TIDMEO.
RNS Number : 1849N
EnCore Oil PLC
12 February 2009
Press Release
For immediate release: 12 February 2009
EnCore Oil plc ('EnCore' or 'the Company')
Interim Results to 31 December 2008
EnCore Oil plc (LSE: EO.) announces its interim results for the six months ended
31 December 2008.
Highlights:
* Three successful wells drilled, with a fourth announced following period end
* GBP12 million cash in the bank at period end
* Four new licences offered in the 25th UK Offshore Licencing Round
* One disposal and two new farm-ins announced
* Pressure test well completed on Esmond gas storage project
For further information, please contact:
+--------------------------------------------------+--------------------------+
| EnCore Oil plc | www.encoreoil.co.uk |
+--------------------------------------------------+--------------------------+
| Alan Booth, Chief Executive Officer | +44 (0)20 7224 4546 |
+--------------------------------------------------+--------------------------+
| Eugene Whyms, Chief Financial Officer | |
+--------------------------------------------------+--------------------------+
| Yvonne Fraser, Investor Relations Manager | +44 (0)7957 241 408 |
+--------------------------------------------------+--------------------------+
| | |
+--------------------------------------------------+--------------------------+
| Aquila Financial Limited | www.aquila-financial.com |
+--------------------------------------------------+--------------------------+
| Peter Reilly | +44 (0) 118 979 4100 |
+--------------------------------------------------+--------------------------+
| | |
+--------------------------------------------------+--------------------------+
| Hanson Westhouse Limited | |
+--------------------------------------------------+--------------------------+
| Tim Feather | +44 (0)113 246 2610 |
+--------------------------------------------------+--------------------------+
| Matthew Johnson | |
+--------------------------------------------------+--------------------------+
| | |
+--------------------------------------------------+--------------------------+
| KBC Peel Hunt | |
+--------------------------------------------------+--------------------------+
| Jonathan Marren | +44 (0)20 7418 8900 |
+--------------------------------------------------+--------------------------+
Chief Executive's Review
The second half of 2008 saw us continue actively working on our portfolio and
end the period with a healthy cash balance, against a backdrop of falling oil
prices and a severe tightening of the capital and equity markets.
We drilled three successful wells, with a fourth announced following the period
end; we made one disposal; we farmed out equity on two licences; and we were
awarded four new licences in the 25th UK Offshore Licencing Round. We also
further investigated our potential offshore gas storage project through the
drilling of a pressure test well on Esmond.
Financial Position
The company ended the half year entirely debt free and with a cash balance of
GBP12.0 million. Taking into account the cash commitments on our current
activities, namely the completion of the current Breagh well and the development
of Ceres and Kirkleatham, the directors are of the opinion that we are
adequately funded for the foreseeable future without bringing into account any
potential proceeds from any asset disposals. In addition, production revenue is
expected from the Ceres field in mid-2009, and potentially from Kirkleatham by
the end of 2009.
Drilling Activity
We built on the initial drilling success of November 2007 at Breagh (block
42/13a; EnCore 15 per cent.) by drilling two successful appraisal / development
wells during the period. Well 42/13-4 successfully tested gas at a rate of 10.2
million standard cubic feet per day (mmscfd). Well 42/13-5z was drilling over
the period end, and has since tested gas at a rate of 26 mmscfd. All three wells
demonstrated that developable flow rates can be achieved without the need for
reservoir stimulation and indicate that the Breagh field has the potential to
become one of the most significant gas developments in the Southern North Sea in
recent years. The next stage is to work with our partners towards gaining Field
Development Plan approval from the Government as early as possible during 2009.
Prior to the recent drilling campaign, our Operator, Sterling Resources,
published potential resource sizes for Breagh (East and West) that suggested the
field had the potential to contain gas in place of over 1 trillion cubic feet.
These numbers are now in the process of being updated following our recent
successful drilling campaign by the Operator's external reserve evaluators. Our
own internal evaluation gives us the confidence that this potential will be
confirmed. The success at Breagh has, not surprisingly, attracted significant
industry interest given its potential size. We are, of course, always alert to
the opportunities to maximise the near term value of this asset for our
shareholders.
In July we announced that Ceres (formerly known as Barbarossa) on UK North Sea
block 47/9c successfully tested gas at a maximum flow rate of 40 mmscfd which
exceeded our pre-drill expectations. A Field Development Plan was approved by
the Government in September and Ceres is now being developed as a single well
sub-sea tieback jointly with the nearby Eris discovery. First gas is planned for
mid-2009. EnCore has a 10 per cent. interest in Ceres subject to a five per
cent. buy back by the previous owner.
November saw the results of the Cladhan well (formerly known as Bowstring East;
EnCore 16.6 per cent.) on block 210/29a in the UK Northern North Sea. The wire
line logging programme confirmed the presence of a 110 ft light oil column with,
significantly, no oil-water contact. Oil samples, reservoir pressure and
permeability data were taken from the well to be analysed and the well was
suspended for likely use during future appraisal and development drilling.
Cladhan is a significant discovery in that we have proven the presence of an
effective stratigraphic trap containing light oil. The next step will be to
sidetrack the well to an area where the reservoir appears to be more thickly
developed and, in the event of success, undertake a testing programme. Until we
better understand the distribution and nature of the reservoir away from the
original well, together with the location of the oil-water contact, the possible
range for the amount of oil in place is broad although the upside potential is
very significant.
Other portfolio activity
September saw significant portfolio activity as we entered into two farm outs
and a disposal during the month.
Firstly, we completed the US$5.5 million cash sale to TAQA Energy B.V. of our
wholly owned subsidiary EnCore Oil Nederland B.V., whose only asset was a 10 per
cent. interest in the Amstel field offshore Netherlands realising a gain of
GBP1.2 million which is reflected in our half year earnings.
Secondly, we farmed out part of our interest in the northern North Sea blocks
210/29a and 210/30a on which the Cladhan well was later drilled. Dyas UK Limited
took a 10 per cent. interest in the blocks in exchange for contributing to the
well on a promote basis. EnCore retains a 16.6 per cent. interest in the blocks.
At the end of the month, we farmed out 20 per cent. of our interest in Central
North Sea blocks 28/9 and 28/10c to Revus Energy in exchange for a contribution
to the costs of drilling the 'Catcher' well on the blocks, again on a promote
basis. The well, which was scheduled to be drilled in early 2009 has been
delayed due to the operator, Oilexco, going into administration in January 2009
and we await further developments on that front. EnCore currently has a 15 per
cent. interest in the well.
We were offered four licences covering five blocks and part blocks in the 25th
Offshore Licencing Round announced in November. Two blocks have been offered
under a traditional licence and three blocks under a promote licence. The blocks
offered are: 15/21g (40 per cent.), 48/1d (25 per cent.), 9/27c (100 per cent.),
14/29d and 14/30b (100 per cent.). EnCore has been offered operatorship of each
of the blocks, all of which come with drill or drop options.
Gas Storage
The pressure test well on Esmond was drilled during October. The results showed
the reservoir behaviour to be more complex than initially modelled. Some parts
of the reservoir will perform as modelled and other parts may require a
different engineering solution to that looked at to date.
In January 2009 we were notified by the operator, Star Energy that the project
no longer met their economic and strategic investment criteria and they no
longer wished to proceed with the project. It is our intention to continue with
the project as it is still technically viable and the UK is in need of
additional gas storage. The next step will be attracting further investment
partners, though given the current capital and debt markets this may take some
time to materialise.
In view of the increased uncertainty, and the fact that our partner no longer
wishes to proceed, earnings for the period reflect the write off of all of our
costs associated with this gas storage project. Approximately GBP0.5 million is
included in impairment write down and GBP0.3 million in administrative expenses.
Outlook and Activity in 2009
We look forward to first production from Ceres mid-year, and to confirming the
development plan for Kirkleatham in the next few months.
Managing our portfolio of assets will be our key focus in 2009. Whilst we
believe that we have a number of drillable exploration prospects in our
portfolio, we are of the view that drilling costs will continue to come down and
in the current economic and commodity price environment, we are prepared to sit
tight and allow that to happen prior to making any further drilling commitments.
In the meantime, it is clear that the industry will need to go through a period
of consolidation, especially in the smaller cap oil & gas sector. In line with
our long stated strategy we will seek to sell certain assets at the appropriate
time in their capital and risk cycle and, where appropriate, enter into further
farm outs with a view to returning value to our shareholders.
I look forward to reporting on our portfolio activity at the year end and thank
shareholders for your continued support.
Alan Booth
Chief Executive Officer
11 February 2009
INDEPENDENT REVIEW REPORT TO ENCORE OIL PLC
We have been engaged by the company to review the condensed set of financial
statements in the half-yearly financial report for the six months ended 31
December 2008 which comprises the Group income statement, the Group balance
sheet, the Group cash flow statement, the Group statement of changes in equity
and related notes. We have read the other information contained in the
half-yearly financial report and considered whether it contains any apparent
misstatements or material inconsistencies with the information in the condensed
set of financial statements
This report is made solely to the company in accordance with the terms of our
engagement. Our review has been undertaken so that we might state to the company
those matters we are required to state to it in this report and for no other
purpose. To the fullest extent permitted by law, we do not accept or assume
responsibility to anyone other than the company for our review work, for this
report, or for the conclusions we have reached.
Directors' responsibilities
The half-yearly financial report is the responsibility of, and has been approved
by, the directors. The directors are responsible for preparing the half-yearly
financial report in accordance with the AIM Rules of the London Stock Exchange
As disclosed in note 1, the annual financial statements of the Encore Oil Plc
are prepared in accordance with IFRSs as adopted by the European Union. The
condensed set of financial statements included in this half-yearly financial
report has been prepared using accounting policies consistent with those to be
applied for the year ended 30 June 2008 and to be adopted for the financial year
ending 30 June 2009.
Our responsibility
Our responsibility is to express to the company a conclusion on the condensed
set of financial statements in the half-yearly financial report based on our
review.
Scope of review
We conducted our review in accordance with International Standard on Review
Engagements (UK and Ireland) 2410, "Review of Interim Financial Information
Performed by the Independent Auditor of the Entity" issued by the Auditing
Practices Board for use in the United Kingdom. A review of interim financial
information consists of making enquiries, primarily of persons responsible for
financial and accounting matters, and applying analytical and other review
procedures. A review is substantially less in scope than an audit conducted in
accordance with International Standards on Auditing (UK and Ireland) and
consequently does not enable us to obtain assurance that we would become aware
of all significant matters that might be identified in an audit. Accordingly, we
do not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that causes us to believe
that the condensed set of financial statements in the half-yearly financial
report for the six months ended 31 December 2008 is not prepared, in all
material respects, in accordance with the AIM Rules of the London Stock
Exchange.
PKF (UK) LLP
London, UK
11 February 2009
GROUP INCOME STATEMENT
Six months ended 31 December 2008
+-------------------------------------------------+-------------+-------------+-------------+
| | 6 months | 6 months | Year |
| | ended | ended | ended |
| | 31.12.08 | 31.12.07 | 30.06.08 |
| | Unaudited | Unaudited | Audited |
| | GBP | GBP | GBP |
+-------------------------------------------------+-------------+-------------+-------------+
| | | | |
+-------------------------------------------------+-------------+-------------+-------------+
| Impairment write down - exploration costs | (706,174) | (641,363) | (988,095) |
+-------------------------------------------------+-------------+-------------+-------------+
| Administrative expenses | (1,045,788) | (1,213,953) | (2,342,974) |
+-------------------------------------------------+-------------+-------------+-------------+
| Operating loss | (1,751,962) | (1,855,316) | (3,331,069) |
+-------------------------------------------------+-------------+-------------+-------------+
| Gain on sale of subsidiary (note 4) | 1,154,043 | - | - |
+-------------------------------------------------+-------------+-------------+-------------+
| Finance income | 338,437 | 379,567 | 893,002 |
+-------------------------------------------------+-------------+-------------+-------------+
| Finance costs | (1,354) | (1,750) | (3,299) |
+-------------------------------------------------+-------------+-------------+-------------+
| Other gains and losses - foreign currency | 93,143 | (42,673) | 30,880 |
+-------------------------------------------------+-------------+-------------+-------------+
| Loss from continuing activities before taxation | (167,693) | (1,520,172) | (2,410,486) |
+-------------------------------------------------+-------------+-------------+-------------+
| Taxation | - | - | - |
+-------------------------------------------------+-------------+-------------+-------------+
| Net loss from continuing activities | (167,693) | (1,520,172) | (2,410,486) |
+-------------------------------------------------+-------------+-------------+-------------+
| | | | |
+-------------------------------------------------+-------------+-------------+-------------+
| Loss per ordinary share (pence) | | | |
+-------------------------------------------------+-------------+-------------+-------------+
| - Basic | (0.1) | (0.6) | (0.8) |
+-------------------------------------------------+-------------+-------------+-------------+
| - Diluted | (0.1) | (0.6) | (0.8) |
+-------------------------------------------------+-------------+-------------+-------------+
GROUP BALANCE SHEET
As at 31 December 2008
+------------------------------------------+-------------+-------------+--------------+
| | 31.12.08 | 31.12.07 | 30.06.08 |
| | Unaudited | Unaudited | Audited |
| | GBP | GBP | GBP |
+------------------------------------------+-------------+-------------+--------------+
| ASSETS | | | |
+------------------------------------------+-------------+-------------+--------------+
| Non-current assets | | | |
+------------------------------------------+-------------+-------------+--------------+
| Intangible exploration and appraisal | 42,092,762 | 33,686,378 | 38,204,540 |
| assets (note 5) | | | |
+------------------------------------------+-------------+-------------+--------------+
| Field under development | 3,191,890 | - | - |
+------------------------------------------+-------------+-------------+--------------+
| Property, plant and equipment | 32,631 | 49,232 | 57,240 |
+------------------------------------------+-------------+-------------+--------------+
| Investments | 50,000 | 50,000 | 50,000 |
+------------------------------------------+-------------+-------------+--------------+
| | 45,367,283 | 33,785,610 | 38,311,780 |
+------------------------------------------+-------------+-------------+--------------+
| Current Assets | | | |
+------------------------------------------+-------------+-------------+--------------+
| Other receivables | 278,156 | 683,364 | 3,464,363 |
+------------------------------------------+-------------+-------------+--------------+
| Restricted cash | - | 3,000,000 | 4,254,013 |
+------------------------------------------+-------------+-------------+--------------+
| Cash and cash equivalents | 12,017,917 | 19,782,200 | 14,526,541 |
+------------------------------------------+-------------+-------------+--------------+
| | 12,296,073 | 23,465,564 | 22,244,917 |
+------------------------------------------+-------------+-------------+--------------+
| TOTAL ASSETS | 57,663,356 | 57,251,174 | 60,556,697 |
+------------------------------------------+-------------+-------------+--------------+
| | | | |
+------------------------------------------+-------------+-------------+--------------+
| LIABILITIES | | | |
+------------------------------------------+-------------+-------------+--------------+
| Current liabilities | | | |
+------------------------------------------+-------------+-------------+--------------+
| Trade and other payables | (2,564,532) | (2,492,165) | (5,764,657) |
+------------------------------------------+-------------+-------------+--------------+
| | | | |
+------------------------------------------+-------------+-------------+--------------+
| Non-current liabilities | | | |
+------------------------------------------+-------------+-------------+--------------+
| Provisions | (1,154,834) | (738,708) | (975,000) |
+------------------------------------------+-------------+-------------+--------------+
| Deferred taxation | (3,591,511) | (3,591,511) | (3,591,511) |
+------------------------------------------+-------------+-------------+--------------+
| | (4,746,345) | (4,330,219) | (4,566,511) |
+------------------------------------------+-------------+-------------+--------------+
| TOTAL LIABILITIES | (7,310,877) | (6,822,384) | (10,331,168) |
+------------------------------------------+-------------+-------------+--------------+
| NET ASSETS | 50,352,479 | 50,428,790 | 50,225,529 |
+------------------------------------------+-------------+-------------+--------------+
| | | | |
+------------------------------------------+-------------+-------------+--------------+
| EQUITY | | | |
+------------------------------------------+-------------+-------------+--------------+
| Equity attributable to equity holders of | | | |
| the parent | | | |
+------------------------------------------+-------------+-------------+--------------+
| Called up share capital | 16,443,186 | 16,373,844 | 16,443,186 |
+------------------------------------------+-------------+-------------+--------------+
| Share premium | 37,798,714 | 37,474,257 | 37,798,714 |
+------------------------------------------+-------------+-------------+--------------+
| Reserves | (7,248) | (58,748) | (36,967) |
+------------------------------------------+-------------+-------------+--------------+
| Retained earnings | (3,882,173) | (3,360,563) | (3,979,404) |
+------------------------------------------+-------------+-------------+--------------+
| TOTAL EQUITY | 50,352,479 | 50,428,790 | 50,225,529 |
+------------------------------------------+-------------+-------------+--------------+
| | | | |
+------------------------------------------+-------------+-------------+--------------+
GROUP STATEMENT OF CHANGES IN EQUITY
Six months ended 31 December 2008
+------------------------+------------+------------+----------+-------------+-------------+-------------+
| | Attributable to parent company equity holders |
+------------------------+------------------------------------------------------------------------------+
| GBP | Equity | Share | Other | Foreign | Retained | Total |
| | share | premium | reserve | Currency | earnings | |
| | capital | | |translation | | |
| | | | | reserve | | |
+------------------------+------------+------------+----------+-------------+-------------+-------------+
| | | | | | | |
+------------------------+------------+------------+----------+-------------+-------------+-------------+
| At 1 July 2007 | 14,632,742 | 27,215,923 | 266,908 | (327,607) | (2,116,363) | 39,671,603 |
+------------------------+------------+------------+----------+-------------+-------------+-------------+
| Loss for the | - | - | - | - | (2,410,486) | (2,410,486) |
| period | | | | | | |
+------------------------+------------+------------+----------+-------------+-------------+-------------+
| Currency | - | - | - | 23,732 | - | 23,732 |
| translation | | | | | | |
+------------------------+------------+------------+----------+-------------+-------------+-------------+
| Total income and | - | - | - | 23,732 | (2,410,486) | (2,386,754) |
| expenses for the | | | | | | |
| period | | | | | | |
+------------------------+------------+------------+----------+-------------+-------------+-------------+
| Issued for | 1,736,111 | 10,763,889 | - | - | - | 12,500,000 |
| cash | | | | | | |
+------------------------+------------+------------+----------+-------------+-------------+-------------+
| Expenses of | - | (505,564) | - | - | - | (505,564) |
| share issue | | | | | | |
+------------------------+------------+------------+----------+-------------+-------------+-------------+
| New shares issued in | 74,333 | 324,466 | - | - | - | 398,799 |
| respect of employee | | | | | | |
| share options | | | | | | |
+------------------------+------------+------------+----------+-------------+-------------+-------------+
| Share option | - | - | - | - | 547,445 | 547,445 |
| expense | | | | | | |
+------------------------+------------+------------+----------+-------------+-------------+-------------+
| | | | | | | |
+------------------------+------------+------------+----------+-------------+-------------+-------------+
| At 30 June | 16,443,186 | 37,798,714 | 266,908 | (303,875) | (3,979,404) | 50,225,529 |
| 2008 | | | | | | |
+------------------------+------------+------------+----------+-------------+-------------+-------------+
| | | | | | | |
+------------------------+------------+------------+----------+-------------+-------------+-------------+
| | | | | | | |
+------------------------+------------+------------+----------+-------------+-------------+-------------+
| Loss for the | - | - | - | - | (167,693) | (167,693) |
| period | | | | | | |
+------------------------+------------+------------+----------+-------------+-------------+-------------+
| Currency | - | - | - | 29,719 | | 29,719 |
| translation | | | | | | |
+------------------------+------------+------------+----------+-------------+-------------+-------------+
| Total income and | - | - | - | 29,719 | (167,693) | (137,974) |
| expenses for the | | | | | | |
| period | | | | | | |
+------------------------+------------+------------+----------+-------------+-------------+-------------+
| Share option | | | | | 264,924 | 264,924 |
| expense | | | | | | |
+------------------------+------------+------------+----------+-------------+-------------+-------------+
| | | | | | | |
+------------------------+------------+------------+----------+-------------+-------------+-------------+
| At 31 December | 16,443,186 | 37,798,714 | 266,908 | (274,156) | (3,882,173) | 50,352,479 |
| 2008 | | | | | | |
+------------------------+------------+------------+----------+-------------+-------------+-------------+
| | | | | | | |
+------------------------+------------+------------+----------+-------------+-------------+-------------+
GROUP CASH FLOW STATEMENT
Six months ended 31 December 2008
+--------------------------------------------+--------------+--------------+--------------+
| | 6 months | 6 months | Year |
| | ended | ended | ended |
| | 31.12.08 | 31.12.07 | 30.06.08 |
| | Unaudited | Unaudited | Audited |
| | GBP | GBP | GBP |
+--------------------------------------------+--------------+--------------+--------------+
| Cash flows from operating activities | | | |
+--------------------------------------------+--------------+--------------+--------------+
| Loss before taxation | (167,693) | (1,520,172) | (2,410,486) |
+--------------------------------------------+--------------+--------------+--------------+
| Depreciation | 15,902 | 13,020 | 29,142 |
+--------------------------------------------+--------------+--------------+--------------+
| Share based remuneration charges | 264,924 | 275,972 | 547,445 |
+--------------------------------------------+--------------+--------------+--------------+
| Exploration costs written off | 706,174 | 641,363 | 988,095 |
+--------------------------------------------+--------------+--------------+--------------+
| Items shown as financing and investing | (1,593,347) | (335,144) | (920,003) |
| activities | | | |
+--------------------------------------------+--------------+--------------+--------------+
| Operating cash outflow prior to working | (774,040) | (924,961) | (1,765,807) |
| capital | | | |
+--------------------------------------------+--------------+--------------+--------------+
| Working capital adjustments | 214,082 | 1,659,502 | 1,727,925 |
+--------------------------------------------+--------------+--------------+--------------+
| Cash (used)/generated in operations | (559,958) | 734,541 | (37,882) |
+--------------------------------------------+--------------+--------------+--------------+
| | | | |
+--------------------------------------------+--------------+--------------+--------------+
| Cash flows from investing activities | | | |
+--------------------------------------------+--------------+--------------+--------------+
| Purchase of intangible exploration and | (8,996,334) | (10,808,981) | (14,982,704) |
| evaluation assets | | | |
+--------------------------------------------+--------------+--------------+--------------+
| Purchase of field under development assets | (621,059) | - | - |
+--------------------------------------------+--------------+--------------+--------------+
| Decrease/(Increase) in restricted cash | 4,254,013 | (1,369,639) | (2,623,652) |
+--------------------------------------------+--------------+--------------+--------------+
| Purchase of property, plant and equipment | - | (36,327) | (62,537) |
+--------------------------------------------+--------------+--------------+--------------+
| Interest received | 326,870 | 392,078 | 957,261 |
+--------------------------------------------+--------------+--------------+--------------+
| Proceeds from sale of property, plant and | 9,078 | - | 2,080 |
| equipment | | | |
+--------------------------------------------+--------------+--------------+--------------+
| Proceeds from sale of intangible assets | - | 944,193 | 944,193 |
+--------------------------------------------+--------------+--------------+--------------+
| Proceeds from sale of subsidiary | 2,999,586 | - | - |
+--------------------------------------------+--------------+--------------+--------------+
| Net cash used in investing activities | (2,027,846) | (10,878,676) | (15,765,359) |
+--------------------------------------------+--------------+--------------+--------------+
| | | | |
+--------------------------------------------+--------------+--------------+--------------+
| Cash flows from financing activities | | | |
+--------------------------------------------+--------------+--------------+--------------+
| Shares issued for cash | - | 11,999,436 | 12,393,235 |
+--------------------------------------------+--------------+--------------+--------------+
| Interest paid and bank charges | (1,354) | (1,750) | (3,878) |
+--------------------------------------------+--------------+--------------+--------------+
| Net cash (used)/generated by financing | (1,354) | 11,997,686 | 12,389,357 |
| activities | | | |
+--------------------------------------------+--------------+--------------+--------------+
| | | | |
+--------------------------------------------+--------------+--------------+--------------+
| Net (decrease)/increase in cash and cash | (2,589,158) | 1,853,551 | (3,413,884) |
| equivalents | | | |
+--------------------------------------------+--------------+--------------+--------------+
| Cash and cash equivalents at start of | 14,526,541 | 17,967,096 | 17,967,096 |
| period | | | |
+--------------------------------------------+--------------+--------------+--------------+
| Translation difference | 80,534 | (38,447) | (26,671) |
+--------------------------------------------+--------------+--------------+--------------+
| Cash and cash equivalents at end of period | 12,017,917 | 19,782,200 | 14,526,541 |
+--------------------------------------------+--------------+--------------+--------------+
| | | | |
+--------------------------------------------+--------------+--------------+--------------+
Notes to the Interim Financial Statements
Six months ended 31 December 2008
1. Basis of Accounting and Presentation of Financial Information
These condensed interim consolidated financial statements are for the six months
ended 31 December 2008. The interim financial report has been prepared in
accordance with the UK AIM Rules for Companies and using accounting policies and
methods of computation consistent with those used in the Group's annual report
for the year ended 30 June 2008 and to be adopted for the financial year ended
30 June 2009. The Group has not adopted IAS 34, Interim Financial Statements.
The disclosed figures are not statutory accounts in terms of section 240 of the
Companies Act 1985. Statutory accounts for the period ended 30 June 2008, on
which the auditors gave an unqualified report, have been filed with the
Registrar of Companies.
2. Going Concern
These condensed interim consolidated financial statements have been prepared on
a going concern basis. The Group's net cash used in investing activities of some
GBP2.0m and used in operations of GBP0.6m resulted in a reduction of the Group's
cash reserves to some GBP12.0m as at 31 December 2008. Although significant
progress has been made in developing the Group's asset base, the business will
remain a net consumer of cash over the coming year.
The Directors have prepared financial forecasts for the next 12 months based on
current expected activity and the assumption of no further external funds being
raised.
After due consideration of these forecasts and the current cash resources of
some GBP12.0m the Directors are of the view that the Group has adequate
financial resources to meet its liabilities as they fall due for the foreseeable
future and for a period of at least 12 months from the date of authorisation of
these interim accounts.
However, factors affecting project timing and outcomes and market conditions and
financing could affect the Group's ability to explore all its investment
opportunities on optimal schedules.
3. Approval of Accounts
These interim accounts were approved by the Board of Directors on 11 February
2009.
4. Gain on sale of EnCore Nederland B.V.
+---------------------------------------+-------------+-------------+
| Analysis of gain on sale of EnCore | GBP | GBP |
| Nederland B.V. | | |
+---------------------------------------+-------------+-------------+
| | | |
+---------------------------------------+-------------+-------------+
| Sale consideration | | 3,046,747 |
+---------------------------------------+-------------+-------------+
| Less deductions: | | |
+---------------------------------------+-------------+-------------+
| Expenses of sale | | (47,161) |
+---------------------------------------+-------------+-------------+
| Net assets at sale | | |
+---------------------------------------+-------------+-------------+
| Intangible oil and gas exploration | (1,831,107) | |
| assets | | |
+---------------------------------------+-------------+-------------+
| Working capital balances | (14,436) | (1,845,543) |
+---------------------------------------+-------------+-------------+
| Gain on sale | | 1,154,043 |
+---------------------------------------+-------------+-------------+
In September 2008 the Company sold its wholly owned subsidiary EnCore Oil
Nederland B.V., whose only asset was a 10 per cent. interest in the Amstel field
offshore Netherlands for consideration of US$5.5 million, paid in cash. The
purchaser was TAQA Energy B.V.. It is anticipated that no tax liability will
arise on the sale.
5. Exploration Costs
Exploration costs impaired in the six months to 31 December 2008 largely reflect
costs of GBP546,587 associated with the Esmond gas storage project, together
with accumulated costs on licences which have been or will be relinquished.
+--------------------------------------+--------------+------------+--------------+
| Analysis of intangible exploration | 6 months | 6 months | Period |
| and appraisal assets | ended | ended | ended |
| | 31.12.08 | 31.12.07 | 30.06.08 |
| | Unaudited | Unaudited | Audited |
| | GBP | GBP | GBP |
+--------------------------------------+--------------+------------+--------------+
| | | | |
+--------------------------------------+--------------+------------+--------------+
| Net book value brought forward | 38,204,540 | 24,191,869 | 24,191,869 |
+--------------------------------------+--------------+------------+--------------+
| Additions | 8,996,334 | 10,047,604 | 14,879,584 |
+--------------------------------------+--------------+------------+--------------+
| Transferred to field under | (2,570,831) | - | - |
| development status | | | |
+--------------------------------------+--------------+------------+--------------+
| Impairment write down - exploration | (706,174) | (641,363) | (988,095) |
| costs | | | |
+--------------------------------------+--------------+------------+--------------+
| Disposals | (1,831,107) | - | - |
+--------------------------------------+--------------+------------+--------------+
| Currency translation adjustments | - | 88,268 | 121,182 |
+--------------------------------------+--------------+------------+--------------+
| Total net book value of intangible | 42,092,762 | 33,686,378 | 38,204,540 |
| exploration and appraisal assets | | | |
+--------------------------------------+--------------+------------+--------------+
6. Earnings per Share
The calculation of basic earnings per share is based on the loss for the period
after taxation of GBP167,693 (1H2007 - loss after taxation of GBP1,520,172) and
a weighted average number of shares in issue of 307,360,839 (1H2007 -
273,244,545). As there is a loss for all periods presented there is no
difference between the basic and diluted loss per share.
7. Post Balance Sheet Events
On 22 January 2009 it was announced that the Breagh horizontal well 42/13-5z on
Block 42/13 in the Southern North Sea had tested successfully.
The well tested dry gas at a maximum rate of 26 million standard cubic feet per
day through an 80/64 inch choke at a flowing wellhead pressure of circa 890psi.
The well was then shut in for an initial pressure build up survey after which
the well was flowed for a further 59 hours at various rates to evaluate
reservoir performance fully. The well has been suspended to allow future
re-entry as a production well.
On 28 January 2009 it was announced that following an extensive evaluation of
the results of the recent Esmond well, Star Energy Group plc a wholly owned
subsidiary of Petronas and EnCore have concluded that from a technical
perspective its use as a gas storage facility would appear to be viable, albeit
with a somewhat more complex development and start up phase. However, Star
Energy, indicated that from an economic and strategic perspective it does not
meet their current investment criteria, and as such they no longer wish to
proceed into the Front End Engineering and Design phase as required in the
farm-in agreement with EnCore.
8.Commitments and contingent liabilities
+---------------------------------------+-----------+-----------+-----------+
| | As at | As at | As at |
| | 31.12.08 | 31.12.07 | 30.06.08 |
| | Unaudited | Unaudited | Audited |
| | GBP | GBP | GBP |
+---------------------------------------+-----------+-----------+-----------+
| | | | |
+---------------------------------------+-----------+-----------+-----------+
| Oil and gas expenditure: | | | |
+---------------------------------------+-----------+-----------+-----------+
| Intangible exploration and evaluation | 2,496,607 | - | 9,155,949 |
| assets | | | |
+---------------------------------------+-----------+-----------+-----------+
| | | | |
+---------------------------------------+-----------+-----------+-----------+
| Contracted for | 2,496,607 | - | 9,155,949 |
+---------------------------------------+-----------+-----------+-----------+
The above capital commitments represent EnCore's share of obligations in
relation to its interests in Joint Ventures based on current licence interest
levels. The amount committed at 31 December 2008 represents sums due, over and
above those included in accruals, in the first quarter of 2009 to complete the
drilling and testing of the current well on UK North Sea Block 42/13 as part of
the Breagh appraisal project.
9. Dividend
The directors do not recommend the payment of a dividend.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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