RNS Number:1241J
Venture Production PLC
19 September 2006
19 September 2006
Venture Production plc
('Venture', 'the Company' or 'the Group')
Interim Results for the Six Months Ended 30 June 2006
Venture is a UK independent oil and gas company focused on the UK and Dutch
sectors of the North Sea. Venture's strategy involves the acquisition and
development of discovered but undeveloped reserves, collectively known as
'stranded' reserves and through operational excellence bringing these reserves
into production.
Operational Highlights
* Strong operational performance from all production hubs - in line with
expectations
* Record production levels - average production up 80% to 43,572 boepd
(first half 2005 - 24,255 boepd)
* 2006/7 UKCS development programme on track - all new wells expected to
contribute during 2006 now drilled
Financial Highlights
* Record financial performance driven by higher production levels and
realised commodity prices
* Revenue up 230% to #185.4 million (2005 - #56.1 million)
* Pre-tax profit of #97.7 million (2005 - pre-tax loss of #5.9 million)
* Profit for the financial period of #55.9 million (2005 - loss of
#2.8 million)
* Operating cashflow #155.5 million (2005 - #3.9 million)
* Total capital expenditure (including acquisitions) of #65.2 million (2005 -
#82.3 million) - decrease due to investment timing.
Corporate Development and Outlook
* Acquisition of CH4 Energy Limited for #153 million in August - adds a
fourth gas focused production hub
* Four additional asset acquisitions to date in 2006 adding 6.8 MMboe of
proven and probable reserves
* Formation of a strategic partnership to pursue southern North Sea gas
opportunities, North Sea Gas Partners - initial assets acquired by
partnership Average production guidance for 2006 raised to 41,500 -
43,500 boepd - including contribution from CH4 acquisition
Note: All comparatives are with the first half of 2005
Commenting on the results, Mike Wagstaff, Chief Executive of Venture said:
"During the first half of 2006, Venture delivered record operational and
financial performance. All of our production hubs performed strongly and, in
aggregate, delivered slightly ahead of expectations. Financially, we are reaping
the rewards of our intense North Sea development programme over the last two
years. Looking forward we are continuing to invest across our expanded base and
our development programme remains on track to deliver continued growth through
2006 and beyond.
Venture is progressing through a repeated cycle of investment and production
growth which will deliver cashflow and earnings generation irrespective of
commodity price volatility. We have assembled a deep inventory for development
over the next three years, combined with asset and corporate acquisitions such
as the recent CH4 deal, will provide a platform for sustained growth for the
foreseeable future."
Enquiries:
VENTURE PRODUCTION plc 01224 619 000
Mike Wagstaff, Chief Executive
Marie-Louise Clayton, Finance Director
BRUNSWICK GROUP 020 7404 5959
Patrick Handley
Chris Blundell
Chairman and Chief Executive's Statement
The first half of 2006 saw Venture deliver the full benefits of its North Sea
development programme, which commenced in 2004, leading to record operational
and financial performance. All three of our production hubs performed strongly
and, in aggregate, delivered production slightly ahead of our expectations.
We have seen the continued benefits of the strong growth and diversification of
our portfolio over recent years. Following the acquisition of CH4 Energy Limited
('CH4'), Venture now has interests in a total of 16 producing oil and gas
fields, of which we operate 13. In the current market of scarce resources, we
are seeing tangible benefits from our operatorship led strategy. Our early
recognition of the tightening market conditions lead us to develop strategic
partnerships with key contractors, which have not only ensured Venture's ability
to deliver a substantial and complex development programme, but have also
enabled us to respond quickly and effectively to the inevitable unplanned
operational issues that arise in offshore operations. These partnerships, plus
the strengthening and deepening of the senior management team, have also allowed
us to create and seize new business development opportunities.
Average daily production for the first half of the year increased by 80% to
43,572 boepd (2005 - 24,255 boepd). Revenue increased by 230% to #185.4 million
(2005 - #56.1 million) due to increased production volumes and higher realised
commodity prices. Financial performance and costs were in line with expectations
and resulted in a pre-tax profit of #97.7 million (2005 - a loss of #5.9
million) and profit after tax of #55.9 million (2005 - a loss of #2.8 million).
We have also seen a transformation in the cashflow generation of Venture's
business during 2006. During the first half of the year, operating cashflow
totalled #155.5 million, (2005 - #3.9 million). The operating cashflow generated
in the first six months of 2006 is 79% greater than for the whole of 2005.
Operational Highlights
At 30 June 2006, Venture had interests in a total of 31 oil and gas fields. Of
these, 11 were in production, four were under near term development and 16 were
medium term development candidates. These fields are located in the three
discrete production hubs, 'A' Fields, 'Trees' and the Greater Kittiwake Area
('GKA').
In addition, as a result of the recently completed CH4 acquisition, Venture has
acquired interests in a further three producing gas fields and one gas field
under development. The CH4 acquisition has also added a fourth production hub to
Venture's business, the Greater Markham Area ('GMA'), and makes Venture one of
the largest UK independent gas producers.
Average net daily production for the first six months of 2006 was 43,572 boepd,
an increase of 80% over the comparable period last year. This was a result of
new field developments coming on stream, combined with good reservoir
performance supported by high levels of production facilities uptime.
During the first half of 2006, Venture continued its development programme
across the business. The Company drilled and completed five wells and Field
Development Plan ('FDP') approval was received for two new fields, Goosander
(which came on stream in August 2006) and Mimas (which is expected to be brought
on stream before the year end).
'A' Fields
Strong production performance has continued from Venture's southern North Sea
('SNS') 'A' Fields gas production hub. During the first half of 2006 the 'A'
Fields produced at an average rate of 27,556 boepd, or 63% of the Group total
(2005 - 12,546 boepd and 52%). This increase in production was principally the
result of contributions for a full period from Annabel (Venture - 100% owned)
and the Saturn Unit (Venture - 22%), both of which came on stream during 2005.
In the first half of 2006 we successfully completed drilling an in-fill well on
the Ann field (Venture - 100%), which was brought into production in April. In
the ConocoPhillips operated Saturn Unit (Venture - 22%) the third production
well was successfully drilled and brought on stream in June. Additionally, a
well has been successfully drilled into the Rhea structure in the southern
portion of the Saturn Unit area. The well has been completed and tested at a
gross flow rate in excess of 100 MMcfpd and is expected to be brought on stream
shortly. In May, FDP approval was received for development of the Mimas field
(Venture - 15%) as a satellite to Saturn. Mimas is being developed utilising a
single production well drilled from a minimum facilities platform, which was
installed in early July. The Mimas field is expected to come on stream in late
2006.
Operated SNS drilling activities are expected to re-commence in late September
with the arrival of the Noble Julie Robertson ('NJR') jack-up drilling rig on a
two year contract to Venture. The first well to be drilled using the NJR is
anticipated to be an appraisal well on the Ensign field (Venture - 100%), a
large undeveloped gas discovery acquired during 2005.
Greater Kittiwake Area ('GKA')
The GKA production hub (Venture operated - 50%) contributed 5,387 boepd, or
12.5% of the Group total during the period (2005 - 3,612 boepd or 15%). This
increase was driven by the contribution of Gadwall for a full period, the impact
of the new Mallard water injection well drilled in the second half of 2005 and
the subsequent start-up of the Mallard producer in April 2006. Strong production
performance from GKA during the first half of 2006 was partially offset by an
anchor dragging incident involving the Gadwall/Mallard pipeline in February,
which led to both fields being shut-in for a period of six weeks. Calling upon
our strategic partnerships with contractors enabled a rapid restoration of
production and a permanent solution to the problem completed in early July. Both
fields have now been restored to full production potential.
The first half of 2006 has also been a period of intense development activity on
GKA. During February, the Gadwall water injection well was completed and, in
July, drilling of a second water injection well on the Mallard field commenced.
This latest GKA well has been successfully drilled and is currently being
completed. In January, FDP approval for the Goosander field was received. The
Goosander production well was completed and tested in April, the sub-sea
flowline bundle installed in June and the field brought on stream in early
August. Successful completion of the Goosander project represents an important
development milestone for Venture and was brought on stream, within budget and
almost four weeks ahead of schedule.
During the period, we have seen operational benefits from the replacement of the
Kittiwake loading buoy ('KLB') with a new single anchor loading ('SAL') system
in 2005. During the first half of the year, work has continued in evaluating
long term export options to replace the GKA storage and export tanker, which
will reach the end of its life during 2007.
Trees
During the first half of 2006, the Trees production hub (Venture - 100%)
produced at an average rate of 10,629 boepd or 24.5% of total Group production
(6,914 boepd or 28% during 2005). Overall, this increase in production is
primarily driven by a full period's contribution during 2006 and the
contribution from the south Sycamore production well. The central Sycamore water
injection well, SW-2, was completed in November 2005 and brought on stream in
January. Production from the south Sycamore production well, which was drilled
in late 2005, was steady during the period and reservoir data from the initial
period will be used to determine whether water injection support is required.
While water injection into SW-2 has been continuing since the start of the year,
we have not yet sufficiently repressurised the reservoir around the production
well (SP-2) to allow this well to be brought back on stream. Resumption of
production is expected later in the year. A second central Sycamore water
injection well, SW-1, was drilled early this year and encountered disappointing
quality reservoir. This well has been suspended pending further evaluation.
An exploration well to test the Ash prospect (Venture - 100%) in the south of
the Trees block 16/12a is to be drilled as an extended reach well from the
Tiffany platform. This well is expected to commence around the end of the third
quarter, with results anticipated around year end.
Other Central North Sea
Development activity continued on the Chestnut field (Venture operated -
69.875%) during the first half of the year. The Chestnut water injection well
was successfully drilled and completed in May and construction has commenced on
the Sevan Marine SSP 300 floating production unit at the shipyard in China. The
project is on track for first oil production during the second half of 2007.
On the Pilot heavy oil field (Venture operated - 70.37%), subject to regulatory
approval, Venture is planning to drill an appraisal well utilising a
geotechnical survey drillship rather than a conventional mobile drilling unit.
Delays in availability of this drillship from other users mean that it will not
be possible to drill this well during the 2006 weather window and it is now
anticipated that it will be drilled in Spring 2007. During the period Venture
increased its interest with the acquisition of an additional stake in the field
from one of its partners. In addition, dependant on the results of the Pilot
appraisal well, a second well will be drilled to appraise the 28/2-1 discovery
in the adjoining block 28/2 (Venture - 100%), acreage that was awarded to
Venture in the 23rd UKCS Licensing Round in 2005.
On Block 28/5a (Venture - 13.04%), BG has farmed-in to drill an exploration well
later in the year. The well will target a medium risk prospect with potential
gross reserves of up to 25 MMboe. During the first half of 2006, Venture agreed
to farm-in to 'Moonraker' exploration prospects located in Block 14/28b by
paying a higher share of well costs to earn a 20% interest in the prospect. The
well was drilled in August at a net cost of #2.0 million, but the reservoir
encountered was water bearing and the well has subsequently been abandoned.
Corporate and Business Development
During 2006, we have taken significant steps to build Venture's long term
sustainable growth prospects. Against a background of buoyant commodity prices,
the competitive market for acquisitions continued during the first six months of
2006, with acquisitions of producing North Sea assets commanding record prices.
Venture's proven ability to bring undeveloped 'stranded' discoveries into
production gives it the flexibility to acquire assets across a wide range of
development maturities.
During the first half of 2006 Venture continued to develop the project inventory
that was acquired in 2004 and 2005. In addition, we worked on several
transactions designed to increase working interests in and around ongoing
developments. To date in 2006 four such asset acquisitions have been made.
In early April, Venture announced the acquisition of an additional interest in
Blocks 21/27a (including the Pilot heavy oil discovery) and 21/27b for a nominal
cash consideration. Following exercise of pre-emption rights by existing field
partners, this acquisition took Venture's stake in the Pilot field from 47.5% to
70.4% ahead of the planned drilling of a further appraisal well to confirm the
recoverable reserves of this Venture operated field.
In August 2006, Venture reached agreement for the acquisition of further
interests in blocks 21/20a (excluding the Cook field area), containing the
undeveloped Bligh gas condensate discovery, and 21/20b, containing the
undeveloped Christian oil discovery. These undeveloped discoveries are located
immediately to the east of GKA and are both candidates for tie back to the
Kittiwake platform, with Christian likely to be prioritised for development into
production by 2010. Under the terms of an 'area of mutual interest' agreement
put in place at the time of the original GKA acquisition, Venture has
subsequently sold down 50% of its total acquired Christian and Bligh interests
to its GKA partner, Dana Petroleum, and upon legal completion, anticipated early
in the fourth quarter, Venture will have working interests of 20.67% in block 21
/20a (Bligh) and 50% and operatorship of block 21/20b (Christian). The net cash
inflow to Venture arising from these transactions will amount to approximately
#0.5 million.
Also in August 2006, Venture agreed to farm in to block 22/22c to operate the
drilling of an appraisal well into the Millburn oil discovery adjacent to the
Selkirk discovery (Venture - 31.5%). The well will be designed for completion as
a future producer and Venture will fund 100% of the well cost to earn a 70%
interest in the Millburn block.
In addition, at a more strategic level, Venture has created an innovative new
partnership targeting southern North Sea gas assets. In mid-April, we announced
the formation of North Sea Gas Partners Limited ('NSGP'), a joint venture
company between Venture and three financial institutions to pursue jointly large
scale southern North Sea acquisition and development opportunities. Venture will
provide 33.3% of the total $300 million commitments to the company and will
typically also have a direct interest of between 25% and 45% in any assets in
which the partnership invests. This will result in an effective economic
interest in NSGP assets of between 50% and 65% net to Venture. Venture has
recently announced the acquisition by NSGP of interests in two gas discoveries
(Ensign and Amanda) and the Agatha exploration prospect from Venture. These
transactions will reduce our net interests in Ensign to 50.0% and in Amanda and
Agatha to 66.67% ahead of drilling on all three during late 2006 and 2007.
Venture has also continued to take steps to ensure its ability to deliver future
business in a very tight market for oilfield and equipment services. In June, we
announced we had entered into two long term drilling contracts with Noble
Corporation ('Noble'). Firstly, Venture extended its existing contract on the
Noble Ton van Langeveld ('NTvL') semi-submersible drilling unit for a further 12
months, jointly with BG, from the second quarter of 2008. Venture also entered
into an agreement with Noble for the delivery of a new-build heavy-duty harsh
environment ('HDHE') jack-up drilling rig which will be designed to operate
across the vast majority of Venture's asset portfolio, in both the southern and
central North Sea. The new rig is expected to come into service during the first
half of 2009 for an initial two year commitment. These contracts will give
Venture access to high quality drilling capacity to support its development
programme into 2011.
In August, Venture announced the acquisition of CH4, a privately owned UK E&P
company focusing on gas in the SNS, for a total of Euro224 million (#153 million).
This represents the largest acquisition in Venture's history and will add a
second SNS gas production hub to our business. CH4's operations are focused
around the median line between the Dutch and UK sectors of the North Sea and its
principal assets consist of a 37.5% operated unitised interest in the Markham
gas field and a 95% operated interest in the Chiswick gas field, which is due on
stream during the first quarter of 2007. The acquisition of CH4 will add 30.7
MMboe of proven and probable reserves, an increase of 19% on year end 2005
reserves, and CH4 is anticipated to add a similar percentage production
increment to 2007 annual production once Chiswick is on stream. Since
acquisition, progress on the two principal projects in CH4's portfolio, the
Markham compression tower ("CT") and Chiswick field development, has progressed
according to plan. Both platforms have been successfully installed and the
jack-up rig to drill the first Chiswick production well is scheduled to arrive
later in the year. The acquisition of CH4 represents an excellent fit with
Venture's business and will establish Venture as one of the largest independent
UK natural gas production companies.
The consideration for the acquisition, which included Euro16.5 million of working
capital, was satisfied by Euro123.5 million in cash and the issue of 9.05 million
new ordinary shares (representing 7% of the total enlarged share capital of
Venture). We welcome CH4's former shareholders, consisting of 3i Group plc,
Trust Company of the West and management, as significant new investors in
Venture.
Board Development
In 2006, we have been delighted to welcome two new non-executive directors to
Venture's Board, Tom Ehret and Tom Blades. Tom Ehret is Chief Executive Officer
of Acergy, a leading offshore contractor to the oil and gas industry. Tom Blades
is Chief Executive Officer of Choren Industries, a German technology company
which is a world leader in the conversion of biomass to synthetic liquid fuels.
Messrs Blades and Ehret will both bring invaluable experience from their
hands-on management of rapid growth in differing corporate situations.
David Morrison, who was a Board member since 1999, decided not to stand for
re-election and stepped down from the Board in April. The Board would like to
express its thanks to David for his important contribution to the growth of the
Company during the time he has been a member of the Board.
Financial Highlights
Revenue for the period was #185.4 million (2005 - #56.1 million), an increase of
230% over the comparable period in 2005. This was a result of the increase in
sales volumes of 17,010 boepd and substantially higher effective realised
prices. Natural gas accounted for 67% of total sales volume with an effective
realised price of #24.96/boe. The effective realised price of oil was #29.47/
bbl. Across all sales, this resulted in an average effective realised price of
#26.33/boe - an increase of 87% over 2005. This increase has been driven by
higher global commodity prices and a substantially higher proportion of oil
production that is sold at market prices. For the first half of the year, 30% of
oil production was hedged, the majority of which was attributable to the below
market value hedges put in place in the 2003/4 period, resulting in an average
hedged price of $25.46/bbl. In the second half of the year the impact of these
below market value hedges reduces considerably to affect less than 10% of
production and, price wise, is offset by higher value hedges giving an average
second half hedged price of $39.23/bbl.
Key Statistics First Half 2006 First Half 2005
#/boe #/boe
Effective realised price 26.33 14.09
Lifting costs 4.20 6.10
Depreciation, depletion and amortisation 5.36 3.67
Administrative expenses 1.00 1.02
Operating profit for the period was #101.2 million, a nine fold increase over
2005, (2005 - #10.7 million). This reflects the increase in production leading
to economies of scale on an operational basis. On a unit basis, the lifting
costs for the first half have reduced by 31%, however these remain subject to
continuing cost pressure.
As anticipated, on a unit basis, the charge for depreciation, depletion and
amortisation ('DD&A') has increased by 46% from the first half of 2005 to #5.36/
boe. This increase reflects the transfer of development costs to the depreciable
pool as a number of major development projects were brought on stream.
Additionally, as a result of the review of our DD&A calculations and
decommissioning provision estimates completed in the first half of the year, the
DD&A rates applied to high producing fields have increased. This has added to
the overall increase in the DD&A charge for the first half of 2006. Following
the review of estimates, the decommissioning provision has been increased by
#0.7 million. DD&A calculations are now based on budgeted capital expenditure
and proven and probable reserves, which is more consistent with industry
practice.
Administrative expenses have increased on a gross basis as a result of IFRS 2
charges (share based payments) relating to new schemes, an associated increase
in National Insurance contribution ('NIC') accrual due to share price movements
and underlying business growth. On a unit basis they have declined by 2%,
despite the higher staff costs. A non-cash loss on foreign exchange is recorded
as a result of the movement in GBP/USD exchange rates on opening and closing
dollar debtors and overlift balances.
Interest charges were in line with expectations at #4.7 million (2005 - #4.7
million).
Profit before taxation for the first half of the year was #97.7 million with a
taxation charge of 43%. The increase in Supplementary Charge rate of 10% has not
been applied to the half year numbers as the legislation was not fully enacted.
However, the full year results will be taxed at a Corporation Tax rate of 30%
and Supplementary Charge rate of 20%. It should be noted that the tax charge for
the period is entirely deferred and Venture does not anticipate paying
Corporation Tax until 2007.
Profit after taxation for the first six months of 2006 was #55.9 million (2005 -
loss #2.8 million), #58.7 million higher than that for the same period last
year. This resulted in fully diluted earnings per share of 41.8p compared with a
loss of 2.3p/share in 2005. No account has been taken of the acquisition of CH4
in the first half of 2006, as the transaction occurred after the end of the
reporting period.
The net cash generated from operating activities was #149.4 million (2005 #1.6
million). This was utilised by acquisition and capital expenditure of #65.2
million (2005 #82.3 million). In addition, during the first half of 2006 the
Company purchased its own shares to be held in treasury at a cost of #11.2
million, paid #5.1 million to the employee benefit trust ('EBT') and repaid bank
debt of #30.5 million, leaving a net increase in cash balances of #37.6 million.
The Company's share acquisition programme has been implemented to meet
obligations under the staff incentive schemes.
The Group had fixed tangible assets of #469.5 million (2005 - #335.9 million)
reflecting continuing field development activity over this period.
The deferred tax liability has increased from #47.0 million at 31 December 2005
to #94.8 million in 2006 mainly due to the profits made in the period.
The balance sheet now reflects a net current asset position of #48.4 million (31
December 2005 #5.7 million net current liabilities). This is due to the
Company's cash position and the unwinding of the IAS 39 fair value of derivative
financial instruments from #42.9 million at 31 December 2005 to #10.5 million at
30 June 2006. The provision reduces as the volumes hedged and the proportion of
production hedged at below market prices diminish.
Outlook and Summary
Current production levels after the summer shutdowns and new field tie-ins have
been restored to approximately 50,000 boepd and remain in line with
expectations. As a result, our average production guidance for the full year has
been raised to 41,500 - 43,500 boepd, including the contribution from the newly
acquired CH4 assets, representing a 39 to 46% increase over 2005.
Overall, the first half of 2006 represents a period of record operating and
financial performance. Due to the rolling off of Venture's below current market
oil price hedges, we anticipate further increases in average realised commodity
prices at current market levels during the remainder of 2006 and for 2007. 2006
has also seen substantial growth for Venture, which is expected to continue
through the remainder of the year and beyond. With a broad and diversified asset
base, an exciting development programme and favourable commodity price
environment, we remain confident of the outlook for Venture's business.
John Morgan Mike Wagstaff
Chairman Chief Executive
19 September 2006
Independent review report to Venture Production Plc
Introduction
We have been instructed by the company to review the financial information for
the six months ended 30 June 2006 which comprises the consolidated interim
balance sheet as at 30 June 2006 and the related consolidated interim statements
of income, cash flows and recognised income and expense for the six months then
ended and related notes. We have read the other information contained in the
interim report and considered whether it contains any apparent misstatements or
material inconsistencies with the financial information.
Directors' responsibilities
The interim report, including the financial information contained therein, is
the responsibility of, and has been approved by the directors. The Listing Rules
of the Financial Services Authority require that the accounting policies and
presentation applied to the interim figures should be consistent with those
applied in preparing the preceding annual accounts except where any changes, and
the reasons for them, are disclosed.
This interim report has been prepared in accordance with the International
Accounting Standard 34, 'Interim financial reporting'.
Review work performed
We conducted our review in accordance with guidance contained in Bulletin 1999/4
issued by the Auditing Practices Board for use in the United Kingdom. A review
consists principally of making enquiries of group management and applying
analytical procedures to the financial information and underlying financial data
and, based thereon, assessing whether the disclosed accounting policies have
been applied. A review excludes audit procedures such as tests of controls and
verification of assets, liabilities and transactions. It is substantially less
in scope than an audit and therefore provides a lower level of assurance.
Accordingly we do not express an audit opinion on the financial information.
This report, including the conclusion, has been prepared for and only for the
company for the purpose of the Listing Rules of the Financial Services Authority
and for no other purpose. We do not, in producing this report, accept or assume
responsibility for any other purpose or to any other person to whom this report
is shown or into whose hands it may come save where expressly agreed by our
prior consent in writing.
Review conclusion
On the basis of our review we are not aware of any material modifications that
should be made to the financial information as presented for the six months
ended 30 June 2006.
PricewaterhouseCoopers LLP
Chartered Accountants
Aberdeen
18 September 2006
Condensed Group Income Statement
For the six months ended 30 June 2006
----------------
Six months ended Year ended
---------------------- ------ ------------------------- ------------
30 June 30 June 31 December
2006 2005 2005
Unaudited Unaudited Audited
Notes #000 #000 #000
---------------------- ------ --------- --------- ------------
Revenue 2 185,376 56,097 164,103
Cost of sales (75,602) (45,029) (85,723)
---------------------- ------ --------- --------- ------------
Gross profit 3 109,774 11,068 78,380
Administrative expenses (7,932) (4,459) (10,561)
Loss on foreign exchange (941) (5,967) (1,552)
Gain on disposal of
foreign subsidiaries - - 438
Other operating income 253 10,079 6,801
---------------------- ------ --------- --------- ------------
Operating profit 2 101,154 10,721 73,506
Finance income 783 652 1,424
Finance expense (4,668) (4,688) (12,594)
Change in fair value of
derivative financial
instruments 4 - (12,588) (6,487)
Share of profit of
associate 7 403 - -
---------------------- ------ --------- --------- ------------
Profit/(loss) before
taxation 97,672 (5,903) 55,849
Taxation 5 (41,777) 3,096 (24,751)
---------------------- ------ --------- --------- ------------
Profit/(loss) for the
financial period 55,895 (2,807) 31,098
---------------------- ------ --------- --------- ------------
Earnings per ordinary share
Basic Earnings per Share 6 45.7p (2.3)p 25.3p
Diluted Earnings per Share 6 41.8p (2.3)p 23.9p
---------------------- ------ --------- --------- ------------
All items dealt with in arriving at the profit for the period relate to
continuing activities.
Condensed Group Statement of Recognised Income and Expense
For the six months ended 30 June 2006
----------------
Six months ended Year ended
---------------------- ------ ------------------------- ------------
30 June 30 June 31 December
2006 2005 2005
Unaudited Unaudited Audited
Notes #000 #000 #000
---------------------- ------ --------- --------- ------------
Profit/(loss) for the
financial period 55,895 (2,807) 31,098
Cash flow hedges:
- fair value losses net of tax (3,328) 19,368 (22,383)
- reclassified and
reported in net profit (12,741) (7,042) 38,669
---------------------- ------ --------- --------- ------------
Total recognised income
for the period 39,826 9,519 47,384
---------------------- ------ --------- --------- ------------
Condensed Group Balance Sheet
As at 30 June 2006
----------------
Six months ended Year ended
---------------------- ------ ------------------------- ------------
30 June 30 June 31 December
2006 2005 2005
Unaudited Unaudited Audited
Notes #000 #000 #000
---------------------- ------ --------- --------- ------------
Assets
Non-current assets
Property, plant and
equipment 8 469,534 335,909 441,403
Investments accounted for
using the equity method 5,919 - 5,516
Convertible loan notes
receivable 5,805 - 5,805
Derivative financial
instruments 398 - -
---------------------- ------ --------- --------- ------------
481,656 335,909 452,724
---------------------- ------ --------- --------- ------------
Current assets
Inventories 5,018 2,923 2,120
Trade and other
receivables 52,078 62,357 83,818
Assets held for sale - 21,908 -
Derivative financial
instruments 5,789 - -
Cash and cash equivalents 50,785 6,106 13,153
---------------------- ------ --------- --------- ------------
113,670 93,294 99,091
---------------------- ------ --------- --------- ------------
Liabilities
Current liabilities
Trade and other payables 49,023 49,902 61,770
Assets held for sale - 5,028 -
Derivative financial
instruments 16,254 58,693 42,953
Income taxes payable - - 44
---------------------- ------ --------- --------- ------------
65,277 113,623 104,767
---------------------- ------ --------- --------- ------------
Net current
assets/(liabilities) 48,393 (20,329) (5,676)
---------------------- ------ --------- --------- ------------
Non-current liabilities
Financial liabilities -
borrowings 172,120 150,566 201,825
Deferred tax liabilities 94,812 12,643 46,953
Derivative financial
instruments - 12,833 -
Other non-current
liabilities 11,933 5,700 11,933
Provisions 55,215 52,144 52,505
---------------------- ------ --------- --------- ------------
334,080 233,886 313,216
---------------------- ------ --------- --------- ------------
Net assets 195,969 81,694 133,832
---------------------- ------ --------- --------- ------------
Shareholders' equity
Called up share capital 9 498 490 497
Share premium 9 105,083 103,279 104,906
Other reserves 9 2,514 (31,340) (14,741)
Retained earnings 9 87,874 9,265 43,170
---------------------- ------ --------- --------- ------------
Total shareholders' equity 195,969 81,694 133,832
---------------------- ------ --------- --------- ------------
Condensed Group Cashflow Statement
For the six months ended 30 June 2006
----------------
Six months ended Year ended
---------------------- ------ ------------------------ ------------
30 June 30 June 31 December
2006 2005 2005
Unaudited Unaudited Audited
Notes #000 #000 #000
---------------------- ------ ---------- ---------- ------------
Cashflows from operating
activities
Operating cashflow 10 155,476 3,891 86,848
Interest received 783 652 1,400
Interest paid (6,894) (2,843) (11,159)
Tax received/(paid) 51 (75) 615
---------------------- ------ ---------- ---------- ------------
Net cash generated from
operating activities 149,416 1,625 77,704
---------------------- ------ ---------- ---------- ------------
Cashflow from investing
activities
Purchase of property,
plant and equipment (65,169) (82,258) (207,886)
Proceeds from disposal of
foreign subsidiaries (net
of cash disposed) - - 2,727
Additional investment in
associate - - (892)
---------------------- ------ ---------- ---------- ------------
Net cash used in investing
activities (65,169) (82,258) (206,051)
---------------------- ------ ---------- ---------- ------------
Cashflow from financing
activities
Shares acquired by
Employee Benefit Trust (5,065) - (1,100)
Purchase of treasury
shares (11,191) - -
(Repayments)/Proceeds from
borrowings (30,537) 86,067 108,740
Proceeds from convertible
bond issue - - 28,346
Proceeds from exercise of
share options 178 95 1,759
---------------------- ------ ---------- ---------- ------------
Net cash (used in)/from
financing activities (46,615) 86,162 137,745
---------------------- ------ ---------- ---------- ------------
Net increase in cash and
cash equivalents 37,632 5,529 9,398
Opening cash and cash
equivalents 13,153 3,755 3,755
Translation difference - (121) -
---------------------- ------ ---------- ---------- ------------
Closing cash and cash
equivalents 50,785 9,163 13,153
---------------------- ------ ---------- ---------- ------------
Closing cash and cash equivalents at 30 June 2005 include #3,057,000 classified
under Assets Held for Sale on the Balance Sheet.
Notes to the Interim Accounts
For the six months ended 30 June 2006
1. Accounting policies for the six months ended 30 June 2006
Basis of preparation
The interim financial statements for the six months ended 30 June 2006 have been
prepared in accordance with IAS 34. The accounting policies adopted are
consistent with those of the annual financial statements for the year ended 31
December 2005.
New standards, amendments to standards and interpretations, which are applicable
for the financial year ending 31 December 2006, have had no impact on the
accounting policies.
The comparative figures for the year ended 31 December 2005 do not constitute
statutory financial statements for the purpose of Section 240 of the Companies
Act 1985. They have been extracted from the Company's published accounts, a copy
of which has been delivered to the Registrar of Companies. The report of the
auditors on those accounts was unqualified and did not contain a statement under
either Section 237(2) or (3) of the Companies Act 1985. These financial
statements should be read in conjunction with the 2005 financial statements.
Property, Plant and Equipment
During the period the Group carried out a review of its depreciation, depletion
and amortisation ('DD&A') policy and decommissioning estimates. As a result of
these reviews the following changes have been made:
The basis of calculation of DD&A has been changed to bring the Group into line
with other companies of similar maturity in the sector. The calculation is now
based on budgeted capital expenditure and proven and probable reserves, as
opposed to actual capital expenditure and proven reserves, previously applied.
This has resulted in an increase in the charge for the period of #7.2 million.
Decommissioning estimates have been reviewed and revised in the period, as a
result of which the decommissioning provision has been increased by #0.7m.
2. Segmental reporting
Following the disposal of the Trinidadian operations in December 2005, the
following changes to business segment boundaries have been made. Geographic
segments are no longer appropriate as the Group is organised for management
reporting purposes into two principal divisions, crude oil and natural gas, and
its reportable segments are now based on this structure.
Oil business segment
The oil segment comprises of all activities connected with the Group's oil
assets, which consist of the Trees and GKA hubs.
Gas business segment
The gas segment consists of all activities connected with the Group's gas
assets, currently the 'A' Fields.
----------------
Six months ended Year ended
---------------------- ------------------------ ------------
30 June 30 June 31 December
2006 2005 2005
Unaudited Unaudited Audited
#000 #000 #000
---------------------- ---------- ---------- ------------
Revenue
Oil 60,583 35,997 46,589
Gas 123,991 16,435 107,643
Total 184,574 52,432 154,232
Operating Profit
Oil 27,152 9,797 65,538
Gas 80,567 11,240 27,201
Total 107,719 21,037 92,739
Reconciliation of total segment result to operating profit:
----------------
Six months ended Year ended
---------------------- ------------------------ ------------
30 June 30 June 31 December
2006 2005 2005
Unaudited Unaudited Audited
#000 #000 #000
---------------------- ---------- ---------- ------------
Segment result 107,719 21,037 92,739
Trinidadian operations - - 5,731
Unallocated corporate
activities (6,565) (10,316) (24,964)
------------------------- --------- --------- ------------
Operating Profit 101,154 10,721 73,506
------------------------- --------- --------- ------------
3. Gross profit
The following items have been included in arriving at gross profit:
----------------
Six months ended Year ended
---------------------- ------------------------ ------------
30 June 30 June 31 December
2006 2005 2005
Unaudited Unaudited Audited
#000 #000 #000
---------------------- ---------- ---------- ------------
Over/(under)lift 153 45 (7,966)
Operating expenses 31,911 21,097 45,742
Well workover expenses 1,217 3,915 1,228
Depreciation, depletion and
amortisation 42,282 16,098 44,314
4. Change in fair value of derivative financial instruments
In 2006 all derivative financial instruments qualified for hedge accounting
under IAS 39. In 2005 the change in fair value of derivative financial
instruments is the effect of the movement of the market values of hedge
contracts that do not qualify for hedge accounting under IAS 39.
5. Taxation
In respect of the Group's UK operations, tax has been calculated based on a rate
of 30% plus the Supplementary Tax of 10% (2005: 30% plus 10% Supplementary). The
effective tax rate for 2006 is 43% compared with 42% for the year to 31 December
2005. It should be noted that this tax charge is all deferred as a result of the
Group's tax position in the UK.
On 19 July 2006, a further Supplementary Tax of 10% was enacted, which has not
been adopted at 30 June 2006. Were this rate to be adopted, the current year tax
charge would be increased by #11.0 million and the opening deferred tax balance
would be increased by #14.0 million.
6. Earnings per ordinary share
Basic earnings per share is calculated by dividing the earnings attributable to
ordinary shareholders by the weighted average number of ordinary shares
outstanding during the period, excluding shares held in treasury and those held
in the employee benefit trust. For diluted earnings per share, the weighted
average number of ordinary shares in issue during the year is adjusted to assume
conversion of all dilutive potential ordinary shares.
The calculation of earnings per ordinary share shown is based upon the
following:
----------------
Six months ended Year ended
---------------------- ----------------------- ------------
30 June 30 June 31 December
2006 2005 2005
Unaudited Unaudited Audited
#000 #000 #000
---------------------- ---------- ---------- ------------
Profit/(Loss) for the period 55,895 (2,807) 31,098
Weighted average number of
ordinary shares for the
period
Basic (thousand) 122,362 122,283 123,004
- Diluted (thousand) 134,602 122,283 131,232
---------------------- ---------- ---------- ------------
Earnings per share
- Basic 45.7p (2.3)p 25.3p
- Diluted 41.8p (2.3)p 23.9p
---------------------- ---------- ---------- ------------
7. Share of profit of associate
The income from interest in the associated undertakings of #402,520 is the
Group's share of the results of Ten Degrees North Energy Limited after tax.
8. Capital expenditure
Capital expenditure during the period amounted to #68.5 million and mainly
related to the Goosander, Sycamore and Chestnut developments.
9. Reserves
During the period the Company transferred #5.1 million to the employee benefit
trust, which was used to purchase ordinary shares in the market. In addition,
the Company purchased 1,785,780 ordinary shares at a cost of #11.2 million to be
held in treasury.
The Company issued 111,105 ordinary shares at a nominal value of 0.4p each in
settlement of share options being exercised, generating proceeds of #0.1
million.
10. Cashflow from operating activities
----------------
Six months ended Year ended
---------------------- ----------------------- ------------
30 June 30 June 31 December
2006 2005 2005
Unaudited Unaudited Audited
Cashflow from operating #000 #000 #000
activities
---------------------- ---------- ---------- ------------
Operating profit 101,154 10,721 73,506
Depreciation charge 42,282 16,098 44,314
Gain from sale of Trinidad - - (438)
Share-based transactions 4,049 1,887 6,722
Other non cash movements - 221 -
Changes in working capital:
- Inventories (2,898) (2,002) (1,249)
- Trade and other receivables 32,911 (33,840) (78,496)
- Trade and other payables (22,022) 10,806 42,489
---------------------- ---------- ---------- ------------
Operating cashflow 155,476 3,891 86,848
---------------------- ---------- ---------- ------------
11. Contingent liabilities and assets
The Company has provided credit guarantees totalling #7.3 million for
decommissioning security for assets in the North Sea.
Outstanding insurance claims at 30 June 2006 amounted to #7.5 million, of which
#4.3 million relates to repair costs which have been recognised in the period.
Included in Other operating income at 30 June 2005 is #10.0 million for an
agreed insurance claim relating to the Brae Riser.
12. Subsequent events
On 2 August 2006, Venture Production plc acquired the entire share capital of
CH4 Energy Limited. The acquisition includes assets in the southern North Sea
gas basin, a manned platform in the Dutch North Sea sector and an onshore
operating base near Amsterdam. Total consideration for the acquisition was Euro224
million (approximately #153.2 million), which was satisfied in cash and shares.
On 18 April 2006, the Group announced the formation of a strategic partnership
with a group of investors known as North Sea Gas Partners Limited ('NSGP').
Venture Production (North Sea Developments) Limited ('VPNSD') will provide 33.3%
of the total commitments to the partnership, being $100 million. At 30 June 2006
there were minimal costs incurred. Subsequent to 30 June 2006, VPNSD sold 75% of
its 100% share in the Ensign field to NSGP at a net book value of #7.3 million
resulting in no gain or loss.
13. Related party transactions
Intra-group related party transactions, which are eliminated on consolidation,
are not required to be disclosed in accordance with IAS 24.
No transactions occurred with TDNEL during the period.
14. Capital commitments
At 30 June 2006 the Group had capital commitments of #52.0 million relating to
capital equipment expenditure.
Glossary
bbl barrel
Bcf billions of cubic feet
boe barrels of oil equivalent
boepd barrels of oil equivalent per day
bopd barrels of oil per day
MMcfpd millions of cubic feet per day
MMboe millions of barrels of oil equivalent
CNS Central North Sea
GKA Greater Kittiwake Area
SNS Southern North Sea
Lifting costs are defined as: Royalty costs, Production Expense, Workover and
Projects, Transport and Process costs and General Lease expenses.
Effective Realised Price is defined as: Revenue divided by Sales Volume
Note: 6 Mcf = 1 boe
Venture Production plc Kings Close
62 Huntly Street
Aberdeen
AB10 1RS
Telephone +(44) 1224 619 000
Fax +(44) 1224 658 151
Website www.vpc.co.uk
Email enquiries@vpc.co.uk
Registered Office 34 Albyn Place
Aberdeen
AB10 1FW
Registered Number 169182 (Scotland)
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR SFLFWASMSEFU
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