operating and production costs increased to US$13.4 million from US$10.4 million
for the first half of 2002. This increase is attributable mainly to higher
variable production costs, higher abandonment costs and lower inventory compared
to the corresponding period last year.
The charge of Depletion, Depreciation & Amortisation (DD&A) was US$4.8 million
(1H 2002: US$2.3 million) mainly due to a production increase of 109%.
Administrative expenses increased by US$1.1 million to US$1.3 million during
first half of 2003 mainly due to provision of US$0.8 million in the value of the
financial derivative instrument held for hedging purposes.
The interest payable and similar charges increased to US$4.7 million (1H 2002:
US$3.7 million) mainly due to higher ENOC loan costs and additional draw downs
under the EBRD facility since June 2002.
Dragon recorded a profit for the period of US$15.1 million compared to US$1.2
million for the first half of 2002.
Health, Safety and Environmental issues continue to be a high priority. During
the period, there was no lost time accident incident.
Cash Flow
Cash held by Dragon decreased by US$3 million during the six months to 30 June
2003. The cash inflow from operating activities amounted to US$17.8 million (1H
2002: US$6.5 million). During the period, the majority shareholder, ENOC,
provided a new loan facility of US$40 million for a period of one year which was
utilised to repay the existing US$50 million loan to ENOC and this resulted in a
net repayment of US$10 million to ENOC on 3 May 2003. No major capital
expenditure programme other than the production de-bottleneck project was
launched during the first six months of 2003.
The recoverability of amounts recorded as assets for oil and gas interests is
dependent upon the satisfactory completion of the development of the oil
reserves in Turkmenistan and on having sufficient long term financial resources
to undertake the development. Dragon does not generate sufficient cash flow
from operations to fund its entire development activities and therefore intends
to rely upon external funding to finance its operations and development
activities and the Board is continuing to look at all appropriate financing
opportunities. There is inevitable uncertainty regarding the carrying value of
the oil and gas assets pending completion of fundraising.
Balance Sheet
The net book value of tangible fixed assets decreased to US$264.1million
compared to US$265.2 million at the end of 2002 due to the increased DD&A charge
and lower capital expenditure. The current assets decreased by US$3.1 million
to US$33.1 million mainly due to the disposal of the investment in Resources
Investment Trust plc.
Amounts due within one year reduced by US$16.2 million to US$50.6 million due to
the loan repayment of US$10 million to ENOC and lower creditors and accruals.
The amounts falling due after more than one year decreased to US$33.8 million,
from US$36.9 million at the end of the previous year due to the reclassification
of US$3.1 million as amounts due within one year, consequent to its repayment to
EBRD in August 2003. Shareholders funds increased by US$15.1 million as a result
of the profit for the period.
Outlook
The Company's performance in the second half of 2003 is dependent on oil prices
and maintaining production at current levels despite well decline rates that are
a feature of the Cheleken field.
Dragon has arranged an oil hedge for 5,000 bopd for the second half of the year.
This quantity was split at a strike price of US$ 25 per barrel ("bbl") based
upon dated Brent crude and US$ 23.50 per bbl based upon Dubai crude.
The drilling programme from November 2003 up to June 2004 is to drill 3 wells
from the refurbished LAM 21 platform and this is critical to cash flow and
maintaining the profitability of Dragon.
Longer term Prospects
Dragon will continue with its drilling programme beyond LAM 21, subject to
further funding becoming available. The Board is continuing to look at all
appropriate financing opportunities to take Dragon forward into a long term
field development programme.
Dragon will endeavour to promote its excellent relationship with the people and
the Government of Turkmenistan and exploit its established industry reputation.
Management will continually seek to exploit all opportunities that may arise and
serve to strengthen Dragon's asset base, maximize returns to the shareholders
and value for all the stakeholders.
Hussain M Sultan
Chairman& CEO
28 September 2003
Dragon Oil PLC
CONSOLIDATED PROFIT AND LOSS ACCOUNT
FOR THE SIX MONTHS ENDED 30 JUNE 2003
Notes Unaudited Unaudited Audited
6 months ended 6 months ended Year ended
30 June 30 June 31 December
2003 2002 2002
US$'000 US$'000 US$'000
Turnover 8 40,146 15,934 50,593
Cost of sales
Operating and production costs (13,473) (10,369) (21,060)
Depreciation, depletion and
amortisation (4,769) (2,256) (6,111)
--------------------- --------------------- ---------------------
Gross profit 21,904 3,309 23,422
Administrative expenses (2,158) (1,027) (3,363)
Other Income 239 153 805
--------------------- --------------------- ---------------------
Operating profit 19,985 2,435 20,864
Interest payable and similar
charges (4,742) (3,674) (7,870)
(Loss)/profit on sale of investments (131) 2,528 2,528
Investment write down - (51) -
--------------------- --------------------- ---------------------
Profit on ordinary activities
before taxation 15,112 1,238 15,522
Taxation - - -
--------------------- --------------------- ---------------------
Profit on ordinary activities after
taxation 15,112 1,238 15,522
========= ========= =========
Earnings per share
Basic 3 4.17 c 0.34 c 4.29 c
Fully diluted 3 4.16 c 0.34 c 4.28 c
========= ========= =========
Dragon Oil PLC
CONSOLIDATED CASH FLOW STATEMENT
FOR THE SIX MONTHS ENDED 30 JUNE 2003
Notes Unaudited Unaudited Audited
6 months ended 6 months ended Year ended
30 June 30 June 31 December
2003 2002 2002
US$'000 US$'000 US$'000
Net cash inflow from operating 4
activities 17,752 6,484 24,215
--------------------- --------------------- ---------------------
Returns on investments and
servicing of finance
Interest received 83 83 118
Interest paid (5,893) (5,823) (7,682)
--------------------- --------------------- ---------------------
Net cash outflow from returns
on investments and servicing
of finance (5,810) (5,740) (7,564)
--------------------- --------------------- ---------------------
Net cash flow from taxation - - -
--------------------- --------------------- ---------------------
Capital expenditure and financial
Investment
Payments to acquire tangible
fixed assets (4,309) (14,483) (31,744)
Receipts from sale of Investments 1,592 - 26
--------------------- --------------------- ---------------------
Net cash outflow from capital
expenditure and financial
investment (2,717) (14,483) (31,718)
--------------------- --------------------- ---------------------
Cash inflow/(outflow) before
management of liquid resources and
financing 9,225 (13,739) (15,067)
--------------------- --------------------- ---------------------
Management of liquid resources
Net funds deposited from the cash
collateral account (2) (290) (357)
Net funds (deposited)/withdrawn
from the abandonment fund (1,448) - 32
Funds placed on long term deposit (819) - -
--------------------- --------------------- ---------------------
Net cash outflow from
management of liquid resources
financing (2,269) (290) (325)
--------------------- ---------------------- ----------------------
Repayment of loan (10,000) (22,750) (45,500)
Debt draw downs - 38,756 66,300
--------------------- --------------------- ---------------------
Net cash (outflow)/inflow from
financing (10,000) 16,006 20,800
--------------------- --------------------- ---------------------
(Decrease)/ increase in cash 6 (3,044) 1,977 5,408
========= ========= =========
Dragon Oil PLC
CONSOLIDATED BALANCE SHEET
AS AT 30 JUNE 2003
Notes Unaudited Unaudited Audited
6 months ended 6 months ended Year ended
30 June 30 June 31 December
2003 2002 2002
US$'000 US$'000 US$'000
Fixed assets
Tangible assets 264,082 251,759 265,165
------------------ ------------------ ------------------
Current assets
Stocks 5,390 8,810 5,867
Debtors 10,366 779 10,554
Investments 10 - 2,635 1,723
Cash at bank and in hand 17,300 14,609 18,075
------------------ ------------------ ------------------
33,056 26,833 36,219
Creditors amounts falling due within 5, 7, 9
one year (50,603) (63,324) (66,878)
------------------ ------------------ ------------------
Net current liabilities (17,547) (36,491) (30,659)
Total assets less current liabilities 246,535 215,268 234,506
Creditors amounts falling due after 9
more than one year (33,794) (31,923) (36,877)
------------------ ------------------ ------------------
Net assets 212,741 183,345 197,629
------------------ ------------------ ------------------
Capital and reserves
Called-up equity share capital 61,142 138,292 61,142
Share premium account 12 59,798 109,374 109,374
Capital redemption reserve 77,150 - 77,150
Profit and loss account 12 14,651 (64,321) (50,037)
------------------ ------------------ ------------------
Total equity shareholders' funds 212,741 183,345 197,629
======= ======= =======
Dragon Oil PLC
NOTES TO THE FINANCIAL STATEMENTS
(1) The results for the year ended 31 December 2002 do not constitute
full accounts within the meaning of Section 3 of the Companies (Amendment) Act,
1986 and have been extracted from the audited financial statements which have
been filed with the Registrar of Companies.
(2) The Directors do not recommend the payment of a dividend in respect
of the six months ended 30 June 2003 (the 'period') (2002: nil).
(3) The calculation of basic earnings per ordinary share is
based on the weighted average number of 362,153,120 ordinary shares in issue
during the six months to 30 June 2003 (1H 2002: 362,153,112) and on the profit
for the period of US$15.1 million (1H 2002: Profit of US$1.2 million).
Calculation of fully diluted earnings per ordinary share is based on the diluted
number of 362,844,114 ordinary shares in issue during the six months to 30 June
2003 (1H 2002: 362,153,112) and is adjusted to assume conversion of all
potential dilutive options over ordinary shares.
(4) Reconciliation of operating profit to net cash inflow from operating
activities:
(Unaudited) (Unaudited) (Audited)
6 months ended 6 months ended Year ended
30 June 30 June 31 December
2003 2002 2002
US$'000 US$'000 US$'000
Operating profit for the period/year 19,985 2,435 20,864
Adjustments:
Depreciation, depletion and amortisation 4,769 2,256 6,111
Write down of trade investment - - 1,019
Release of excess accrual - - (542)
Foreign exchange gain on investment - (70) (240)
Movement in stocks 477 (1,964) 979
Movement in debtors 188 1,688 (8,087)
Movement in creditors (7,584) 2,222 4,229
Interest Income (83) (83) (118)
------------------ ------------------- ------------------
Net cash inflow from operating activities 17,752 6,484 24,215
======= ======= =======
(5) Under the terms of the Production Sharing Agreement ("PSA"),
7.5% of profit oil is to be transferred to an abandonment fund to meet future
decommissioning and abandonment costs. The balance in the abandonment fund as at
30 June 2003 amounted to US$ 1.8 million
(1H 2002: US$0.7 million). This amount has been included in creditors. As per
the PSA, all decommissioning and abandonment costs will be met by these
arrangements and will only be required as funds become available.
(6) For the purpose of the consolidated cash flow statement,
cash and cash equivalents comprise cash on hand, current assets less overdrafts
with banks and bank deposits with an original maturity of less than three
months.
Dragon Oil PLC
NOTES TO THE FINANCIAL STATEMENTS (continued)
The decrease in cash balance as of the period-end is as follows:
(Unaudited) (Unaudited) (Audited)
6 months ended 6 months ended Year ended
30 June 30 June 31 December
2003 2002 2002
US$'000 US$'000 US$'000
Opening balance 18,075 12,342 12,342
Closing balance 17,300 14,609 18,075
----------------- --------------- ---------------
Net(decrease)/increase in cash balance (775) (2,267) (5,733)
Adjusted for:
Net funds deposited from the cash
collateral account (2) (290) (357)
Net funds (deposited)/withdrawn
from the abandonment fund (1,448) - 32
Funds placed on long term deposit (819) - -
----------------- --------------- ---------------
Net (decrease)/ increase in cash (3,044) 1,977 5,408
======= ====== ======
(7) During the period, the majority shareholder, ENOC, provided a new loan
facility of US$40 million for a period of one year which was utilised to repay
the existing US$50 million loan to ENOC and this resulted in a net repayment of
US$10 million to ENOC on 3 May 2003.
The new loan of US$40 million from ENOC carries interest at LIBOR plus 3.25%, an
arrangement fee of US$3.5 million, and is repayable on 2 May 2004.
(8) All trading activity arose from a single class of business, crude oil
sales and related activities in Central Asia. Accordingly, no segmental
information is provided.
(9) There were no further draw downs during the period under the loan
facility entered into with EBRD. However, subsequent to the half-year end,
US$3.1 million of principal was repaid in August 2003, following the fifth
borrowing base review. The net proceeds of the loan to 30 June 2003, were
US$36.9 million after deducting financing costs of US$1.4 million. Interest is
charged on outstanding amounts at LIBOR plus 3.25%.
The EBRD loan facility of US$60 million has a term of 7 years. Under the terms
of the loan facility future draw down is primarily dependent on the results of
the Group's planned drilling programme, actual production achieved and the level
of capital expenditure. At the present debt level, partial repayment has
commenced in August 2003, and full repayment of the loan is required by 5
February 2008.
Creditors falling due after more than one year comprise of US$33.8
million draw downs (net of expenses) from the EBRD loan facility, after
reclassifying US$3.1 million as short-term creditors due to the repayment in
August 2003.
(10) The Group and Company's investment consisting of 1,754,146 ordinary shares
in Resources Investment Trust Plc was disposed during the period, at an
average price of US$0.94 per share.
(11) The previously stated number of options in the share capital of the
Company held by Essa Al Mulla, executive director, is incorrect. As at 26
September 2003, Essa Al Mulla holds the following options in the share capital
of the Company: 750,000 ordinary shares of Euro0.10 each with an exercise price of
IR#0.25 (Euro0.317) that are exercisable up to 28th March 2010; and 1,000,000
ordinary shares of Euro0.10 each with an exercise price of STG 11.5 pence that are
exercisable up to 25 May 2013.
Dragon Oil PLC
NOTES TO THE FINANCIAL STATEMENTS (continued)
(12) Confirmation from the Irish courts was received on 10 March 2003 for the
reduction of the share premium account by the sum of the Euro equivalent of
$49,576,518.This amount was accordingly set-off against the accumulated losses.
INDEPENDENT REVIEW REPORT TO DRAGON OIL PLC
Introduction
We have been instructed by the Company to review the financial information for
the six months ended 30 June 2003 which comprises the Group's consolidated
profit and loss account, cash flow statement, balance sheet and accompanying
notes. We have read the other information contained in the interim report and
considered whether it contains any apparent misstatements or material
inconsistencies with the financial information.
Directors' responsibilities
The interim report, including the financial information contained therein, is
the responsibility of, and has been approved by, the Directors. The Directors
are responsible for preparing the interim report in accordance with the Listing
Rules of the Irish Stock Exchange and the UK Financial Services Authority which
require that the accounting policies and presentation applied to the interim
figures should be consistent with those applied in preparing the preceding
annual accounts except where any changes, and the reasons for them, are
disclosed.
Review work performed
We conducted our review in accordance with guidance contained in Bulletin 1999/4
issued by the Auditing Practices Board for use in Ireland and the United
Kingdom. A review consists principally of making enquiries of Group management
and applying analytical procedures to the financial information and underlying
financial data and, based thereon, assessing whether the accounting policies and
presentation have been consistently applied unless otherwise disclosed. A review
excludes audit procedures such as tests of controls and verification of assets,
liabilities and transactions. It is substantially less in scope than an audit
performed in accordance with Auditing Standards and therefore provides a lower
level of assurance than an audit. Accordingly we do not express an audit opinion
on the financial information.
Review conclusion
On the basis of our review we are not aware of any material modifications that
should be made to the financial information as presented for the six months
ended 30 June 2003.
PricewaterhouseCoopers
Chartered Accountants
Dublin, Ireland.
28 September 2003
Notes:
(a) The maintenance and integrity of the Dragon Oil Plc website is the
responsibility of the Directors; the work carried out by the auditors does not
involve consideration of these matters and, accordingly, the auditors accept no
responsibility for any changes that may have occurred to the interim report
since it was initially presented on the website.
(b) Legislation in the Republic of Ireland and the United Kingdom governing
the preparation and dissemination of financial information may differ from
legislation in other jurisdictions.
This information is provided by RNS
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END
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