RNS Number:8930P
Premier Oil PLC
18 September 2003
PREMIER OIL PLC
("Premier")
Premier is an independent exploration and production company with gas and oil
interests principally in the UK, Asia and West Africa.
Restructuring
* Completion on 12 September of $670 million restructuring (#406
million) transforming Premier into a fully independent oil company
* Shares consolidated on a 1 for 10 basis with trading now commenced on
the London Stock Exchange
* Substantial improvement in balance sheet: pro forma net debt
post-restructuring of #15.9 million and gearing ratio of 5% at
30 June 2003 (31 December 2002 pre restructuring: #249.5 million -
gearing 80%)
* Ongoing production at the rate of approximately 35,000 boepd
Improved financial performance (pre-restructuring)
* Turnover up 27% at #146.1 million (2002: #115.2 million) reflecting
production increases and strong oil prices
* Operating profit up 54% at #81.1 million (2002: #52.7 million)
* Net profit after tax up 188% at #44.0 million (2002: #15.3 million)
* Operating cash flow after interest and taxes up 57% to #97.1 million
(2002: #61.9 million)
Operating highlights
Exploration
* 10 - 14 well drilling programme over next 15 months - UK, West Africa,
Pakistan, Indonesia and India
* Mauritania - Chinguetti appraisal well spudded 1 September 2003
* Acreage acquisitions
- West Africa - Gabon, Mauritania and SADR from Fusion
- Pakistan - Indus delta block with Shell
- UK - Reach block as operator - Licence P1048
- 2 blocks in 21st Round - Block 39/2b, 39/7
Production
* Pakistan gas production - rising to 10,000 boepd during the second
half
* West Natuna gas - production at record levels (10,000 boepd net to
Premier)
* Unit operating costs down by a third
Non core assets - UK and Australian investments sold for up to #21.2 million
Sir David John, Chairman, commented:
"As we move forward from the restructuring, the outlook for Premier and its
shareholders is very positive with an exciting drilling programme now underway.
We have excellent assets, mainly in production so future costs are low, and
strong finances with negligible net debt by the end of this year. Our goals are
clear - we intend to generate further shareholder value through exploration and
commercial deals - actively managing our portfolio to realise extra value for
shareholders."
18 September 2003
ENQUIRIES:
Premier Oil plc Tel: 020 7730 1111
Charles Jamieson
John van der Welle
College Hill Tel: 020 7457 2020
James Henderson
Chairman's Statement
The first half of 2003 has been a period of particularly strong operational and
financial performance. I am also delighted to report that the corporate
restructuring announced last year has now been completed - Premier is now fully
independent once again after 8 years, and is vigorously pursuing its strategy
for new growth.
Financial and operating performance
Production for the half-year was 62,000 barrels of oil equivalent per day
(boepd), an increase of 24% from 2002. The Brent oil price has averaged over
$28 per barrel, up by over $5 per barrel. Consequently profits are higher in
the first half of 2003 representing the fourth year of increases in succession.
Net profits for the period amounted to #44.0 million (2002: #15.3 million), an
increase of 188% due to higher production and prices. Earnings per share
increased to 27.2 pence, compared with 9.7 pence in the corresponding period.
Reported profits include those attributable to the assets in Myanmar and
Indonesia which were subsequently transferred as part of the restructuring;
excluding these, net profits in respect of the ongoing assets in the half year
amounted to #13.4 million.
Net debt, including joint venture balances, fell over the six months from #249.5
million to #173.4 million, a reduction of #76.1 million due to strong cash flows
supported by disposal receipts. The restructuring has further reduced net debt
as detailed below.
Premier's reserve base is now substantially all in production, following our
heavy investment programme on field developments in recent years. Increases in
production were recorded in three countries. In Indonesia our gas buyers have
taken volumes higher than budgeted, and in Pakistan we have raised production
levels with the start of production from new facilities, and benefited from high
demand from buyers. Production in Myanmar was up 75% as deliveries were
successfully made at higher levels, following a capacity upgrade in accordance
with the planned volume step-up under the gas sales agreement.
The group's health, safety and environment performance has again been industry
top quartile. Of particular note in June this year Premier's operated West
Natuna facilities in Indonesia completed two years of continuous operations
without a lost time incident.
Restructuring
On 12 September 2003 the corporate restructuring was finally completed, nearly a
year after it was agreed and announced. As a result the shares have now been
consolidated on a one for ten basis and share prices have been adjusted on the
London Stock Exchange accordingly. This $670 million transaction - which
involves the sale of our Myanmar and part of our Indonesian businesses - has
proven to be difficult to finalise, in particular due to its complexity and the
number of consents and approvals required. I would like to thank shareholders
for their patience while the company and the now departed major shareholders
have worked hard to achieve completion.
One impact of the restructuring is to considerably strengthen the company's
balance sheet. On a pro forma basis for the transaction, at 30 June 2003
Premier had net debt of #15.9 million representing a gearing ratio of 5%. This
is down from a peak of #492 million only 2 years ago, and is still falling.
Commercial
On the commercial and asset management front, the year to date has seen a number
of transactions successfully reached. We have sold our holdings in certain
non-core UK assets and our equity stake in Australian Worldwide Exploration for
proceeds totalling a maximum of #21.2 million. In May this year we announced
the acquisition of a number of interests in West Africa from Fusion Oil & Gas
plc, including oil reserves awaiting development go-ahead in Mauritania together
with associated exploration interests in that country, and in Gabon and Saharawi
Arab Democratic Republic (SADR). This acquisition represents an important
advance towards our objective of building a material business with significant
upside potential in West Africa, and is a good example of Premier's growth
strategy through commercial deal-making.
Exploration
The results of exploration drilling in Indonesia and Pakistan in the half-year
were frustrating. All exploration wells encountered hydrocarbons, but only one
- Zirkani-1 in Pakistan - has the potential to become part of a commercial gas
field development. Premier has made excellent progress in replenishing its
exploration portfolio to provide the basis of a forward drilling programme of 10
to 14 wells over the next 15 months. The first of three wells in Mauritania
spudded in early September these will be followed by wells in the UK, Pakistan,
Gabon, Guinea Bissau, India and Indonesia. We have added exploration
opportunities in West Africa, Pakistan (offshore) and the UK. Our objective is
to expose shareholders to significant reserve additions by finding attractive
exploration prospects principally in the UK, South and South East Asia and West
Africa.
Board
In June this year we announced the resignation of Richard Mew, who represented
shareholder Amerada Hess, following his resignation from that company.
Following the restructuring completion, the other directors representing Amerada
Hess (J Barclay Collins) and Petronas (Dato' Idris Mansor and Encik Mohammad
Medan Abdullah) have ceased to be directors of any Premier group company.
Outlook
As we move forward from the restructuring, the outlook for Premier and its
shareholders is very positive with an exciting drilling programme now underway.
We have excellent assets, mainly in production so future costs are low, and
strong finances with negligible net debt by the end of this year. Our goals are
clear - we intend to generate further shareholder value through exploration and
commercial deals - actively managing our portfolio to realise extra value for
shareholders.
Financial and Operations Review
Restructuring
On 16 September 2002, Premier announced its corporate restructuring involving
the group's South East Asian interests in a transaction with major shareholders
Amerada Hess and Petronas. The economic effective date of this transaction was
30 September 2002. However, for accounting purposes the impact of the
transaction will be recorded at 12 September 2003, the actual date completion
occurred.
Accordingly, the results for the first six months of 2003 include the full
interim period contributions from the Indonesian and Myanmar businesses
transferred under the restructuring.
The completion of the restructuring occurred prior to the announcement of the
group's interim results, therefore Premier is required to present the
consolidated profit and loss account in accordance with accounting standard FRS
3 - Reporting Financial Performance, and show the operating profit contribution
from discontinued operations.
The sale of the Yetagun asset satisfies the FRS 3 criteria for a discontinued
business and accordingly is shown in the discontinued operation column in the
profit and loss account. In contrast, the Natuna block A interest in Indonesia,
which was partly disposed of, does not satisfy the criteria for discontinued
operations as set out in FRS 3 due to Premier continuing to hold an interest in
this asset. The profit contribution from the block A interest sold is shown in
the column entitled - 'operations disposed as part of the restructuring'.
This approach is designed to show the operating profit associated with the
retained ongoing assets and enable future performance to be assessed against
this reference.
Following the completion of the restructuring, the resultant balance sheet shows
much reduced levels of net debt and gearing in line with Premier's new strategy.
On a pro forma basis, as at 30 June 2003 post the restructuring, the group's net
debt (including joint venture balances) amounted to #15.9 million, with gearing
at 5%.
Profit and loss account
Profit after tax for the six months to 30 June 2003 amounted to #44.0 million,
compared with #15.3 million in the corresponding period in 2002. Record levels
of production and strong oil prices have contributed to the significant growth
in profit during the period.
Group production, on a working interest basis, was up by 24% at 62,000 barrels
of oil equivalent per day (2002: 50,200 boepd). The increase reflects higher
volumes in Indonesia, Pakistan and Myanmar. Premier's realised oil price after
hedging amounted to $26.65 per barrel (2002: $23.38 per barrel). Realised gas
prices increased 7% to $3.40 per thousand standard cubic feet.
As a result of the higher level of production and improved realised sales
prices, turnover, including the group's share of joint ventures in Pakistan and
Myanmar, was 27% higher at #146.1 million, an increase of #30.9 million.
Cost of sales fell in the period to #41.8 million (2002: #47.4 million) as a
result of increased lower cost gas production and declining higher cost
production of UK oil. As in the previous year, this does not include the group's
operations in its joint ventures. Taking these into account, underlying group
total cost of sales amounted to #57.2 million with the underlying group unit
operating cost at #2.16 per barrel of oil equivalent (boe), down 34% on the
corresponding period last year (#3.29 per boe). Underlying group unit
amortisation amounted to #2.94 per boe, 11% down from corresponding period due
to increased production from South East Asia.
Administrative costs, at #3.9 million for the half year, were 11% higher
compared with the corresponding period (2002: #3.5 million) due to costs
associated with the corporate reorganisation. Operating profits rose by #28.4
million to #81.1 million, including the contribution from joint ventures of
#28.7 million. Operating profits for the period in respect of post-restructuring
ongoing assets amounted #37.9 million, compared to #29.3 million in the first
half of 2002.
Net interest expenses of #12.2 million were down 23% (2002: #15.8 million) as
debt levels have continued to fall during the period. Realised exchange gains of
#0.9 million (2002: loss #0.8 million) were generated as a result of the
strengthening of the US dollar against sterling.
Profits before tax for the period were #71.2 million (2002: #36.1 million).
Taxation charges, at #27.2 million, were higher than the charges reported for
the first half of 2002 (#20.8 million) reflecting higher pre-tax profits.
Cash flow
Net cash flow from operating activities, as reported in the cash flow statement
which excludes joint ventures, amounted to #91.3 million, up from #62.5 million
in the corresponding period as a consequence of higher turnover. Net cash flow
from operations after interest and taxes amounted to #66.7 million (2002: #46.2
million). Including joint ventures, net cash flow from operations after interest
and taxes amounted to #97.1 million (2002: #61.9 million).
Capital expenditure in the period was #19.6 million (2002: #25.1 million), or
#31.4 million including joint ventures (2002: #36.8 million). Of this latter
amount, #15.2 million related to field developments, and #16.2 million to
exploration and appraisal expenditure.
Net debt
Net debt, including balances in joint ventures, amounted to #173.4 million at 30
June 2003, down from #249.5 million six months earlier. Gearing, defined as net
debt (including joint venture balances) divided by net assets, was down from 80%
at the end of last year to a level of 49%. At 30 June 2003 the group (including
joint ventures) had cash balances amounting to #101.6 million, together with
undrawn committed bank facilities of #36.4 million.
Group production
The group's production, on a working interest basis, amounted to 62,000 boepd,
up from 50,200 boepd in the corresponding period. The increase reflected higher
gas sales in Asia - overall group production was 69% gas and 31% liquids (2002:
57% gas). Production in the half year relating to ongoing assets retained post
the restructuring amounted to 35,300 boepd (2002: 33,350 boepd).
Exploration and appraisal
During the half-year Premier completed four operated exploration and appraisal
wells - two in Pakistan and two in Indonesia - and one non-operated well also in
Pakistan. Results in both countries were frustrating in that all wells found
hydrocarbons but only Zirkani in Pakistan has the potential to be commercial.
However, exploration work continues on the concession areas drilled - the Dumbar
and Kirthar blocks onshore Pakistan and the Area IV part of block A in the
Natuna Sea Indonesia.
Elsewhere seismic studies have been undertaken in the UK, India and West Africa.
Following the acquisition of the Fusion interests in West Africa, an appraisal
well of the Chinguetti discovery, was recently spudded offshore Mauritania.
Over the last year, significant progress has been made in replenishing the
exploration portfolio and building an exciting forward programme of drilling.
We are planning to drill 10 to 14 wells over the next 15 months, in the UK,
Pakistan, India, Mauritania, Guinea Bissau and Gabon. In addition, attractive
acreage has been newly acquired offshore Pakistan and SADR.
Europe
Production in the UK amounted to 16,200 boepd representing 26% of group
production, compared to 36% in the same period last year. The volume represents
a decrease of some 11% on last year's peak level due to natural declines in
producing fields.
The Wytch farm oil field produced 43,800 boepd (Premier share 5,400 boepd), down
25% on the corresponding period last year. The continued success of the infill
drilling of multilateral sidetracks in maintaining production levels was offset
by periods of planned shutdown and flow restriction for pipeline and compressor
repairs in the first half. With the latest infill well now onstream, gross
rates from the field have been restored to around 50,000 boepd.
Premier's net production from Kyle was 6,000 boepd, up a third on the
corresponding period last year as a result of a period of uninterrupted oil and
gas production from the four development wells this year. In 2002 production was
curtailed due to a gas export pipeline blockage. Gross field rates are
currently around 12,500 boepd.
In the Fife Area, Premier's net production amounted to 3,100 boepd from the
Fife, Fergus, Flora and Angus fields, whilst Scott and Telford account for the
majority of the remainder of net production in the UK.
As an important step in the rejuvenation of our UK exploration portfolio, we
concluded a farm-in agreement with Reach Exploration Limited in July 2003 to
acquire a 50% equity as operator in Moray Firth licence P1048 covering blocks 20
/10b, 21/6a, 20/15a and 21/11b. The licence is on trend with the large Buzzard
oil discovery. Following reprocessing of 3D seismic this year, the joint
venture plans to drill a well in the first half of 2004. In the 21st Licence
Round announced in July 2003, Premier acquired a 30% equity in blocks 39/2b and
39/7 adjacent to our Fife Area interests, on which reprocessing of seismic data
is planned as a first step.
In July 2003 Premier announced the sale of a package of non-core assets for #8.2
million in cash, #3 million of which is made up of deferred payments linked to
first oil from discoveries. Assets sold include a 3.75% interest in the Rob
Roy, Ivanhoe and Hamish fields, a 3.75% interest in the Perth discovery, a 15%
interest in the Chestnut field and an 11.03% interest in block 20/2a, which
includes Premier's 8.27% interest in the Ettrick discovery. Completion of the
disposal is expected later this year.
In Albania, Anglo-Albanian Petroleum has drilled, completed and placed on
production 20 new wells with 6 re-activations continuing to produce. The focus
to date has been to maximise information from each zone to predict production
and recoveries across the field to optimise any future development. Production
from the wells is beginning to increase and the first export of crude is planned
for the fourth quarter 2003. A decision on the future development of the field
is planned within the next few months.
Pakistan
Production net to Premier in the half year amounted to 6,900 boepd, an increase
of 25% on the corresponding period for 2002. The increase is primarily due to
the commissioning of the Bhit plant of 270 million standard cubic feet per day
(mmscfd) capacity, and continued strong demand for gas from gas buyers leading
to additional winter sales of 45 mmscfd from Qadirpur. Production of gas from
the Bhit field began in December 2002 and contractual sales started in February
2003.
Zamzama gross production averaged 80 mmscfd until the end of the period. The
full field development project enabling supply of up to 320 mmscfd was completed
under budget this year, and contractual sales started in July, ahead of
schedule. This, together with the completion of the expansion of Qadirpur
processing facilities to 400 mmscfd, will result in further growth in Premier's
gas production in Pakistan during the second half of 2003 to around 10,000
boepd.
Exploration in the Dumbar licence continued with the completion and testing of
the Benir-2 and the drilling and testing of the Zirkani-1 wells. In Zirkani gas
was encountered in two zones, however the Benir well proved to be uncommercial.
Further appraisal of Zirkani is in progress and an additional prospect - Chung,
which lies midway between Zirkani and the Bhit field, is planned to be spudded
at the start of 2004.
Commercialisation of the Zarghun South gas discovery continued and negotiations
for a farm-out of Premier's share were concluded recently. Premier will now
retain a fully carried 3.75% interest through development and production of the
field.
In July 2003, Premier announced its agreement to acquire a 23.75% interest in
Shell's deepwater exploration licence covering block 2365-1 Offshore Indus E. A
3D seismic survey during the balance of the year will enhance the subsurface
imaging of this tertiary delta, which is considered by Premier and its partners
to have significant potential for both oil and gas.
In September 2003, two wells in Pakistan have been spudded. One well, Zamzama
East-1, is targeting an undrilled prospect on the edge of the Zamzama field and
the second well, Kadanwari West-1, is evaluating a possible extension of the
Sawan gas field into the Kadanwari block.
Indonesia
The corporate restructuring has resulted in a reduction of Premier's interest in
Natuna block A from 66.7% to 28.7%. Premier remains as operator of this block.
During the first half of 2003, production from the Anoa oil and gas field, which
forms part of the West Natuna gas project, averaged 22,800 boepd - up from
17,500 boepd in the first half of 2002.
These volumes were higher than originally budgeted due to increased gas demand
from gas buyers in Singapore. The Anoa Gas Export platform, which is
bridge-linked to the Anoa oil platform, has been working at full pace in order
to sustain these deliveries of gas. Oil production has also been ahead of
forecast as a result of improvements to the offshore system.
The facilities continue to be operated by Premier with an excellent health,
safety and environmental record. In June a significant measure of this record
was reached when the milestone of two years of continuous operations without a
lost time incident was achieved.
Commercial work is continuing to develop the opportunities to sell additional
discovered gas from Natuna block A with the focus now being on the market in
Singapore. Discussions are continuing with potential buyers and with the
Indonesian authorities.
Two exploration wells, Kuda Nil-1 and Binturong-1 were completed on the eastern
Area IV part of Natuna block A during the first quarter. Although both
encountered hydrocarbons, neither structure contained sufficient volumes of oil
to be commercial. Our exploration effort continues and other untested
structures are being evaluated with a view to being considered for drilling in
2004.
Myanmar
The corporate restructuring has resulted in the disposal of all of Premier's
interests in Myanmar, after a period of 13 years of activity there.
During the first half of 2003, gross average gas production from the Premier
operated Yetagun gas field was 282 mmscfd and gross average condensate
production 8,017 barrels per day. This gave Premier a combined net production
for the period of 15,900 boepd compared with 9,100 boepd in the first six months
of 2002.
Nominations have been consistently received from the gas buyer PTT for up to 300
mmscfd, which represents the full daily contractual quantity (DCQ) of 260 mmscfd
plus an additional 15% contract entitlement as specified in the gas sales
contract. A further 4 condensate offtakes were successfully made in the period
from the floating storage and offtake vessel, giving a gross total of nearly 5
million barrels lifted since commencement of production from Yetagun.
Following the successful phase II capacity upgrade implemented last year,
detailed engineering on the phase III capacity upgrade was largely completed
during the period. Offshore pre-works and module fabrication work has now
commenced on the upgrade to 400 mmscfd of DCQ sales of gas, and the
corresponding increase in condensate production to approximately 11,500 barrels
per day, with effect from April 2004.
Preparatory work was also commenced for a programme of in-fill production
drilling to obtain the additional gas required to meet the step up in gas sales
quantities in April 2004. A four well programme is scheduled to commence in the
second half of 2003.
West Africa
In West Africa Premier has continued to build its offshore exploration
portfolio. The acquisition of the interests offshore Mauritania, Gabon and SADR
from Fusion represents a significant advance towards our objective of building a
material business in West Africa. In Mauritania Premier has bought Fusion's
interests in two deep-water production sharing contracts which include the
Chinguetti and Banda oil discoveries.
The Chinguetti field, estimated to contain 120 million barrels of reserves, is
expected to receive its development consent following the multi-well programme
which is now underway. In addition, the appraisal of Banda will be considered in
2004.
Our Guinea Bissau acreage has been extensively re-evaluated and a second well on
the Sinapa prospect is planned for early 2004. We are also in the final stages
of agreeing a farm-out of this acreage to a large international exploration
company with regional expertise. In the event that the Sinapa-2 well is
successful, a number of follow-on targets exist.
In Gabon, the Phenix concession has been converted into the Dussafu production
sharing contract and a well is planned for the first half of 2004. Several
prospects have been identified on the acreage and are being evaluated for
follow-on drilling.
As part of our acquisition from Fusion Premier will earn an 18% interest in the
Iris Marin and Themis Marin Gabon shallow water production sharing contracts,
which have multiple pre-salt targets on trend with our existing Dussafu acreage.
In SADR, we have acquired the option to take a 35% interest under a technical
study agreement. The area, which has considerable potential, is virtually
unexplored as it is currently under a dispute over sovereignty. Recent
developments toward the resolution of this dispute look encouraging.
India
During the first half of 2003 formal approval was received from the Government
of India for Premier's farm-ins to two blocks in North East India, namely
AAP-ON-94/1 (Jaipur) and CR-ON-90/1 (Cachar).
On the Jaipur block in Upper Assam, 118km of new 2D seismic was successfully
acquired in very challenging jungle terrain. At the peak the workforce engaged
in this project numbered some 620 people, and the work was successfully
concluded without any lost time incidents. The data collected is now being
processed and interpreted. A decision to drill will be made later this year.
On the Cachar block various geological studies were completed and the results
have confirmed our earlier view that the block is highly prospective.
Preparations are now underway for a 2D seismic acquisition programme which will
commence in October 2003 and last for approximately six months.
The company's office in New Delhi is now fully functional and a team of skilled
local staff is being assembled. The company is continuing to look for new
opportunities to expand its business in India.
Consolidated profit and loss account
Six months to 30 June 2003 Six months Year to 31
to 30 June December
2002 2002
Continuing Discontinued Total
Ongoing Operations operations**
operations disposed as
part of the
Restructuring*
# million # million # million # million # million # million
Turnover
Group and share of joint ventures 82.6 30.1 33.4 146.1 115.2 263.1
Less: share of joint ventures' turnover (10.7) - (33.4) (44.1) (28.3) (64.4)
Group turnover 71.9 30.1 - 102.0 86.9 198.7
Cost of sales (32.6) (9.2) - (41.8) (47.4) (107.0)
Exceptional provision for oil and gas - - - - - (13.1)
assets
Exploration expenditure written off (3.9) - - (3.9) - (4.6)
Gross profit 35.4 20.9 - 56.3 39.5 74.0
Administrative costs (3.9) - - (3.9) (3.5) (7.9)
Group operating profit 31.5 20.9 - 52.4 36.0 66.1
Share of operating profit in joint 6.4 - 22.3 28.7 16.7 38.0
ventures
Total operating profit (including joint 37.9 20.9 22.3 81.1 52.7 104.1
ventures)
Profit on sale of investment 1.4 - - 1.4 - -
Net interest payable:
Group (8.1) - - (8.1) (9.6) (17.8)
Joint ventures - - (4.1) (4.1) (6.2) (11.2)
Exchange gains/(losses)*** 0.9 - - 0.9 (0.8) (2.5)
Profit on ordinary activities before tax 32.1 20.9 18.2 71.2 36.1 72.6
Tax:
Group (16.6) (3.4) - (20.0) (15.8) (36.2)
Joint ventures (2.1) - (5.1) (7.2) (5.0) (11.4)
Profit after tax 13.4 17.5 13.1 44.0 15.3 25.0
Earnings per share (pence) - basic and 27.2 9.7 15.8
diluted
Consolidated statement of total recognised gains and losses
Six months Six months Year to 31
to 30 June to 30 June December
2003 2002 2002
# million # million # million
Net profit for the period excluding share of profits of joint ventures 26.6 9.8 9.6
Share of joint ventures' profits for the period 17.4 5.5 15.4
Net profit for the period attributable to members of the parent company 44.0 15.3 25.0
Exchange difference on retranslation of net assets of subsidiary undertakings (3.9) (7.2) (16.7)
Exchange difference on retranslation of net assets of joint ventures (2.5) (0.2) (8.3)
Total recognised gains relating to the period 37.6 7.9 -
* Relates to Natuna Sea assets, held in Indonesia, which were disposed as part of the Restructuring (note 6).
As Premier continues to hold an interest in these assets, this disposal does not satisfy the criteria for
discontinued operations in FRS 3 - 'Reporting Financial Performance'.
** Relates to Myanmar assets which were disposed as part of the Restructuring and satisfy the FRS 3 criteria for
discontinued operations.
*** Exchange gains/(losses) relate wholly to the group.
Consolidated balance sheet
At 30 June At 30 June At 31
2003 2002 December
2002
# million # million # million
Fixed assets
Intangible assets 32.1 42.9 24.3
Tangible assets 375.4 439.5 400.1
Investments - 12.6 11.6
Investments in associated undertakings 6.4 - -
Investments in joint ventures:
Share of gross assets 271.1 268.4 257.4
Share of gross liabilities (145.9) (177.1) (155.8)
Total fixed assets 539.1 586.3 537.6
Current assets
Stocks 7.3 14.1 7.0
Debtors, including amounts due after one year 68.0 63.1 81.5
Cash and short term deposits 69.2 125.6 145.7
Total current assets 144.5 202.8 234.2
Creditors: amounts falling due within one year (241.4) (197.5) (195.7)
Net current (liabilities)/assets (96.9) 5.3 38.5
Total assets less current liabilities 442.2 591.6 576.1
Creditors: amounts falling due after one year including convertible debt (28.0) (211.5) (201.3)
Deferred income (11.4) (12.8) (11.7)
Provision for liabilities and charges (51.3) (47.3) (50.8)
Net assets 351.5 320.0 312.3
Capital and reserves
Share capital 79.9 79.3 79.4
Share premium account 139.6 138.4 138.5
Capital reserve 14.5 14.5 14.5
Merger reserve 68.2 68.2 68.2
Profit and loss account 49.3 19.6 11.7
Total equity shareholders' funds 351.5 320.0 312.3
Approved by the Board on
16 September 2003
Consolidated cash flow statement
Six months Six months Year to
to 30 June to 30 June
2003 2002 31 December
2002
# million # million # million
Net cash flow from operating activities 91.3 62.5 123.5
Returns on investment and servicing of finance
Interest received 2.2 1.8 4.3
Interest paid (10.8) (11.2) (21.7)
(8.6) (9.4) (17.4)
Taxation
UK corporation tax refund/(paid) 0.5 - (4.1)
UK petroleum revenue tax paid (8.4) (3.2) (12.6)
Overseas tax paid (8.1) (3.7) (4.0)
(16.0) (6.9) (20.7)
Capital expenditure
Payments to acquire fixed assets (19.6) (25.1) (42.2)
Receipt from sale of fixed assets - 21.2 23.4
Receipt from sale of listed investment 13.0 - -
Investment in associated undertakings (6.4) - -
Investment of funds in joint ventures (8.6) (8.1) (11.6)
(21.6) (12.0) (30.4)
Acquisitions and disposals
Receipt arising from establishment of new joint venture - 6.8 6.8
- 6.8 6.8
Management of liquid resources
Net change in short term deposits 70.7 (32.6) (60.0)
70.7 (32.6) (60.0)
Financing
Issue of ordinary share capital 1.6 0.4 0.7
Repayment of loans (124.2) - -
Net cash (outflow)/inflow from financing (122.6) 0.4 0.7
(Decrease)/increase in cash (6.8) 8.8 2.5
Cash flows for the six months to 30 June 2003 exclude the cash flows of the joint ventures in accordance with FRS 9 -
'Associates and Joint Ventures'.
Notes
Six months Six months Year to 31
to 30 June to 30 June December
2003 2002 2002
# million # million # million
1. Geographical analysis
Group turnover by origin and destination
UK 41.6 45.1 103.0
Indonesia (destination Singapore) 60.4 41.8 95.7
Total group turnover 102.0 86.9 198.7
Joint venture turnover by origin and destination
Pakistan 10.7 9.5 17.9
Myanmar (destination Thailand) 33.4 18.8 46.5
Total joint venture turnover 44.1 28.3 64.4
146.1 115.2 263.1
Group operating profit/(loss) before tax
UK 14.7 10.0 25.6
Albania - - (0.1)
Australia - - (0.1)
Indonesia 41.8 26.2 58.4
Other overseas (4.1) (0.2) (4.6)
52.4 36.0 79.2
Exceptional provision for oil and gas assets
UK - - (13.1)
- - (13.1)
Group operating profit 52.4 36.0 66.1
Share of operating profit in joint ventures:
Pakistan 6.4 6.3 10.8
Myanmar 22.3 10.4 27.2
Profit on disposal of investment 1.4 - -
Net interest payable (12.2) (15.8) (29.0)
Exchange gains/(losses) 0.9 (0.8) (2.5)
Profit on ordinary activities before tax 71.2 36.1 72.6
2. Cost of sales
Operating costs 16.4 20.5 48.1
Royalties 0.2 2.2 5.7
Amortisation and depreciation of tangible fixed assets:
Oil and gas 24.5 24.1 51.8
Other 0.4 0.4 0.9
Amortisation of decommissioning assets 0.3 0.2 0.5
41.8 47.4 107.0
Notes (continued)
Six months Six months Year to 31
to 30 June to 30 June December
2003 2002 2002
3. Group consolidated cash flow statement analysis # million # million # million
a) Reconciliation of operating profit to net cash flow from operating
activities
Operating profit 52.4 36.0 66.1
Amortisation 25.2 24.7 53.2
Impairment write downs - - 13.1
Exploration expenditure written off 3.9 - 4.6
Exchange translation difference (1.4) - (3.5)
(Increase)/decrease in stocks (0.5) (1.9) 4.6
Decrease/(increase) in debtors 13.2 6.9 (9.3)
Decrease in creditors (1.5) (3.2) (5.3)
Net cash inflow from operating activities 91.3 62.5 123.5
b) Reconciliation of net cash flow to movement in net debt
Increase in cash in the period (6.8) 8.8 2.5
Cash (inflow)/outflow from movement in liquid resources (70.7) 32.6 60.0
Repayment of loans 124.2 - -
Change in net debt resulting from cash flows 46.7 41.4 62.5
Exchange translation difference 5.2 12.8 29.4
Decrease in net debt in the period 51.9 54.2 91.9
Opening net debt (180.5) (272.4) (272.4)
Closing net debt (128.6) (218.2) (180.5)
At 1 January Cash flow Re-classification Exchange At 30 June
2003 movements 2003
# million # million # million # million # million
c) Analysis of net debt
Cash in hand and at bank 16.4 (6.8) - 1.1 10.7
Bank loans due within one year (124.2) 124.2 (169.8) - (169.8)
Debt due after one year (202.0) - 169.8 4.2 (28.0)
Short term deposits 129.3 (70.7) - (0.1) 58.5
Total net debt (180.5) 46.7 - 5.2 (128.6)
Notes (continued)
4. Comparative information for disposed and discontinued operations
Six months to 30 June 2002 Year to 31 December 2002
Continuing Continuing
Ongoing Operations Discontinued Total Ongoing Operations Discontinued Total
operations disposed as operations** operations disposed as operations**
part of the part of the
Restructuring Restructuring
* *
# million # million # million # million # million # million # million #
million
Turnover
Group and share of joint 77.9 18.4 18.9 115.2 171.5 45.1 46.5 263.1
ventures
Less: share of joint (9.4) - (18.9) (28.3) (17.9) - (46.5) (64.4)
ventures' turnover
Group turnover 68.5 18.4 - 86.9 153.6 45.1 - 198.7
Cost of sales (42.0) (5.4) - (47.4) (91.2) (15.8) - (107.0)
Exceptional provision for oil - - - - (13.1) - - (13.1)
and gas assets
Exploration expenditure - - - - (4.6) - - (4.6)
written off
Gross profit 26.5 13.0 - 39.5 44.7 29.3 - 74.0
Administrative costs (3.5) - - (3.5) (7.8) (0.1) - (7.9)
Group operating profit 23.0 13.0 - 36.0 36.9 29.2 - 66.1
Share of operating profit in 6.3 - 10.4 16.7 10.9 - 27.1 38.0
joint ventures
Total operating profit 29.3 13.0 10.4 52.7 47.8 29.2 27.1 104.1
(including joint ventures)
* Relates to Natuna Sea assets, held in Indonesia, which were disposed as part of the Restructuring (note 6).
As Premier continues to hold an interest in these assets, this disposal does not satisfy the criteria for
discontinued operations in FRS 3 - 'Reporting Financial Performance'.
** Relates to Myanmar assets which were disposed as part of the Restructuring and satisfy the FRS 3 criteria for
discontinued operations.
5. Other notes
Basis of preparation
The interim statement does not represent statutory accounts within the meaning
of section 240 of the Companies Act 1985.
The comparative financial information is based upon the statutory accounts for
the year ended 31 December 2002. Those accounts, upon which the auditors issued
an unqualified opinion, have been delivered to the Registrar of Companies.
The interim financial information has been prepared on the basis of the
accounting policies set out in the group's 2002 statutory accounts.
Dividends
No interim dividend is proposed (30 June 2002: #nil).
Earnings per share
The calculation of basic and diluted earnings per share is based on the profit
after tax of #44.0 million (30 June 2002: #15.3 million) and on weighted average
shares in issue of 161.48 million (30 June 2002: 158.48 million). The number of
shares quoted above have been adjusted for consolidation of ten ordinary shares
of 5p to one ordinary share of 50p on 12 September 2003, in accordance with the
terms of the Scheme of Arrangement for the Restructuring.
6. Restructuring
On 16 September 2002 the group announced that it had reached agreement with the
two principal shareholders of the company, Amerada Hess Limited and Petronas
International Corporation Limited on the terms of a restructuring (the
Restructuring) which, when completed, will increase the group's core net asset
value per share, whilst reducing both net debt and gearing. The implied
consideration to be received by the group for the assets being transferred as
part of the Restructuring is $670 million (#406 million). The main commercial
elements of the Restructuring are disclosed in statutory accounts for the year
ended 31 December 2002.
The Restructuring was completed on 12 September 2003. As a result of completion
the Court sanctioned the Scheme of Arrangement for Premier in accordance with
section 425 of the Companies Act 1985. Premier Oil plc (formerly Premier Oil
Group plc) (the Company) became the new holding company of Premier Oil Group plc
(formerly Premier Oil plc) (Premier). Premier, which was the holding company of
the Premier group, cancelled its existing shares and issued new shares to the
Company in consideration for which the Company, following the repurchase and
redemption of its existing shares, issued shares to the shareholders of Premier
in proportion to their respective holdings of shares in Premier.
The following pro forma statement of consolidated net assets of the group has
been prepared in order to illustrate how the consolidated net assets and net
debt as at 30 June 2003 might have been affected had the Restructuring been
completed on that date. It has been prepared for illustrative purposes only and,
because of its nature, may not give a true picture of the financial position of
the group post-Restructuring. It has been prepared in accordance with the
explanatory notes set out below.
Premier Oil plc
Pro forma statement of consolidated net assets
At 30 June 2003
Explanatory Balance Impact of Pro forma
sheet at 30 Restructuring balance sheet
notes June 2003 at 30 June
2003
# million # million # million
Fixed assets
Intangible assets 6 32.1 (8.4) 23.7
Tangible assets 6,7 375.4 (94.7) 280.7
Investments in associated undertakings 6.4 - 6.4
Investments in joint ventures:
Share of gross assets 1 271.1 (187.7) 83.4
Share of gross liabilities 1 (145.9) 124.9 (21.0)
Total fixed assets 539.1 (165.9) 373.2
Current assets
Stocks 3 7.3 (1.0) 6.3
Debtors, including amounts due after one year 3 68.0 (14.7) 53.3
Cash and short term deposits 3,4,10 69.2 (29.1) 40.1
Total current assets 144.5 (44.8) 99.7
Creditors: amounts falling due under one year 3,5 (241.4) 179.2 (62.2)
Net current assets (96.9) 134.4 37.5
Total assets less current liabilities 442.2 (31.5) 410.7
Creditors: amounts falling due after one year 5 (28.0) (32.6) (60.6)
Provision for liabilities and charges 8 (62.7) 10.5 (52.2)
Consolidated net assets 13 351.5 (53.6) 297.9
Explanatory notes:
1. The group held part of its interest in Myanmar through
Global Resources Limited, in which it held a 50 per cent share. Premier accounts
for its share in Global Resources Limited using the gross equity method which
reflects Premier's share of the gross assets and liabilities of the joint
venture under FRS 9 - 'Associates and Joint Ventures'.
2. US$ amounts have been converted at $1.65/#1.00, the
exchange rate at 30 June 2003.
3. Estimated working capital balances of #15.7 million
representing stock (#1.0 million), debtors (#14.7 million), cash (#10.0
million), and creditors (#10.0 million) have been transferred with the Natuna
and Yetagun interests. These balances are assumed to be settled on completion.
This estimated working capital balance is based upon the Framework Agreement
dated 16 September 2002.
4. Costs of the transaction are shown as a cash expense. Total
costs assumed, including an estimate of the 'make-whole' payment of Premier's
loan notes, amount to $58.6 million (#35.5 million).
5. Under the Restructuring, bridge finance arrangements have
been put in place and the loan notes will be repaid.
6. The transfer of exploration expenditure from intangible
cost pool to tangible cost pool related to Natuna.
7. The reduction in fixed assets represents the impact of the
partial disposal of Premier's interest in Natuna.
8. The deferred tax provision (#4.9 million) is written back
to reflect Premier's remaining equity in Natuna. In addition, deferred income of
#5.6 million has been released to reserves due to the change in the interest in
Natuna.
9. Net debt (including balances in joint ventures) is #173.4
million pre-Restructuring and #15.9 million post-Restructuring. Gearing is 49
per cent pre-Restructuring and 5 per cent post-Restructuring. Net debt
(excluding balances in joint ventures) is #128.6 million pre-Restructuring and
#20.6 million post-Restructuring.
10. The cash adjustment of #29.1 million is broken down as follows:
# million
Transaction costs (35.5)
Cash consideration 154.6
Working capital settlement (1.1)
Repayment of long term debt (197.7)
Funding from new credit facility 60.6
Cash transferred with assets (10.0)
Total (29.1)
11. The adjustment to net debt of #157.5 million is reconciled as
follows:
# million
Cash movement as detailed above (note 10) (29.1)
Yetagun debt included as part of joint venture net debt transferred 77.2
with asset
Yetagun cash included as part of joint venture net debt transferred (27.7)
with asset
Long term debt repayment 197.7
Funding from new credit facility (60.6)
Total 157.5
12. It is intended that the methodology used to prepare the pro forma
financial statements above will be followed in preparing the financial
statements which will reflect the Restructuring. All adjustments are directly
attributable to the Restructuring.
13. The net assets movement will be reflected in the 2003 consolidated
accounts of the group either as a reserves movement or as an exceptional profit
and loss item depending on the nature of the item. Currently it is expected that
from the total net movement of #53.6 million, an estimated charge of #23.6
million relating to the 'make-whole' payment on Premier's loan notes will be
reflected as an exceptional item in the profit and loss account of the group.
Definitions:
A Net debt is defined as the group's borrowings, including the group's share
of net debt held in joint ventures, less cash and short term deposits.
B Gearing is defined as net debt divided by net assets
This information is provided by RNS
The company news service from the London Stock Exchange
END
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