RNS Number:5814E
Nighthawk Energy plc
27 September 2007
NIGHTHAWK ENERGY PLC
FINAL RESULTS
The Directors of Nighthawk Energy plc ("Nighthawk" or "the Company") (AIM:
HAWK), the US focused hydrocarbon production and development company, announce
the Company's final results for the year ended 30 June 2007.
HIGHLIGHTS
* Continuing strong progress on the drilling and development programme at
Cisco Springs
* Independent evaluation of Cisco Springs showing P90 reserves of 74.9
bcf and P50 reserves of 94.2 bcf of gas, net to Nighthawk, with an NPV10 of
US$192.3 million, net to Nighthawk
* Further acquisitions including substantial interests in the Devon
Oilfield, Jolly Ranch, Centurion and Cliffs projects
* Successful and expanded appraisal drilling programme at the Devon
Oilfield
* AIM admission in March 2007 accompanied by an oversubscribed
institutional fundraising of #9.1 million net
* Secondary fundraising in June 2007 of #5.0 million net
* Cash resources at 30 June 2007 of #11.3 million
David Bramhill, Managing Director of Nighthawk, commented: "Nighthawk is a young
and fast growing company with strong news flow expected from our operations in
the US. The results from our continuing drilling, development and acquisition
programmes have added significantly to our asset and reserve base. As a result
we have commissioned independent consultants, OPC, to conduct a full evaluation
of our expanded project portfolio, which will commence in the fourth quarter of
2007.
"There is still work to be done before we achieve our principal objectives, of
which being cash flow positive is of major importance. However our substantial
investments, in both monetary terms and time, in our key projects are beginning
to bear fruit and our aim to create shareholder value is being reflected
positively at this still early stage in the Company's development."
Enquiries:
Nighthawk Energy plc 01271 882160
David Bramhill, Managing Director office@nighthawkenergy.net
www.nighthawkenergy.net
Hanson Westhouse Limited 0113 246 2610
Tim Feather tim.feather@hansonwesthouse.com
Matthew Johnson matthew.johnson@hansonwesthouse.com
Bishopsgate Communications Limited 020 7562 3350
Dominic Barretto dominic@bishopsgatecommunications.com
Managing Director's Statement
I am pleased to report to the shareholders of Nighthawk Energy plc ("Nighthawk"
or "the Company") significant progress, growth and development during the
financial year ended 30 June 2007.
During the past year the Company has achieved many of its goals. These included
admission to AIM in March 2007, which was accompanied by an oversubscribed
institutional fundraising of #9.1 million net, a secondary fundraising in June
2007 of #5.0 million net and the acquisition of a further 12.5% working interest
in our flagship production and development project, Cisco Springs, which has
seen significant investment and drilling success. In addition, a number of
acquisitions have been made, including substantial interests in the Devon
Oilfield (formerly known as Vogel Bartlesville), the Jolly Ranch, Centurion and
Cliffs projects, details of which are set out below.
Of utmost importance is our rapidly growing working relationship with Running
Foxes Petroleum Inc. ("Running Foxes"), a Denver-based private energy company,
which has been responsible for bringing high quality projects in the US to
Nighthawk. Running Foxes holds interests in, and is the operator of, all of our
projects.
Cisco Springs, Grand County, Utah
Nighthawk acquired a 25% working interest in the producing Cisco Springs natural
gas field from Running Foxes in June 2006, and a further 12.5% in October 2006,
bringing its interest to 37.5%. An evaluation of the project by international
consultants Oilfield Production Consultants ("OPC") in March 2007, calculated
natural gas reserves, net to Nighthawk to be 74.9 billion cubic feet in the P90
(Proved) and 94.2 billion cubic feet in the P50 (Proved + Probable) categories,
with a NPV10 of US$192.3 million net to Nighthawk.
The acquisitions included pro-rata ownership of an Ingersoll-Rand drilling rig,
a work-over rig, 25 miles of pipeline connected to a national distribution
system, numerous oil storage tanks to store ancillary oil production and other
project related equipment. During the year, the land base at Cisco Springs has
increased from 16,000 to 18,000 acres. Further land acquisitions via Bureau of
Land Management ("BLM") auctions and private sale are planned for the future.
These acquisitions will increase proven and probable reserves, due to the
numerous previously drilled stranded gas discoveries on the majority of the
acreage and will also add to the, in excess of, 400 drill sites within the
currently held project area.
Since mid 2006 a major two year production and development programme has been in
progress. This includes the drilling of at least 60 new wells, a work-over
programme on existing wells, seismic acquisition and aeromagnetic surveys.
Since the commencement of the programme, 21 new wells have been drilled, of
which 16 have been logged and cased as future production wells with results
awaited for three wells. An important development has been the recognition of
the potential of the Lower Cretaceous Mancos shale, which covers the whole
project area. The Mancos shale, which has not been tested in wells drilled to
date and was not evaluated by OPC in March 2007, could however be a productive
horizon in all wells, even where wells contain non-commercial quantities of
hydrocarbons in the conventional targets. The directors believe that this
horizon offers significant reserve upside to the project.
During the year, modest production of natural gas has been sold and routed
through a third party owned pipeline which has a limited capacity and is
frequently constrained. The production rate during the year has reached up to
700,000 cubic feet of gas per day with many new discovery wells currently choked
back due to these limitations.
Of great commercial importance to Nighthawk is the implementation of new
compression and gathering facilities and a tap connecting production to a major
trunk pipeline operated by Northwest Pipeline Company. Construction of these
facilities is at an advanced stage with full commissioning expected early in the
fourth quarter of 2007. The new facilities will offer the Company and Running
Foxes a vastly increased sales capacity for natural gas produced at Cisco
Springs and a strong competitive advantage in the area.
The directors are confident that the current development plan and operations at
Cisco Springs will further enhance the already proven potential of the project
and lead to the discovery of significant additional hydrocarbons and the
increase of the Company's production and cashflow.
Devon Oilfield, Bourbon County, Kansas
Nighthawk acquired an 80% interest in the Devon Oilfield, located in Bourbon
County, Kansas, from Mountain Energy Corporation, in March 2007 for a
consideration of US$450,000. At that time, the project area, which is within
the Cherokee Basin, a prolific shallow oil and gas producing area, covered 160
acres. Following continuing drilling success, Nighthawk and Running Foxes have
expanded this acreage incrementally to 1,764 acres.
Running Foxes estimated the oil in-place over the original 160 acres to be
approximately 3 million barrels gross. Since this time the land base of the
project has been expanded by a factor of 10 and the operator now estimates the
oil in-place to be in excess of 10 million barrels gross.
The original 12 well drilling programme over 160 acres was expanded to 54 wells
following the expansion of the land base to 960 acres, the results of which
indicated that the oil bearing sandstones extended beyond the currently known
parameters.
To date, 33 appraisal wells have been reported upon, of which 28 have confirmed
the presence of oil saturated sandstone and have been completed, logged and
cased as future producers.
Subsequent to the planned 54 appraisal well programme covering 960 acres,
Nighthawk has acquired a further 804 acres and two successful test wells, the
Cleaver 5-6A and Cleaver 5-6C, have been drilled within this acreage. As a
result of these discoveries several new wells over and above the planned 54 well
programme are currently being permitted.
The objective of the appraisal drilling, targeting Bartlesville channel
sandstones at depths of between 350 and 450 feet, is to delineate the extent of
the reservoir in preparation for a pilot waterflood operation. Pumpjacks,
in-field flow lines, oil/water separation equipment and storage tanks have been
purchased in anticipation of early development and production.
Jolly Ranch, Lincoln County, Colorado
Nighthawk holds a 50% interest in the Jolly Ranch project which covers
approximately 40,000 acres within the prolific Denver Basin, where production is
drawn from Carboniferous Pennsylvanian, Permian and Cretaceous reservoirs, also
productive throughout much of the mid-Continent region of the US.
The project acreage contains two oilfields, Bolero and Craig Ranch, which were
abandoned during the late 1980s and early 1990s due to outdated completion
practices at that time and low oil prices.
A development programme is underway, with a 3-D seismic programme covering 21
square miles completed and being processed, and the drilling of four test wells
planned for the fourth quarter of 2007. In August 2007 a positive evaluation of
three previously drilled wells was conducted by Bowler Petrophysics, a
Denver-based petrophysical company. Digitised log interpretations in respect of
these three wells showed the estimated oil in-place to be approximately 865,000
barrels. In addition, the report identified by-passed oil zones which will be
tested during the new drilling programme. These zones will also be further
targets in future wells within the project area.
In the opinion of the directors, Jolly Ranch, which is located near a strong
market for oil and gas and in an area that has excellent services for the
industry, has the potential to add substantial value to Nighthawk.
Centurion Project, Sumner County, Kansas
Nighthawk acquired a 50% interest in the Centurion project in June 2007 for a
consideration of US$350,000. The Centurion project covers an area of 12,000
acres in Sumner County, Kansas, within the Sedgwick Basin. The area, south of
Wichita, is a prolific oil producer and with the advent of new 3-D seismic
surveys, a number of operating companies have found oilfields that remained
undiscovered using previous exploration methods.
The project targets numerous conventional oil zones, including the Arbuckle,
Simpson, Viola, Mississippian and Cherokee reservoirs, at depths of less than
4,500 feet. In addition, there is the potential for the production of shale gas
from the Simpson and Chattanooga horizons.
Based on log analyses, the operator, Running Foxes, estimates that the gas
in-place in the Chattanooga Shale interval is between 8 and 12 billion cubic
feet per 640 acres.
A number of older fields in the area, such as Sauzek, were prematurely abandoned
due to high water production. Nighthawk and Running Foxes plan to install
progressive cavity pumps capable of moving large amounts of fluid. This
technology has become a profitable method of recovering oil from high water cut
reservoirs. Using this method, handling and lifting costs for oil are reduced
significantly.
A 3-D seismic programme and two test wells are planned for the fourth quarter of
2007.
Cliffs Project, Clark, Crawford, Cumberland, and Jasper Counties, Illinois
Nighthawk acquired an 80% interest in the Cliffs shale gas project from Mountain
Energy Corporation for a consideration of US$935,000 in June 2007.
The Cliffs project covers an area of 15,591 acres in Clark, Crawford, Cumberland
and Jasper Counties, within the Illinois Basin, an intra-cratonic basin which
has produced in excess of four billion barrels of oil from numerous reservoirs
at depths of less than 2,900 feet.
Shale gas is seen as a long term energy resource that will help to replace
conventional US hydrocarbon reserves as they are depleted. Shale gas production
tends to be relatively slow and long lasting. A typical well in the New Albany
Shale, our main target, will have a 30 year production life.
The gas in-place within the New Albany Shale in the whole of the Illinois Basin
has been estimated by the Devonian Shale Task Group of the National Petroleum
Council Committee, to be approximately 86 trillion cubic feet.
A test well is planned to be drilled in the near future with the objective of
collecting gas content data and a horizontal leg will be initiated in the same
borehole to evaluate potential production rates.
Analysis by Bowler Petrophysics of the logs of two previously drilled wells
within the Cliffs project area showed the gas in-place on a 640 acre spacing to
be 9.6 billion cubic feet and 6.8 billion cubic feet respectively.
In the opinion of the directors, the Cliffs acquisition represents a low cost
and low risk entry into a project with potentially significant gas and oil
reserves in a proven hydrocarbon province.
Nightfox Drilling LLC and Desperado Trucking Services Inc.
Nighthawk Production LLC, a wholly owned US subsidiary of the Company and
Running Foxes own a significant amount of oil service equipment, including a
drilling rig and a work-over rig.
The ownership of this equipment has been transferred into a newly formed company
Nightfox Drilling LLC.
In addition, in June 2007 Nighthawk Production and Running Foxes acquired the
business and assets of Desperado Trucking Services Inc., for a purchase price of
US$450,000.
The current high demand for oilfield equipment and services can cause delays in
operational activities and escalate costs. The directors consider that the
acquisition of these assets combined with our existing project infrastructure is
a positive step in respect of the future development of our projects.
Corporate and Financial
Nighthawk was admitted to AIM in March 2007, accompanied by a placing which
raised #9.1 million net to the Company. These funds are being used to finance
the drilling and development programme and further land acquisition at Cisco
Springs and the funding of the expanded development programme at the Devon
Oilfield. In addition, Nighthawk has satisfied payment in full in respect of
its 37.5% interest in Cisco Springs.
A secondary placing took place in June 2007, raising #5 million net to Nighthawk
to fund the acquisition and development of the interests in the Jolly Ranch,
Centurion and Cliffs projects and the acquisition of Desperado Trucking Services
Inc.
The directors are delighted to have secured these recent acquisitions, in
particular, Jolly Ranch which contains two abandoned oilfields and has been the
subject of independent positive reports. We are optimistic that Jolly Ranch
will convert to a third production project for Nighthawk during the current
financial year.
The successful fundraisings have enabled Nighthawk to progress rapidly and
expand its operations in the US. The past year has seen major investment in two
late stage development projects, namely Cisco Springs, where drilling results
have met our expectations and production is being significantly upgraded by the
construction of new production facilities and the Devon Oilfield which has
yielded drilling results far beyond our original expectations.
The financial results contained within this report reflect the year ended 30
June 2007. Cash balances and liquid investments at the time of this report are
approximately #10 million. Nighthawk is currently generating modest cash flow
from production at Cisco Springs, which is expected to improve significantly
upon commissioning of the new production facilities, royalty interests,
dividends from its high yield bond and equity portfolio and interest on its cash
deposits.
IFRS
The Group will make the transition to IFRS for the six months ending 31 December
2007 as required under the AIM rules. Implementation will require restatement
of the 30 June 2006 and 2007 balance sheets and restatement of the profit and
loss account for the year ended 30 June 2007. The Group's interim financial
information will also require restating as at and for the six months ended 31
December 2007. The Company is currently assessing the impact of the transition
to IFRS. The restatements are not expected to be material to the financial
position of the Group.
Health and Safety
Nighthawk and the operator of its projects Running Foxes have adopted and
maintain high environmental standards. In addition, environmentally sympathetic
methods of drilling and production are employed.
The partnership is also proactive in maintaining excellent relationships with
the BLM and land owners.
Conclusion and the Future
In summary, Nighthawk is a young and fast growing company with strong news flow
expected from our operations in the US.
The results from our continuing drilling, development and acquisition programmes
have added significantly to our asset and reserve base. OPC has been
commissioned to conduct a full evaluation of our expanded project portfolio,
which will commence in the fourth quarter of 2007.
There is still work to be done before we achieve our principal objectives, of
which being cash flow positive is of major importance. However our substantial
investments, in both monetary terms and time, in our key projects are beginning
to bear fruit and our aim to create shareholder value is being reflected
positively at this still early stage in the Company's development.
I would like to take this opportunity to thank our shareholders, my fellow
directors and management, advisers in the US and UK and our partners Running
Foxes for their collective efforts in making 2007 an extremely successful year
for Nighthawk.
David Bramhill
Managing Director
26 September 2007
The preliminary announcement was approved by the Board on 26 September 2007.
Consolidated Profit and Loss Account
for the year ended 30 June 2007
Note 2007 2006
# #
Turnover 65,620 -
Administrative expenses (1,107,811) (46,808)
Exceptional item:
AIM admission costs (205,223) -
(1,313,034) (46,808)
Operating loss (1,247,414) (46,808)
Interest receivable and similar income 165,742 261
Profit on sale of fixed asset investments 14,016 -
Loss on ordinary activities before taxation (1,067,656) (46,547)
Tax on loss on ordinary activities - -
Loss for the financial year (1,067,656) (46,547)
Basic and diluted loss per share 2 (0.95p) (0.53p)
The operating loss in the current year arises from continuing activities.
Consolidated Balance Sheet
as at 30 June 2007
Note 30 June 2007 30 June 30 June
# 2007 2006
# #
Fixed assets
Intangible assets 7,564,661 151,744
Tangible assets 5,431 1,568
Investments in joint ventures
- share of gross assets 114,159 -
- share of gross liabilities (1,862) -
112,298
Investment in associated undertakings 252,545 -
Other investments 767,368 -
1,132,211
8,702,303 153,312
Current assets
Debtors 198,460 51,003
Cash at bank and in hand 11,285,559 1,752,048
11,484,019 1,803,051
Creditors: amounts falling due within one year (459,784) (308,909)
Net current assets 11,024,235 1,494,142
Total assets less current liabilities 19,726,538 1,647,454
Capital and reserves
Called up share capital 419,870 157,663
Share premium account 20,277,354 1,436,750
Merger reserve 99,588 99,588
Share options reserve 43,929 -
Profit and loss account (1,114,203) (46,547)
Equity shareholders' funds 3 19,726,538 1,647,454
Consolidated Cash Flow Statement
for the year ended 30 June 2007
Note 2007 2006
# #
Net cash outflow from operating activities 4 (1,158,981) (62,349)
Returns on investments and servicing of finance
Interest received 140,476 261
Dividends from fixed asset investments 25,266 -
Net cashflow from returns on investments and servicing of 165,742 261
finance
Capital expenditure and financial investment
Purchase of intangible fixed assets (7,508,918) (112,274)
Purchase of tangible fixed assets (6,048) (2,090)
Purchase of fixed asset investments (868,692) -
Sale of intangible fixed assets 56,400 -
Sale of fixed asset investments 115,340 -
Sale of tangible fixed assets 700 -
Net cash outflow from capital expenditure (8,211,218) (114,364)
and financial investment
Acquisitions
Purchase of investment in joint venture (112,298)
Purchase of investment in associated undertaking (252,545)
Net cash acquired with subsidiary - 52,300
Net cash (outflow)/inflow from acquisitions (364,843) 52,300
Management of liquid resources
Purchase of short term deposits (7,962,278) (1,745,273)
Net cash outflow from management of liquid resources (7,962,278) (1,745,273)
Financing
Issue of shares 20,348,605 1,916,200
Expenses of share issues (1,245,794) (40,000)
Net cash inflow from financing 19,102,811 1,876,200
Increase in cash 5 1,571,233 6,775
Notes
1. Basis of Preparation
The preliminary announcement has been prepared in accordance with applicable
accounting standards and under the historical cost convention. The principal
accounting policies of the Group have remained unchanged from those set out in
the Group's 30 June 2006 annual report and financial statements, except for the
adoption of FRS 20 (IFRS 2) Share-Based payment. This has had no impact for the
results to the period ended 30 June 2006. No prior period adjustment was
therefore deemed necessary.
2. Loss per share
The calculation of the loss per ordinary share is based on a loss for the year
of #1,067,656 (2006: #46,547) and the weighted average number of ordinary shares
outstanding at the year end of 112,893,363 (2006: 8,731,542). The share options
are anti-dilutive under FRS 22. Share options that would potentially dilute
basic earnings per share but which were not included in the calculation because
they were anti-dilutive for the periods presented are disclosed in note 13 of
the consolidated financial statements.
3. Reconciliation of movements in shareholders' funds
Group 2007 2006
# #
Total recognised loss for the year (1,067,656) (46,547)
Issue of shares (net of expenses) 19,102,811 1,694,000
Share option reserve 43,929 -
Net increase in shareholders' funds 18,079,084 1,647,453
Shareholders' funds brought forward 1,647,454 1
Shareholders' funds at 30 June 2007 19,726,538 1,647,454
4. Net cash outflow from operating activities
2007 2006
# #
Operating loss (1,247,414) (46,808)
Amortisation 39,601 -
Depreciation 1,485 522
Transfer to share option reserve 43,929 -
Increase in debtors (147,457) (39,972)
Increase in creditors 150,875 23,909
Net cash outflow from operating activities (1,158,981) (62,349)
5. Reconciliation of net cashflow to movement in net funds
2007 2006
# #
1,571,233 6,775
Increase in cash in the period
Cash inflow from increase in liquid resources 7,962,278 1,745,273
Change in net funds resulting from cashflows 9,533,511 1,752,048
Net funds at 1 July 2006 1,752,048 -
Net funds at 30 June 2007 11,285,559 1,752,048
6. Segmental Analysis
The Group's net segmental analysis are in the following geographical locations:
Loss before taxation Net assets
2007 2006 2007 2006
# # # #
United Kingdom (953,404) (46,547) 11,941, 304 602,342
United States of America (114,252) - 7,785,234 1,034,082
Other - - - 11,030
(1,067,656) (46,547) 19,726,538 1,647,454
The loss in the United Kingdom includes exceptional AIM costs of #205,223.
7. Publication of non-statutory accounts
The financial information set out in this preliminary announcement does not
constitute statutory accounts as defined in section 240 of the Companies Act
1985.
The summarised balance sheet at 30 June 2007 and the summarised profit and loss
account, summarised cash flow statement and associated notes for the year then
ended have been extracted from the Group's 30 June 2007 statutory financial
statements upon which the auditors opinion is unqualified and does not include
any statement under Section 237 of the Companies Act 1985.
Those financial statements have not yet been delivered to the Registrar of
Companies.
8. Annual report and AGM
The annual report will be available from the Company's website,
www.nighthawkenergy.net, from 27 September 2007 and posted to shareholders in
the week commencing 1 October 2007. The annual report contains notice of the
annual general meeting of the Company which will be held at 11.00 a.m. on 7
November 2007 at the offices of Osborne Clarke, One London Wall, London EC2Y
5EB.
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR SESFAMSWSELU
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