TIDMHAWK
RNS Number : 6617U
Nighthawk Energy plc
20 October 2010
20 October 2010
NIGHTHAWK ENERGY PLC
("Nighthawk" or "the Company")
Preliminary Results for the year ended 30 June 2010
- New CEO initiates review of spending to ensure resources are
effectively targeted to maximise impact on the development of Jolly
Ranch -
Nighthawk, the US focused oil and gas development and production
company (AIM: HAWK and OTCQX: NHEGY), announces preliminary results
for the year ended 30 June 2010 and provides an operational update
for its lead projects.
Financial Highlights
-- Revenue increased 332% to US$2.1 million (2009: US$498,000)
-- Invested approximately US$30 million in development of projects
-- Loss for the financial year of US$1.28 million (2009: US$1.30 million)
-- Cash at year end of US$7.2 million and debt free
-- Post year end, secured a three year Equity Finance Facility ("EFF") of up
to GBP25 million with Darwin Strategic Limited
Tim Heeley, Chief Executive Office ("CEO") of Nighthawk,
said:
"Having just been appointed CEO it is too early to comment on
specific initiatives that we will look to introduce over the coming
months. However, it is important to stress at this stage that we
will, as a priority, review spending to ensure that our resources
are effectively targeted. This process will involve a thorough
review of strategy and performance to ensure that the months and
years ahead for Nighthawk are value-adding.
"The priority at Jolly Ranch is to determine the most efficient
fracturing ("fraccing") method for the multi-stacked hydrocarbon
bearing horizons. This initial phase takes longer than with a
conventional development; however, once the shale formations are
properly understood and capable of demonstrating long-term
production the results should be applicable can be applied to the
whole of the Nighthawk acreage, given the homogenous nature of the
shales at Jolly Ranch, thereby creating significant value."
Operational Update - Jolly Ranch
-- Drilling activity taking total wells at Jolly Ranch to 19: 16 producers
(6 currently producing), 2 water disposal wells and one shut-in
production well recently acquired at no cost to Nighthawk.
-- Each producing well has encountered hydrocarbons in multiple horizons.
-- The John Craig 7-2 wildcat well, drilled approximately 30 miles
north-west of the Craig Ranch core area, confirmed the extension of
shales to that area. The well was placed on pump during September and
whilst currently producing around 30 bopd, sand is prohibiting optimum
flow and the well will be cleaned out prior to being put back onto test
production.
-- Test production during the year, net to Nighthawk, was approximately 11
000 bbls net of royalty and production taxes.
-- Given the performance of some of the wells, it is now anticipated that
the previously advised target of 1,000 bopd gross will not be met by the
end of 2010. Production varies significantly on a day-by-day basis due to
the limited number of wells currently on test production. This effect
will dissipate as further wells are brought onstream.
-- Key to generating value will be to determine the most efficient fraccing
method for the multi-stacked hydrocarbon bearing horizons. A further five
well programme has been permitted, but the immediate focus of Nighthawk
and the Operator is on the completion and testing of existing wells in
order to accelerate production rates and increase understanding of the
best completion techniques.
-- Macquarie Tristone will continue the marketing process to attract a
potential farm-in partner for a proportion of the Jolly Ranch project
until the end of the year. In the event that a suitable transaction is
not in prospect by the end of the year, the BoardOs current intention is
to withdraw from the process until further progress has been made in
understanding the drilling and completion techniques which are best
suited to the Jolly Ranch project.
-- Leading petroleum consultants Gaffney Cline & Associates has been
appointed to undertake a Reserves and Resource assessment of Jolly Ranch,
the completion of this report is anticipated late Q4 2010/early Q1 2011
following completion of the Schlumberger Eclipse Reservoir simulation
model.
Operational Update - Revere (incorporating the Devon, Buchanan
and Xenia fields)
-- 167 production wells have been drilled on Revere to date, with 118 wells
awaiting completion and a further 96 currently permitted.
-- Total net production over the year was just under 30,000 boe (net of
royalty and production tax) (2009: 9,105 boe net).
-- The Xenia gas project, brought on-stream in November 2009, is an
important contributor to revenues with gas production currently in excess
of 500,000 cubic feet per day.
-- Recent Xenia reserve evaluation conducted by Oilfield Production
Consultants Limited, shows total 2P reserves to be 1.4 billion cubic feet
over 6,000 acres. The project area since that evaluation has grown to in
excess of 15,000 acres.
-- Oil production is increasing at Devon and Buchanan with over 100 wells on
production, a figure growing as the more recently drilled wells are
brought on-line.
-- New acquisitions such as Hammond and Green Valley are expected to provide
further revenue growth to what is now a substantial low-cost stand-alone
project in the Nighthawk portfolio.
Enquiries:
Nighthawk Energy plc 020 7887 1454
Tim Heeley, Chief Executive +1 720 344 5154
Mike Thomsen, Executive Chairman
---------------------------------- ----------------------------------------
Westhouse Securities Limited 020 7601 6100
Tim Feather tim.feather@westhousesecurities.com
Matthew Johnson matthew.johnson@westhousesecurities.com
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Matrix Corporate Capital LLP 020 3206 7000
Louis Castro louis.castro@matrixgroup.co.uk
James Pope james.pope@matrixgroup.co.uk
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Financial Dynamics 020 7831 3113
Ben Brewerton ben.brewerton@fd.com
Ed Westropp edward.westropp@fd.com
---------------------------------- ----------------------------------------
Bishopsgate Communications Limited 020 7562 3395
Nick Rome nick@bishopsgatecommunications.com
---------------------------------- ----------------------------------------
CEO's Statement
I am pleased to report to the shareholders of Nighthawk Energy
plc ("Nighthawk" or "the Company") for the first time as CEO.
Whilst too early to comment on specific initiatives and plans that
we will look to introduce over the coming months, it is important
to stress at this stage that we will, as a priority, review
spending to ensure that value is delivered for shareholders. There
will be a thorough review of strategy and performance to ensure
that the months and years ahead for Nighthawk are value-adding.
Macro conditions are more positive compared with those of the
equivalent period last year, however volatility remains. The oil
price has been relatively stable ranging from around US$65 to US$87
per barrel during the period.
Approximately US$30 million was invested by Nighthawk during the
year in its hydrocarbon projects across the US mid-west in
partnership with Running Foxes Petroleum Inc. ("Running Foxes"),
the operator of the projects, which holds, in most cases, a 50%
working interest and contributes pro-rata towards the project
spend.
As anticipated, there has been a relatively substantial increase
in test production revenues from around US$500,000 in 2009 to in
excess of US$2 million in the latest financial year due to organic
growth. We expect this figure to increase as more wells are put
into production.
Jolly Ranch
The project, located in Colorado, comprises three areas, Jolly
Ranch, Mustang Creek and Middle Mist. Hydrocarbon targets are both
conventional oil and non-conventional shale oil.
Nighthawk holds a 50% interest in the development project and
Running Foxes, the remaining 50%.
Known and understood technology now makes the development of
shale plays around the world, including Jolly Ranch, easier - the
key is to "crack the code" of the shales, a process which takes
time and capital but yields substantial rewards once successful, as
has been demonstrated in several similar shale oil and gas plays in
the USA and elsewhere.
In August 2007, Nighthawk's initial investment in Jolly Ranch
was approximately 50,000 gross acres. Since that time the land base
has grown to in excess of 400,000 gross acres, a substantial land
position more akin to a major or mid-tier company.
During this time the level of interest in continental US
liquid-rich shale-based resource plays has been exceptional and it
is the aim of management to continue to add value to the project
through ongoing development. Of particular note in the immediate
region, we have seen major independent oil companies such as
Newfield Exploration Company and Unit Corporation commence the
drilling of wells and, most recently, Devon Energy acquired a
package of land.
Shale oil resource plays like Jolly Ranch are typically large
homogeneous deposits covering many thousands of acres within
geological basins. The formation of these shales leads to large
quantities of oil being generated. This is underlined by
Schlumberger's report indicating some 1.4 billion barrels of oil in
place over 246,000 acres at Jolly Ranch. A great deal of the
generated oil remains in-situ. The oil bearing rock has in some
cases low permeability and porosity, therefore the shale formation
needs to be fractured with high pressure fluids and sand to
accelerate the flow of oil.
The key to obtaining optimum value from Jolly Ranch is to
determine the most efficient method of fracturing the multiple
stacked hydrocarbon-bearing horizons present in each of the
production wells.
The timing for this initial phase of appraisal is longer than
for a conventional development. However once the shale formations
are properly understood and can demonstrate long term production,
as we are now starting to see from some of our wells, the
application to the wider area is precipitated given the homogeneous
nature of the shales, creating value for shareholders.
Subsequent to their July 2009 report on the oil-in-place at
Jolly Ranch, Schlumberger has been re-appointed to examine the
hydrocarbon-bearing potential of the wider project area further and
also to undertake a more detailed study to evaluate potential
production profiling in a reservoir simulation model which will
assess recovery factors from several different oil bearing
horizons. Once this report has been completed the results will be
passed to Gaffney Cline & Associates to assess and determine
reserves and resources at Jolly Ranch.
Due to the early phase of development at Jolly Ranch and the way
that reserves and resources are attributable to shale oil plays, it
is anticipated that the reserves associated with the core area of
project will be relatively low at this stage of the development.
However the fact that they can be estimated is testament to the
work undertaken and production achieved to date, but more
importantly, will for the first time provide shareholders and
stakeholders a viable, industry recognised method to determine
value on the core (and also wider) acreage areas.
As expected, the recent independent report compiled by
Schlumberger has concluded that the regional continuity of the
shale formations was such that the resources in place are laterally
continuous from the core area to the John Craig 7-2 well, a
distance of approximately 30 miles from the core Craig Ranch
area.
Revere
Revere, the product of the consolidation of the Devon Oilfield,
Buchanan and Worden, Xenia fields and the recently acquired Hammond
project, is a combined oil waterflood and gas project, covering in
excess of 60,000 acres located on and around the Kansas and
Missouri State borders.
The oil reservoir is under-pressured and requires water
injection to help bring the oil to surface. This is a
straightforward process that has been applied successfully for
decades on similar oilfields in the USA and elsewhere in the
world.
The Xenia gas project was brought on-stream in November 2009 and
is an important contributor to revenues with gas production
currently in excess of 500,000 cubic feet per day. The 26 kilometre
pipeline at Xenia was completed on time and on budget linking to
the 50% Nighthawk owned and operated Bourbon County pipeline where
product is sold to a subsidiary of General Electric.
A recent Xenia reserve evaluation conducted by Oilfield
Production Consultants Limited, showed total net 2P reserves to be
1.4 billion cubic feet over 6,000 acres. The project area since the
evaluation has grown to in excess of 15,000 acres.
Oil production is increasing at Devon and Buchanan with over 100
wells on production, a figure growing as more recently drilled
wells are put on-line.
New acquisitions such as Hammond and Green Valley are also
expected to provide further revenue growth to what is now a
substantial low-cost stand-alone project in the Nighthawk
portfolio.
Corporate and Financial
The financial results for the year continue to reflect the
operations of an active hydrocarbon appraisal and development
company.
In comparison to the results of 2009 on a like-for-like
basis:
-- Non-current assets increased by 42% from US$75.18 million to US$106.78
million
-- Revenue increased by 332%
-- Operating loss reduced by 23%
As a post balance sheet event we were pleased to announce on 14
October 2010 the completion of an Equity Finance Facility ("EFF" or
"the Facility") with Darwin Strategic Limited ("Darwin"), a part of
the Evolution Group.
The EFF, which is for GBP25 million, provides Nighthawk with a
facility which, subject to certain limited restrictions, can be
drawn down at any time over the next three years; the timing and
amount of any draw down is at the discretion of Nighthawk.
Nighthawk is under no obligation to make a draw down and may
make as many draw downs as it wishes, up to the total value of the
EFF, by way of issuing subscription notices to Darwin. The
subscription price for any Ordinary Shares to be subscribed by
Darwin under a subscription notice will be at a 5.0% discount to an
agreed reference price determined during 5, 10 or 15 trading days
following delivery of a subscription notice.
Nighthawk has entered into a warrant agreement for the grant to
Darwin of warrants to subscribe for up to 3,000,000 Ordinary
Shares, such warrants to be exercisable at a price of 20 pence per
share and to be exercisable at any time prior to the expiry of 36
months following the date of the warrant agreement. The agreement
also grants to Darwin warrants to subscribe for up to 1,500,000
Ordinary Shares, exercisable at a price of 10 pence per share, to
be exercisable 24 months after the signing of the agreement if
Nighthawk does not make use of the Facility in this period or draws
down less than GBP5 million during the first 24 months of the
agreement.
There are no upfront costs associated with the Facility, other
than both parties' legal fees. The Company intends to put
resolutions to shareholders at the forthcoming annual general
meeting to facilitate the utilisation of the Facility.
The EFF will give Nighthawk the financial flexibility to
continue to develop Jolly Ranch and ultimately to deliver value for
shareholders. The Board considered a number of financing options
and it was clear that this route has the potential to deliver a
lower level of dilution to existing shareholders as the Company
will control the drawdown rate and the discount rate is considered
by the board as more favourable than raising equity in the markets
at present.
During the year under review the non-executive management was
strengthened by the appointment of Stuart Eaton who was previously
a senior fund manager at Insight Asset Management.
I would also like to take this opportunity to thank David
Bramhill and Joe O'Farrell, who both left the Board in September
2010, for their contributions in getting the company to where it is
today. We wish them all the best in their future endeavours.
Outlook
On the ground we expect the upcoming reserves report to continue
to delineate the Jolly Ranch project and allow value to be defined
accurately as we continue our development work. Over the coming
weeks we will look closely at the current portfolio and its
anticipated returns profile and look to adapt our strategy to
ensure shareholders receive the best value as the Company grows. We
look forward to updating the market with our progress in due
course.
Timothy Heeley
CEO
20 October 2010
Consolidated Income Statement
for the year ended 30 June 2010
Notes 2010 2009
US$ US$
Continuing operations:
Revenue 2,148,689 497,876
Gross profit 2,148,689 497,876
Administrative expenses (3,699,775) (2,511,055)
Operating loss (1,551,086) (2,013,179)
Finance income 269,257 338,121
Loss on sale of available-for-sale
investments (1,263) (19,587)
Loss before taxation (1,283,092) (1,694,645)
Taxation - -
Loss for the financial year from
continuing operations (1,283,092) (1,694,645)
Discontinued operations:
Profit for the financial year from
discontinued operations - 396,557
Loss for the financial year (1,283,092) (1,298,088)
Attributable to:
Equity shareholders of the Company (1,283,092) (1,298,088)
Loss per share from continuing and
discontinued operations
Basic and diluted loss per share (cents) 2 (0.40) (0.55)
Loss per share from continuing operations
Basic and diluted loss per share (cents) 2 (0.40) (0.72)
Consolidated Statement of Comprehensive Income
for the year ended 30 June 2010
2010 2009
US$ US$
Loss for the financial year (1,283,092) (1,298,088)
Other comprehensive income
Fair value gain / (loss) on available-for-sale
financial assets 35,821 (633,050)
Foreign exchange losses on consolidation (1,247,565) (2,408,499)
Other comprehensive income for the financial
year, net of tax (1,211,744) (3,041,549)
Total comprehensive income for the financial
year (2,494,836) (4,339,637)
Consolidated Balance Sheet
as at 30 June 2010
2010 2009
Assets US$ US$
Non-current assets
Property, plant and equipment 24,575,543 11,769,386
Intangible assets 80,584,488 61,911,429
Available-for-sale financial assets 1,620,592 1,497,941
106,780,623 75,178,756
Current assets
Trade and other receivables 701,169 179,824
Cash and cash equivalents 7,217,285 5,932,315
7,918,454 6,112,139
Total Assets 114,699,077 81,290,895
Equity and liabilities
Capital and reserves attributable
to the Company's equity shareholders
Share capital 1,480,731 1,219,415
Share premium account 119,252,765 84,546,504
Foreign exchange translation reserve (3,946,114) (2,698,549)
Retained earnings (6,885,690) (5,638,419)
Share-based payment reserve 889,972 815,639
Merger reserve 180,533 180,533
Total equity 110,972,197 78,425,123
Current liabilities
Trade and other payables 3,726,880 2,865,772
Total liabilities 3,726,880 2,865,772
Total equity and liabilities 114,699,077 81,290,895
Consolidated Statement of Changes in Equity
for the year ended 30 June 2010
Foreign
Share exchange Share-based
Share premium translation Retained payment Merger
capital account reserve earnings reserve reserve Total
US$ US$ US$ US$ US$ US$ US$
Balance at 1
July 2009 1,219,415 84,546,504 (2,698,549) (5,638,419) 815,639 180,533 78,425,123
For the year
ended 30 June
2010
Loss for the
year - - - (1,283,092) - - (1,283,092)
Other comprehensive
income:
Fair value gain on
available-for-sale
financial assets - - - 35,821 - - 35,821
Foreign exchange
losses on
consolidation - - (1,247,565) - - - (1,247,565)
---------- ------------ ------------ ------------ ------------ -------- ------------
Total comprehensive
income - - (1,247,565) (1,247,271) - - (2,494,836)
Share-based
payments - - - - 74,333 - 74,333
Issue of share
capital 261,316 36,322,869 - - - - 36,584,185
Issue costs - (1,616,608) - - - - (1,616,608)
Balance at 30
June 2010 1,480,731 119,252,765 (3,946,114) (6,885,690) 889,972 180,533 110,972,197
========== ============ ============ ============ ============ ======== ============
Balance at 1
July 2008 998,622 67,977,242 (290,050) (3,707,281) 748,584 180,533 65,907,650
For the year
ended 30 June
2009
Loss for the
year - - - (1,298,088) - - (1,298,088)
Other comprehensive
income:
Fair value loss on
available-for-sale
financial assets - - - (633,050) - - (633,050)
Foreign exchange
losses on
consolidation - - (2,408,499) - - - (2,408,499)
---------- ------------ ------------ ------------ ------------ -------- ------------
Total comprehensive
income - - (2,408,499) (1,931,138) - - (4,339,637)
Share-based
payments - - - - 67,055 - 67,055
Issue of share
capital 220,793 17,442,667 - - - - 17,663,460
Issue costs - (873,405) - - - - (873,405)
Balance at 30
June 2009 1,219,415 84,546,504 (2,698,549) (5,638,419) 815,639 180,533 78,425,123
========== ============ ============ ============ ============ ======== ============
Consolidated Cash Flow Statement
for the year ended 30 June 2010
Notes 2010 2009
US$ US$
Cash outflow from operating activities 3 (2,400,327) (1,990,684)
Cash flow from investing activities
Purchase of intangible assets (15,500,861) (23,749,531)
Purchase of property, plant and
equipment (14,871,429) (10,457,763)
Purchase of financial assets - (185,557)
Proceeds on disposal of financial
assets 84,526 747,153
Dividend received 78,775 138,051
Proceeds from disposal of project - 5,000,000
Interest received 190,482 200,070
Net cash used in investing activities (30,018,507) (28,307,557)
Cash flow from financing activities
Proceeds on issue of new shares 36,584,185 17,663,460
Expenses of new share issue (1,616,608) (873,405)
Net cash generated from financing
activities 34,967,577 16,790,055
Net increase / (decrease) in cash
and cash equivalents 2,548,743 (13,508,186)
Cash and cash equivalents at beginning
of financial year 5,932,315 21,067,305
Effects of exchange rate changes (1,263,773) (1,626,804)
Cash and cash equivalents at end of
financial year 7,217,285 5,932,315
Notes
1. Basis of Preparation
This announcement has been prepared in accordance with
International Financial Reporting Standards ("IFRS") as adopted by
the European Union ("EU") applied in accordance with the provisions
of the Companies Act 2006.
IFRS is subject to amendment and interpretation by the
International Accounting Standards Board ("IASB") and the IFRS
Interpretations Committee and there is an ongoing process of review
and endorsement by the European Commission. These accounting
policies comply with each IFRS that is mandatory for accounting
periods ending on 30 June 2010.
2. Loss per share
Basic loss per share is calculated by dividing the earnings
attributable to ordinary shareholders by the weighted average
number of ordinary shares outstanding during the year.
Given the Group's reported loss for the year, share options are
not taken into account when determining the weighted average number
of ordinary shares in issue during the year and therefore the basic
and diluted earnings per share are the same.
2010 2009
Basic loss per share US cents US cents
------------ ------------
Loss per share from continuing
operations (0.40) (0.72)
Earnings per share from discontinued
operations - 0.17
Total basic loss per share (0.40) (0.55)
------------ ------------
The earnings and weighted
average number of ordinary
shares used in the calculation
of basic earnings per share 2010 2009
are as follows: US$ US$
Earnings used in the calculation
of total basic and diluted
earnings per share (1,283,092) (1,298,088)
Profit for the year from discontinued
operations used in the calculation
of basic and diluted earnings
per share from discontinued
operations - 396,557
Earnings used in the calculation
of basic earnings per share
from continuing operations (1,283,092) (1,694,645)
------------ ------------
2010 2009
Number of shares
Weighted average number of
ordinary shares for the purposes
of basic loss per share 321,210,436 234,475,130
------------ ------------
If the Company's share options
were taken into consideration
in respect of the Company's
weighted average number of
ordinary shares for the purposes
of diluted earnings per share,
it would be as follows:
Number of shares
Weighted average number of
ordinary shares for the purposes
of diluted earnings per share 327,460,436 241,100,472
------------ ------------
3. Cash outflow from operating activities
2010 2009
US$ US$
------------ ------------
Loss for the financial year (1,283,092) (1,298,088)
Finance income (269,257) (338,121)
Share-based payment 74,333 67,055
Loss on disposal of available-for-sale
investments 1,263 19,587
Gain on disposal of business - (370,321)
Depreciation 52,852 11,892
Amortisation 4,141 4,353
Net foreign exchange gain (157,498) (181,000)
------------ ------------
(1,577,258) (2,084,643)
Changes in working capital
Increase in trade and other receivables (521,345) (45,285)
(Decrease)/increase in trade and
other payables (301,724) 139,244
------------ ------------
Net cash outflow from operating
activities (2,400,327) (1,990,684)
------------ ------------
4. Publication of non-statutory accounts
The financial information set out in this announcement does not
comprise the Group's statutory accounts for the years ended 30 June
2010 or 30 June 2009.
The financial information has been extracted from the statutory
accounts of the Company for the year ended 30 June 2009 which have
been delivered to the Registrar of Companies. The auditors' opinion
on those accounts was unqualified and did not contain a statement
under section 498 (2) or section 498 (3) Companies Act 2006 and did
not include references to any matters to which the auditor drew
attention by the way of emphasis. The statutory accounts for the
year ended 30 June 2010 will be finalised on the basis of the
financial information presented by the directors in this
preliminary announcement and will be delivered to the Registrar of
Companies following the company's annual general meeting.
5. Annual Report and AGM
The Annual Report will be available from the Company`s website,
www.nighthawkenergy.com, from 21 October 2010 and will be posted to
shareholders by 28 October 2010. The Annual Report contains notice
of the Annual General Meeting of the Company which will be held at
9.00 a.m. on 1 December 2010 at the offices of Financial Dynamics,
Holborn Gate, 26 Southampton Buildings, London WC2A 1PB.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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