Sodra Petroleum AB - Final Results
February 26 1999 - 10:35AM
UK Regulatory
RNS No 2749m
SODRA PETROLEUM AB
26th February 1999
Sodra Petroleum AB (publ)
Report for the period 15 December 1997 - 31 December 1998
OPERATIONS
Sodra Petroleum AB (Sodra) has been formed to explore for, and if
successful, produce oil in the geographic region offshore the Falkland
Islands in the South Atlantic.
To do this, Sodra holds an 87.5% interest in six exploration and
production licenses covering an area known as Tranche F in Falkland
territorial waters. The remaining 12.5% interest in these licences is
held by Sodra's partner Desire Petroleum plc, a company quoted on the
Alternative Investment Market (AIM) of the London Stock Exchange.
Sodra is the operator of Tranche F which is held through Sodra's Dutch
subsidiary Sodra Petroleum BV.
Between April and December 1998 a drilling campaign involving eleven
oil companies carried out a total of six exploration wells offshore
the Falklands. The wells were operated by Amerada Hess (two wells in
Tranche A), Lasmo (one well in Tranche C), Shell (two wells in Tranche
B) and Sodra (one well in Tranche F).
Sodra drilled its well on a prospect known as Braela in a geological
environment perceived to be similar to producing fields in the North
Sea. The Braela well known as 14/24-1 was drilled in September-October
1998 to a total depth of 2 983 metres below sea level. The geologic
formations at that depth were found to be unfavorable for oil
accumulation or generation and it was decided to plug and abandon the
well.
The combined results of all the drilled wells offshore the Falkland
Islands have however shown the necessary elements for an oil
accumulation to be present in the basin but the right combination of
these elements is yet to be found. To achieve a full evaluation of the
data obtained to date and to enhance the understanding of the North
Falkland Basin, Sodra has commissioned a study from independent
engineers Robertson Research International Ltd. The result of the
Robertson study, which is expected in September of 1999 will, together
with other information, determine Sodra's decision regarding further
work in the Falkland's area. Sodra has one commitment well outstanding
which must be completed by October 2001.
All the same in view of the disappointing drilling results, the high
costs incurred to date and the current oil price environment Sodra has
decided to write off the exploration expenditures made so far
amounting to MSEK 209.
Following the completion of the Braela well Sodra has remaining
financial resources. Sodra is therefore investigating the possibility
of taking on other projects. Any such project would however be subject
to shareholder approval as it would constitute a change in the company
direction from being a pure Falkland's explorer.
While awaiting the evaluation of the Falkland's area and the emergence
of other projects, Sodra has entered into a loan agreement with its
parent company Lundin Oil AB (Lundin) under which Lundin can borrow up
to MUSD 12 from Sodra. The loan carries an interest of three percent
above LIBOR and is callable with a two week notice period. Under the
terms of the loan agreement Lundin Oil is prohibited from securing
assets not currently secured under its existing MUSD 125 bank
facility.
Should Sodra be unsuccessful in all its endeavours the Sodra shares
can be converted to shares of Lundin Oil in November 2001 at a ratio
of 12 Sodra shares for one newly issued share of Lundin Oil.
RESULT AND CASH FLOW
The Group
(This is the first year of operations so there are no comparative
figures.)
Sodra reports a group net result of MSEK -201.0 corresponding to SEK -
2.48 per share for the period ended 31 December 1998. Write off of oil
and gas properties amounted to MSEK 209.9 as a result of the write off
of the exploration costs incurred in the Falkland Islands.
Sodra incurred administration expenses of MSEK -3.3 during the period.
Net financial income and expenses were MSEK 12.1. Included was
interest received of MSEK 7.7 and net currency exchange gains of MSEK
10.1 offset by AIM share-listing costs of MSEK -5.7. Currency
exchange gains arose primarily as a result of translating loans
receivable from USD to SEK.
Parent Company
The parent company reported a net result for the period from
incorporation until 31 December 1998 of MSEK -213.7. The loss
included a write-off of shares in the subsidiary of MSEK 209.2
included in financial expenses, share issue costs of MSEK -11.4 and
AIM share-listing costs of MSEK -5.7 being charged to income during
the period netted off against unrealised currency exchange gains on
loans receivable of MSEK 10.1.
GROUP STRUCTURE
Sodra is the parent company of the group also consisting of Sodra's
100%-owned subsidiary Sodra Petroleum BV, a company registered in the
Netherlands and IPC Falklands Ltd, a Bermudan registered company.
Sodra in its turn is a 50% owned subsidiary of Lundin Oil AB.
FINANCING AND LIQUIDITY
On 27 February the Board of Directors of Lundin Oil AB decided to
offer 50% of the interest offshore the Falkland Islands, to Lundin
Oil's shareholders through a share issue in Sodra, which single
purpose subsidiary held the Falkland interest, then comprising 100% of
Tranche F. Shareholders were offered one new convertible share of
Sodra for every two shares held in Lundin Oil, 40 506 476 convertible
shares in aggregate, at a price of SEK 7.50 per share. An EGM in
Lundin Oil on 17 March approved the issue of a maximum of 3 400 000
warrants to allow Sodra shares to be converted back into shares of
Lundin Oil, at the holder's option, in November 2001 at the ratio 12
Sodra shares for one new share of Lundin Oil.
The Sodra share issue was completed in May 1998 and all 40 506 476
convertible shares were placed, including 3 000 000 shares taken up by
Lundin Oil. Through the new share issue Sodra raised approximately
MSEK 304 before issue costs. In connection with a listing of the Sodra
convertible shares on the Alternative Investment Market (AIM) in
London, Lundin Oil placed 3 000 000 shares in Sodra originally taken
up by Lundin Oil. Greig Middleton & Co. Limited acted as Nominated
Broker and Adviser to Sodra for the AIM-listing.
Liquid assets at 31 December 1998 amounted to MSEK 68.9. This amount
represents the balance of share issue proceeds after the acquisition
of the Falkland Islands concession and the subsequent funding of
expenditures. Under the loan agreement with Sodra's parent company
Lundin Oil, according to which Lundin Oil can borrow up to MUSD 12
from Sodra, MUSD 9.4 were outstanding at year end.
INVESTMENTS
During the period, investment in oil and gas assets have been made to
an amount of MSEK 209.9. Of this amount, MSEK 18.6 was for the
acquisition of Lundin Oil's interest in the Falklands concession.
Remaining investments primarily represents Sodra's 87.5% share of
expenditure for the drilling of one well offshore the Falkland
Islands.
SHARE DATA AND OWNERSHIP
The total number of shares in Sodra amount to 81 012 976 divided into
two classes of shares, ordinary shares and convertible shares. There
are 40 506 500 ordinary shares outstanding and 40 506 476 convertible
shares outstanding. The convertible shares can be exchanged for shares
in the parent company Lundin Oil according to the ratio 12 convertible
shares of Sodra for one new share of Lundin Oil at the nominal price
of SEK 0.50. The exchange may take place in November 2001. All
ordinary shares are owned by Lundin Oil, corresponding to 50.01% of
the share capital.
Sodra's second largest shareholder is its Chairman Adolf H. Lundin
holding 10 214 834 convertible shares, corresponding to 12.6% of the
share capital.
The convertible shares are traded on the New Market of the Stockholm
Stock Exchange and as of 17 July 1998 on AIM in London.
INCORPORATION AND HISTORY
Sodra was incorporated, on 15 December 1997. The initial financial
year of the company ends on 31 December 1998. Prior to the
commencement of its current trading activities, the company had not
carried out any activities. The company name was changed to Sodra
Petroleum AB on 24 February 1998.
BOARD OF DIRECTORS
At an Extraordinary General Meeting of Shareholders on 13 March, 1998
Adolf H. Lundin, Ian H. Lundin, Bo Hjelt and Magnus Nordin were
elected to the Board of Directors. At an additional EGM held on 2
October Dr Roger Cairns was elected to the Board of Directors.
DIVIDEND
The Board of Directors recommend that no dividend be paid for the
year.
KEY FINANCIAL RATIOS
Group Parent
Company
Key Financial Ratios
Equity ratio, %(1) 72.31 76.20
Shareholders' equity SEK per share(2) 1.32 1.32
Earnings SEK per share(3) -2.48 -2.64
Number of shares at the period end 81 012 976 81 012 976
Definitions
1 Equity ratio is defined as the shareholders' equity in relation
to total assets.
2 Shareholders' equity SEK per share is defined as the
shareholders' equity divided by the number of shares at the period
end.
3 Earnings SEK per share is defined as the net result divided by
the weighted average number of shares for the period of operations.
INCOME STATEMENTS IN SUMMARY
15 Dec 1997- 15 Dec 1997-
Expressed in TSEK 31 Dec 1998 31 Dec 1998
Group Parent Company
Write off of exploration -209 861 -
expenditure
Administration expenses -3 255 -3 127
------- --------
Operating loss -213 116 -3 127
Financial income and expenses, net 12 086 -210 555
------- --------
Net result -201 030 -213 682
BALANCE SHEETS IN SUMMARY
Expressed in TSEK 31 Dec 1998 31 Dec 1998
Group Parent Company
ASSETS
Tangible fixed assets
Oil and gas properties 0 -
Financial fixed assets
Shares in subsidiaries - 106 013
Current assets
Other current assets 3 040 29
Loan to parent company 75 456 -
Cash and bank 68 916 33 850
------ -------
Total current assets 147 412 33 879
------- -------
Total assets 147 412 139 892
SHAREHOLDERS' EQUITY AND LIABILITIES
Shareholders' equity including
net result for the financial 106 597 106 597
period
Current liabilities 40 815 33 295
------ -------
Total shareholders' equity and 147 412 139 892
liabilities
STATEMENTS OF CASH FLOWS
Expressed in TSEK 15 Dec 1997- 15 Dec 1997-
31 Dec 1998 31 Dec 1998
Group Parent Company
Cash flow from operations
Net result -201 030 -213 681
Adjustments for write-offs and 198 442 209 169
other non-cash items
Changes in working capital -37 681 33 265
------- -------
Total cash flow from operations -40 269 28 753
Investment in oil and gas -209 861 0
properties
Investments in subsidiaries - -315 182
------- --------
Total cash flow used for -209 861 -315 182
investments
Cash flow from financing
Issuance of new share capital 320 279 320 279
------- -------
Total cash flow from financing 320 279 320 279
Other -1 233 -
Change in cash at bank and in hand 68 916 33 850
The annual report will be distributed to shareholders in late April 1999.
Sodra's Annual General Meeting of shareholders will be held on 20 May 1999
The report for the first quarter 1999 will be published on 20 May 1999.
Stockholm, 26 February 1999
Magnus Nordin
Managing Director
For further information, please contact:
Magnus Nordin
Tel: 00 46 8 440 54 50
Judith Parry/Simon Rothschild
Millham Communications
Tel: 0171 256 5756
END
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