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Petroceltic International PLC : Final Results

04/26/2012 | 03:07am US/Eastern
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Petroceltic International PLC

Dublin

26th April 2012

Petroceltic International plc

Preliminary Results Announcement

Results for the twelve months ended 31 December 2011.

Petroceltic International plc ("Petroceltic" or "the Company"), the independent oil & gas exploration company focussed on the Middle East-North Africa ("MENA") and Mediterranean region today announces its results for the year ended 31 December 2011.

Highlights:

·     Successful six well appraisal drilling campaign in Algeria completed on time and under budget.

·     Petroceltic estimate of most likely gas resource in place in the Isarene permit area, Algeria, increased by c.70 per cent to 10.3 TCF.

·     Enel introduced to the Isarene permit as 18.375 per cent partner. Over US$100 million received to date.

·     Substantial progress on finalising with Sonatrach a plan of development incorporating gross recoverable contingent resources of 2.2 TCF of gas and 180 million barrels of condensate and LPG recoverable contingent resources over life of field.

·     Sonatrach, Petroceltic and Enel agree to a three month period from 24th April 2012 to conclude the Final Discovery Report and submission of the Declaration of Commerciality for the field.

·     Entry into two highly prospective licences in the Kurdistan Region of Iraq.

·     Preparation for drilling of high value Carpignano Sesia prospect (formerly Rovasenda) in Italy.

·     Strengthened investor base following successful US$60 million share placing in May 2011.

·     Funded and well placed to continue to develop and grow the business. Net debt position of US$15 million at year end and cash at 31 March 2012 is US$64 million with no debt.

Robert Arnott, Chairman of Petroceltic commented:

"Petroceltic delivered on all of its key targets for 2011. The Isarene farm-out deal was approved by the Algerian authorities, the Company completed its appraisal campaign on time and under budget, achieving significant success, the plan of development was submitted to Sonatrach on time, and the portfolio expanded through the addition of two highly prospective licences in the Kurdistan Region of Iraq.

The coming year will see the maturation of our Algerian asset towards development sanction, the booking of commercial reserves, and accelerated activity on some exciting exploration in Italy and Kurdistan. In 2012, the Company is well positioned, operationally and financially, to take advantage of opportunities to expand its portfolio".

Ends

For further information, please contact:

Brian O' Cathain/Tom Hickey, Petroceltic International          Tel: +353 (1) 421 8300

Philip Dennis/Rollo Crichton-Stuart,

Pelham Bell Pottinger                                                              Tel: +44 (20) 7861 3919

Joe Murray/Joe Heron, Murray Consultants                            Tel: +353 (1) 498 0300

John Frain/Stephen Barry, Davy                                             Tel: +353 (1) 679 6363



2011 Annual Report

Chairman's Statement

Dear Shareholder,

2011 was a challenging and turbulent year in our area of geographic focus.  The onset of the Arab Spring heightened the markets perception of uncertainty and risks in the politics and economics of the MENA region.  The region remains hungry for energy and revenue that is generated by the Oil and Gas sector, and therefore needs to continue to attract investment from international oil companies. There are strong indications that host governments in the region are seeking to incentivise greater investment by our industry in a manner that is encouraging for Petroceltic's portfolio.  We believe that the MENA region offers opportunities for above average returns in oil and gas, in particular for companies of our scale and skill set.

In Algeria, Petroceltic, as operator, invested over US$100 million during 2011 in the highly successful Ain Tsila appraisal campaign and we now look forward with confidence to participating in the commercial development of this important gas resource. During 2012, we also expect to see the launch of significant new fiscal terms designed to attract more international inward investment in the Algerian upstream sector and believe this is an important step which will assist Algeria in the optimal long-term development of its natural resources.   

The political landscape in Italy in 2011 was dominated by the decline of the ruling coalition which was replaced by a technical government in November.  This political upheaval, combined with the ongoing impact of the introduction of the restrictive DL 128 legislation in June 2010, effectively stopped most offshore upstream investment in Italy and adversely affected Petroceltic's ability to advance its planned offshore drilling programme.

The Italian Minister for Economic Development,  recently set out a new energy strategy for Italy which outlined the Technical Government's plan to re-launch domestic hydrocarbon production. It is clear that the new Government of Italy sees the upstream sector as a potential key source of jobs, growth and energy security and intends to take active steps to improve the regulatory landscape to encourage and facilitate investments and development.  The new strategy, which appears to be a  response to the loss of supply during the Libyan conflict in addition to the restrictions on the import of Russian gas during the past winter, set a target for domestic production to rise from under 10 per cent of Italian demand, where it is today, to 20 per cent.  Petroceltic welcomes this new approach and believes that it will enable development and growth of our Italian portfolio leading to the unlocking of potentially substantial value.

During 2011, the Company also recorded a notable success in acquiring interests in two highly prospective licences in the Kurdistan Region of Iraq. Since licensing recommenced in 2004, in excess of 50 awards have been made to a variety of companies, and competition for acreage is very high. Put simply, the geological opportunity in Kurdistan is virtually unparalleled, and this has been reflected in outstanding rates of exploration success. We have also been impressed by the progressive policies of the Kurdistan Regional Government ("KRG"), in particular their promotion of private enterprise and foreign direct investment in the upstream energy sector.

Our Vision

Petroceltic's business model is based fundamentally on the quality of our people. Our geoscientists, petroleum engineers and operations staff are central to our decision-making process.  We focus on recruiting people with proven and demonstrated skills and knowledge in our basins and areas of focus, and then empowering those staff to apply their expertise, combined with the latest industry technology, to find and develop oil and gas fields.

We believe that most value is added at the exploration and appraisal stage of the development cycle, and we will continue to focus our efforts on areas and basins where members of our team have experience which gives us a sustainable competitive advantage.  Petroceltic's entry into two attractive blocks in Kurdistan is testament to the strength and persistence of our team.

More broadly, we also aim to develop, appraise or acquire producing assets into the portfolio, principally to provide internal cash-flow for re-investment in the growth engine of exploration and appraisal.  Our collective experience tells us that this is a model for value creation which works, and we believe that it will continue to deliver value for our shareholders.

We aim for an open, team-work focused culture with collegiate decision-making, which values creativity.  We value our relationships with our investors, industry partners, host governments and communities very highly and aim to be open, transparent, trust-worthy and ethical in all of our interactions with partners and stakeholders.  We believe that our proven ability to partner with and in some cases operate on behalf of significantly larger companies such as Sonatrach, Algeria's National Oil Company, Hess Corporation, Enel and ENI is testament to our ability to operate effectively in a highly competitive industry.

Corporate Governance

The Board was pleased to appoint Hugh McCutcheon as a Non Executive Director in December 2011. Hugh has a long association with and experience of the Energy and Natural Resources sector as an Investment Banker with Davy, where he was Head of Corporate Finance from 2001-2011. He has previously advised many natural resources companies such as Tullow Oil, Dragon Oil, Providence Resources and Kenmare Resources. The Board is delighted that Hugh has agreed to join us and believes that his deep experience will be of immense value to our business.

The Petroceltic Board recognises the importance of good Corporate Governance and is committed to business integrity and high ethical values across the Group's activities, viewing it as an integral part of managing the Group's business. We are committed to the highest ethical standards in all aspects of business and expect the same from our employees, contractors and agents worldwide. We comply with relevant national and international laws and act in accordance with local guidelines and regulations, including those which are industry specific, governing our operations.

The Board constantly seeks to review methods and practices to make the Board more effective, and to help it provide entrepreneurial leadership to the Company, within a framework of prudent and effective control which enables risks to be accurately assessed and managed.

As always we would like to thank Petroceltic's shareholders for the strong support which they have shown for the Company during the last year. We also wish to thank Petroceltic's staff and contractors, our partners and other stakeholders for all their hard work and loyal support during what has been the most active year in the Company's history, and one which leaves us well placed to deliver further growth in the portfolio and in shareholder value during 2012.

Robert Arnott

Chairman

Chief Executive's Review

Petroceltic is an independent oil and gas exploration and production company, focused on the Middle East, North Africa and Mediterranean region.  Our current asset portfolio includes exploration and production assets in Algeria, Italy and the Kurdistan Region of Iraq and we continue to look at new ventures across the region.

2011 has been an exciting period of change and development for our business. In Algeria, we successfully appraised our world class Ain Tsila gas condensate discovery, increasing  Petroceltic's estimates of most likely gas resource in place by 70 per cent to 10.3 TCF. We farmed out an 18.375 per cent stake in the Isarene PSC to our new partner Enel and received over US$100m in cash from the deal in 2012. We entered into the much sought after hydrocarbon province of Kurdistan through a 16 per cent participating interest in two high potential blocks on trend from existing oil discoveries. In Italy, we accelerated our onshore exploration in the Po Valley in partnership with ENI and preparatory work for drilling is due to commence later this year. We also continue to screen opportunities to acquire existing production and development assets both within and external to the MENA region. 

Algeria - from appraisal to development

Appraisal Programme

In Algeria, we completed our extended six well appraisal programme on the Ain Tsila gas condensate field on time and under budget, with an excellent safety record.  Proven and probable contingent resources for the field have been assessed for the first time, and the draft plan of development has been substantially agreed by Sonatrach, Petroceltic and Enel.

Petroceltic's introduction of Enel as a new partner in April 2011 was an important part of moving the Ain Tsila project towards development.  Enel is Italy's largest power producer, and is the second largest electricity generator in Europe by installed generation capacity.  It is also one of Sonatrach's largest gas purchasers, buying nine billion cubic meters of gas per annum from Algeria.  The Enel transaction was formally approved by the Algerian authorities in December 2011; and funds of over US$100 million were received in February, while  an additional contingent payment, linked to the final approved production profile for the Ain Tsila development, is expected to fall due later in 2012. The Enel transaction was agreed in principle in August 2010, when only three wells had been drilled in the Ain Tsila field. At that time the Company's best estimate of gas in place in the field was 5.5 TCF. 

This campaign culminated in a series of good results including  the outstanding well test results seen from well AT-9, which in December 2011 reported a sustained flow rate of 67.6 million standard cubic feet of gas per day and 910 barrels per day of condensate from an Ordovician reservoir section which had not been fracture stimulated.  This excellent result was confirmed as one of the highest gas flow rates ever achieved in Algeria from this reservoir zone without fracture stimulation. At the end of that programme, gas initially in place delineated by the appraisal campaign had risen to 10.3 TCF, an increase of circa 70 per cent from April 2011. 

Development Planning

Petroceltic, along with its partners, is working steadily towards achieving a declaration of commerciality on the Ain Tsila development during 2012. Two separate components are required to achieve this. The co-venturers must agree on a plan of development, which covers reserves, production profiles, the development scheme and associated costs. Secondly, the partners must also agree that the likely revenues from the proposed sales of gas and hydrocarbon liquids are sufficient to cover all costs and leave a profit for the joint venture group, i.e. that the development is commercially attractive.

The critical first step in this process was met early in 2012.  Following completion of the appraisal campaign, an intensive period of technical evaluation, economic analysis, market evaluation and refinement of development plans resulted in Petroceltic and Enel submitting a draft plan of development for the Ain Tsila field to Sonatrach for its consideration in January 2012. Over the last number of months this draft plan has been  under active discussion and substantial and encouraging progress has been made towards its finalisation. Given the significant advances that have been made, Sonatrach, Petroceltic and Enel have agreed to a three month period from the 24th April within which to conclude these discussions. We expect that this period will allow Sonatrach, Enel, and Petroceltic to submit  the agreed Final Discovery Report to the Algerian regulatory authorities for approval. The most recent agreed profile for the plan of development incorporates a most likely gross contingent resources level for the Ain Tsila field of 2,200 Billion Cubic Feet of Gas and 180 MMbbls of LPG and condensate with a wet gas production plateau rate between 350-400 mmscf/d, resource and plateau  levels that are consistent with similar commercial developments in the Illizi basin in Algeria. In addition, the integration of the test results from the AT-9 well into the development plan,  has resulted in a significant reduction in the number of wells and associated capital expenditure required to reach the plateau production rate.  

The partners in the Isarene Licence agreed in March 2012 to initiate a gas sales feasibility study, which considers the sale of the gas from the Ain Tsila field, either to Sonatrach, or to possible third parties, via a Joint Marketing Company between the co-venturers. It is expected that this feasibility study will also be completed within the three month period ending 24th July 2012.

Upon receipt of both the agreed plan of development and the final feasibility study, the Isarene licence partners will consider the commerciality of the proposed development.  Thereafter, both of these reports may be submitted to the Algerian Competent Authorities, who in turn review the commerciality of the proposed development and consider granting an exploitation period, lasting  a period of 30 years.

In parallel with the on-going commerciality proceedings, the Company has initiated a 2nd phase farm-out  process for an interest in the Ain Tsila field. The Company has been greatly encouraged by both the quality of the prospective counter parties and the level of engagement that they have shown to date. The Company remains confident that it will commercially agree a 2nd farm-out transaction during 2012.

Entry into Kurdistan Region of Iraq

Petroceltic has been considering making an investment in the highly prospective Kurdistan region of Iraq for several years.  We were attracted by the prospective geology of the region, in the shape of the folded anticlines of the Zagros fold belt. These opportunities had been widely explored in Iran and other parts of Iraq, but largely left undrilled in Kurdistan, primarily for political rather than technical reasons.

Throughout 2010 and early 2011 the Company continued to carry out geological work in our chosen areas of focus and to present the results of our analysis to the technical experts of the Ministry of Natural Resources of the Kurdistan Regional Government ("KRG").  As we progressed in our studies and understanding of the area, we concluded that a partnership with a larger company would significantly improve to our chance of success.  In July of 2011, that decision paid off when Petroceltic, in partnership with Hess Corporation and the KRG was awarded Production Sharing Contracts for the Dinarta and Shakrok blocks.  Petroceltic holds a 16 per cent interest in each PSC, with Hess Corporation holding 64 per cent and operating on behalf of the partnership. The Kurdistan Regional Government has a 20 per cent carried interest in each block.

The blocks are in the area to the North and East of the Kurdish capital Erbil in the oil fairway established by the nearby Shaikan, Atrush, Swara Tika and Bina Bawi oil discoveries.  Since award, the contract for 2-D seismic has been tendered and awarded to BGP, a Chinese-owned seismic company which has operated in the adjacent blocks on behalf of Murphy, DNO, MOL and Maersk-Hillwood.  The acquisition of approximately 850 kilometres of 2-D seismic has recently commenced and is expected to complete in December 2012, following which the joint venture plans to drill at least one exploration well in each of the PSC areas in 2013.

Italy - operational activity accelerating

It is clear that the new Government of Italy sees the upstream sector as a potential key source of jobs, growth and energy security and intends to take active steps to improve the regulatory landscape to encourage and facilitate investments and development.  This very welcome change of approach will, we believe, help in the development of our highly prospective Italian portfolio. In particular we are optimistic that the currently suspended Elsa appraisal well will come back on to the agenda in 2012, and that some of the exploration licence applications around the Elsa permit offshore the Abruzzo region will finally be granted in 2012.

Within the Italian onshore portfolio in 2011, we transferred the operatorship of the Carisio licence to ENI, to facilitate the drilling of a high impact exploration prospect there.  This prospect, formerly known as Rovasenda, has been renamed Carpignano Sesia at the suggestion of the local administrative authorities to better reflect its geographical location. We now hope to begin preliminary operations on the well site in late 2012, with a view to commencement of drilling of the well later in 2012, or early 2013. Mean prospective resources are 245 MMboe and the prospect is analogous to the nearby ENI operated Villafortuna-Trecate field which had a peak production of circa 88,000 bopd. Petroceltic's interest in this licence is 47.5 per cent, and the Company has been in discussions with a number of potential partners with a view to sharing the risks and rewards of drilling this prospect.

Finance

In May 2011, the Company raised US$60 million from new and existing shareholders to fund the Algerian appraisal programme and Italian exploration, ahead of the Enel deal being ratified by the Algerian authorities. In November, the Company also put in place a US$30 million bridging facility with Macquarie Bank Limited. The facility was partially drawn towards year end to allow completion of the Algerian drilling campaign prior to receipt of the Enel funds. When the Enel funds were received in February 2012, the facility was repaid in full. The Company is now well funded for the remainder of 2012, and with the expected further payment from Enel, coupled with the likely 2nd phase farm-out in Algeria, Petroceltic expects to continue to be well funded to develop and grow its business.

Business Development

Petroceltic is an exploration company focused on value creation through exploration and appraisal. It has always formed part of the strategy of Petroceltic that some of this exploration and appraisal should and will be funded from internal cash flow. The Company continually screens opportunities to acquire production and development assets with upside within our region of focus. Management considers that the opportunities to acquire assets with upside potential within both the region and beyond are attractive at the moment. We look not only at production and development opportunities but also at high impact exploration opportunities which can help to renew the portfolio.

Investor Relations

The Company hosted its first ever Capital Markets day for Institutional Investors and Analysts in October 2011. The day was well-attended, with over 70 participants, and feedback was universally positive. This event, when combined with the positive well results from the appraisal campaign, made a large contribution to reducing the risks perceived by market commentators and investment analysts in respect of the execution of the Ain Tsila field plan of development. The Company has been successful in broadening the quantity and quality of investment analyst coverage, increasing the number of analysts covering the stock to nine by year end.

Health, Safety and Environment

In Health, Safety and Environmental policy ("HSE"), we set targets for HSE performance, and monitor performance in all areas. In 2011, we had 1.5 million operational man-hours, with three lost time incidents ("LTI's"), giving a lost-time incident frequency of 2.4 per million man-hours. This performance is comparable with industry averages from the International Association of International Drilling Contractors ("IADC") reported statistics. We are particularly pleased that whilst the KCA Deutag rig 211 was on contract with Petroceltic it recorded a cumulative total of 1500 days without a lost time incident.  This excellent performance continued to the end of the program and we congratulate KCA Deutag and the Petroceltic operations team on this achievement. There were no Petroceltic staff LTI's or environmental incidents during the period.

Looking Forward

2011 has been a year in which Petroceltic made great strides towards building a solid foundation for future growth. We believe that our successful 2011 appraisal campaign, coupled with the introduction of Enel as a new partner in the Ain Tsila field, and the improving regional gas pricing environment has significantly enhanced the value of the Ain Tsila development. We are confident that the development plan and the gas sales feasibility study will be agreed in 2012, leading to the formal booking of reserves before year end.

In Kurdistan, the completion of the 2-D seismic in 2012 will set the scene for an exciting drilling programme in 2013. In Italy, we are optimistic that the recently announced New National Energy Policy will break the logjam in offshore developments and speed up the pace of decision-making in general.

We look forward to continuing our policy of dual focus, on both organic development of our portfolio, but also remaining vigilant for opportunistic possibilities for seizing corporate and asset acquisition opportunities with the potential  to grow and transform our business.

Brian O'Cathain

Chief Executive



Financial Review

Despite the challenging economic and market backdrop, 2011 was a year of significant success in investment and funding activity for Petroceltic.  During the year, the Company consistently sought to balance the dual requirements of funding and successful execution of its six well Algeria appraisal programme and the continued expansion of the Company into exciting new exploration areas.

·     The Enel farm-out agreement was ratified formally by the Algerian authorities in December 2011. Consideration received to date is over US$100 million.

·     The Company raised US$60 million in new equity to fund the expanded six well drilling programme in Algeria and provide funds for the Company's entry in the Kurdistan Region of Iraq.

·     A bridging facility of US$30 million was signed with Macquarie Bank, allowing Petroceltic to complete the Algerian appraisal programme on time and submit the Final Discovery Reports in advance of the License deadline.

The Company is now in a strong financial position due to the completion of the Enel deal and the receipt of funds in excess of US$100 million in February 2012.

Farm-out Agreement with Enel

In April 2011, the Company announced a farm-out agreement with Enel S.p.A whereby Enel acquired an 18.375 per cent interest in the Isarene PSC. Under the agreement, Enel agreed to pay up to 24.5 per cent of back costs incurred from signing of the PSC in 2005 until the end of the exploration period in April 2010 and  also committed to fund 49 per cent of the six well appraisal drilling campaign. The total amount receivable from Enel at completion of the transaction was US$100.6 million, and substantially all of these funds were received in February 2012.

A contingent cash consideration, up to a maximum of US$75 million is also payable, although our current expectation is for an amount significantly less than this figure. The amount ultimately payable is dependent on a number of technical parameters approved by the Algerian Authorities in the Final Discovery Report, a draft of which was submitted to Sonatrach, the Algerian State Oil and Gas Company in January 2012.

Capital Expenditure

Capital expenditure in the year was US$169.7m (2010: US$45.8m). A total of US$110.9m (2010: US$41.2m) was invested in the Isarene permit in Algeria; however a significant proportion of these costs were offset by the receipt from Enel of over $100m in February 2012. In July 2011, Petroceltic entered into two production sharing contracts in the Kurdistan region of Iraq, in a joint venture with Hess Corporation and the Kurdistan Regional Government. Petroceltic holds a 16 per cent participating interest (20 per cent paying interest) in two PSCs for the Dinarta and Shakrok exploration blocks, with 2-D seismic and at least one exploration well planned for each block; total signature and related bonuses payable by Petroceltic amounted to US$53.8m. Of the remaining US$6m, US$1.9m was invested in Italy, primarily to support technical work on the western Po Valley permits, and US$3.2m was invested in new ventures.

Net Loss

Successful Equity Placing

In May, the Company raised gross proceeds of approximately US$60m (Stg£37.5m) placing a total of 351,000,000 new ordinary shares at Stg10.5 pence each, representing approximately 17 per cent of the ordinary shares in issue immediately prior to the placing. The placing was co-ordinated by Petroceltic's brokers Mirabaud, Davy and Bank of America Merrill Lynch. The shares were placed with both new and existing institutional shareholders and funds were raised to complete the expanded Algerian drilling and appraisal programme. Both Brian O'Cathain (Chief Executive) and Tom Hickey (Director of Corporate Development) subscribed for shares in this placing.

Macquarie Bank Facility

In October, the Company announced the agreement of a one year, US$30m bridging loan facility with Macquarie Bank. The Macquarie facility represented a strong technical, commercial and financial endorsement of Petroceltic's business and asset portfolio. US$24m was drawn down from the facility in 2011, with all amounts outstanding being repaid in full in February 2012. In addition to normal fees and interest payable under such a facility, Macquarie was also entitled to warrants over Petroceltic shares based on the timing and extent of amounts drawn.

Under the facility, up to 40 million warrants are issuable to Macquarie in lieu of arrangement and facility fees.  The cost of these warrants falls within the scope of IFRS 2 Share-based Paymentand are being recognised over the expected term of the facility.  This share-based payment expense constitutes a transaction cost under IAS 39 Financial Instruments: Recognition and Measurementand is being amortised over the expected term of the facility.  A charge of US$839k was recognised in the year.  As the borrowings relate directly to the development of qualifying assets, these costs have been included within borrowing costs capitalised as part of the exploration and evaluation assets within intangible assets.

In addition, further warrants were issuable, based on the amount and timing of drawings. The commitment to issue a variable number of warrants is a derivative financial liability for accounting purposes and is subject to measurement initially and subsequently at fair value.  The initial fair value of the liability of $775k has been offset against the carrying value of the loan on drawdown and is being recognised over the term of the loan on an effective interest rate basis.  This amount, together with interest payable, is included in borrowing costs capitalised as part of the exploration and evaluation assets within intangible assets.  Subsequent changes in the fair value of the derivative liability are to be recognised through the Income Statement.

At 31 December 2011 there was a total of 50,763,321 warrants issued or issuable to Macquarie under this arrangement at share prices ranging from Stg4.5 pence to Stg7.8 pence. A further 8,306,481 warrants were issued up to the date of the repayment of the facility and no further warrants are issuable under this agreement.

Treasury and Liquidity

The Board sets out the treasury policies and objectives of the Company. In general, the policies reflect the current development stage of the Company and thus focus primarily on capital raising, cash management and financial risk. The policies ensure that the Company's deposit terms are reviewed and optimised on an on-going basis and that capital is held with a diverse group of banks who meet the Company's credit rating standards.

The Company's budget is presented to the Board each year for approval. Prior to approval, the Board ensures the Company can continue to meet its liabilities as they fall due. Throughout the year, monthly performance against budget is prepared and reported on by management at each board meeting. Increases to the budget over US$500k are brought to the Board for approval. Any material changes to the phasing of the budget spend must also be brought to the notice of the Board.

Investor Relations

The Company actively manages investor relations through regular meetings and telephone calls with market analysts and institutional investors, as well as interviews with journalists and presentations at national and international conferences. The Company keeps a record of meetings and calls held with institutional holders and during 2011 presented at 24 conferences and met face to face with over 130 institutional investors. Over the last 12 months the Company has increased its investment analyst research coverage with the addition of Canaccord, Goldman Sachs, Bank of America Merrill Lynch and Daniel Stewart (all in London) and Merrion Stockbrokers (Dublin).

Accounting Policies

The Company and Group's accounting policies and standards comply with IFRS as adopted by the EU and as required by the rules of the AIM and the ESM.

Principal Risks and Uncertainties

The Company and Group have a risk management structure in place which is designed to identify, manage and mitigate business risk. A Risk Register is maintained by the group and updated on a monthly basis.

The main objective of the finance function is to provide a flexible financial organisation that allows the management team to shape, fund and manage the long term strategy and direction of the Company. With the right people, processes and technologies it aims to deliver solid business planning, underpinned by budgets that are fully funded, delivering real-time information that enables good Company decision making. In doing this, it ensures proper stewardship of our shareholders' funds and maintains flexibility to respond to change and new opportunities.



Consolidated Statement of Comprehensive Income

For the year ended 31 December 2011






2011

2010



US$'000

US$'000

Continuing Operations




Revenue


419

270





Administrative expenses


(4,834)

(6,330)

Amortisation & depreciation


(367)

(312)

Exploration costs written off


(3,182)

(6,998)

Cost of share-based payments


(1,759)

(1,105)

Results from operating activities


(9,723)

(14,475)





Finance income  


1,658

1,914

Finance expense


(108)

-





Loss before tax


(8,173)

(12,561)





Income tax expense


-

-





Loss for the period - all attributable to equity holders of the Company


(8,173)

(12,561)





Other comprehensive income




Net change in fair value of available-for-sale assets


-

(351)

Income tax on other comprehensive income


-

73

Other comprehensive income for the period, net of income tax


-

(278)









Total comprehensive income for the period -all attributable to equity holders of the Company


(8,173)

(12,839)





Basic loss per share (cents)


(0.37)

(0.69)

Diluted loss per share (cents)


(0.37)

(0.69)



Consolidated Statement of Changes in Equity


For the year ended 31 December 2011






Share capital

Share premium

Capital conversion  reserve fund

Share-based payment reserve

Fair value reserve

Retained deficit

Total equity


US$'000

US$'000

US$'000

US$'000

US$'000

US$'000

US$'000

2010








Balance at 1 January 2010

37,710

197,023

51

7,678

278

(83,903)

158,837









Total comprehensive income for the year








Loss for the financial year

-

-

-

-

-

(12,561)

(12,561)









Other comprehensive income








Gain/(loss) on available-for-sale assets net of tax

-

-

-

-

(278)

-

(278)

Total comprehensive income for the year

-

-

-

-

(278)

(12,561)

(12,839)









Transactions with owners, recorded directly in equity






Contributions by and distributions to owners







Shares issued

10,673

108,089

-

-

-

-

118,762

Share based payment charge

-

-

-

1,288

-

-

1,288

Effect of share options exercised or lapsed

-

-

-

(1,765)

-

1,765

-

Total transactions with owners

10,673

108,089

-

(477)

-

1,765

120,050









Balance at 31 December 2010

48,383

305,112

51

7,201

-

(94,699)

266,048









2011








Balance at 1 January 2011

48,383

305,112

51

7,201

-

(94,699)

266,048









Total comprehensive income for the year








Loss for the financial year

-

-

-

-

-

(8,173)

(8,173)









Total comprehensive income for the year

-

-

-

-

-

(8,173)

(8,173)









Transactions with owners, recorded directly in equity






Contributions by and distributions to owners







Shares issued

6,371

50,809

-

-

-

-

57,180

Share-based payment charge

-

-

-

2,720

-

-

2,720

Effect of share options exercised or lapsed

-

-

-

(1,081)

-

1,081

-

Total transactions with owners

6,371

50,809

-

1,639

-

1,081

59,900









Balance at 31 December 2011

54,754

355,921

51

8,840

-

(101,791)

317,775



Consolidated Statement of Financial Position

As at 31 December 2011






2011

2010



US$'000

US$'000





Assets




Non-current assets




Intangible assets


360,933

194,539

Property, plant and equipment


504

714

Other investments


-

31

Total non-current assets


361,437

195,284





Current assets




Trade and other receivables


1,021

4,223

Cash and cash equivalents


9,075

82,244

Total current assets


10,096

86,467





Total assets


371,533

281,751





Equity




Share capital


54,754

48,383

Share premium


355,921

305,112

Capital conversion reserve fund


51

51

Share-based payment reserve


8,840

7,201

Retained deficit


(101,791)

(94,699)

Total equity


317,775

266,048





Liabilities- current




Trade and other payables


23,381

13,713

Loans & borrowings


23,413

-

Derivative liability


882

-





Liabilities- non current




Decommissioning provisions


6,082

1,990





Total liabilities


53,758

15,703





Total equity and liabilities


371,533

281,751



Consolidated Statement of Cash Flows

For the year ended 31 December 2011






2011

2010



US$'000

US$'000

Cash flows from operating activities




Loss before tax


(8,173)

(12,561)

Adjustments for:




Finance income


(1,658)

(1,914)

Finance expense


108

-

Amortisation & depreciation


367

312

Exploration costs written off


3,182

6,998

(Gain)/loss on investment


(3)

25

Cost of share-based payments


1,759

1,105

Cash from operations before changes in working capital


(4,418)

(6,035)





Decrease/(increase) in trade and other receivables


3,202

(3,185)

Increase/(decrease) in trade and other payables


9,668

(17,801)

Increase in provisions


-

490

Net cash from operating activities


8,452

(26,531)





Cash flows from investing activities




Expenditure on intangible assets


(164,529)

(45,014)

Expenditure on tangible assets


(86)

(797)

Interest received


882

1,034

Sale of financial investments


34

-

Net cash used in investing activities


(163,699)

(44,777)





Cash flows from financing activities




Proceeds from the issue of new shares


59,896

123,977

Payment of share issue transaction costs


(2,594)

(5,032)

Drawdown of bank loan


24,000

-

Net cash used in financing activities


81,302

118,945





Net (decrease)/increase in cash and cash equivalents


(73,945)

47,637

Effect of foreign exchange fluctuation on cash and cash equivalents


776

880

Cash and cash equivalents at start of period


82,244

33,727

Cash and cash equivalents at end of period


9,075

82,244



General Information

The financial information presented in this report has been prepared using accounting policies consistent with International Financial Reporting Standards ("IFRS") as adopted by the European Union and as set out in the Group's annual financial statements in respect of the prior year ended 31 December 2010 except as noted below. The financial information herein does not include all the information and disclosures required in the annual financial statements, however the full financial statements are included within the Annual Report which will be distributed to shareholders and made available on the Company's website www.petroceltic.com in due course.  It will also be filed with the Company's Annual Return in the Companies Registration Office. 

The financial information herein for the prior year ended 31 December 2010 represents an abbreviated version of the Group's statutory financial statements and which full financial statements have been filed with the Companies Registration Office.

Basis of Preparation, Accounting Policies and Estimates

(a) Basis of Preparation and Accounting Policies

The financial information contained in this Preliminary Statement has been prepared in accordance with the accounting policies set out in the last annual financial statements.  The following are the other new standards that are effective for the Group's financial year ending on 31 December 2011 and that had no significant impact on the results or financial position of the Group for the year ended 31 December 2011:

•     Improvements to IFRSs (2010)

•     IAS 24 Revised: Related Party Disclosures

•     Amendment to IAS 32 - Financial Instruments: Presentation - Classification of Rights Issues

•     Amendment to IFRIC 14 - Prepayments of a Minimum Funding Requirement

•     IFRIC 19 - Extinguishing Financial Liabilities with Equity Instruments

(b) Estimates

The preparation of this Preliminary Statement requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expense. Actual results may differ from these estimates.  In preparing this Preliminary Statement, the significant judgements made by management in applying the Group's accounting policies and the key sources of estimation uncertainty were the same as those that applied to the consolidated financial statements as at and for the year ended 31 December 2010.



Intangible Assets Note


Royalty

Exploration and evaluation assets

Total


2011

2010

2011

2010

2011

2010


US$'000

US$'000

US$'000

US$'000

US$'000

US$'000

Cost







At start of year

3,753

3,753

222,308

177,294

226,061

181,047

Additions*

-

-

169,647

45,014

169,647

45,014

At end of year

3,753

3,753

391,955

222,308

395,708

226,061








Amortisation and impairment







At start of year

3,306

3,105

28,216

21,218

31,522

24,323

Amortisation

71

201

-

-

71

201

Exploration costs written off**

-

-

3,182

6,998

3,182

6,998

At end of year

3,377

3,306

31,398

28,216

34,775

31,522








Net book value







At start of year

447

648

194,092

156,076

194,539

156,724








At end of year

376

447

360,557

194,092

360,933

194,539















*  This is net amounts incurred by Petroceltic and does not include amounts incurred by other partners of US$200k (2010: US$15.7m).

**  Exploration costs written off relates to new ventures and permit application costs. In 2010, this included an impairment write down of US$5.7m representing the Ksar Hadada permit in Tunisia which was relinquished.

Dr. Dermot Corcoran, Head of Exploration, Petroceltic International plc, is the qualified person who has reviewed and approved the technical information contained in this announcement. Dr. Corcoran has a B.Sc in Geology, a M.Sc. in Geophysics, and a Masters degree in Business Administration, all from the National University of Ireland, Galway. He also holds a Ph.D in Geology from Trinity College, Dublin. Dr. Corcoran has over 20 years experience in oil & gas exploration and production, and has previously worked at ExxonMobil, the Petrofina Group, and Statoil. Definitions in this press release are consistent with Society of Petroleum Engineers/ World Petroleum Council guidelines.

Notes to Editors:

Petroceltic International plc is a leading Upstream Oil and Gas Exploration and Production Company, focused on the Middle East, North Africa and Mediterranean area, and listed on the London Stock Exchange's AIM Market and the Irish Stock Exchange's ESM Market. The Company has exploration and appraisal assets in Algeria, Italy and the Kurdistan Region of Iraq. Petroceltic is in a unique position in Algeria, operating a significant licence in partnership with Sonatrach, the National Oil Company of Algeria, and Enel, and is the only AIM listed company to enjoy this position.

Glossary of Terms

Bcf

boe

bopd

mmboe

mmbbls

mmscf/d

tcf

LPG

PSC

IFRS

IFRIC

IAS

AIM

ESM

Billion cubic feet (1 cubic foot = 0.028 m3)

Barrels of oil equivalent. (5.6 Million cubic feet of gas = 1 boe).

Barrels of oil per day (1 barrel = 159 litres).

Million barrels of oil equivalent

Million barrels of oil

Million standard cubic feet per day

Trillion cubic feet

Liquid petroleum gas

Production sharing contract

International Financial Reporting Standards

International Financial Reporting Interpretations Committee

International Accounting Standards

London Stock Exchange's Alternative Investment Market

Irish Stock Exchange's Enterprise Securities Market


This information is provided by RNS
The company news service from the London Stock Exchange
ENDFR IAMLTMBBTBAT
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