RNS Number:1096L
Northern Petroleum PLC
15 May 2003
Embargoed: 0700 hrs 15 May 2003
Northern Petroleum Plc
("Northern" or the "Company")
Final Audited Results for the Year Ended 31 December 2002
HIGHLIGHTS
* PROFIT PER SHARE OF 0.15 PENCE AFTER WRITE OFFS
* PROFITABLE SALE OF IRISH INVESTMENTS
* IMMEDIATE PAYBACK ON INVESTMENT IN SPANISH PRODUCTION
* STRONG CASH POSITION
* 3.9 MILLION BARRELS RECOVERABLE PROBABLE RESERVES IN UK
* ALL INVESTMENTS NOW UNDER THE COMPANY'S OWN OPERATIONAL CONTROL
* NEW LICENCES AWARDED
Richard Latham, Chairman of Northern Petroleum Plc, commented,
"This has been a year of significant progress. We achieved the profitable sale
of our Irish investments and a six month payback on our investment in the
Ayoluengo oil field. We have doubled to a 40% interest our position in licence
PEDL 113, on the Isle Of Wight, where we have now established 3.9 million
barrels of recoverable probable oil reserves net to the Company. It is, in my
view, of great importance that Northern has now achieved operational control
over all its investments.
This progress coupled with a strong cash position affords me a great deal of
confidence in Northern Petroleum going forward."
For Further Information Please Contact:
Richard Latham
Chairman
Northern Petroleum Plc
Tel: +44 (0) 20 7743 6080
Derek Musgrove
Managing Director
Northern Petroleum Plc
Tel: +44 (0) 20 7743 6080
Chris Roberts
Ben Simons
Hansard Communications
Tel: +44 (0) 20 7245 1100
Chairman's Statement
I report a profit of 0.15p per share reflecting, after write offs, the
profitable sale of our Irish investments and the commencement of profitable
operations in Spain. I also report the establishment of almost four million
barrels, verified by independent consultants, of probable recoverable oil
reserves on the Isle of Wight.
This has been a year of significant progress. We achieved the profitable sale of
our Irish investments and a six-month payback on our investment in the Ayoluengo
oil field. We have doubled to a 40% interest our position in licence PEDL 113,
on the Isle Of Wight, where we have now established 3.9 million barrels of
recoverable probable oil reserves net to the Company. It is, in my view, of
great importance that Northern has now achieved operational control over all its
investments.
This progress coupled with a strong cash position affords me a great deal of
confidence in Northern Petroleum going forward.
The successful appraisal drilling in 2001 of the Seven Heads Gas Field was
followed in 2002 by the development of economically attractive plans for putting
the field into production. In July 2002 we sold our interest in both the Seven
Heads and Galley Head gas fields for #2 million in cash and 294,118 ordinary
shares of Ramco Energy plc. Your Board took this action as we accepted the
paramount importance of having the major part of our investments under our own
management control. The sale also released funds which could be redeployed to
add value in the short term rather than be locked into a project to which little
significant value could be added by us until first production scheduled for late
2003. The Seven Heads gas field is forecast to supply some 10% of Irish
requirements. It remains a good project and it was particularly pleasing to read
that the first development well tested 34.3 mmscfd, a result substantially
better than expected. We are maintaining through our holding of Ramco Energy plc
shares virtually the same exposure as originally invested in this project and
are confident that we will benefit as the market becomes aware of the positive
achievements of the project.
Gary Moore joined the Board during the year as a result of this transaction and
resigned in May 2003 to pursue other interests. We hope these will prove as
successful for him as Seven Heads and thank him for his considerable
contribution to the Company.
In May 2002 we purchased from Repsol/YPF a 45% interest in the La Lora licence
in Northern Spain which includes the Ayoluengo oil field. We also arranged with
the remaining partners to be appointed as Operator to manage the field. It is
pleasing to report that, with the improved oil prices and the uncontrolled
delays in receiving approvals from the authorities in Madrid, by the time the
transaction became unconditional on December 12th 2002, sufficient net revenues
had already accrued since July 1st , to cover more than the purchase price of
$112,500. Whilst I would wish to show an operating profit for the Ayoluengo
field of #68,691 for the period 1st July to 31st December 2002 I am advised that
this would not conform with Financial Reporting Standards 5 and 7. As a
consequence, and you are referred to the Finance Report, the benefits prior to
December 12th are shown as negative goodwill, a result of acquiring assets for
less than they are now worth.
It is our initial intention to increase profits from Ayoluengo by a programme of
cost reduction, down-hole clean up, restoration and further lateral drilling
into as yet un-drained areas of the reservoir. The first phase has already begun
with initially encouraging results. In the longer term we are working to confirm
drilling targets below and on the flanks of the current area in production. I am
reminded of the adage that the best place to find oil is in the shadow of an oil
field.
On another nearby licence we are developing plans to drill the Hontomin-4
appraisal well combined with a deeper test to benefit from the drilling and
testing in 1991-1992 of Hontomin-2 which tested up to 200 bopd of oil, but with
water. This is viewed as a sufficiently low-risk project to meet our business
strategy criteria. Unlike the previous licensee we will now have the added
benefit of being able to test and produce using the oil handling and water
disposal facilities at Ayoluengo only 20km away.
Another well being planned is Huidobro-3 to attempt to produce oil from the
Cretaceous formation from which Chevron tested oil in 1963. It is also intended
that the structure will be tested at the deeper Middle Jurassic horizon in which
reportedly oil was logged at greater depths in the nearby Lora-1 well.
As a result of these activities it is clear that Spain is a core area for the
Company. A major position has been acquired in the oil-prone Sedano Basin. These
licences have become all the more attractive as our technical staff examine the
deeper prospects in the basin which have in addition to oil potential a very
large potential for gas sourced from the local coal measures which outcrop and
were mined to the northwest.
Early in 2002 we assumed the management control of our key South of England
licences and have now increased our interest in them from 20% to 40%. In 2002 we
acquired an additional 15% interest from Black Rock Plc by an inexpensive
farm-in, bringing our interest up to 35% in each of PEDL 098, 099 and 113. In
early 2003 we acquired from Italmin Petroli S.r.l. a further 5% in the same
three licences simultaneous with surrender of our 10% interest in the Fiume
Arrone licence. Following detailed technical work our team has upgraded its
evaluation of Sandhills-1 to a substantial logged oil discovery independently
evaluated at 9.8 million barrels of "probable" oil reserves using a 20%
estimated recovery factor, 3.9 million barrels net to Northern, increasing to
6.2 million barrels if the "possible" reserves are included. Approaches are in
progress to gain planning consents to re-drill and test Sandhills later this
year. This one project is capable of transforming the perceived value of your
company.
The detailed petrophysical work has given rise to the identification of a number
of other targets for new licence applications which must remain undisclosed for
commercial reasons.
During 2002 we announced that we had entered into arbitration proceedings under
English Law with a Lukoil subsidiary, Open Joint Stock Company
Arkhangelskgeoldobytcha ("AGD") and with the seat of arbitration subsequently
transferred to London. On February 14th 2003 we submitted our full case for
damages and awaited responses. Replies have been received from the lawyers
acting for AGD. Despite requests AGD has repeatedly failed to respond directly
to Northern's reasonable attempts to resolve issues through commercial
discussions, thereby saving legal costs. We have found their stance to be
obstructive.
It has been reported to us that the Tedin field produced approximately 1.25
million barrels during 2002 and we continue to regard ourselves as to be
entitled under contract to a 10.34% share of the net profits from the sale of
that oil.
Having taken advice on financial reporting standards, all the investment costs
associated with the Russian venture have now been provided for, save for a
nominal one pound. I wish to emphasise that this in no way reflects the
potential value of the investment. Whilst we do not expect the unsatisfactory
standards of behaviour we have encountered to change to those expected from a
Western partner, we will continue to attempt to realise the proper value through
the arbitration proceedings.
Progress in Italy has been made with the award of two licences. One is the
highly productive Po Valley region and the other is offshore, to the south of
Sicily. Five further applications are outstanding of which only one is the
subject of competition. Italy remains a region of great interest, but for the
time being we must accept the slow pace of licensing and concentrate our efforts
elsewhere.
Inevitably, some of the projects we have undertaken have not worked out for us.
I have to report, sadly Peru was one of these where deal terms deteriorated at
the last moment. I take it as one of your Company's many strengths that we
maintain tough deal criteria and are prepared to walk away when our standards
cannot be met.
As a result of our efforts last year, particularly by our technical team, we are
now in a position to pursue our Spanish and South of England projects in the
coming year. We are well funded. We expect to drill two or three appraisal wells
in the Isle of Wight and Spain and begin a programme for the increase of oil
production from the Ayoluengo field. I look forward to reporting on the progress
of these activities during the coming year.
Richard Latham
Chairman
RESULTS SUMMARY
The results for the Group for the year ending 31 December 2002 show a profit of
# 0.241 million compared with a loss of #(6.437) million for the year ended 31
December 2001. The major components of this result were the #1.777 million
exceptional profit on disposal of the Group's Irish interests, offset by the
#0.732 million exceptional provision against the Group's Russian investment and
a #0.228 million exceptional provision against the value of the Group's
investment in Ramco Energy Plc. The operating loss excluding all exceptional
items for the year under review was #0.444 million compared with a restated
figure for the prior year of #0.9 million (restated to reflect the previous
year's writedown against the Russian investment as an exceptional item). This
improvement is in part as a result of increased revenues and reductions in
administrative expenses.
Actual production net to Northern was 13,950 barrels of oil equivalent, with an
average price received for oil during the second half of 2002 of US$28.50 per
barrel. However attributable production for the year only totalled 1,610 barrels
of oil equivalent, as in order to conform with Financial Reporting Standards 5
and 7, the Group was only able to report revenues from the Ayoluengo field from
12 December 2002. Therefore the net income for the period to 12 December of
#43,372 has had to be taken to the balance sheet as an adjustment to the
purchase price, as disclosed in note 11.
If the purchase had of been treated as completed on 1 July 2002, the following
figures in respect of the Ayoluengo field would have been included within the
Consolidated Profit & Loss account for the year to 31 December 2002:
#
Turnover 254,787
Operating costs (186,096)
Gross profit 68,691
Taxation (19,662)
Actual net profit - Ayoluengo 49,029
Amount taken to balance sheet (43,372)
Reported net profit - Ayoluengo 5,657
Management consider that such an adjustment does not reflect the true worth of
the assets purchased, and as a consequence the balance sheet shows negative
goodwill (note 8), indicating that the Group has acquired assets for less than
they are actually worth.
TAXATION
As there was limited UK cash flow during the year, except for interest on
surplus funds, the Group further increased its available UK tax losses. However
as a result of profits made on the sale of our Irish interests, and net revenues
from Spanish operations, the Group is for the first time liable to pay overseas
tax. For more detailed information please refer to note 5 within this
announcement.
CAPITAL STRUCTURE
The capital structure of the Group did not materially change during the year. A
limited share placing was carried out in January 2002, and the Group issued
shares during the first seven months of the year to fund some acquisitions.
RISK ASSESSMENT
The Group's oil and gas activities are subject to a range of financial and
operational risks, as described below, which can significantly impact its
performance.
LIQUIDITY AND INTEREST RATE RISKS
As with previous years, in the first half of 2002 the overriding financial risk
to the Group was that of liquidity. The position was highlighted by the material
cash outflows on the Irish activity, but was resolved by the Group's decision to
sell those interests to Ramco Energy Plc, for an immediate cash injection of #2
million. The sale was completed on 3rd July. In light of the Group's desire to
pursue acquisition opportunities, a decision was taken to ensure that all
surplus funds remained liquid. The Group continually reviews whether a potential
increase in interest income could be derived from a more aggressive strategy
with regard to the investment of surplus liquid funds; however, it is considered
that any potential benefit from such a strategy is limited given current
interest rate levels, and would be outweighed by the consequential loss of
flexibility in terms of use of the surplus funds.
With surplus funds and no debt financing for projects, the Group had no external
debt during the year. This strategy will be reviewed in the light of project
developments and new project opportunities.
CURRENCY RISK
Due to the limited income and expenses denominated in foreign currencies, it was
not considered cost effective to manage transactional currency exposure. In
addition, the revenues and costs associated with the Group's first production
are predominantly in Euros and are thus naturally hedged. It should be noted
that the major capital expenditures in the year were denominated in either
sterling or euros.
As a result of the Group's significant investment in the Russian project, which
is denominated in US dollars, movements in the US dollar/sterling exchange rate
can significantly affect the Group's balance sheet. Due to the capital structure
of the Group, it is not possible to manage this exposure on an active basis.
Exchange differences that arise on consolidation are taken to reserves.
FINANCIAL INSTRUMENTS
In light of the position as set out above, it was not considered an appropriate
policy for the Group to enter into any hedging activities or trade in any
financial instruments, such as derivatives.
OPERATIONAL RISK
Operational risks include equipment failure, well blowouts, pollution, fire and
the consequences of bad weather. Where the Group is project operator of a
producing field, it takes increased responsibility for ensuring that all
relevant legislation is met, and that all partners have appropriate insurance
cover in place. The Group's insurance policies contain overall limits and
deductibles.
J M White
Finance Director
Consolidated Profit and Loss Account
Year ended Year ended Year ended Year ended Year ended Year ended
31 December 31 December 31 December 31 December 31 December 31 December
2002 2002 2002 2001 2001 2001
Notes # # # # # #
Acquisitions Continuing Total Continuing Discontinued Total
Operations Operations Operations
Turnover 3
Group turnover 29,398 - 29,398 - 2,663 2,663
and share of
joint venture
Less: share of - - - - (2,663) (2,663)
joint venture
Group turnover 29,398 - 29,398 - - -
and share of
joint venture
Cost of sales
Production 16,258 - 16,258 - - -
costs
Depreciation, 2,023 90,737 92,760 88,301 - 88,301
depletion and
amortisation
Provision - - - - 5,818 5,818
against loan to
joint venture
18,281 90,737 109,018 88,301 5,818 94,119
Gross (79,620) (94,119)
profit/(loss)
Administrative (396,331) (461,560)
expenses
Other operating 31,500 -
income
Provision - (301,037)
against debtor
Operating loss (444,451) (856,716)
Share of - (43,447)
operating loss
in joint
venture
Total operating (444,451) (900,163)
loss: Group and
share of joint
venture
Profit on 4a) 1,776,741 -
disposal of oil
and gas assets
Provision 4b) (731,820) (5,672,273)
against fixed
asset
investment
Profit on - 84,218
liquidation of
associated
company
Loss on 4c) (15,164) -
disposal of
current asset
investment
Provision 4c) & (227,940) -
against current 10
asset
investment
Interest 37,845 51,479
receivable
Profit/(loss) 395,211 (6,436,739)
on ordinary
activities 5 (154,461) -
before taxation
Tax on profit
on ordinary
activities
Profit/(loss) 240,750 (6,436,739)
for the year
Basic 6 0.15p (5.05)p
profit/(loss)
per share
Diluted 6 0.14p (4.39)p
profit/(loss)
per share
Statement of Total Recognised Gains and Losses
Year ended Year ended
31 December 31 December
2002 2001
Notes # #
Profit/(loss) for the financial year excluding share of loss in joint 240,750 (6,393,292)
venture
Share of joint venture's loss for the year - (43,447)
Profit for the financial year 240,750 (6,436,739)
Exchange differences on retranslation of net assets of subsidiary (27,179) 76,832
undertakings
Total recognised gains and losses 213,571 (6,359,907)
Consolidated Balance Sheet
2002 2001
Notes # #
Fixed assets
Intangible assets 7 180,965 1,126,703
Negative goodwill 8 (42,595) -
Tangible assets 9 164,562 891
Investments 10 1 759,000
Total fixed assets 302,933 1,886,594
Current assets
Debtors 392,728 182,944
Investments 772,060 -
Cash at bank and in hand 1,806,220 32,107
2,971,008 215,051
Creditors: amounts falling due within one year 396,085 211,245
Net current assets 2,574,923 3,806
Creditors: amounts falling due after more than one year 38,130 -
Provisions for liabilities and charges 76,260 -
Total assets less liabilities 2,763,466 1,890,400
Capital and reserves
Called up share capital 6,035,889 5,813,039
Share premium account 5,297,560 4,860,915
Profit and loss account (8,569,983) (8,783,554)
Shareholders' funds 2,763,466 1,890,400
Shareholders' funds attributable to - equity shares (1,670,714) (2,543,780)
- non-equity shares 4,434,180 4,434,180
2,763,466 1,890,400
The accounts were approved by the Board of directors on 14 May 2003 and were
signed on its behalf by:
R H R Latham D R Musgrove
Consolidated Statement of Cash Flows
Year ended Year ended
31 December 31 December
2002 2001
Notes # #
Net cash outflow from operating activities 11a) (637,849) (282,019)
Returns on investments and servicing of financing
Interest received 37,845 51,479
Capital expenditure and financial investments 11b) (148,603) (936,937)
Acquisitions and disposals 11c) 1,999,850 -
Cash outflow before financing 1,251,243 (1,167,477)
Financing
Issue of ordinary shares for cash (net of commissions) 11e) 522,870 10,000
Increase/(decrease) in cash in the year 1,774,113 (1,157,477)
Reconciliation of net cash flow to movement in net funds 11f)
Increase/(decrease) in cash in the year 1,774,113 (1,157,477)
Net funds 1 January 32,107 1,189,584
Net funds 31 December 1,806,220 32,107
Notes to the Accounts
1. BASIS OF PREPARATION
The financial information presented in this announcement does not constitute
statutory accounts within the meaning of s240 of the Companies Act 1985. The
information has however been extracted from the Company's statutory accounts for
the year ended 31 December 2002 which were approved by the Board on 14 May 2002
and on which the Company's auditors have given an unqualified opinion.
2. ACCOUNTING POLICIES
Accounting convention
The accounts have been prepared under the historical cost convention and in
accordance with applicable UK accounting standards.
The financial statements fall within the scope of the Statement of Recommended
Practice ("SORP"), "Accounting for Oil and Gas Exploration, Development,
Production and Decommissioning Activities", issued by the Oil Industry
Accounting Committee. The financial statements, including disclosures, have been
prepared in accordance with the provisions of the SORP currently in effect.
In preparing the financial statements for the current year, the group has
adopted FRS 19 'Deferred Tax'. The adoption of FRS 19 has resulted in a change
in accounting policy for deferred tax. Deferred tax is recognised on a full
provision basis, subject to certain exceptions, in accordance with the
accounting policy described below. Previously, deferred tax was provided for on
a partial provision basis, whereby provision was made on all timing differences
to the extent that they were expected to reverse in the future without
replacement. This change in accounting policy has not resulted in any revisions
to the financial statements in either the current or prior year.
Basis of consolidation
The consolidated financial statements include the financial statements of the
Company and its subsidiaries made up to 31 December 2002. The acquisition method
of accounting has been adopted, such that the results of subsidiary undertakings
acquired or disposed of in the year are included in the consolidated profit and
loss account from the date of acquisition, or up to the date of disposal. On
consolidation, assets and liabilities of subsidiary undertakings and
representative offices which are denominated in foreign currencies are
translated into sterling at the rate ruling at the balance sheet date. Income
and cash flow statements are translated at average rates of exchange prevailing
during the year. Exchange differences resulting from the translation at closing
rates of net investments in subsidiary undertakings and of foreign currency
representative offices, together with differences between earnings for the year
translated at average and closing rates, are dealt with in reserves.
The Company has taken advantage of Section 230 of the Companies Act 1985 in not
presenting its own profit and loss account.
The Group's exploration, development and production activities are generally
conducted jointly with other companies. Since these arrangements do not
constitute entities in their own right, the financial statements reflect the
relevant proportion of costs, revenues, assets and liabilities applicable to the
Group's interests.
Entities in which the Group holds an interest on a long term basis and which are
jointly controlled by the Group and one or more other venturers under a
contractual arrangement are treated as joint ventures. In the Group accounts,
joint ventures are accounted for using the gross equity method.
Russian business environment
The Group's Russian operations are currently subject to the unique economic,
political and social risks inherent in doing business in the Russian Federation.
These include matters arising out of the policies of the Russian government,
economic conditions, imposition of or changes to taxes or other similar changes
by regulatory bodies, foreign exchange controls and uncertainty over contract
rights and enforceability.
Turnover
Turnover is recognised on an entitlement basis and represents the sales value,
net of value added and similar taxes, of the Group's share of oil and gas
revenue in the year.
Income charged, net of value added and similar taxes, to other companies by the
Group in respect of fees for acting as operator of both production and
pre-production activities is disclosed within other operating income.
Depreciation
The cost of fixed assets is written off by equal annual instalments over their
expected useful lives, as follows:
Computer and office equipment - four years
Fixtures and fittings - four years
The carrying values of tangible fixed assets are reviewed for impairment if
events or changes in circumstances indicate the carrying value may not be
recoverable.
Oil and gas projects
Production assets
Depreciation, depletion and amortisation
Amortisation of expenditure held in each tangible cost pool is provided using
the unit of production method based on entitlement to proved and probable
reserves of oil and gas and estimated future development expenditure to be
incurred to access these reserves. Changes in reserves are accounted for
prospectively.
Decommissioning costs
Provision for decommissioning is recognised in full at the commencement of oil
and gas production, or when the assets are first acquired, if later. The amount
recognised is the present value of the estimated future expenditure. A
corresponding tangible fixed asset is also created at an amount equal to the
provision. This is subsequently amortised as part of the capital costs of the
production facilities. Any change in the present value of the estimated
expenditure is reflected as an adjustment to the fixed asset.
Non-production assets
The Group has adopted the full cost accounting policy for expenditure on oil and
gas projects. As a result, all costs are accumulated in cost pools and are then
written off to the extent that they are not supported by underlying oil and gas
reserves, unless the expenditure relates to an area where it is too early to
make such a decision. Expenditure in the latter category has been included on
the balance sheet under intangible assets.
Stocks
Stocks comprise of oil and gas in tanks and parts and supplies, all of which are
stated at the lower of cost and net realisable value.
Foreign currencies
Transactions in foreign currencies are translated into sterling or, in the case
of Group companies with functional currencies other than sterling, at the rate
of exchange ruling at the date of the transaction. Monetary assets and
liabilities denominated in foreign currencies are retranslated at the rate of
exchange ruling at the balance sheet date. All differences are taken to profit
and loss account.
Deferred taxation
Deferred tax is recognised in respect of all timing differences that have
originated but not reversed at the balance sheet date where transactions or
events have occurred at that date that will result in an obligation to pay more,
or a right to pay less or to receive more, tax, with the following exceptions:
* provision is made for tax on gains arising from the revaluation (and similar
fair value adjustments) of fixed assets, and gains on disposal of fixed
assets that have been rolled over into replacement assets, only to the
extent that, at the balance sheet date, there is a binding agreement to
dispose of the assets concerned. However, no provision is made where, on
the basis of all available evidence at the balance sheet date, it is more
likely than not that the taxable gain will be rolled over into replacement
assets and charged to tax only where the replacement assets are sold;
* provision is made for deferred tax that would arise on remittance of the
retained earnings of overseas subsidiaries, associates and joint ventures
only to the extent that, at the balance sheet date, dividends have been
accrued as receivable;
* deferred tax assets are recognised only to the extent that the directors
consider that it is more likely than not that there will be suitable taxable
profits from which the future reversal of the underlying timing differences
can be deducted.
Deferred tax is measured on an undiscounted basis at the tax rates that are
expected to apply in the periods in which timing differences reverse, based on
tax rates and laws enacted or substantively enacted at the balance sheet date.
Cash and liquid resources
Cash, for the purposes of the cash flow statement, comprises cash in hand and
deposits repayable on demand.
Liquid resources comprise funds held in term deposit accounts.
3. SEGMENTAL INFORMATION
All turnover in 2002 relates to income from the group's oil and gas assets, and
is analysed as follows:
Year ended Year ended
31 December 31 December
2002 2001
# #
Spain (from 12 December 2002) 29,398 -
The profit/(loss) before interest for the year is analysed by geographical area
as follows:
Year ended Year ended
31 December 31 December
2002 2001
# #
United Kingdom & Ireland 1,550,936 (50,348)
Spain (2,121) -
Rest of Europe (815,906) (6,012,093)
Common costs (375,543) (425,777)
Profit/(loss) before interest 357,366 (6,488,218)
Net interest 37,845 51,479
Tax on profit on ordinary activities (154,461) -
Profit/(loss) for the year 240,750 (6,436,739)
Miscellaneous common costs have not been apportioned to geographical areas.
The loss before interest for the year for the United Kingdom & Ireland and Rest
of Europe corresponds to the categories analysed in the 2001 accounts as
follows:
Year ended
31 December
2001
#
United Kingdom (84,571)
Ireland (6,548)
Share of operating loss in joint venture (43,447)
Profit on liquidation of associated company 84,218
United Kingdom & Ireland (50,348)
Russia (6,002,545)
Italy (9,548)
Rest of Europe (6,012,093)
The net operating assets/(liabilities) are analysed by geographical area as
follows:
Year ended Year ended
31 December 31 December
2002 2001
# #
Operating assets:
United Kingdom & Ireland (32,258) 996,436
Spain 149,127 34,208
Rest of Europe 3,160 827,649
South America 16,707 -
136,736 1,858,293
Non-operating assets:
Interest bearing loan 48,450 -
Current asset investment 772,060 -
Cash 1,806,220 32,107
2,626,730 32,107
2,763,466 1,890,400
4. EXCEPTIONAL ITEMS
a) Sale of business
Year ended Year ended
31 December 31 December
2002 2001
# #
Proceeds from sale of subsidiary 3,000,000 -
Satisfied by:
Shares in unlisted investment 1,000,000 -
Cash 2,000,000 -
3,000,000 -
Net assets disposed of:
Intangible assets 1,223,109 -
Cash 150 -
1,223,259 -
Profit on sale of subsidiary 1,776,741 -
The business sold during the year contributed #(3,215) to the group's operating
loss for the year.
b) Provision against fixed asset investment
Year ended Year ended
31 December 31 December
2002 2001
# #
Charge for the year (731,820) (5,672,273)
For a full explanation of this provision please refer to note 10.
c) Loss and provision against current asset investments
Year ended Year ended
31 December 31 December
2002 2001
# #
Loss on disposal of current asset investment (15,164) -
Provision against current asset investment (227,940) -
5. TAX ON PROFIT ON ORDINARY ACTIVITIES
a) Analysis of tax charge
Year ended Year ended
31 December 31 December
2002 2001
# #
Current tax:
Overseas tax on profit on disposal of oil and gas assets 155,000 -
Overseas tax (539) -
Total current tax (note 7b) 154,461 -
b) Factors affecting tax charge
The tax charge is lower than the standard rate of corporation tax in the UK
(30%). The difference is explained below:
Year ended Year ended
31 December 31 December
2002 2001
# #
Group profit/(loss) on ordinary activities before tax 395,211 (6,436,739)
Tax on group profit on ordinary activities before tax @ 30% 118,563 (1,931,022)
Effects of:
Gains not taxable in the UK (530,022) -
Current tax losses not utilised 410,823 1,931,022
Overseas tax on profit on disposal of oil and gas assets 155,000 -
Overseas tax 97 -
Current tax charge for period 154,461 -
c) Factors that may affect future tax charges
The Group and Company have tax losses arising in the UK of approximately #2.70m
(2001 - #2.15m) and #2.47m (2001 - #2.0m) that are available indefinitely for
offset against future taxable profits of those companies in which the losses
arose. Deferred tax assets have not been recognised in respect of these losses
as they may not be used to offset taxable profits elsewhere in the Group, and
they have arisen in subsidiaries that may be loss making for some time. The
approximate value of the unrecognised tax assets for the Group and Company are
#0.81m (2001 - #0.66m) and #0.74m (2001 - #0.62m) respectively.
No deferred tax is recognised on the unremitted earnings of overseas
subsidiaries and joint ventures. As the earnings are continually reinvested by
the Group, no tax is expected to be payable on them in the foreseeable future.
6. PROFIT PER SHARE
The basic and diluted profit per share is calculated by reference to the profit
for the year of #240,750 (2001: loss of #6,436,739) and the weighted average
number of ordinary shares in issue during the year of 157,522,599 (2001:
127,371,748).
7. INTANGIBLE ASSETS
Intangible assets represent the cost of investment in oil and gas projects where
it is too early to make a decision regarding the existence or otherwise of
commercial reserves.
United Kingdom & Ireland
# Rest of South America
Spain Europe # Total
# # #
Group
Cost:
At 1 January 2002 1,102,599 34,208 207,950 - 1,344,757
Additions 291,256 39,123 21,022 16,707 368,108
Disposals (1,223,109) - - - (1,223,109)
At 31 December 2002 170,746 73,331 228,972 16,707 489,756
Amortisation:
At 1 January 2002 78,753 - 139,301 - 218,054
Charge for the year 10,986 13,238 66,513 - 90,737
89,739 13,238 205,814 - 308,791
Net book value:
At 31 December 2002 81,007 60,093 23,158 16,707 180,965
At 31 December 2001 1,023,846 34,208 68,649 - 1,126,703
On 4 July 2002, the group disposed of its fully owned subsidiary, Northern
Exploration Limited, which held licence interests in respect of the Seven Heads
and Galley Head fields. Full details of this disposal are disclosed within note
4a).
8. NEGATIVE GOODWILL
Negative goodwill has arisen because the fair value of oil and gas assets
purchased as detailed in Note 9 is greater than the consideration paid.
#
Group
Cost:
At 1 January 2002 -
Additions (43,372)
At 31 December 2002 (43,372)
Amortisation:
At 1 January 2002 -
Credit for the year 777
777
Net book value:
At 31 December 2002 (42,595)
At 31 December 2001 -
In accordance with accounting standards, the company has the opportunity to
reassess the fair value of assets acquired in its financial statements for the
year ended 31 December 2003.
9. TANGIBLE ASSETS
Oil and Gas Computer Fixtures
Assets (Spain) equipment and fittings Total
# # # #
Group
Cost:
At 1 January 2002 - 8,473 213 8,686
Acquisition of oil and gas interests 123,339 - - 123,339
Net cash received (43,372) - - (43,372)
79,967 - - 79,967
Additions - 11,004 - 11,004
Decommissioning provision 76,260 - - 76,260
At 31 December 2002 156,227 19,477 213 175,917
Depletion, depreciation and amortisation:
At 1 January 2002 - 7,635 160 7,795
Charge for the year 2,800 707 53 3,560
At 31 December 2002 2,800 8,342 213 11,355
Net book value:
At 31 December 2002 153,427 11,135 - 164,562
At 31 December 2001 - 838 53 891
The carrying value of oil and gas assets includes the acquisition cost of a 45%
interest in the producing Ayoluengo field purchased by the company's wholly
owned subsidiary, Northern Petroleum Exploration Limited. This acquisition
became unconditional on 12 December 2002. The acquisition was funded entirely
in cash. The company has performed an initial fair value review at 31 December
2002, and considers the total value of assets purchased to be equal to the
acquisition cost, before the accounting adjustment made in respect of the net
income for the period to 12 December which has been treated as an adjustment to
the purchase price.
10. INVESTMENTS
Group
#
Cost:
At 1 January 2002 6,431,273
Additions -
Exchange difference on revaluation (616,801)
At 31 December 2002 5,814,472
Provision:
At 1 January 2002 5,672,273
Provided during the year 731,820
Exchange difference on revaluation (589,622)
At 31 December 2002 5,814,471
Carrying value at 31 December 2002 1
Carrying value at 31 December 2001 759,000
The investment of #1 represents a nominal value only, after write-offs in
conformity with the requirements of Financial Reporting Standard (FRS) No. 11,
Impairment of Fixed Assets and Goodwill. This investment, which is a 10.34% net
profit interest in both the Tedin and Rossikhin oil fields results from payments
made under the terms of a financing agreement between Northern Petroleum Limited
("NPL") and Arkhangelskgeologiya ("AG") dated 25th August 1995 and subsequently
assigned to Arkhangelsgeoldbuycha ("AGD"). Under the agreement funds were
invested in Polar Bear JSC. The investment is carried on the basis of direct
cost, plus the cost of acquisition of NPL, a wholly owned subsidiary of the
Company, and the cost of rights held by Chinevale Limited, also a wholly owned
subsidiary of the Company, less amounts subsequently provided for. No further
investment has been made since balance sheet date.
The Company had previously been advised that development operations had been
carried out on the Tedin field. Such operations were carried out without
reference or financial recourse or other to NPL. In view of the lack of
communication from AGD, the company served a notice of arbitration upon AGD (as
permitted by the financing agreement referred to above) on 14th June 2002, the
purpose of which was to uphold NPL's rights earned in terms of the financing
agreement. Whilst an arbitration tribunal has been composed, the matter has yet
to reach a hearing. The Company has also been advised that Polar Bear JSC no
longer exists as a legal entity, although this does not affect NPL's rights as
described above. In view of the immaterial carrying value after the write-off,
it has been decided to continue to categorise the asset as an investment.
11. NOTES TO THE STATEMENT OF CONSOLIDATED CASH FLOWS
(a) Reconciliation of operating loss to net cash outflow from operating
activities:
Year ended Year ended
31 December 31 December
2002 2001
# #
Operating loss (444,451) (856,716)
Depreciation, depletion and amortisation 93,537 88,301
Amortisation of negative goodwill (777) -
Depreciation - non oil and gas tangible assets 760 813
Decrease/(increase) in operating debtors and prepayments (338,034) 314,177
Increase/(decrease) in operating creditors and accruals 51,116 171,406
(193,398) 273,660
Net cash outflow from operating activities (637,849) (282,019)
(b) Capital expenditure and financial investment:
Year ended Year ended
31 December 31 December
2002 2001
# #
Purchase of tangible fixed assets (90,971) (308)
Expenditure on oil and gas assets (307,343) (1,143,939)
Less: Expenditure satisfied by the issue of share capital 61,750 207,310
(245,593) (936,629)
Purchase of current asset investment (203,125) -
Less: Expenditure satisfied by the issue of share capital 203,125 -
- -
Sale of current asset investment 187,961 -
Net cash outflow from capital expenditure and financial investment (148,603) (936,937)
(c) Acquisitions and disposals:
#
Sale of subsidiary undertaking (note (d)) 2,000,000
Net cash transferred with subsidiary undertaking (150)
1,999,850
(d) Sale of business:
#
Net assets disposed of:
Intangible assets 1,223,109
Cash 150
Profit on disposal 1,776,741
3,000,000
Satisfied by:
Shares in unlisted investment 1,000,000
Cash 2,000,000
3,000,000
(e) Reconciliation of issue of new ordinary shares with cash received in the
year:
#
Cash received in 2002 in respect of 2001 issue of ordinary shares (including premium upon issue) 128,250
Issue of new ordinary shares (including premium upon issue) 659,495
Less: Share capital issued for acquisition of assets (264,875)
Cash received from issue of new ordinary shares 522,870
(f) Analysis of net funds:
At At
1 January Cash 31 December
2002 flow 2002
# # #
Cash at bank 32,107 1,774,113 1,806,220
12. ANNUAL GENERAL MEETING
The annual general meeting of the Company will be held at No.1 Cornhill, London
EC3V 3ND on 9 July 2003 at 10.00am.
13. ANNUAL REPORT AND FINANCIAL STATEMENTS
Copies of the Annual Report and Financial Statements will be circulated to
shareholders shortly and may be obtained after the posting date from the Company
Secretary, Northern Petroleum Plc, No.1 Cornhill, London, EC3V 3ND. Full details
will also be available on our website, www.northpet.com.
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR USSNROSRVAAR