RNS Number:0881K
Ramco Energy PLC
16 April 2003
16 April 2003
RAMCO ENERGY plc
("Ramco" or "the Company")
Preliminary Results for the year ended 31 December 2002
Ramco, the oil and gas exploration and production company with interests in
Ireland, Poland, Montenegro, and Bulgaria announces its preliminary results for
the year ended 31 December 2002.
SUMMARY
* Financial Results:
- Turnover increased 14% to #16.8 million (2001: #14.7 million).
- Loss after tax : #9.3 million (2001: #12.0 million).
- Cash at 31 December 2002 : #24.0 million.
- Final ACG instalment received February 2003 : #15.4 million.
- #60 million project finance loan agreed with Bank of Scotland.
* Operations:
- Strategic Review completed - focus on proving up substantial natural
gas reserves from a small number of projects with high impact potential.
- The management team strengthened with key appointments.
- The disposal of four non-core assets completed.
- Seven Heads project in Ireland on track to deliver first gas in Q4 2003:
* Stake in project increased from 49% to 86.5%;
* Project declared commercial & Plan of Development approved;
* Gas Sale Agreement concluded with Innogy;
* Pipeline laying underway;
* Results of first production well exceed expectations - 34.3 million
standard cubic feet per day (scfd);
* Proven and probable recoverable reserves 304 bcf (50 million boe),
(Exploration Consultants Limited).
- Encouraging results achieved from drilling of Polish exploration wells
and analysis of seismic data in Bulgaria.
- Faster progress expected on Montenegro project following Hellenic
Petroleum becoming new partner.
Steve Remp, Executive Chairman of Ramco, commented:
While the Oil Services business continued to provide the company with a stable
revenue platform in 2002, the year was most notable for the comprehensive
strategic review undertaken by the Board. As a result of this review, Ramco
will now primarily focus on developing a small number of core gas projects,
which it believes offer the company significant upside with reduced risk.
To this end, we have strengthened our management team, disposed of a number of
non-core assets, and made good progress with the development of our core
projects. In particular, we have made excellent progress with the Seven Heads
project and expect first gas to be available before the end of 2003. While this
will be our primary focus for the year ahead, we will also continue with our
exploration programmes in Poland, Montenegro and Bulgaria.
ENQUIRIES:
Ramco 01224 352 200
Steve Remp, Executive Chairman
Dan Stover, Chief Operating Officer
Steven Bertram, Group Financial Director
College Hill 020 7457 2020
James Henderson
Phil Wilson-Brown
2002 Chairman's Statement
2002 has been an important year for Ramco. The Board has undertaken a major
strategic review resulting in the decision to focus its resources on pursuing a
small group of core projects. Good progress has been made with each of these
projects and a number of peripheral exploration assets have been disposed of in
order to achieve this focus.
In particular, 2002 has seen intense activity on our Seven Heads Gas Project
offshore Ireland, which has been transformed from an appraisal concept into a
live development, targeting first production later this year. Our first
production well, 48/24-6, recently tested dry gas at rates in excess of 34.3
mmscfd, substantially exceeding our best expectations.
Elsewhere, our first exploration well in Poland produced encouraging results and
a second well is nearing completion. In Montenegro, we now anticipate faster
progress following a privatisation process in which our partner, the State Oil
Company, has become a subsidiary of Hellenic Petroleum of Greece.
Our Oil Services operation showed continued improvement in the performance of
its one-stop facility at Badentoy and this went some way towards offsetting the
effects of a weakening market for its other activities.
Financial results
Group Turnover for 2002 totalled #16.8 million, up from #14.7 million in 2001.
Gross losses after exploration write-offs were further reduced to #6.8 million
from #18.8 million in 2001. Administrative expenses fell to #1.4 million from
#1.7 million the previous year and the substantial exchange gain of #2.3 million
recorded in 2001 reversed during 2002 creating an exchange loss of #2.7 million.
Interest income fell from #3.8 million in 2001 to #1.8 million in 2002. After
providing for taxation of #0.1 million, the Group loss was #9.3 million (2001:
loss #12.0 million). The Board is not recommending payment of a dividend (2001:
nil).
At 31 December 2002 we had cash of #24 million and since that date have received
the final instalment of the ACG proceeds, plus interest due, totalling #15.4
million. In addition a #60 million project finance loan has been arranged with
the Bank of Scotland to support the Seven Heads development and is now available
to draw down.
Strategy
During 2002, the Board and senior management team looked back on the spectacular
results achieved by the disposal of our interest in the ACG field offshore
Azerbaijan, as well as our exploration failures. We critically analysed what we
had done well and where mistakes had been made. This comprehensive strategic
review has led to a new and sharper focus by all of us at Ramco.
Conventional wisdom told us that to mitigate the substantial risk in exploration
we should build a portfolio with a broad spread of interests. Following the
strategic review and with considerable benefit of hindsight, the Board is firmly
of the belief that an overly 'broad portfolio' approach can easily lead to lack
of focus, strained finances and a dilution of management time and effort.
Our successes, on the other hand, tell us that we can create outstanding value
by focusing on a smaller portfolio of interests in which we can apply leading
edge technologies, both to exploit opportunities and to reduce risk. We believe
that Seven Heads is one such case.
Our objective is to prove up substantial natural gas reserves from a small
number of projects which have high impact potential, an acceptable level of risk
and in which we hold substantial equity positions. The Seven Heads development,
scheduled for first production before the end of the year, is the first step
towards that objective.
The Board has done two things to equip the Company for a more focused approach.
Firstly, we have strengthened and expanded the management team to ensure that we
have the capability to realise an ambitious strategy. The individuals who have
joined Ramco during the past two years have a track record in creating
significant value both through the drill bit and offshore development projects:
Dan Stover recently appointed as Chief Operating Officer, Ian Phillips - VP
Project Development, Terry Jones - VP Commercial, and Steve Boldy - VP Ireland.
These appointments complement our strong finance team led by Steven Bertram as
Group Financial Director and Chris Moar - VP Finance & Company Secretary.
Secondly, we have disposed of a number of subsidiaries which held projects on
the periphery of our business. These subsidiaries held exploration interests
with significant future work commitments which together with the associated
overhead expenditure will now be met by the purchaser.
Ireland
During 2000, Ramco re-evaluated the Seven Heads structure, originally drilled in
the 1970's, using new seismic interpretation technology. The results led to a
successful appraisal well in late 2001 which flowed at 13.7 mmscfd on a 92/64"
choke with a flowing well head pressure of 561 psia, indicating the strong
possibility of a commercial development. Much of the early part of 2002 was
taken up confirming this through additional technical work using the latest
technology and in negotiating access to Marathon's nearby Kinsale Head
facilities. The ability to utilise existing facilities both reduced the capital
cost of developing Seven Heads gas, and enabled the finalisation of a fast track
development schedule. The gas field was declared commercial by Ramco and its
partners in July and our growing confidence in this project was the catalyst for
a series of transactions which increased our interest in the project from 49% to
86.5%.
In November, we successfully concluded a Gas Sales Agreement with Innogy for our
share of the Seven Heads gas and the Irish Authorities granted Ramco and its
partners a Petroleum Lease. Since then the Plan of Development for the gas field
has received formal approval from the Irish government and the drilling of the
first of five further production wells is now complete.
Well 48/24-6 reached a total depth of 1,298m on 29 March. The well set a new
record for the Celtic Sea in the 12 1/4" hole section which was drilled with a
single bit run.
Following coring and logging programmes, the well tested dry gas from the Upper
Wealden sandstones at a maximum flow rate of 34.3 mmscfd, on a 128/64" choke
with a flowing well head pressure of 565 psia. Ramco and partners are extremely
pleased with these flow test results which substantially exceeded our
expectations.
Infield pipelines required to connect the six wells to the Kinsale Head
facilities were laid and trenched during late March. Currently the pipelay
vessel, the Castoro Sei, is on location laying the 18" pipeline from the field
back to the Marathon operated Kinsale A platform. We continue to anticipate
first gas production before the end of the year.
Poland
Activity in Poland in the early part of 2002 was aimed at finalising the well
locations for the two exploration wells to be drilled by our partner RWE Dea AG.
The first of these, Zdynianka - 1, spudded in August and reached a total depth
of 2,325m. The well produced high quality gas and was tested over five zones.
Three of those zones produced over-pressured gas together with formation water.
Although encouraging, it was concluded that the well had penetrated the target
horizon in a down-structure position close to the gas-water contact and the well
was abandoned and its costs expensed. The second exploration well, Ropa - 2,
spudded in January and has reached its target depth of 2,530m. Log evaluation
programmes are in progress on the well. Future plans for the acreage will be
finalised once the results of the two wells have been fully studied.
Montenegro
In Montenegro, the privatisation of our local partner Jugopetrol Kotor (JPK),
which took much of last year, limited the work that we could complete on the
concession. We used the time however, to conduct further technical work designed
to help prioritise options for further exploration activity.
The privatisation process was concluded towards of the end of 2002, with
Hellenic Petroleum of Greece emerging as the majority shareholder of JPK. Our
initial discussions with Hellenic have been very productive and it is clear they
share our enthusiasm for prospectivity of the concession. In order to help
accelerate the exploration process, Ramco and Hellenic are working to agree a
number of changes to improve the commercial efficiency of the contract governing
the exploration of the Ulcinj block.
Bulgaria
Our seismic acquisition and geological studies programme over the A-Lovech block
in Bulgaria has advanced well and early indications from interpretation have
been encouraging. As a result we have, together with our partner Anschutz,
submitted a proposal to the government to retain the acreage for a further two
years. Additional geophysical and geological studies will be completed, focused
on the key areas of interest identified from last year's work.
Outlook
We believe that this revised portfolio will enable us to achieve the necessary
balance between the upside we seek and the level of exploration and development
risk we can accept and will create outstanding value for our shareholders.
The year ahead will be challenging, with much to do to bring Seven Heads on
stream and ongoing exploration activity in Poland, Montenegro and Bulgaria.
Oil Services, once Ramco's core business, remains an integral part of the Group.
We have invested well and the profitability of Oil Services has been pivotal to
the successful development of the Group's E&P business. Although North Sea
activity declined during 2002, exploration by smaller independents combined with
new contracts in Japan and Norway should have a positive impact in the future.
Ramco Energy plc
Preliminary Results
Consolidated Profit and Loss Account
For the year ended 31 December 2002 unaudited
2002 2001
Note #'000 #'000
--------------------------------- ------- --------- --------
Turnover - Group and share of joint venture 18,773 19,019
and associates -------
Less share of joint venture and associates (1,964) (4,278)
--------------------------------- --------- --------
-------
Group turnover 1 16,809 14,741
Cost of sales (23,560) (33,586)
--------------------------------- ------- --------- --------
Gross loss (6,751) (18,845)
Administrative expenses ------- (1,430) (1,644)
(Loss)/gain on exchange (2,750) 2,277
--------------------------------- --------- --------
-------
Group operating loss (10,931) (18,212)
Share of operating (loss) / profit in joint ------- (34) 199
venture and associates --------- --------
--------------------------------- -------
Loss on ordinary activities before
exceptional items
and interest (10,965) (18,013)
Exceptional item - gain on disposal of oil 2 - 3,448
and gas interest ------- --------- --------
---------------------------------
Loss before interest and taxation (10,965) (14,565)
Interest receivable ------- 1,765 3,759
--------------------------------- --------- --------
-------
Loss on ordinary activities before 1 (9,200) (10,806)
taxation
Tax on loss on ordinary activities (142) (1,148)
--------------------------------- ------- --------- --------
Retained loss for the year 7 (9,342) (11,954)
--------------------------------- ------- --------- --------
Loss per ordinary share - basic and fully
diluted
On loss for the financial year 3 (35.9)p (46.2)p
The results relate to continuing operations.
There is no material difference between the loss on ordinary activities before
taxation and the retained loss for the year stated above, and their historical
cost equivalents.
Consolidated Statement of Total Recognised Gains and Losses
For the year ended 31 December 2002
unaudited
--------------------------------------- 2002 2001
#'000 #'000
-------- -------
---------------------------------------
Loss for the financial year (9,342) (11,954)
Unrealised translation differences on foreign currency 83 16
net investments -------- -------
---------------------------------------
Total recognised losses relating to the year (9,259) (11,938)
--------------------------------------- -------- -------
Balance Sheets
As at 31 December 2002 Group Company
unaudited unaudited
2002 2001 2002 2001
Note #'000 #'000 #'000 #'000
------------------------ ------ --------- ------- -------- -------
Fixed assets
Intangible assets 4 2,895 13,076 - -
Development assets 5 40,980 - - -
Other fixed assets 12,343 12,703 2,006 2,049
Investments
--------- ------- -------- -------
Share of joint venture's gross 2,785 2,352 - -
assets
Share of joint venture's gross (1,784) (1,346) - -
liabilities --------- ------- -------- -------
Share of joint venture's net 1,001 1,006 - -
assets
In subsidiaries - - 37,077 37,755
In associated undertakings 9 15 - -
Other fixed asset investments 111 3 109 -
--------- ------- -------- -------
Total investments 1,121 1,024 37,186 37,755
---------------------------- --------- ------- -------- -------
57,339 26,803 39,192 39,804
---------------------------- --------- ------- -------- -------
Current Assets
Stocks 442 408 - -
Debtors : amounts falling 6 3,836 34,784 - -
due after one year
Debtors : amounts falling due 23,540 43,252 95,240 64,819
within one year
Cash at bank and in hand 24,009 12,216 17,050 5,111
---------------------------- --------- ------- -------- -------
51,827 90,660 112,290 69,930
Creditors : amounts falling due (33,974) (34,322) (79,383) (29,286)
within one year --------- ------- -------- -------
----------------------------
Net current assets 17,853 56,338 32,907 40,644
---------------------------- --------- ------- -------- -------
Total assets less current 75,192 83,141 72,099 80,448
liabilities
Provisions for liabilities and (3,147) (2,840) (54) (147)
charges --------- ------- -------- -------
----------------------------
Net assets 72,045 80,301 72,045 80,301
---------------------------- --------- ------- -------- -------
Capital and reserves
Called up share capital 2,620 2,588 2,620 2,588
Share premium account 56,410 55,421 56,410 55,421
Revaluation reserve 787 805 29,076 29,755
Other reserves (2) (85) - -
Profit and loss account 7 12,230 21,572 (16,061) (7,463)
------------------------ ------ --------- ------- -------- -------
Equity shareholders' 8 72,045 80,301 72,045 80,301
funds ------ --------- ------- -------- -------
------------------------
Consolidated Cash Flow Statement
For the year ended 31 December 2002 unaudited
2002 2001
Note #'000 #'000
----------------------------------------- ------ -------- -------
Net cash inflow from continuing operating 9(a) 39,150 24,968
activities ------ -------- -------
-----------------------------------------
Returns on investments and servicing of finance
Interest received 1,452 3,781
Interest paid (68) -
--------------------------------------------- -------- -------
Net cash inflow from returns on investments and 1,384 3,781
servicing of finance -------- -------
---------------------------------------------
Taxation
United Kingdom corporation tax paid - (3)
Overseas tax paid (402) (271)
--------------------------------------------- -------- -------
Taxation paid (402) (274)
--------------------------------------------- -------- -------
Capital expenditure and financial investment
Purchase of tangible fixed assets (753) (3,571)
Sale of tangible fixed assets 16 44
Oil & gas expenditure - intangible assets (25,623) (15,847)
Receipts from sales of investments - 7
--------------------------------------------- -------- -------
Net cash outflow for capital expenditure and financial (26,360) (19,367)
investment -------- -------
---------------------------------------------
Acquisitions and disposals
Purchase of subsidiary undertakings (2,000) -
--------------------------------------------- -------- -------
NET CASH OUTFLOW FROM ACQUISITIONS AND DISPOSALS (2,000) -
Cash inflow before management of liquid resources and 11,772 9,108
financing
Management of liquid resources
Net transfer from term deposits (14,159) 54
--------------------------------------------- -------- -------
Net cash (outflow) / inflow before financing (2,387) 9,162
--------------------------------------------- -------- -------
Financing
Issue of share capital 21 87
--------------------------------------------- -------- -------
Net cash inflow from financing 21 87
--------------------------------------------- -------- -------
------------------------------------------ ----- -------- -------
(Decrease) / increase in cash 9(b) (2,366) 9,249
------------------------------------------ ----- -------- -------
Notes to the Financial Statements
For the year ended 31 December 2002
1. Segmental Reporting Oil & Gas Oil Services Total
unaudited unaudited unaudited
2002 2001 2002 2001 2002 2001
#'000 #'000 #'000 #'000 #'000 #'000
---------------------------- ------- -------- ------- -------- -------
-------- ------- -------- ------- -------- -------
Turnover - - 18,773 19,019 18,773 19,019
Less joint venture and - - (1,964) (4,278) (1,964) (4,278)
associates -------- ------- -------- ------- -------- -------
----------------------
Group turnover - - 16,809 14,741 16,809 14,741
---------------------- -------- ------- -------- ------- -------- -------
Operating loss
--------------------------------------------------------
-------- ------- -------- ------- -------- -------
Group (9,013) (21,388) 2,228 2,742 (6,785) (18,646)
Less Joint venture and 45 5 (11) (204) 34 (199)
associates -------- ------- -------- ------- -------- -------
Group operating (loss) (8,968) (21,383) 2,217 2,538 (6,751) (18,845)
/profit
Joint venture and (45) (5) 11 204 (34) 199
associates -------- ------- -------- ------- -------- -------
(Loss)/profit on ordinary activities
before exceptional items,
income and interest (9,013) (21,388) 2,228 2,742 (6,785) (18,646)
Exceptional item - 3,448 - - - 3,448
Administrative (1,001) (1,151) (429) (493) (1,430) (1,644)
expenses
(Loss)/gain on (2,597) 2,237 (153) 40 (2,750) 2,277
exchange -------- ------- -------- ------- -------- -------
(Loss)/profit before
interest and
taxation
(12,611) (16,854) 1,646 2,289 (10,965) (14,565)
Net interest 1,765 3,759
-------- -------
Loss before taxation (9,200) (10,806)
--------------------------------------------- -------- -------
2. Exceptional item - Gain on Disposal of Oil and Gas unaudited
Asset 2002 2001
--------------------------------------------- #'000 #'000
-------- -------
---------------------------------------------
Gain on disposal of interest in ACG field - 3,448
--------------------------------------------- -------- -------
- 3,448
--------------------------------------------------- -------
3. Loss Per Share
(a) Basic and fully diluted loss per share
The calculation of loss per share is based on the loss for the financial year of
#9,342,000 (2001 - loss #11,954,000) and 26,037,656 (2001 - 25,861,480) ordinary
shares, being the weighted average number of ordinary shares in issue during the
year.
As a loss was recorded in both 2001 and 2002 the exercise of share options would
not have been dilutive and accordingly in each year the basic and diluted loss
per share are the same.
4. Intangible Fixed Assets unaudited
2002 2001
#'000 #'000
-------------------------------------- --------
At 1 January 13,076 14,553
Additions 35,806 15,847
Costs written off (5,007) (17,324)
Transfer to development assets (40,980) -
---------------------------- ------------ --------
At 31 December 2,895 13,076
---------------------------- ------------ --------
5. Development Assets unaudited
2002 2001
Cost and net book value #'000 #'000
---------------------------- ------------ --------
At 1 January - -
Transfer from intangible assets 40,980 -
---------------------------- ------------ --------
At 31 December 40,980 -
---------------------------- ------------ --------
6. Debtors unaudited
2002 2001
Amounts falling due after one year : #'000 #'000
-------------------------------- -------- --------
Amounts owed by associated undertakings (i) 3,836 3,962
Other Debtors (ii) - 30,822
-------------------------------- -------- --------
3,836 34,784
-------------------------------- -------- --------
(i) This relates to a loan due from Medusa Oil & Gas (Poland) Sp.zo.o. It is due
to be repaid in equal annual instalments commencing on 31 December 2005. Full
repayment is due by 31 December 2010. Interest is calculated daily at a rate
equal to 12 month US Dollar LIBOR plus 3% and is payable annually, commencing 31
December 2005.
(ii) This relates to the third instalment of the proceeds of the ACG sale, which
is receivable as follows:
unaudited
2002 2001
US Dollars Exchange Sterling Sterling
rate #'000 #'000
-------------------------------
Feb-2003 45,000 1.46 - 30,822
---------------------------------------- ---------
- 30,822
---------------------------------------- ---------
The balance of the proceeds of the ACG sale outstanding at 31 December 2002 was
$22.5 million. This amount is included in current assets and was received in
February 2003.
7. Profit and Loss account
unaudited
2002 2001
#'000 #'000
--------------------------------- ---------
At 1 January 21,572 33,526
Loss for the year (9,342) (11,954)
---------------------------- -------- ---------
At 31 December 12,230 21,572
---------------------------- -------- ---------
8. Movement in Shareholders' Funds
unaudited
2002 2001
#'000 #'000
-------------------------------------- -------- --------
Loss for the year (9,342) (11,954)
Other recognised gains and losses relating to the year 83 16
Issue of ordinary share capital 1,021 87
Amortisation of deferred gain on asset sold to joint (18) (18)
venture --------- --------
------------------------------
Net change in shareholders' funds (8,256) (11,869)
Shareholders' funds at 1 January 80,301 92,170
------------------------------ --------- --------
Shareholders' funds at 31 December 72,045 80,301
------------------------------ --------- --------
9. Notes to Consolidated Cash Flow Statement
(a) Reconciliation of operating loss to net cash flow from continuing operating
activities
unaudited
2002 2001
#'000 #'000
--------------------------------- --------- -------
Operating loss (10,931) (18,212)
Exceptional gain on disposal of oil and gas interest - 3,448
Amounts written off in respect of intangible oil and gas 5,007 17,324
assets
Amortisation of goodwill 30 30
Depreciation on tangible fixed assets 940 795
(Gain) / loss on sale of tangible fixed assets (15) 24
Amortisation of deferred gain on asset sold to joint (18) (18)
venture
Increase in stocks (34) (180)
Decrease in debtors 50,822 23,726
Decrease in creditors (4,315) (2,695)
(Decrease) / increase in provisions (2,455) 711
Provision against investments 53 -
Exchange difference on retranslation 66 15
--------------------------------- --------- -------
Net cash inflow from continuing operating activities 39,150 24,968
--------------------------------- --------- -------
(b) Reconciliation of net cash flow to movements in net funds
unaudited
2002 2001
#'000 #'000
----------------------------------------
(Decrease) / increase in cash in the year (2,366) 9,249
Cash outflow / (inflow) from decrease in liquid resources 14,159 (54)
---------------------------------- ------- -------
Change in net funds resulting from cash flows 11,793 9,195
Net funds at start of the year
Cash at bank and in hand 12,191 2,942
Short term deposits 25 79
---------------------------------- ------- -------
12,216 3,021
---------------------------------- ------- -------
---------------------------------- ------- -------
Net funds at end of the year 24,009 12,216
---------------------------------- ------- -------
Represented by:
Cash at bank and in hand 9,825 12,191
Short term deposits 14,184 25
---------------------------------- ------- -------
24,009 12,216
---------------------------------- ------- -------
Liquid resources represent short term deposits not qualifying as cash.
10. Comparative Information
The comparative financial information is based on statutory accounts for the
year ended 31 December 2001. Those accounts, upon which the auditors have issued
an unqualified opinion, have been delivered to the Registrar of Companies.
This information is provided by RNS
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