RNS Number : 1494P
Sound Oil PLC
29 September 2011
 



29 September 2011

 

Sound Oil plc

("Sound Oil" or "the Company")

 

Interim results for the six months ended 30 June 2011

 

Sound Oil (AIM:SOU), the upstream oil and gas company with assets in Italy and Indonesia, announces its unaudited interim results for the six months ended 30 June 2011.

 

Highlights

 

·              Successful acquisition of Consul

 

·              New permit awarded to Apennine 100% on Costa del Sole, Sicily

 

·              Casa Tiberi-1 to start drilling in October

 

·              Three well drilling programme at Citarum in Indonesia

 

·              Sungai-Lahei-1 well at Bangkanai to start drilling in November

 

·              Cash at 30 June 2011 stood at £11.4 million

 

 

Gerry Orbell, Sound Oil's Chairman and Chief Executive, commented:

 

"Sound is well funded and has an exciting exploratory programme ready to start in the Autumn. We have acquired some very interesting acreage over the last few months which we are now focused on developing while continuing to consider additional opportunities for growth.  I am particularly pleased to announce that Sound has become a drilling operator in Italy for the first time allowing us to control the pace of our activities."

 

 

 

For further information please contact:

 

Sound Oil

Gerry Orbell, Chairman and Chief Executive

 

Tel: 44 (0)1372 365745

Smith & Williamson - Nominated Adviser

Azhic Basirov

David Jones

 

 Tel: 44 (0)20 7131 4000

Investec - Broker

Charles Batten

David Flin

Adam Strachan

 

Tel: 44 (0)20 7597 4000

Buchanan Communications

Tim Thompson

Ben Romney

Helen Chan

 

Tel: 44 (0)20 7466 5000

 

 

 

Chairman's Statement

 

During the last eight months we have successfully acquired assets in Italy and have been busy progressing operations which will lead to a very active drilling campaign both in Italy and Indonesia starting in the Autumn.

 

During June we farmed-in to the Montemarciano permit near Ancona, Italy and became the Operator. Construction of the well site is on schedule for the Casa Tiberi-1 farm-in exploration well which we expect to start drilling in late October. In August we were awarded the gas field at Rapagnano, also in the Ancona area, at no cost to the Company. This is a small field which was shut-in several years ago when it was still producing revenues of US$60,000 per month. Also in the summer we perforated two gas zones in the Marciano gas field in the very south of Italy. Although a very satisfactory gas flow occurred from the upper sand on a short-term test, later analysis of the pressure data indicated that the reservoir was of limited extent.

 

In Java, Indonesia, work is underway on the well sites for three substantial exploration prospects on the Citarum PSC where we have a 20% interest. The site at Jatayu is now complete and the road to the Cataka well site 50% finished. The operator Pan Orient Energy advises that the Jatayu-1 well is expected to start in late November followed by Cataka-1 and the third well Geulis-1, back to back.

 

In Kalimantan, Indonesia we have a 5% carried interest in a two well exploration programme and the development of the Kerendan gas field on the Bangkanai PSC. Salamander Energy, the Operator, advises that the Sungai Lahei-1 exploration well will start drilling on a very large prospect at the end of November. This deep well will be turned into the first production well in the shallower overlying Kerendan gas field. During 2012 a further 3 wells will be drilled at Kerendan which is scheduled to start gas production in mid 2013.

 

The Group incurred a loss after tax of £3.0 million in the first six months of 2011. This compares with a loss of £14.0 million in the first half of 2010 (of which £13.4 million arose from the farm-down of the Bangkanai PSC). Exploration costs were £0.6 million (2010 £0.2 million) and administration £1.3 million (2010 £0.7 million), the increases being due to the activity on the new licences in Italy. There was a £0.6 million unrealised foreign exchange loss on US$ holdings (2010 £0.3 million gain). Costs of the Italian acquisition in 2011 were £0.5 million. In the balance sheet, the shares issued for the Consul acquisition and for the share placings contributed to an increase in shareholders equity which rose by £9.6 million to £27.2 million. The fundraisings increased cash balances which at the end of June stood at £11.4 million.

 

Tony Heath retired as the Chief Financial Officer of the Company in September and joined the Board as a non executive director. On behalf of the Board I thank him for his continuing support and welcome him to the Board. James Parsons joined the Company as Chief Financial Officer after a 14 year career in Shell and I welcome him to Sound.

 

Sound is well funded and has an exciting exploratory programme ready to start in the Autumn. We have acquired some very interesting acreage over the last few months which we are now focused on developing while continuing to consider further opportunities for growth.

 

 

Gerry Orbell

Chairman

28 September 2011

 

 

 

Condensed Interim Consolidated Income Statement

for the six months ended 30 June 2011

 



Six months

Six months

Year ended



ended

30 June 2011

ended

30 June 2010

31 December

2010



Unaudited

Unaudited

Audited


Notes

£'000

£'000

£'000

Exploration costs


(580)

(197)

(430)

Gross loss


(580)

(197)

(430)

Administrative expenses


(1,345)

(685)

(1,502)

Group trading loss


(1,925)

(882)

(1,932)

Other income


-

-

(58)

Group operating loss from continuing operations


(1,925)

(882)

(1,990)

Finance revenue


21

10

21

Foreign exchange gain/(loss)


(604)

341

211

Expense incurred in acquiring subsidiaries


(522)

-

-

Loss on disposal of licence interests


-

(13,425)

(14,210)

Loss before income tax


(3,030)

(13,956)

(15,968)

Income tax credit


-

-

-

Loss for the period


(3,030)

(13,956)

(15,968)

Other comprehensive income/(loss):





Foreign currency translation income/(loss)


(777)

1,175

711

Total comprehensive loss for the period attributable to the equity holders of the parent


(3,807)

(12,781)

(15,257)

Loss for the period attributable to:





Owners of the Company


(3,025)

(13,956)

(15,968)

Non-controlling interests


(5)

-

-



(3,030)

(13,956)

(15,968)

Total comprehensive loss attributable to:





Owners of the Company


(3,802)

(12,781)

(15,257)

Non-controlling interests


(5)

-

-



(3,807)

(12,781)

(15,257)

Loss per share basic and diluted for the period attributable to the equity holders of the parent (pence)

4

(0.19)

(2.02)

(2.31)

 

 

 

Condensed Interim Consolidated Balance Sheet

at 30 June 2011

 

 



30 June 2011

30 June 2010

31 December

 2010



Unaudited

Unaudited

Audited


Notes

£'000

£'000

£'000

Non-current assets





Property, plant and equipment


80

22

12

Intangible assets


2,131

1,565

1,525

Exploration and evaluation assets

6

15,934

11,012

9,954

Other debtors


662

630

621



18,807

13,229

12,112

Current assets





Other debtors


341

144

2,940

Prepayments


56

58

65

Current tax receivable


-

26

26

Cash and short term deposits


11,429

9,063

4,484



11,826

9,291

7,515

Total assets


30,633

22,520

19,627

Current liabilities





Trade and other payables


1,107

667

284

Current tax payable


-

-

-



1,107

667

284

Non-current liabilities





Deferred tax liabilities


2,131

1,565

1,525

Provisions


108

111

103



1,676

1,628

Total liabilities


3,346

2,343

1,912

Net assets


27,287

20,177

17,715

Capital and reserves





Equity share capital


49,825

36,456

36,456

Non controlling interests


44

-

-

Foreign currency reserve


2,964

4,205

3,741

Accumulated deficit


(25,546)

(20,484)

(22,482)

Total equity


27,287

20,177

17,715






 

 

 

Condensed Interim Consolidated Cash Flow Statement

for the six months ended 30 June 2011

 


Six months
ended 30 June
2011
Unaudited
£'000

Six months
ended 30 June
2010
Unaudited
£'000

Year ended
31 December
2010
Audited
£'000

Cash flow from operating activities




Cash flow from operations

(1,109)

(826)

(2,683)

Interest received

21

10

21

Net cash flow from operating activities

(1,088)

(816)

(2,662)

Cash flow from investing activities




Capital expenditure and disposals

(69)

(1)

(2)

Exploration expenditure

(897)

(994)

(1,165)

Expense in acquiring subsidiaries

(522)

-

-

Acquisition of subsidiaries

(1,436)

-

-

Payment in escrow - acquisitions of subsidiaries

-

-

(2,413)

Net cash flow from investing activities

(2,924)

(995)

(3,580)

Net cash flow from financing activities

10,791

-

-

Net increase/(decrease) in cash and cash equivalents

6,779

(1,811)

(6,242)

Net foreign exchange difference

166

252

104

Cash and cash equivalents at the beginning of the period

4,484

10,622

10,622

Cash and cash equivalents at the end of the period

11,429

9,063

4,484

 

 

Notes to cash flow





Six months

Six months

Year ended


ended 30 June

ended 30 June

31 December


2011

2010

2010


Unaudited

Unaudited

Audited


£'000

£'000

£'000

Cash flow from operations reconciliation




Loss before tax

(3,030)

(13,956)

(15,968)

Expense in acquiring subsidiaries

522

-

-

Loss on disposal of licence interests

-

13,425

14,210

Finance revenue

(21)

(10)

(21)

Foreign exchange (gain)/loss

604

(341)

(211)

Exploration expenditure written off

(9)

(4)

3

Income tax charge

-

-

-

Increase/(decrease) in accruals and short term creditors

355

(262)

(630)

Depreciation

6

5

15

Share based payments charge

12

2

16

Increase in long term provisions

-

-

(5)

Decrease/(increase) in long term debtors

(32)

204

194

Decrease/(increase) in short term debtors

484

111

(286)

Cash flow from operations

(1,109)

(826)

(2,683)

 

 

 

Notes to the Condensed Interim Consolidated Financial Statements

 

1.  Basis of preparation

 

The condensed interim consolidated financial statements do not represent statutory accounts within the meaning of section 435 of the Companies Act 2006. The comparative financial information is based on the statutory accounts for the year ended 31 December 2010. Those accounts, upon which the auditors issued an unqualified opinion, have been delivered to the Registrar of Companies and did not contain statements under section 498(2) or (3) of the Companies Act of 2006.

 

The condensed interim financial information is unaudited and has been prepared on the basis of the accounting policies set out in the Group's 2010 statutory accounts and in accordance with IAS 34 Interim Financial Reporting.

The seasonality or cyclicality of operations does not impact on the interim financial statements.

 

2.  Share-based payments

 

13,260,000 share options were granted on 1.3.2011 at 2.75p, 9,500,000 on 28.3.2011 at 5.6p and 1,000,000 on 1.4.2011 at 4.95p, all for a five year period. No charge has been included in the consolidated financial statements as it is considered negligible.

 

3.  Related party transactions

 

There were no sales or purchases to or from related parties, no guarantees provided or received for any related party receivables or payables and no other transactions with related parties, directors' loans and other directors' interests.

 

4.  Loss per share

 

The calculation of basic loss per ordinary share is based on the loss after tax and on the weighted average number of ordinary shares in issue during the period. Basic loss per share is calculated as follows:

 


Loss after tax

Weighted average number of shares

Loss per share


June

June

December

June

June

December

June

June

December


2011

2010

2010

2011

2010

2010

2011

2010

2010


£'000

£'000

£'000

million

million

million

pence

pence

pence

Basic

(3,025)

(13,956)

(15,968)

1,616

692

692

(0.19)

(2.02)

(2.31)

 

Diluted loss per share has not been disclosed as inclusion of unexercised options would be anti-dilutive.

 

5.  Segment information

 

The Group has adopted IFRS 8, Operating Segments which requires information on the separate segments of a business.

 

The Group's activity is exploration for oil and gas in Indonesia under two Production Sharing Contracts (PSC's), Bangkanai and Citarum and in Italy under sixteen licences. To date there has been no development activity, production or turnover. The exploration expenditure written off to the Income Statement is not allocated to operating segments. Capitalised exploration expenditure in the Balance Sheet is comprised of:

 

·      Indonesia; £0.2 million for the Bangkanai PSC, £3.7 million for the Citarum PSC and £5.4 million for the fair value uplift which arose on acquisition of the company which owned the PSC's, (at end 2010 £0.3 million, £3.6 million and £6.0 million respectively).

·      Italy; £3.3 million for the sixteen licences and £2.4 million for the fair value uplift which arose on the acquisition of the company which owned the licences (at the end 2010: £nil).

 

The Group has not provided information on revenue, products and services as it is not yet trading.

 

 

 

6.  Exploration and evaluation assets






30 June 2011

30 June 2010

31 December

2010


Unaudited

Unaudited

Audited


£'000

£'000

£'000

Costs




At start of period

12,982

25,123

25,123

Acquisitions

5,931

-

-

Additions

897

994

1,165

Disposals

-

(13,402)

(14,051)

Exchange adjustments

(848)

1,398

745

At end of period

18,962

14,113

12,982

Impairment




At start of period

3,028

2,938

2,938

Write back

-

(4)

3

Exchange adjustments

-

167

87

At end of period

3,028

3,101

3,028

Net book amount at end of period

15,934

11,012

9,954

 

7.  Acquisition

 

On 4 January 2011, the Company completed the acquisition of 96% of the issued share capital of Consul Oil & Gas Ltd ("Consul"), an unquoted company with interests in Italy, for a total consideration of £4.64 million and made an offer to acquire the remaining 4%. The consideration was satisfied by the payment in cash of approximately US$2.19 million (£1.41 million) and the issue of 269,127,983 ordinary shares to the vendors. In addition the Company purchased an existing loan from RAB to Consul of €1.15 million. On 29 January 2011 the Company acquired a further 2% of the issued share capital of Consul, satisfied by the payment in cash of US$46,667 and the issue of 5,555,555 new ordinary shares. After the end of the reporting period, on 22 August 2011, the remaining 2% of Consul not owned by the Group was acquired for consideration of the issue of a further 5,555,555 ordinary shares and the payment of US$46,667 in cash.

The fair value of 96% of the assets of Consul is as follows:


Book

value
IFRS
£'000's

Adjustments

and/or revaluation

£'000's

Fair value
to the
Company
£'000's

Intangible exploration & evaluation costs

3,303

2,391  

5,694

Tangible fixed assets

4

-  

4

Current debtors

244

-  

244

Non-current debtors

28

-  

28

Cash

42

-  

42

Current creditors

(432)

-  

(432)

Non-current creditors

(944)

-  

(944)

Deferred tax liabilities

-

(658)  

(658)

Net assets

2,245

1,733  

3,978

 

The directors consider that goodwill of approximately £658,000 will arise on the acquisition, consisting largely of the synergies expected from combining the operations of the Group and Consul.

 


8.  Share Issues

 

On 4 January 2011, the Company placed 311,251,000 new ordinary shares at 1.2p per share, raising approximately £3.7 million, and entered into a £10 million SEDA equity placing facility which can be drawn upon at the discretion of the Company.

 

On 17 January 2011, the Company placed 230,000,000 new ordinary shares at 1.4p per share, raising approximately £3.22 million.

 

On 12 March 2011, the Company drew down £1.0 million of the SEDA equity placing facility by way of the issue of 38,800,485 new ordinary shares at 2.577p per share.

 

On 18 April 2011, the Company drew down a further £2.80 million of the SEDA equity placing facility by way of the issue of 54,337,384 new ordinary shares at 5.153p per share.

 

On 19 April 2011, options were exercised and the Company issued 2,390,000 ordinary shares at 1.5p per share to Indonesian employees.

 

The proceeds of the above share issues will be used to fund the enlarged Group's combined work programme and ongoing costs.

 

In addition:

 

On 4 January 2011, the Company issued 269,127,983 ordinary shares to acquire control of Consul (per Note 7 above).

 

On 11 January 2011, the Company issued 12,500,000 ordinary shares at 1.2p per share as compensation to 2 former employees of Consul.

 

On 29 January 2011, the Company issued 5,555,555 ordinary shares to acquire a further 2% of the issued share capital of Consul (per Note 7 above).

 

9.  Cash flow effect of acquisitions

 

On 4 January 2011, the Group obtained control of the Consul Oil & Gas group by acquiring 96% of its issued share capital.

 

The fair values of assets acquired and liabilities assumed, relating to that 96%, were as follows:


£'000's

Exploration and evaluation assets

3,303

Property, plant and equipment

4

Long term receivables

28

Accounts receivable

244

Cash

42

Accounts payable

(321)

Accruals

(111)

Long term creditors - Euro loan

(935)

Long term provisions

(9)


2,245

less: cash acquired in the Consul group

(42)


2,203

The cash consideration paid to obtain control was:



£'000's

Total paid to vendors

4,636

less: share element therein

(3,230)


1,406

plus: amount to settle Euroloan (in full)

983

Total cash consideration made

2,389

A further £30,000 was paid later in the period to obtain an additional 2% interest.


 


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