Alliance Resources - Final Results
25 October 1997 - 12:13AM
UK Regulatory
RNS No 6169u
ALLIANCE RECOURCES PLC
24th October 1997
PRELIMINARY ANNOUNCEMENT OF RESULTS
FOR THE YEAR ENDED 30 APRIL 1997
Chairman's Statement
The results for the year ended 30 April 1997 are inevitably
overshadowed by the successful acquisition of LaTex Resources
Inc. which was completed just after the year end on 1 May
1997. Details of the acquisition were included in Listing
Particulars sent to shareholders on 4 April 1997.
Nevertheless, while the results themselves predate the
completion of the acquisition, a considerable part of the
fiscal year was devoted to negotiating and completing the
transaction.
The completion of the LaTex acquisition represented a key
milestone in the development of the Alliance Group and
considerable progress has already been made in combining, and
rationalising, the operations and interests of the new,
enlarged group. The acquisition has transformed the prospects
of the new Group with production, which averaged 460 barrels
of oil equivalent per day (boepd) during the year ended 30
April 1997, now averaging approximately 2,100 boepd.
Since 1 May 1997, a number of disposals of non-core properties
have been completed and operational efforts have been directed
at enhancing existing production from the Group's principal
fields. The proceeds of the disposals have been reinvested in
the core oil and gas assets of the Group and applied towards
strengthening the combined group's balance sheet. The next
phase of operational activity will be directed at unlocking
the considerable potential of the Group's non-producing
reserves through an active recompletion programme.
Trading Results and Financial Position
The results for the year ended 30 April 1997 show a loss on
ordinary activities before and after tax of US$1.827 million
(1996 - loss of US$3.593 million) giving a loss per share of
0.3p (1996 - loss per share of 0.8p).
However, we are pleased to report that turnover was virtually
unchanged at US$3.681 million (1996 - US$3.686 million).
Following various property disposals production declined to
166,000 barrels of oil equivalent for the year (1996 - 225,000
boe), representing approximately 460 boepd (1996 - 620 boepd).
The decline in volumes was offset by the improved price
environment for both oil and gas in North America resulting in
an average realised price of US$21.13 per barrel of oil
equivalent (1996 - US$14.81/boe).
Although cost of sales showed a reduction from the previous
year, these costs still amounted to US$2.744 million for the
year (1996 - US$3.930 million). Administrative expenses were
relatively unchanged at US$2.575 million (1996 - US$2.629
million). However, the acquisition has already resulted in
rationalisation of the combined group's overheads with the
consolidation of the North American operations in Tulsa. The
results for the year continued to be adversely affected by
some non-recurring costs, although these costs are now running
at an immaterial level.
During the year ended 30 April 1997 proceeds of US$2.227
million were received for property disposals covering
approximately 426 thousand barrels of oil equivalent.
The Group ended the financial year at 30 April 1997 with cash
balances of $1.461 million and no material debt.
LaTex Acquisition
As mentioned earlier, the acquisition of LaTex was completed
on 1 May 1997. At the same time the Group also completed the
acquisition of an overriding royalty interest from Bank of
America, effected a share consolidation pursuant to which
every 40 ordinary shares of 1p each were consolidated into 1
ordinary share of 40p and entered into revised credit
arrangements with Bank of America.
Since the completion of the LaTex acquisition in May
considerable progress has been made:
Disposals: Disposals of non core properties completed to
date have realised US$4.536 million and the properties held by
the Group have now been rationalised to approximately 400 core
properties.
Production: The remedial programme has yielded
significant early success with gross production from eleven
key fields increasing from 244 barrels of oil equivalent per
day in early May 1997 to in excess of 865 boed by mid August.
Overheads: Consolidation of operations in Tulsa, and the
consequent closure of Alliance's previous offices in Houston
and Lafayette, has reduced the enlarged group's overhead.
Oil & Gas Prices: LaTex's previous oil and gas price
hedges were bought out for $1.128 million in May, thereby
providing exposure to the recent favourable price environment.
The next phase of the Group's business plan will focus on
crystallising the potential of the currently non producing
reserves through a programme of recompletions which should
result in a significant increase in production and producing
reserves. I would also like to highlight the excellent terms
which management has achieved in concluding the farm-out
arrangement on the Group's Jefferson Island property which is
described in the Operations Review which follows. This deal,
which is the result of careful geoscience review and
painstaking negotiations, has the potential for significant
addition to shareholder value in the coming years.
Board Matters
I would like to welcome to the Board two new non-executive
directors, appointed on the completion of the LaTex merger.
Although Jeff Wilson will not be standing for re-election as a
director at the forthcoming Annual General Meeting, John
Martinson brings considerable oil and gas expertise to the
Board. He was a non-executive director of LaTex and is
currently managing director of Wood Roberts LLC, a petroleum-
oriented investment banking and advisory partnership.
This will be my last report to you as Chairman of Alliance. I
have decided not to stand for re-election as a director when
my term of office ends by rotation at the forthcoming Annual
General Meeting. I have come to this decision because the
tasks which needed to be accomplished when I was elected
Chairman in late 1995 - no less than the restructuring and
revitalisation of Alliance to ensure its survival - are now
complete, and because there are people better qualified than I
to carry the Group forward into its next phase of development.
Prospects
Alliance's goal is to become a major international independent
oil and gas company by pursuing a production-oriented strategy
focusing on older, undeveloped assets or undervalued companies
thereby continuing the strategic rationale which led to the
acquisition of LaTex. We believe that this strategy provides
the opportunity for significant growth potential with
considerably less risk than one based on exploration
The current financial year has already started positively with
the focus on rationalising the property portfolio, increasing
production from the core properties and improving the quality
of the balance sheet. We will remain focused on extracting
value from our existing assets while remaining committed to
appraising international opportunities.
While the Board is disappointed at the recent trading range of
the share price, we believe that the progress currently being
made will be reflected in the share price in the near term.
We look forward to the future with confidence. It is envisaged
that a Form 10-Q, covering the results of the Group for the
quarter ended 31 July 1997, will be filed with the U.S.
Securities and Exchange Commission in the near future.
D Patrick Maley
Chairman
Enquiries to:
Alliance Resources PLC
Brian Williams , Finance Director Tel: 0171-930-9337
Jak Keenan, Managing Director Tel: 001-918-747-7000
Basham & Coyle
John Coyle Tel: 0171-253-3300
Consolidated profit and loss account
Notes Year ended Year ended
30 Apr 97 30 Apr 96
US$000 US$000
Turnover 3,681 3,686
______ ______
Operating costs
Exceptional costs
arising from irregularities 1 (292) (589)
Other operating costs 2 (5,319) (6,559)
______ ______
(5,611) (7,148)
______ ______
Operating loss (1,930) (3,462)
Exceptional amounts
written off investments 3 - (201)
______ ______
Loss on ordinary activities
before interest and tax (1,930) (3,663)
Other interest receivable
and similar income 113 257
Interest payable
and similar charges 4 (10) (187)
______ ______
Loss on ordinary activities
before and after taxation
transferred to reserves (1,827) (3,593)
Loss per share (pence) 5 (0.3)p (0.8)p
The results derive solely from continuing activities
Consolidated balance sheet
As at As at
30 Apr 97 30 Apr 96
US$000 US$000
Fixed assets
Tangible fixed assets 4,276 7,311
_____ _____
Current assets
Debtors 2,850 1,357
Cash at bank and in hand 1,461 1,177
_____ _____
4,311 2,534
Creditors
Amounts falling due within one year (2,505) (1,998)
_____ _____
Net current assets 1,806 536
_____ _____
Total assets less current liabilities 6,082 7,847
Creditors
Amounts falling due after more than
one year (85) (92)
Provisions for liabilities and charges (36) -
_____ _____
Net assets 5,961 7,755
Capital and reserves
Called up share capital 5,105 5,105
Share premium account 20,157 20,157
Merger reserve 401 401
Profit and loss account (19,702) (17,908)
_____ _____
Shareholders' funds - equity 5,961 7,755
Consolidated cash flow statement
Year ended Year ended
30 Apr 97 30 Apr 96
US$000 US$000
Net cash outflow from
operating activities (524) (5,399)
Returns on investments
and servicing of finance 54 208
Capital expenditure
and financial investment 1,432 (2,512)
______ ______
Cash inflow / (outflow) before use
of liquid resources and financing 962 (7,703)
Financing (674) 9,765
______ ______
Increase in cash in the period 288 2,062
Reconciliation of net cashflow to movement in net
funds / (debt)
Increase in cash in the period 288 2,062
Decrease in loan 7 528
Translation difference 33 -
______ ______
Movement in net funds in the period 328 2,590
Net funds / (debt) at beginning of period 1,048 (1,542)
______ ______
Net funds at end of period 1,376 1,048
Notes:
1. Exceptional costs arising from irregularities
The exceptional charge comprises:
30 Apr 97 30 Apr 96
US$000 US$000
Loss arising from transactions
with certain companies
related to Mr O'Brien - 73
Professional fees 121 788
Settlement with Mr O'Brien 171 (272)
_____ _____
292 589
Professional fees
The exceptional cost of US$121,000 in the year to 30 April
1997 (1996: US$788,000) relates to the cost of
professional assistance obtained by the directors in
relation to actions taken arising from the alleged
fraudulent activities in the period in which Mr O'Brien
was Chief Executive.
Proceeds resulting from the settlement with Mr O'Brien
As part of the settlement reached with Mr. O'Brien, the
10,351,966 shares in the Company held in the name of
Progas Holdings Ltd. have now been sold and the Company
has received the proceeds of such sale amounting to
US$123,023.
2. Operating costs
30 Apr 97 30 Apr 96
US$000 US$000
Total operating costs were: 5,611 7,148
Made up as follows:
Cost of sales
Operating costs and production taxes1,701 2,318
Depletion of oil and gas interests 1,043 1,612
_____ _____
2,744 3,930
Administrative expenses
Exceptional professional fees net of
settlement proceeds (note 1) 292 589
Administrative expenses 2,575 2,629
_____ _____
2,867 3,218
The gross profit / (loss) was:- 937 (244)
3. Exceptional amounts written off investments
Following the removal of Mr O'Brien in September 1995,
the Group reviewed its portfolio of investments, unlisted
investments and joint venture interests. It was
considered unlikely that significant amounts would be
recovered from the Tatarstan investment or from the Geos
joint venture. Accordingly, additional charges were made
to the profit and loss account in the year ended 30 April
1996 in respect of costs incurred in relation to these
investments .
4. Interest payable and similar charges
30 Apr 97 30 Apr 96
US$000 US$000
On bank loans and overdrafts 10 28
Foreign exchange loss - 159
____ ____
10 187
The foreign exchange gain in the current year has been
included in other interest receivable and similar income
5. Loss per share
The calculation of loss per share is based upon the
following:
30 Apr 97 30 Apr 96
Loss for the period (US$000) 1,827 3,593
Weighted average
number of shares 324,152,633 317,175,674
6. UK and Canadian Generally Accepted Accounting Principles
The financial statements have been prepared in accordance
with accounting principles generally accepted in the
United Kingdom. The Group's consolidated loss on ordinary
activities after taxation and the Group's share capital
and reserves for the financial year ended 30 April 1997
would not have differed had the financial statements been
prepared in accordance with Canadian GAAP.
The financial information contained herein does not constitute
the Company's statutory accounts for the years ended 30 April
1997 or 1996. Statutory accounts for the year ended 30 April
1996 have been delivered to the Registrar of Companies and
those for the year ended 30 April 1997 will be delivered
following the Company' Annual General Meeting. The auditors
have reported on both the 1997 and 1996 accounts. Their
reports for 1997 and 1996 were unqualified and their report
for 1996 contained a statement that proper accounting records
had not been kept for the period up until the investigation
into Mr. O'Brien's involvement in the Group's activities had
been concluded.
Statement of Proved and Probable Oil and Gas Reserves
Oil Gas Total
thousands millions BOE's
of of cubic thousands
barrels feet
Net proved reserves
disclosed at 1 May 1996 628 2,384 1,026
Changes during the year
- Production (147) (114) (166)
- Disposals (65) (2,165) (426)
- Revisions 302 1,943 625
______ ______ ______
Net proved reserves
disclosed at 30 April 1997 718 2,048 1,059
Of which
Proved developed producing 377 144 401
Proved developed behind pipe 25 - 25
Proved developed non-producing 22 - 22
Proved undeveloped primary 294 1,904 611
______ ______ ______
Net proved reserves
disclosed at 30 April 1997 718 2,048 1,059
Net probable reserves
disclosed at 30 April 1997 546 2,755 1,005
The 1997 Annual Report and Financial Statements will be
delivered to shareholders in due course.
Registered Office: Company No:2532955
Kingsbury House
15-17 King Street
London SW1Y 6QU
END
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