RNS Number : 0458E
Indago Petroleum Limited
23 September 2008
Correction: The title for this announcement on the RNS page was incorrect and should have been Interim Results rather than Final
Results, all other information in the announcement remains unchanged.
Indago Petroleum Limited
Interim Results (unaudited) for the six months ended 30 June 2008
Indago Petroleum Limited ("Indago" or "the Company"), the independent oil and gas exploration company exploring onshore the Sultanate of
Oman, today announces its unaudited interim results for the six months ended 30 June 2008.
HIGHLIGHTS
Operational
* Exploration wells on Jebel Hafit and Adam prospects curtailed following operational problems.
* New data indicate that the Al Jariya-1 well at Jebel Hafit penetrated the shallower Natih objective, which was water-bearing.
* Deeper Shuaiba objective at Jebel Hafit remains untested.
* Data from recent wells on Jebel Hafit and Adam still being evaluated.
* Indago and its partner, RAK Petroleum, have entered into new 3-year exploration term for Block 31.
Financial
* Indago and RAK insured for the underground blow out on Al Jariya-1 well.
* Underwriters made payment on account in respect of the costs of controlling Al Jariya-1 well.
* Around $25 million plus insurance contribution towards new well on Jebel Hafit anticipated to be available for future drilling
campaign.
Outlook
* Indago's exploration portfolio remains prospective.
* Current exploration activities are focused on the deeper objective at Jebel Hafit and on Adam.
* New wells unlikely before mid 2009.
* Indago to consider asset or corporate transactions in order to diversify the Company's value proposition.
Tim Eggar, Chairman of Indago, commented:
"Indago has experienced an extremely difficult year operationally. However, the Company remains financially sound and retains
considerable exploration potential which has still not been tested.
Nonetheless, given an enforced delay in drilling activity until mid 2009 at least and more constrained financial resources, the Board
believes that diversification of opportunity and risk through asset or corporate transactions is appropriate. This would allow shareholders
to participate in new projects whilst retaining a significant interest in the existing exploration portfolio in Oman."
23 September 2008
Enquiries:
Indago Petroleum Limited
Tim Eggar, Chairman +44 (0) 7771 597 499
Dr David Bremner, Chief Executive Officer +1 805 708 4892
Martin Groak, Chief Financial Officer +44 (0) 20 7096 3461
Ambrian Partners Limited (NOMAD and corporate broker)
Marc Cramsie (NOMAD) +44 (0) 20 7634 4705
Richard Swindells (broker) +44 (0) 20 7634 4856
College Hill Associates + 44 (0) 20 7457 2020
Nick Elwes / Paddy Blewer
Chairman's statement
When I last wrote to you in May this year, I reported that the Al Jariya-1 well on Jebel Hafit had encountered a high temperature, high
pressure water-bearing zone. At the time, it was hoped that the well could be continued by re-drilling below 4,300 meters. Unfortunately,
this proved not to be possible and we announced on 28 April 2008 that the well had to be abandoned soon after. Subsequently, Indago
participated in the Zad well on the Adam prospect. This well also had to be curtailed for operational reasons, as outlined in our
announcement on 15 July 2008, having reached a depth of about 800 meters, some 3,500 meters short of the intended target.
Following the initial interpretation of the results of Al Jariya-1, Indago and the Operator of Block 31, RAK Petroleum, were of the
opinion that the prospectivity of the Jebel Hafit prospect was not substantially diminished. Within the past few days, the Operator has
communicated the results of a further, more detailed palaeontological analysis of cuttings from the Al Jariya well, which mean that this
previous assessment must be revisited. The new analysis indicates that the zone which blew out in the well below 5,125 meters was, in all
likelihood, the Cretaceous Natih Formation. This zone, which was the upper of two potential reservoirs targeted by the well, was found to be
water-bearing with only shows of gas. Additional studies, due for completion later in the year, will help the venture to decide whether this
failure at the Natih level has any implication for the deeper Shuaiba objective. Pre-drill estimates showed that the Shuaiba holds about 80%
of the prospective resources.
The Al Jariya-1 and Zad wells comprised the extent of Indago's firm exploration drilling programme following the sale of assets to RAK
Petroleum in 2007. As such, therefore, their operational failure and the subsequent interpretation of the results of Al Jariya-1 represent a
serious setback to the Company's plans. However, it is important that Indago's current circumstances are placed in context.
Firstly, the Indago portfolio still holds considerable untested reserves potential. At the present time, therefore, the exploration
activities of the Company are focused on the deep Jebel Hafit (Shuaiba) and Adam prospects. To that end, we are pleased to announce today
that Indago has entered into the next three year exploration period for Block 31, in which Jebel Hafit is located.
Secondly, the financial impact of the problems on Al Jariya-1 is expected to be significantly mitigated by insurance covering the events
which caused the abandonment of the well. This means that the joint venture partners are being reimbursed for the costs of controlling the
well and that a substantial part or all of the costs of re-drilling the Al Jariya well to the depth reached prior to abandonment is expected
to be reimbursed by the underwriters. Moreover, the wisdom of retaining sufficient cash from the sale to RAK to take account of unforeseen
events has left Indago with a solid cash position going forward, despite the operational difficulties experienced this year. After
reimbursement by the insurers of the costs of controlling Al Jariya-1, Indago will have around $25 million, plus the anticipated insurance
contribution to the costs of drilling a second Al Jariya well, to deploy in the execution of its future exploration programme. Consequently,
based on our current estimates, Indago could participate in the re-drilling of Jebel Hafit and Adam at its existing levels of interest.
Notwithstanding Indago's financial position, however, the Board has concluded that the lengthy hiatus in the Company's drilling
activities, plus the renewed commitment of Indago to Block 31, is an opportune time to contemplate alternative strategic options. In
particular, the Company will consider bringing new investors into its portfolio of assets in Oman and combinations with other companies. Any
such transaction would be aimed at enabling Indago's shareholders to maintain their participation in the future exploration of all Indago's
blocks in Oman, while at the same time giving them exposure to a greater spread of upstream activities. We expect that opportunities
beneficial to Indago's shareholders will arise given the current dynamics of the upstream sector.
I wish to thank my colleagues on the Board and employees of Indago for their considerable efforts during a difficult last few months.
Finally, I welcome Ambrian as Indago's broker. We have a long standing relationship with Nabarro Wells, prior to their combination with
Ambrian, as the Company's Nominated Adviser and are pleased to be able to expand the scope of our collaboration. It is appropriate to
Indago's profile presently to combine the role of broker and nominated adviser. I am grateful to JP Morgan Cazenove, our previous brokers,
for their contribution during the last two years, especially during the asset sale to RAK.
Tim Eggar
Chairman
CONSOLIDATED INCOME STATEMENT
FOR THE SIX MONTHS ENDED 30 JUNE 2008
6 months ended 6 months ended Year
30 June 2008 30 June 2007 ended
31 Dec
2007
Unaudited Unaudited Audited
Notes $000 $000 $000
Revenue - 3,771 3,771
Cost of sales - (841) (929)
Gross profit - 2,930 2,842
Exploration costs written off 4 (12,081) (11,154) (11,678)
Administrative expenses (3,266) (5,172) (6,603)
Other income 4 2,042 246 246
Profit on disposal of - 306,024 306,024
subsidiaries
(Loss)/profit before interest (13,305) 292,874 290,831
and taxation
Interest income 538 1,654 3,090
(Loss)/profit before taxation (12,767) 294,528 293,921
Taxation - - (66)
(Loss)/profit for the period (12,767) 294,528 293,855
attributable to equity holders
of the parent
(Loss)/profit per share in US 2 (24) 552 551
cents - basic
(Loss)/profit per share in US 2 (24) 514 511
cents - diluted
The accompanying notes 1-4 form an integral part of these financial statements
CONSOLIDATED BALANCE SHEET AS AT 30 JUNE 2008
Group at 30 Group at 30 Group at 31 December
June 2008 June 2007 2007
Unaudited Unaudited Audited
Notes $000 $000 $000
NON - CURRENT ASSETS
3 28,862 10,237 22,457
Intangible assets
Plant, fixtures and fittings 97 120 112
28,959 10,357 22,569
CURRENT ASSETS
55 55 55
Inventories
Trade and other receivables 246 1,750 353
Cash and cash equivalents 27,214 54,495 41,315
27,515 56,300 41,723
TOTAL ASSETS 56,474 66,657 64,292
CURRENT LIABILITIES
(9,974) (7,843) (5,618)
Trade and other payables
TOTAL LIABILITIES (9,974) (7,843) (5,618)
NET ASSETS 46,500 58,814 58,674
EQUITY
27 27 27
Called up share capital
Retained profit 46,473 58,787 58,647
TOTAL EQUITY ATTRIBUTABLE TO 46,500 58,814 58,674
THE COMPANY'S EQUITY HOLDERS
The financial statements were approved by the Board of Directors on 22 September 2008.
Martin Groak
DIRECTOR
The accompanying notes 1-4 form an integral part of these financial statements
CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE SIX MONTHS ENDED 30 JUNE 2008
6 months ended 6 months ended Year ended
30 June 2008 30 June 2007 31 December 2007
$000 $000 $000
Unaudited Unaudited Audited
Operating activities
(Loss)/profit before taxation (12,767) 294,528 293,921
Adjustments to reconcile
profit/(loss) before taxation
to net cash flows:
Share based payments 593 1,777 2,310
Capitalised exploration costs - - 5,583
written off
Amortisation of and write off - 48 48
of intangible assets
Depreciation of property, 17 251 287
plant and equipment
Profit on disposal of - (306,024) (306,024)
subsidiaries
Interest income (538) (1,654) (3,090)
Tax expense - - (66)
Decrease/(increase) in - 63 63
inventories
Decrease / (increase) in 107 (2,406) (1,014)
receivables
Increase / (decrease) in 4,356 (622) (2,847)
payables
Increase in provisions - 156 161
Net cash flows from operating (8,232) (13,883) (10,668)
activities
Investing activities
Interest received 538 1,654 3,090
Purchase of property, plant (2) (7,319) (7,347)
and equipment
Purchase of intangible fixed (6,405) (9,456) (27,259)
assets in joint ventures
Proceeds from sale of - 356,675 356,675
subsidiaries and other assets
net of cash and cash
equivalents disposed of
Net cash flows from investing (5,869) 333,708 325,159
activities
Financing activities
Dividends paid - (317,713) (317,713)
Net cash flows from financing - (317,713) (317,713)
activities
(Decrease)/increase in cash (14,101) 9,958 (3,222)
and cash equivalents
Cash and cash equivalents at 41,315 44,537 44,537
the start of the period
Cash and cash equivalents at 27,214 54,495 41,315
the end of the period
The accompanying notes 1-4 form an integral part of these financial statements
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
GROUP Retained profit /
(Accumulated losses)
$000
Share capital Share premium
$000 $000
Total
$000
At 1 January 2007 27 112,170 (31,975) 80,222
Share-based payments - - 1,777 1,777
Total income and expenses for - - 1,777 1,777
the period recognised in
equity
Profit for the period - - 294,528 294,528
Cancellation of share premium - (112,170) 112,170 -
account
Dividend paid - - (317,713) (317,713)
At 30 June 2007 27 - 58,787 58,814
Share-based payments - - 533 533
Total income and expenses for - - 533 533
the period recognised in
equity
Loss for the period - - (673) (673)
At 31 December 2007 27 - 58,647 58,674
Share-based payments - - 593 593
Total income and expenses for - - 593 593
the period recognised in
equity
Loss for the period - - (12,767) (12,767)
At 30 June 2008 27 - 46,473 46,500
The accompanying notes 1-4 form an integral part of these financial statements NOTES TO THE UNAUDITED INTERIM FINANCIAL STATEMENTS -
30 JUNE 2008
1. PRINCIPAL ACCOUNTING POLICIES
Basis of preparation
These accounts have been prepared under the historical cost convention and in accordance with the terms of the Companies (Guernsey) Law
1994 and applicable International Financial Reporting Standards (IFRS) as adopted by the EU. As permitted, these interim accounts have been
prepared in accordance with UK AIM listing rules and not in accordance with IAS 34 - Interim Financial Reporting. At the date of this
report, the Company is not required to adopt IAS 34.
The interim financial statements represent the consolidated accounts of Indago Petroleum Limited, including its subsidiary companies
Indago (UK) Services Limited, Indago Ventures 31 Limited, Indago Ventures 43 Limited and Indago Ventures 47 Limited. The comparatives also
include the income and expenditure for the period 1 January 2007 to 31 March 2007 in relation to its former subsidiaries, Indago Oman
Limited, Indago Technical Services Limited, Indago Al Khaleej Limited, Indago Oman Block 8 Limited and Indago Oman Block 30 Limited. After
31 March 2007, control of these former subsidiaries passed to RAK Petroleum PCL.
The statements, which are unaudited, have been prepared on the basis of the accounting policies published in the consolidated financial
statements for the year ended 31 December 2007. The financial information set out in this interim report does not include all the
information and disclosures required in the annual financial statements and does not constitute statutory accounts as defined in the
Companies (Guernsey) Law 1994. The figures for the year ended 31 December 2007 have been extracted from the consolidated financial
statements that have been filed in accordance with Guernsey company regulations. The auditors' report to these statutory accounts was
unqualified and did not contain a statement under section 64 of the Companies (Guernsey) Law 1994.
2. (LOSS) / EARNINGS PER ORDINARY SHARE
The calculation of basic (loss) / earnings per share is based on a net loss after taxation but before dividends attributable to equity
holders of the parent for the 6 months ended 30 June 2008 of $12,767,000 (6 months ended 30 June 2007: profit $294,528,000; year ended 31
December 2007: profit $293,855,000) and 53,333,311 ordinary shares, being the weighted average number of ordinary shares in issue during the
period (30 June 2007: 53,333,311; 31 December 2007: 53,333,311).
In relation to the six months ended 30 June 2008, the loss attributable to equity holders and the weighted average number of ordinary
shares for the purpose of calculating the diluted loss per share are identical to those used for the basic loss per share. This is because
the exercise of share options would have the effect of reducing the loss per share and is therefore not dilutive under the terms of IAS 33.
The calculation of the diluted earnings per share is based on net profit after taxation attributable to equity holders of the parent for
the 6 months ended 30 June 2007 of $294,528,000 and 57,299,157 ordinary shares and options, being the weighted average number of ordinary
shares in issue during the period (53,333,311), plus the weighted average number of 3,965,846 ordinary shares held under options by past and
present employees, advisers and brokers, assumed to have been exercised on the first day of the period. No other options would have vested
by the end of the period.
The calculation of the diluted earnings per share is based on net profit after taxation attributable to equity holders of the parent for
the year ended 31 December 2007 of $293,855,000 and 57,458,986 ordinary shares and options, being the weighted average number of ordinary
shares in issue during the period (53,333,311), plus the weighted average number of 4,125,675 ordinary shares held under options by past and
present employees, advisers and brokers, assumed to have been exercised on the first day of the period. No other options would have vested
by the end of the period.
3. INTANGIBLE ASSETS
Exploration and appraisal expenditure
$'000
Cost:
At 1 January 2007 37,697
Additions 9,456
Disposals (36,916)
At 30 June 2007 10,237
Additions 17,803
Write offs (5,583)
At 31 December 2007 22,457
Additions 6,405
At 30 June 2008 28,862
Amortisation:
At 1 January 2007 935
Charge for the period 48
Disposals (983)
At 30 June 2007 -
Charge for the period -
At 31 December 2007 -
Charge for the period -
At 30 June 2008 -
Net book value at 30 June 2008 28,862
Net book value at 31 December 2007 22,457
Net book value at 30 June 2007 10,237
The intangible asset cost additions pertaining to retained assets include capitalised amounts as at 30 June 2008 and not amortised of
$24,905,000 relating to the drilling of the Al Jariya-1 well on the Jebel Hafit prospect in Block 31 Oman (31 December 2007: $21,638,000). A
further $613,000 relates to work done on the Hawamel well incurred after 1 January 2007 on the Izz prospect in Block 47 Oman (31 December
2007: $613,000) and $3,344,000 for the initial drilling of the Zad well on the Adam prospect in Block 47 Oman (31 December 2007: $206,000).
4. INSURED LOSS
In February 2008, the Al Jariya-1 well suffered an underground blowout which resulted in the plugging and abandoning of that particular
well. It also resulted in well control actions for which the Company's share amounted to $11,690,000. These well control costs, as well as
the costs of re-drilling the well, are insured under the Operator's (RAK Petroleum PCL's) insurance policy and are expected to be
substantially, if not fully, recovered (less the Company's share of the policy excess, being $125,000).
In accordance with applicable reporting standards:
* The Company's share of costs incurred during the period of $11,690,000 relating to the well control incident at Al Jariya-1 have
been written off in full in the Income Statement; and
* Insurance recoveries are only recognised to the extent that they have either been physically received in cash or notified as
having been approved for payment by the underwriters. They are reported under "Other Income" in the Income Statement.
As at the date of this report, the Operator had submitted all the necessary documentation to support in full the first part of the claim
(relating to the well control incident) and underwriters had made an interim payment (Indago share $2,042,000). The Directors have been
advised that it would be reasonable to expect the balance (up to $9.5 million) to be dealt with by the end of the financial year.
SUPPLEMENTARY INFORMATION
WEBSITE
The Company has a website www.indagopetroleum.com on which statutory information, press releases and background information on the
Company and its operations can be found. The website is compliant with AIM Rule 26 on disclosure of key information about the Group.
REVIEW BY QUALIFIED PERSON:
The technical information and opinions contained in this press release have been reviewed by Don Scott, a qualified Geoscientist (BSc
(Hons) Geology - Southampton 1963, MSc Applied Geophysics - Birmingham 1964) and a Fellow of the Geological Society of London since 1964.
This information is provided by RNS
The company news service from the London Stock Exchange
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