RNS Number:9330U
Venture Production PLC
17 April 2007
17th April, 2007
Venture Production plc
('Venture', 'the Company' or 'the Group')
Preliminary Results for the year ended 31st December, 2006
Venture is a British independent oil and gas company focused on the UK and Dutch
sectors of the North Sea. Venture's strategy is to acquire and develop
discovered but undeveloped reserves, collectively known as 'stranded assets',
and through operatorship to bring these reserves into optimal production.
Operational Highlights
An outstanding year for delivery across the business:
* Strong operational performance from all production hubs - ahead of
expectations
* Average annual production increased 50% to 44,706 boepd (2005: 29,864
boepd)
* Two new fields on stream - Goosander and Rhea and seven additional
'in-field' development projects completed
* Six acquisitions in 2006 adding 42.5 MMboe of proven and probable ("2P")
reserves
* 37% increase in year-end 2P reserves to 221.5 MMboe (2005: 164.4 MMboe), a
reserves' replacement ratio of 455%
Strategic Highlights
New business initiatives building long term growth:
* Kittiwake export pipeline sanctioned and expected onstream during late 2007
* Acquisition of CH4 Energy, our largest acquisition to date providing entry
to the Dutch sector
* Innovative financial partnerships put in place to pursue opportunities in
the southern North Sea and infrastructure
Financial Highlights
Record financial performance:
* Revenue up 120% to #360.3 million (2005: #164.1 million)
* Profit before tax up 217% to #176.7 million (2005: #55.8 million)
* Profit on ordinary activities after tax up 162% to #81.6 million (2005:
#31.1 million)
* Capital expenditure, including acquisitions, totalled #318.2 million (2005:
#217.0 million)
* Operating cashflow up 252% to #273.5 million (2005: #77.7 million) - free
cashflow generative
* Proposed inaugural dividends totalling 50p/share:
- 10p/share Ordinary Dividend for the year; and
- 40p/share Special Dividend
Commenting on the results, Mike Wagstaff, Chief Executive of Venture said:
"2006 was an outstanding year for Venture, both operationally and financially
and we have continued to make excellent progress in increasing both production
and reserves. Venture reached an important milestone with our business
generating cashflow significantly in excess of capital expenditures for the
first time in its history. As a result, I am delighted to be able to announce
today substantial inaugural dividend payments totalling 50p/share to reward
shareholders for the progress in building Venture to this point, and to reflect
the Board's confidence in the future growth of the business in 2007 and beyond.
The extremely strong performance across all areas of our business during 2006 is
a testament to the commitment and professionalism of the entire Venture team and
marks a real coming of age for Venture as we reach our tenth anniversary since
the Company was founded in 1997. Development activity is currently at record
levels and we are on track to deliver our average production guidance of
47-51,000 boepd for 2007. Our development programme is expected to sustain
Venture's growth for the foreseeable future and we are on course to achieve our
strategic goal of doubling the size of our business from 2005 levels over the
2006-8 period."
Enquiries:
VENTURE PRODUCTION plc 01224 619 000
Mike Wagstaff, Chief Executive
Marie-Louise Clayton, Finance Director
BRUNSWICK GROUP LLP 020 7404 5959
Patrick Handley
Chris Blundell
WEBER SHANDWICK 01224 806600
John MacDonald
Jonathan Moore
Chairman and Chief Executive's Review
Average net daily production for 2006 was 44,706 barrels of oil equivalent per
day ("boepd"), an increase of 50% over 2005. This resulted from new field
developments coming on stream combined with good reservoir and well performance
supported by improved levels of production facilities uptime. Venture's southern
North Sea ("SNS") gas fields contributed 61% of total 2006 production, slightly
higher than expectations, with the balance from Venture's central North Sea
("CNS") oil fields.
During the fourth quarter of 2006, despite difficult weather related offshore
operating conditions toward the end of the year, Venture's average production
rate reached approximately 54,000 boepd, a new record for the Company.
Venture's success in 2006 has been built upon continued execution of our
strategy, summarised as follows:
* The acquisition and development of proved but under-exploited oil and gas
fields, known as 'stranded' reserves;
* Maintain a tight geographic focus as a North Sea development and
production company;
* Continue to develop our portfolio of interests in almost 40 North Sea oil
and gas fields, less than half of which are currently in production;
* Exploit Venture's operational and development expertise, which we believe
offers a real competitive advantage as an efficient low cost operator; and
* Continue to build on our long term strategic relationships with our core
contractors to ensure the availability of key equipment and services.
At 31st December 2006, net proven and probable reserves are estimated to total
221.5 million barrels of oil equivalent ("MMboe"), a 37% increase over 2005.
This growth reflects a reserve replacement ratio, including acquisitions, of
approximately 455%, which has been achieved net of the sale to partners of a
proportion of Venture's interest in the Ensign development during the year.
Financial Results
Average daily production for 2006 increased 50% to 44,706 boepd compared to the
previous year (2005: 29,864 boepd). The average realised sales price of #24.18/
boe represented a 39% increase over the prior year (2005: #17.35/boe). This
increase resulted from the rise in commodity prices during the year for both oil
and natural gas, partially offset by residual oil production hedged at prices
below current market levels. As a result, turnover for the year more than
doubled to #360.3 million, (2004: #164.1 million). Group profitability benefited
from increased production volumes and higher realised commodity prices. As a
result, pre-tax profit increased by 217% to #176.7 million (2005: #55.8
million). Venture recorded a net profit after tax up 162% to #81.6 million
(2005: #31.1 million).
During 2006, Venture's operating cashflow increased by 255% to #274.0 million
(2005: #77.7 million) and 2006 represents an important milestone being the first
year that Venture's operating cashflow has exceeded its capital expenditures.
Venture's effective tax rate for 2006 includes the impact of the increase in the
UK North Sea tax rate from 40 to 50%. As a result of Venture's historic position
the 2006 tax charge is not expected to result in a cash tax charge at this time.
The closing balance sheet reflects the strength of Venture's business with a
cash balance of #60 million and borrowings substantially below the available
borrowing facility. The proposed dividend can be met out of cash reserves and
increased borrowings.
Operational Overview
During 2006, Venture participated in 10 wells including two new field
developments which came on stream during the year. Overall, operational delivery
has been on schedule and within budget for those activities under our direct
control and currently Venture has three drilling units operating in the North
Sea. Total planned and unplanned downtime for the full year was within
management expectations. However, during the fourth quarter of 2006 and
continuing into the first quarter of 2007, we have experienced unusually poor
offshore weather conditions, in common with other North Sea operators. This
impacted all of Venture's drilling operations during the period and has also
resulted in a deferral of some GKA production due to the storage and offloading
tanker being unable to stay on station during the severe weather.
In the southern North Sea, strong production performance has continued from
Venture's 'A' Fields gas production hub and, in particular, from the Annabel and
Saturn fields which both continue to produce ahead of expectations. The Ensign
appraisal well was spudded in late September utilising the Noble Julie Robertson
("NJR") jack-up drilling rig. The well was successfully drilled, hydraulically
fractured and tested at rates of 12-15 MMcfpd which is towards the lower end of
expectations. The future development plan for the field will involve the
drilling of a horizontal appraisal/production well later in 2007, prior to
commitment to the production platform and export pipeline.
During the second half of 2006, the Rhea production well was successfully
brought on stream and is now contributing to production from the Saturn Unit. In
the fourth quarter the development well on the Mimas field was drilled and
tested. The Mimas field will be tied back to the Saturn production facilities
and is expected to be brought on stream during the second quarter of 2007.
The acquisition of CH4 Energy Limited ("CH4") in August 2006 gave Venture a
second SNS gas production hub, named Greater Markham Area ("GMA"), centred upon
the Venture operated Markham field which straddles the UK/Dutch median line.
During the second half of 2006, GMA development activity was focused on two key
projects, the Markham compression tower ("CT") and the Chiswick field
development. Installation and commissioning of the Markham CT was completed in
early 2007 and has resulted in an increase in production. Markham field
production performance during the period has been slightly ahead of
expectations.
On the Chiswick field development the platform and inter-field pipeline to
Markham have now been installed and tied-in. The jack-up drilling rig, the Noble
Kolskaya, was delayed in arriving from its previous operator until mid-December.
As a result, drilling of the first Chiswick production well is later than
originally scheduled with first gas production from Chiswick now anticipated in
June. The rig is currently drilling the extended horizontal well section prior
to completion and hydraulic fracturing. The well has encountered reservoir
quality in line with expectations.
Strong production performance from all fields within the GKA production hub
continued during 2006 and peak production rates reached record levels of around
16,500 boepd net to Venture during the fourth quarter. However, production
during the fourth quarter and the first quarter of 2007 has been limited by
greater weather related downtime than normal.
2006 continued to be a period of intense development activity on GKA. During the
first half, a water injection well was successfully drilled on the Gadwall
field. In August, the Goosander field was brought on stream and reservoir
production performance has been significantly better than anticipated. In
November, Venture announced the construction of a new oil export pipeline
linking GKA to the Forties Pipeline System. This pipeline will be installed
during the second and third quarters of 2007 and is scheduled to come on stream
during the fourth quarter of the year. Replacing the existing tanker based
offloading system with the new pipeline is expected to result in lower net
operating costs and significantly better operational uptime performance,
particularly during poor weather.
'Trees' production has been steady during 2006. During the fourth quarter,
production from the central Sycamore production well, SP2, was restored after
reservoir re-pressurisation as a result of water injection and the well is
producing steadily. An exploration well to test the Ash prospect in the south of
the 'Trees' block 16/12a is currently being drilled as an extended reach well
from the Tiffany platform. Drilling of this well commenced in December, with
results anticipated in the second quarter of 2007.
Development activity continued on the Chestnut field during the second half of
the year. Construction of the Sevan 300 floating production unit was completed
during the first quarter of 2007 in China. The unit has since been shipped to
Rotterdam for installation of the processing equipment and commissioning prior
to installation in the field. The project is on track for first oil production
during the fourth quarter of 2007.
Corporate and Business Development
During 2006, our acquisition strategy continued to focus on the expansion of our
existing production hubs and the acquisition of further long-term development
inventory to allow us to deliver sustained production growth through the end of
the decade.
2006 was Venture's most active year for acquisitions. A total of six
transactions were completed including the recently announced Barbarossa farm-in.
Of these, the most significant was the corporate acquisition of CH4 for Euro224
million (#154 million). The consideration was satisfied partly in cash and
partly in new Venture equity and represents the largest acquisition in our
Company's history and the first corporate acquisition. CH4 has now been
successfully integrated into the Venture business.
In early 2006, we announced the formation of North Sea Gas Partners ("NSGP"), a
partnership between Venture and three financial institutions to jointly pursue
large-scale SNS acquisition and development opportunities. During the second
half of the year, we entered into agreements with NSGP to sell down part of our
interest in the Ensign development and to farm-down a portion of our interest in
the Amanda/Agatha drilling prospects.
During the year we also established a second partnership, North Sea
Infrastructure Partners ("NSIP"). NSIP is designed to provide efficient capital
structures for infrastructure assets in the North Sea with the first project
being the new oil pipeline that we are building between the Kittiwake platform
and the Forties Pipeline System ("GKA pipeline"). Venture will invest alongside
a financial institution in all NSIP projects and will arrange non-recourse debt
funding appropriate to the nature of the assets involved. In the case of the GKA
pipeline the level of debt funding that has been arranged is significantly in
excess of that which could have been generated under Venture's existing
corporate borrowing facilities.
As a development and production operator, we recognise the importance of access
to high quality equipment and services to deliver our business objectives,
especially in the current, extremely tight, global market and we continue to
maintain a high level of management focus on this area. During the year, jointly
with another North Sea operator, we extended Venture's existing contract on the
Noble Ton van Langeveld ("TvL") semi-submersible drilling rig for 12 months from
mid-2008. We also entered into an agreement with Noble for the delivery of a
new-build heavy-duty harsh environment ("HDHE") jack-up drilling rig. This new
rig is 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 with an initial two year
commitment that will help secure Venture's ability to continue to develop its
inventory of projects through the end of the decade. In aggregate our contracts
will give Venture access to sufficient high quality drilling capacity to support
our development programme into at least 2011.
Board and Management
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. Previously
he was Vice Chairman of the management board of Technip and President of its
offshore branch. A well recognised figure in the offshore and subsea sector,
where he has over 30 years experience, 20 of which in management positions, Tom
has been instrumental in several industry-shaping moves.
Tom Blades is Chief Executive Officer of Choren Industries, a German technology
company, currently a world leader in the conversion of biomass to synthetic
liquid fuels. Prior to this he was President and Chief Executive Officer of
Spectro, a specialised manufacturer in the global analytical instruments
industry. In recent years his achievements have included major improvements in
corporate performance through strategic re-engineering and implementation of
value building strategies. Messrs Blades and Ehret bring invaluable experience
from their hands-on management of rapid growth in differing corporate situations
and have already made a real contribution to the Board.
David Morrison, who has been a Board member since 1999, decided not to stand for
re-election and stepped down from the Board in April in 2006. The Board would
like to express its thanks to David for his significant contribution to the
growth of the Company during the time he has been a member of the Board.
Staff and Contractors
Without the sustained commitment, professionalism and enthusiasm of our staff
and contractors, Venture would be unable to deliver its business objectives.
Once again, our people have excelled in delivering an extremely ambitious
drilling and development programme, while at the same time maintaining very high
levels of operational, health, safety and environmental performance. The Board
would like to thank all of the Venture team for their critical contribution to
our continued success.
Capital Return Policy
As an oil and gas production company, Venture is required to maintain high and
sustained levels of capital reinvestment into its business. Up to and including
2005, Venture had invested significantly greater levels of capital into its
business than operating cashflow generated. This shortfall was historically
funded by a combination of debt and equity financing. However, 2006 represented
a turning point whereby Venture generated operating cashflow significantly in
excess of its capital expenditures. In addition, acquisitions have always
represented an important, but unpredictable, part of Venture's growth and 2006
represented Venture's most active year to date.
In utilising any free cashflow generated, the Board has determined the following
priorities: firstly, acquisitions or other internally generated business
development opportunities meeting Venture's strict investment criteria; second,
management of the Company's outstanding debt to sustainable long term levels and
third, the return of capital to shareholders through dividends or other
mechanisms.
In keeping with these priorities and mindful of the strong cashflows generated
by the Company in 2006, the Directors have recommended an inaugural dividend
totalling 50 pence per ordinary share. This will consist of an Ordinary Dividend
for the year of 10 pence per share and a Special Dividend of 40 pence per share
at an estimated total cost of #66 million.
If approved at the forthcoming Annual General Meeting the final dividend will be
paid on 24th July 2007 to shareholders on the register at the close of business
on 6th July 2007, with an ex-dividend date of 4th July 2007.
Going forward, Venture's capital return policy will reflect the inherent
uncertainties in its business namely commodity price volatility and variable
capital expenditure requirements and unpredictable acquisition opportunities. As
a result, the Board anticipates maintaining a modest but sustainable level of
ordinary dividend going forward with the majority of capital return to
shareholders coming in the form of capital growth and share buybacks.
Annual General Meeting
The Company will be holding its Annual General Meeting at the Copthorne Hotel,
Huntly Street, Aberdeen AB10 1SU on Wednesday 6th June, 2007 at 2.00pm and 2006
Annual Report & Accounts, Notice of Meeting and Form of Proxy will be issued to
all shareholders on 4th May, 2007.
Current Trading and Outlook
Operationally, we have had a very good start to 2007 despite the severe weather
conditions offshore, which has led to delays in offshore drilling operations and
deferred GKA production in the early months of the year.
During 2006, Venture continued to benefit from relatively strong commodity
prices for both oil and gas. While these prices fell during the fourth quarter,
particularly for UK natural gas, we have recently seen some recovery in UK
wholesale gas prices and Venture remains confident that the longer term supply
and demand fundamentals remain favourable. To address the short term volatility
in commodity prices and to provide assurance over future cashflow and earnings,
Venture continues to employ oil and gas price hedging in line with Board policy.
The 2007 development programme consists of a number of large, individual
projects which are subject to the everyday risks this industry faces; some of
which are beyond our direct control and most of which impact timing rather than
the intrinsic value of our assets. The 2007 development programme differs from
2006 in that many of our prospects are due to come on stream later in the year
and therefore in the event of delay some projects may slip into 2008.
We are on track to meet our growth objectives for 2008 and beyond and our
average production guidance for 2007 of 47-51,000 boepd.
In summary, as a result of the strong operating performance of our business
combined with favourable commodity prices, the Board remains confident of the
positive outlook for Venture's business.
17th April, 2007
John Morgan Mike Wagstaff
Chairman Chief Executive
Group Income Statement
For the year ended 31 December 2006
2006 2005
Notes #000 #000
------------------------- ------ --------- ---------
Revenue 2 360,251 164,103
Cost of sales (173,545) (85,723)
------------------------- ------ --------- ---------
Gross profit 4 186,706 78,380
Administrative expenses (5,684) (10,561)
Loss on foreign exchange (2,465) (1,552)
Gain on disposal of foreign subsidiaries - 438
Other operating income 5 3,363 6,801
------------------------- ------ --------- ---------
Operating profit 4 181,920 73,506
Finance income 6 2,547 1,424
Finance expense 6 (10,737) (12,594)
Change in fair value of derivative financial
instruments 23 2,401 (6,487)
Share of profit of associates 13 604 -
------------------------- ------ --------- ---------
Profit before tax 176,735 55,849
Income tax expense 7 (95,142) (24,751)
------------------------- ------ --------- ---------
Profit for the year 81,593 31,098
------------------------- ------ --------- ---------
Earnings per Ordinary Share
Basic Earnings per Share 8 64.5p 25.3p
Diluted Earnings per Share 8 59.0p 23.9p
------------------------- ------ --------- ---------
All items dealt with in arriving at the profit for the year relate to continuing
activities.
Statement of Recognised Income and Expense
For the year ended 31 December 2006
Group Company
2006 2005 2006 2005
#000 #000 #000 #000
--------------------- -------- ------- -------- --------
Profit for the financial year 81,593 31,098 15,149 4,360
Cash flow hedges:
- Fair value gains/(losses) net of tax
(Note 27) 19,862 (22,383) - -
- Reclassified and reported in net
profit (Note 27) 14,051 38,669 - -
--------------------- -------- ------- -------- --------
Total recognised income for the year 115,506 47,384 15,149 4,360
--------------------- -------- ------- -------- --------
Group Balance Sheet
As at 31 December 2006
2006 2005
Notes #000 #000
------------------------- ------ ---------- ---------
Assets
Non-current assets
Property, plant and equipment 10 664,634 441,403
Intangible assets 11 43,215 -
Investments accounted for using the equity 13 11,098 5,516
method
Convertible loan notes receivable 16 5,376 5,805
Derivative financial instruments 23 6,093 -
------------------------- ------ ---------- ---------
730,416 452,724
------------------------- ------ ---------- ---------
Current assets
Inventories 15 3,183 2,120
Trade and other receivables 16 90,427 83,818
Derivative financial instruments 23 19,916 -
Cash and cash equivalents 17 59,167 13,153
------------------------- ------ ---------- ---------
172,693 99,091
------------------------- ------ ---------- ---------
Assets classified as held for sale 12 3,391 -
------------------------- ------ ---------- ---------
Total Assets 906,500 551,815
------------------------- ------ ---------- ---------
Liabilities
Current liabilities
Trade and other payables 18 (81,589) (61,770)
Derivative financial instruments 23 - (42,953)
Income taxes payable (16,848) (44)
------------------------- ------ ---------- ---------
(98,437) (104,767)
------------------------- ------ ---------- ---------
Net current assets/(liabilities) 77,647 (5,676)
------------------------- ------ ---------- ---------
Non-current liabilities
Financial liabilities - borrowings 19 (245,921) (201,825)
Deferred income tax liabilities 20 (188,685) (46,953)
Other non-current liabilities 21 (5,158) (11,933)
Provisions 22 (61,831) (52,505)
------------------------- ------ ---------- ---------
(501,595) (313,216)
------------------------- ------ ---------- ---------
Liabilities of subsidiary held for sale 12 (1,093) -
------------------------- ------ ---------- ---------
Total Liabilities (601,125) (417,983)
------------------------- ------ ---------- ---------
Net assets 305,375 133,832
------------------------- ------ ---------- ---------
Shareholders' equity
Called up share capital 24 534 497
Share premium 25 105,084 104,906
Other reserves 27 86,622 (14,741)
Retained earnings 26 113,135 43,170
------------------------- ------ ---------- ---------
Total shareholders' equity 305,375 133,832
------------------------- ------ ---------- ---------
Company Balance Sheet
As at 31 December 2006
2006 2005
Notes #000 #000
------------------------- ------ ---------- --------
Assets
Non-current assets
Property, plant and equipment 10 736 780
Investment in subsidiaries 13 158,771 15
Investments accounted for using the equity method 13 6,120 5,516
Amounts due from subsidiary undertakings 16 227,995 261,982
Convertible loan notes receivable 16 5,376 5,805
Derivative financial instruments 23 725 -
------------------------- ------ ---------- --------
399,723 274,098
Current assets
Trade and other receivables 16 2,773 39,254
Deferred tax assets 20 13,365 6,570
Cash and cash equivalents 17 44,100 15,539
Derivative financial instruments 23 1,676 -
------------------------- ------ ---------- --------
61,914 61,363
------------------------- ------ ---------- --------
Liabilities
Current liabilities
Trade and other payables 18 (21,943) (11,005)
Income taxes payable - (44)
------------------------- ------ ---------- --------
(21,943) (11,049)
------------------------- ------ ---------- --------
Net current assets 39,971 50,314
------------------------- ------ ---------- --------
Non-current liabilities
Financial liabilities - borrowings 19 (245,921) (201,825)
------------------------- ------ ---------- --------
(245,921) (201,825)
------------------------- ------ ---------- --------
Net assets 193,773 122,587
------------------------- ------ ---------- --------
Shareholders' equity
Called up share capital 24 534 497
Share premium 25 105,084 104,906
Other reserves 27 74,818 7,368
Retained earnings 26 13,337 9,816
------------------------- ------ ---------- --------
Total shareholders' equity 193,773 122,587
------------------------- ------ ---------- --------
Group Cashflow Statement
For the year ended 31 December 2006
2006 2005
Notes #000 #000
-------------------------- ------ ---------- ---------
Cash flows from operating activities
Operating cashflow 28 284,410 86,848
Interest received 2,278 1,400
Interest paid (13,187) (11,159)
Income tax received - 615
-------------------------- ------ ---------- ---------
Net cash generated from operating activities 273,501 77,704
-------------------------- ------ ---------- ---------
Cash flows from investing activities
Purchase of property, plant and equipment (174,027) (207,886)
Acquisition of subsidiary (net of cash acquired) 3 (73,952) -
Proceeds from disposal of property, plant and
equipment 9,956 -
Proceeds from disposal of foreign subsidiaries - 2,727
(net of cash disposed)
Investments in joint ventures and associates (6,408) (892)
------------------------- ------ ---------- ---------
Net cash used in investing activities (244,431) (206,051)
------------------------- ------ ---------- ---------
Cash flows from financing activities
Shares acquired by employee benefit trust (14,100) (1,100)
Purchase of treasury shares (12,033) -
Proceeds of borrowings 83,419 108,740
Repayments of borrowings (40,000) -
Proceeds from convertible bond issue 31 - 28,346
Proceeds from issuance of ordinary shares 212 -
Proceeds from exercise of share options 449 1,759
------------------------- ------ ---------- ---------
Net cash from financing activities 17,947 137,745
------------------------- ------ ---------- ---------
Net increase in cash and cash equivalents 47,017 9,398
Opening cash and cash equivalents 13,153 3,755
------------------------- ------ ---------- ---------
Closing cash and cash equivalents (Note 17) 60,170 13,153
------------------------- ------ ---------- ---------
Company Cashflow Statement
For the year ended 31 December 2006
2006 2005
Notes #000 #000
-------------------------- ------- --------- ---------
Cash flows from operating activities
Cash generated from operations 28 17,519 28,275
Interest received 20,215 10,552
Interest paid (6,756) (8,822)
Income tax paid - (204)
-------------------------- ------- --------- ---------
Net cash generated from operating activities 30,978 29,801
-------------------------- ------- --------- ---------
Cash flows from investing activities
Purchase of property, plant and equipment (458) (68)
Acquisition of subsidiary 3 (73,952) -
Net proceeds from disposal of foreign - 7,554
subsidiaries
Investments (4,295) (892)
Repayments (loans to) from subsidiaries 58,341 (167,876)
-------------------------- ------- --------- ---------
Net cash used in investing activities (20,364) (161,282)
-------------------------- ------- --------- ---------
Cash flows from financing activities
Shares acquired by employee benefit trust (14,100) (1,100)
Purchase of treasury shares (12,033) -
Proceeds from borrowings 83,419 108,740
Repayments of borrowings (40,000) -
Proceeds from convertible bond issue 31 - 28,346
Proceeds from issuance of ordinary shares 212 -
Proceeds from exercise of share options 449 1,759
-------------------------- ------- --------- ---------
Net cash from financing activities 17,947 137,745
-------------------------- ------- --------- ---------
Net increase in cash and cash equivalents 28,561 6,264
Opening cash and cash equivalents 15,539 9,275
-------------------------- ------- --------- ---------
Closing cash and cash equivalents 44,100 15,539
-------------------------- ------- --------- ---------
Notes to the Financial Statements
1. Accounting Policies for the year ended 31 December 2006
Basis of Preparation
These financial statements have been prepared in accordance with IFRS and IFRIC
interpretations endorsed by the European Union ('EU') and with those parts of
the Companies Act, 1985, applicable to companies reporting under IFRS. The
financial statements have been prepared under the historical cost convention as
modified by the revaluation of certain financial assets and liabilities
(including derivative instruments). A summary of the more important Group
accounting policies is set out below, together with an explanation of where
changes have been made to previous policies on the adoption of new accounting
standards in the year.
The preparation of financial statements requires the use of estimates and
assumptions that affect the reported amount of assets and liabilities at the
date of the financial statements and the reporting amount of income and expenses
during the year. Although these estimates are based on management's best
knowledge of the amount, event or actions, actual results ultimately may differ
from those estimates.
The financial information set out in these financial statements does not
constitute the company's statutory accounts for the years ended December 2006 or
2005. Statutory accounts for 2005 have been delivered to the Registrar of
Companies. The auditor's report on the 2005 statutory accounts was (i)
unqualified, (ii) did not include references to any matters to which the
auditors drew attention by way of emphasis without qualifying their report, and
(iii) did not contain any statements under 237(2) or (3) of the Companies Act
1985. The 2006 statutory accounts have not yet been delivered to the Registrar,
nor have the auditors yet reported on them.
Consolidation
Subsidiaries
Subsidiaries are entities over which the Group has the power to govern the
financial and operating policies, generally accompanying a shareholding of more
than one half of the voting rights. The existence and effect of potential voting
rights that are currently exercisable or convertible are considered when
assessing whether the Group controls another entity. Subsidiaries are fully
consolidated from the date on which control is transferred to the Group. They
are de-consolidated from the date on which control ceases.
The purchase method of accounting is used to account for the acquisition of
subsidiaries by the Group. The cost of an acquisition is measured as the fair
value of the assets given, equity instruments issued and liabilities incurred or
assumed at the date of exchange, plus costs directly attributable to the
acquisition. Identifiable assets acquired, liabilities and contingent
liabilities assumed in a business combination are measured initially at their
fair values at the acquisition date. The excess of the cost of acquisition over
the fair value of the Group's share of the identifiable net assets acquired is
recorded as goodwill. If the cost of acquisition is less than the fair value of
the net assets of the subsidiary acquired, the difference is recognised directly
in the income statement.
Inter-company transactions, balances and unrealised gains on transactions
between group companies are eliminated as part of the consolidation process.
Unrealised losses are also eliminated unless the transaction provides evidence
of an impairment of the asset transferred. Accounting policies of subsidiaries
have been changed where necessary to ensure consistency with the policies
adopted by the Group.
Critical estimates and judgements
The main estimates and judgements made by the Group included decommissioning
estimates, estimates of future capital expenditures used in the calculation of
depreciation, depletion and amortisation ('DD&A'), tax provisioning and
hydrocarbon reserve estimates. See accounting policy on each item for further
information.
1. Accounting Policies for the year ended 31 December 2006 (continued)
Investment in Associates
The Group's investment in its associates is accounted for under the equity
method of accounting. This is an entity in which the Group has significant
influence and which is neither a subsidiary nor a joint venture. The financial
statements of the associate are used by the Group to apply the equity method.
The reporting dates of the associate and the Group are identical and both use
consistent accounting policies.
The investment in associates is carried in the balance sheet at cost plus
post-acquisition changes in the Group's share of net assets of the associates,
less any impairment in value. The income statement reflects the share of the
results of operations of the associates.
Joint Ventures
The Group is engaged in oil and gas development and production through
incorporated and unincorporated joint ventures. The Group accounts for its share
of the results and net assets of these joint ventures as jointly controlled
assets.
In addition where the Group acts as operator to the joint venture, the gross
liabilities and receivables (including amounts due to or from non-operating
partners) of the joint venture are included in the Group consolidated balance
sheet.
Revenue Recognition
Revenue comprises the fair value for the sale of oil, gas and natural gas
liquids, net of VAT. Revenue is recognised when it is probable that the benefits
associated with the transaction will flow to the Group and the amounts can be
measured reliably.
Revenue is recognised as follows:
(a) Sale of goods
The sale of oil, gas and natural gas liquids follows an entitlement basis.
Consequently for sales in respect of oil liftings sold, adjustments for overlift
(liftings greater than production entitlement) and underlift (production
entitlement greater than liftings) are recorded against cost of sales at market
value.
(b) Tariff income
Tariff income is recognised when the products are physically transferred into a
vessel, pipe or other delivery mechanism.
Segmental reporting
Segmental reporting follows the Group's internal reporting structure, and
accordingly its primary segment reporting is by business segment. A business
segment is engaged in providing products within a particular economic
environment that is subject to risks and returns that are different from those
segments operating in other economic environments. In the opinion of the
directors the operations of the Group comprise two classes of business, oil
production and gas production.
Foreign Currency Translation
(a) Functional and presentation currency
Items included in the financial statements of each of the Group's entities are
measured using the currency of the primary economic environment in which the
entity operates ('the functional currency'). The consolidated financial
statements are presented in pounds sterling, the Group's functional and
presentation currency.
1. Accounting Policies for the year ended 31 December 2006 (continued)
(b) Transactions and balances
Foreign currency transactions are translated into the functional currency using
the exchange rates prevailing at the dates of the transactions. Foreign currency
gains and losses resulting from the settlement of such transactions and from the
translation at year-end exchange rates of monetary assets and liabilities
denominated in foreign currencies are recognised in the income statement, except
when deferred in equity as qualifying cashflow hedges.
Goodwill and fair value adjustments arising on the acquisition of a foreign
entity are treated as assets and liabilities of the foreign entity and
translated at the closing rate.
Goodwill
Goodwill represents the excess of the cost of an acquisition over the fair value
of the group's share of the net identifiable assets of the acquired subsidiary
at the date of acquisition. Goodwill on acquisition of subsidiaries is included
in 'intangible assets'. Separately recognised goodwill is tested annually for
impairment and carried at cost less accumulated impairment losses. Impairment
losses on goodwill are not reversed. Gains and losses on the disposal of an
entity include the carrying amount of goodwill relating to the entity sold.
Goodwill is allocated to cash-generating units for the purpose of impairment
testing. The allocation is made to those cash generating units or groups of cash
generating units that are expected to benefit from the business combination
which the goodwill arose.
Property, Plant and Equipment
Expenditure relating to oil and gas activities is capitalised in accordance with
the 'successful efforts' method of accounting. All capitalised costs associated
with exploration and developed fields are classified as tangible for the
purposes of these financial statements. Exploration costs are held on the
balance sheet under a separate category until they become developing or
producing, where upon they are transferred to the development and producing
assets category. Upon commencement of production these costs are amortised on a
unit of production basis that is calculated to write off the expected cost of
each asset over its life in line with the depletion of proved and probable
reserves.
During the year the Group carried out a review of its 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 year of #10.9 million.
Decommissioning estimates have been reviewed and revised in the period, as a
result of which the decommissioning provision has been increased by #0.7
million.
Acquisition costs relating to oil and gas activities are recorded at fair value
in accordance with the sale and purchase agreement.
All property, plant and equipment is shown at cost less subsequent depreciation
and impairment. Cost includes expenditure that is directly attributable to the
acquisition of the items. Subsequent costs are included in the asset's carrying
amount or recognised as a separate asset, as appropriate, only when it is
probable that future economic benefits associated with the item will flow to the
Group and the cost of the item can be measured reliably. All other repairs and
maintenance are charged to the income statement during the financial period in
which they are incurred.
Depreciation on other assets is calculated using the straight-line method to
allocate their cost less their residual values over their estimated useful
lives, as follows:
1. Accounting Policies for the year ended 31 December 2006 (continued)
Plant and machinery 10-33%
Office equipment 25%
Motor vehicles 25%
Buildings 5%
The assets' residual values and useful lives are reviewed, and adjusted if
appropriate, at each balance sheet date. An asset's carrying amount is written
down immediately to its recoverable amount if the asset's carrying amount is
greater than its estimated recoverable amount.
Gains and losses on disposals are determined by comparing proceeds with carrying
amount. These are included in the income statement.
Impairment of non-financial Assets
Assets that have an indefinite useful life are not subject to amortisation and
are tested annually for impairment. Assets that are subject to amortisation are
reviewed for impairment whenever events or changes in circumstances indicate
that the carrying amount may not be recoverable. An impairment loss is
recognised for the amount by which the asset's carrying amount exceeds its
recoverable amount. The recoverable amount is the higher of an asset's net
realisable value less costs to sell and value in use. For the purposes of
assessing impairment, assets are grouped at the lowest levels for which there
are separately identifiable cashflows. These cash-generating units ("CGUs") are
aligned to the business unit and sub-business unit structure the Group uses to
manage its business. Cash flows are discounted in determining the value in use.
Deferred Consideration
Deferred consideration relates to the future cash consideration payable in
respect of acquisitions which is contingent on the outcome of future events.
When an acquisition agreement provides for an adjustment to the consideration
contingent on future events, provision is made for that amount if the adjustment
is probable and can be measured reliably. The amount provided is included in the
cost of the acquisition. When the final amount payable is determined or when
revised estimates are made the acquisition cost and provision are adjusted
accordingly. Deferred consideration is recorded at its fair value.
Inventories
Inventories are stated at the lower of cost and net realisable value and
comprise oil in tanks and pipelines and materials. Cost values for stocks of oil
are calculated using a weighted average cost for the year.
Under/Overlift
Lifting or offtake arrangements for oil and gas produced in certain of the
Group's jointly owned operations are such that each participant may not receive
and sell its precise share of the overall production in each period. The
resulting imbalance between cumulative entitlement and cumulative production
less stock is 'underlift' or 'overlift'. Underlift and overlift are valued at
market value and included within debtors and creditors respectively. Movements
during an accounting period are adjusted through Cost of Sales such that Gross
Profit is recognised on an entitlement basis. The Group's share of any physical
stock is accounted for at the lower of cost and net realisable value.
Assets held for sale
Assets held for sale are stated at fair value on the basis that they are
available for immediate sale in their present condition, subject only to terms
that are usual and customary for sales of such assets and that the sale is
highly probable at the balance sheet date.
1. Accounting Policies for the year ended 31 December 2006 (continued)
Trade Receivables
Trade receivables are recognised and carried at original invoice amount less any
provision for impairment. A provision for impairment of trade receivables is
established when there is objective evidence that the Group will not be able to
collect all amounts due according to the original terms of the receivables.
Cash and Cash Equivalents
Cash and cash equivalents includes cash in hand, bank overdrafts and deposits
held at call with banks with maturity dates of less than three months. Bank
overdrafts are shown within borrowings in current liabilities on the balance
sheet.
Share Capital
Ordinary shares are classified as equity. Incremental costs directly
attributable to the issue of new shares or options are shown in equity as a
deduction, net of tax, from the proceeds. Incremental costs directly
attributable to the issue of new shares or options, for the acquisition of a
business are included in the cost of acquisition as part of the purchase
consideration.
Dividends on ordinary shares are not recognised as a liability or charged to
equity until they have been declared.
Where any Group company purchases the Company's equity share capital (Treasury
shares), the consideration paid, including any directly attributable incremental
costs (net of income taxes), is deducted from equity attributable to the
Company's equity holders until the shares are cancelled, reissued or disposed
of. Where such shares are subsequently sold or reissued, any consideration
received, net of any directly attributable incremental transaction costs and the
related income tax effects, is included in equity attributable to the Company's
equity holders.
The Group is deemed to have control of the assets, liabilities, income and costs
of its employee share benefit trusts ('EBT'). They have therefore been
consolidated in the financial statements of the Group. Shares acquired by and
disposed of by the EBT are recorded at cost. The cost of shares held by the EBT
is deducted from shareholders' equity.
Borrowings
Borrowings are recognised initially at fair value, net of transaction costs
incurred. Borrowings are subsequently stated at amortised cost; any difference
between the proceeds (net of transaction costs) and the redemption value is
recognised in the income statement over the period of the borrowings.
Borrowings are classified as current liabilities unless the Group has an
unconditional right to defer settlement of the liability for at least 12 months
after the balance sheet date.
Capitalised Interest
Interest is capitalised gross of related tax relief during the period of
construction, where it relates either to the financing of major projects with
long periods of development, or to dedicated financing of other projects. All
other interest is charged against income.
Derivative Financial Instruments and Hedging
Derivatives are initially recognised at fair value on the date a derivative
contract is entered into and are subsequently re-measured at their fair value.
The method of recognising the resulting gain or loss depends on whether the
derivative is designated as a hedging instrument and, if so, the nature of the
item being hedged. The Group designates derivatives as hedges of highly probable
forecast transactions (cashflow hedge).
1. Accounting Policies for the year ended 31 December 2006 (continued)
The Group documents at the inception of the transaction the relationship between
hedging instruments and hedged items, as well as its risk management objective
and strategy for undertaking various hedge transactions. The Group also
documents its assessment, both at hedge inception and on an ongoing basis, of
whether the derivatives that are used in hedging transactions are highly
effective in offsetting changes in cashflows of hedged items. At the point of
settlement, any payments or receipts relating to hedge transactions are included
in revenue.
Cashflow Hedge
The effective portion of changes in the fair value of derivatives that are
designated and qualify as cashflow hedges, are recognised in equity net of
deferred income tax. The gain or loss relating to the ineffective portion is
recognised immediately in the income statement.
Amounts accumulated in equity, including the associated deferred income taxes,
are recycled in the income statement in the periods when the hedged item will
affect profit or loss (for example, when the forecast sale that is hedged takes
place).
When a hedging instrument expires or is sold, or when a hedge no longer meets
the criteria for hedge accounting, any cumulative gain or loss existing in
equity at that time remains in equity and is recognised when the forecast
transaction is ultimately recognised in the income statement. When a forecast
transaction is no longer expected to occur, the cumulative gain or loss that was
reported in equity is immediately transferred to the income statement.
Derivatives that do not qualify for hedge accounting
Certain derivative instruments do not qualify for hedge accounting. Such
derivatives are classified as at fair value through profit or loss, and changes
in the fair value of any derivative instruments that do not qualify for hedge
accounting are recognised immediately in the income statement.
Fair value estimation
Fair value is the amount at which a financial instrument could be exchanged in
an arm's length transaction between informed and willing parties, other than a
forced or liquidation sale and excludes accrued interest. Where available,
market values are used to determine fair values. Where market values are not
available, fair values are calculated by discounting expected cash flows at
prevailing interest and exchange rates.
Taxation
The tax charge, including UK corporation tax and overseas corporate tax,
represents the sum of tax currently payable and deferred tax. Tax currently
payable is based on the taxable profit for the year. Taxable profit differs from
the profit reported in the income statement due to items that are not taxable or
deductible in any period and also due to items that are taxable or deductible in
a different period. The Group's liability for current tax is calculated using
tax rates enacted or substantively enacted at the balance sheet date.
Current UK Petroleum Revenue Tax (PRT) is charged as a tax expense on chargeable
field profits included in the profit and loss account and is deductible for UK
corporation tax.
Deferred income tax is provided in full, using the liability method, on
temporary differences arising between the tax bases of assets and liabilities
and their carrying amounts in the consolidated financial statements. However, if
the deferred income tax arises from initial recognition of an asset or liability
in a transaction other than a business combination, that at the time of the
transaction effects neither accounting nor taxable profit or loss, it is not
accounted for. Deferred income tax is determined using tax rates (and laws) that
have been enacted, or substantially enacted, by the balance sheet date and are
expected to apply when the related deferred income tax asset is realised or the
deferred income tax liability is settled.
1. Accounting Policies for the year ended 31 December 2006 (continued)
Deferred income tax assets are recognised to the extent that it is probable that
future taxable profit will be available against which the temporary differences
can be utilised.
Deferred income tax is provided on temporary differences arising on investments
in subsidiaries and associates, except where the timing of the reversal of the
temporary difference is controlled by the Group and it is probable that the
temporary difference will not reverse in the foreseeable future.
Operating leases
Rentals payable under operating leases are charged to the income statement on a
straight-line basis.
Pension costs
The Group pays contributions to personal pension schemes of employees, which are
administered independently of the Group. The Group has no further payment
obligations once the contributions have been paid. The contributions are
recognised as an employee benefit expense when they are due.
Share-based payments
The Group currently has various share based payment schemes for its employees
and Directors, details of which are given in the Directors' Remuneration Report.
The fair value of share-based awards is determined at the date of grant of the
award allowing for the effect of any market-based performance conditions. This
fair value, adjusted by the Group's estimate of the number of awards that will
eventually vest as a result of key performance measures, is expensed uniformly
over the vesting period. The corresponding credit is taken to the employee
benefit reserve. The proceeds on exercise of share options are credited to share
capital and share premium.
The fair values are calculated using a binomial option pricing model with
suitable modifications to allow for employee turnover after vesting and early
exercise. The inputs to the model include the share price at date of grant,
exercise price, expected volatility, expected dividends, risk free rate of
interest and patterns of early exercise of the plan participants.
Decommissioning
Provision for decommissioning is recognised in full at the commencement of oil
and natural gas production. The amount recognised is the present value of the
estimated future expenditure determined in accordance with local conditions and
requirements. A corresponding tangible fixed asset of an amount equivalent to
the provision is also created. This is subsequently depreciated as part of the
capital costs of the production and transportation facilities. Any change in the
present value of the estimated expenditure is reflected as an adjustment to the
provision and the fixed asset. Unwinding of discount is treated as a finance
cost.
Disclosure of impact of new and future accounting standards
The following standards, amendments and interpretations to published standards
were mandatory for the year ended 31 December 2006. The application of these
standards did not have a material impact on the financial statements.
IAS 21 (Amendment) Net investment in a foreign operation
IAS 39 (Amendment) Cash flow hedge accounting of forecast intra group
transactions
IAS 39 (Amendment) The fair value option
IAS 39 and IFRS 4 (Amendment) Financial guarantee contracts
1. Accounting Policies for the year ended 31 December 2006 (continued)
IFRS 1 (Amendment) First time adoption of international financial
reporting standards
IFRIC 4 Determining whether an arrangement contains a
lease
IFRIC 5 Rights to interest arising from decommissioning
restoration and environmental rehabilitation funds
IFRS 6 Exploration for and evaluation of mineral
resources.
The group has not yet adopted the following standards which are only effective
for periods commencing on or after 1 January 2007.
IFRS 7 'financial instruments; disclosures'
This standard consolidates IAS 30 and the disclosure requirements of IAS 32
relating to financial instruments. We do not anticipate that this standard will
have a material impact on the Group's financial statements.
IFRS 8 'operating segments'
This standard replaces IAS14 'segment reporting' and proposes that entities
adopt a management approach to reporting performance. We do not anticipate that
this standard will have a material impact on the Group's financial statements.
2. Segmental Reporting
Following the disposal of the Trinidadian operations in December 2005,
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. All of
the Group's activities are in the UK and Dutch sectors of the North Sea, which
is considered to be one geographical segment.
Primary segment - business segments
Oil business segment
The oil segment consists of all activities connected with the Group's oil
assets, currently 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 and the Greater Markham Area.
Segment results
Revenues Expenses Operating Profit
--------- -------- -------- -------- -------- -------- --------
Year ended Year ended Year ended Year ended Year ended Year ended
31 Dec 2006 31 Dec 2005 31 Dec 2006 31 Dec 2005 31 Dec 2006 31 Dec 2005
#000 #000 #000 #000 #000 #000
--------- -------- -------- -------- -------- -------- --------
Oil 127,188 53,290 (59,402) (30,914) 67,786 22,376
Gas 233,063 110,813 (110,952) (47,706) 122,111 63,107
Unallocated
Corporate - - (7,977) (11,977) (7,977) (11,977)
--------- -------- -------- -------- -------- -------- --------
Total 360,251 164,103 (178,331) (90,597) 181,920 73,506
--------- -------- -------- -------- -------- -------- --------
2. Segmental Reporting (continued)
Segment assets and liabilities
----------------- --------- --------- ---------- ---------
Oil Gas Unallocated Total
#000 #000 Corporate #000
#000
----------------- --------- --------- ---------- ---------
At 31 December 2006:
Segment assets 294,640 526,139 85,721 906,500
Segment liabilities (55,202) (73,321) (472,602) (601,125)
----------------- --------- --------- ---------- ---------
Net assets / (liabilities) 239,438 452,818 (386,881) 305,375
----------------- --------- --------- ---------- ---------
At 31 December 2005:
Segment assets 246,835 276,416 28,564 551,815
Segment liabilities (99,818) (54,529) (263,636) (417,983)
----------------- --------- --------- ---------- ---------
Net assets / (liabilities) 147,017 221,887 (235,072) 133,832
----------------- --------- --------- ---------- ---------
Segment assets and liabilities are presented before the elimination of
inter-segment trading balances. Unallocated assets and liabilities includes
investments, convertible loan notes, income tax, deferred tax and cash and
borrowings where this relates to the financing of the Group's operations.
Other segment items
----------------- --------- --------- ---------- ---------
Oil Gas Unallocated Total
#000 #000 Corporate #000
#000
----------------- --------- --------- ---------- ---------
At 31 December 2006
Capital expenditure
- Property, plant and equipment 60,963 102,281 470 163,714
- Acquisitions - 157,715 - 157,715
- Depreciation (26,246) (61,482) (514) (88,242)
- Disposals - (9,956) - (9,956)
----------------- --------- --------- ---------- ---------
34,717 188,558 (44) 223,231
----------------- --------- --------- ---------- ---------
At 31 December 2005
Capital expenditure
- Property, plant and equipment 95,300 120,777 899 216,976
- Depreciation (15,098) (28,820) (396) (44,314)
- Disposals (14,609) - - (14,609)
----------------- --------- --------- ---------- ---------
65,593 91,957 503 158,053
----------------- --------- --------- ---------- ---------
3. Business combinations
Acquisitions in 2006
Acquisition of CH4 Energy Ltd.
On 2 August 2006 the Group acquired 100% of the voting shares of CH4 Energy Ltd
(CH4), an unlisted company based in the United Kingdom.
The total cost of the combination was #154.5 million and comprised cash, an
issue of equity instruments, repayment of debt and costs directly attributable
to the combination. The Group issued 9.05 million ordinary shares with a fair
value of #7.775 each, being the published price of the shares of Venture
Production plc at the date of exchange.
The provisional fair value of the identifiable assets and liabilities of CH4 as
at the date of acquisition and the corresponding carrying amounts immediately
before the acquisition are shown below. The fair value adjustments relate
primarily to the recognition at fair value of the acquired interests in oil and
gas assets, the impact of the adoption of Venture accounting policies and the
recognition of deferred tax based on the fair value of assets and liabilities
acquired as required by IAS 12 'Income Taxes'. The impact of recognising
deferred tax on the fair value of the assets and liabilities acquired is to
reduce the value of the net asset acquired and thereby increase the goodwill
arising on acquisition.
3. Business combinations (continued)
Acquiree's Adjustments Provisional
carrying amount fair value
#000 #000 #000
---------------------- ----------- --------- ---------
Property, plant and equipment 70,867 86,848 157,715
Trade receivables 9,737 - 9,737
Assets classified as held for sale 3,391 - 3,391
Cash and cash equivalents 9,154 - 9,154
----------- --------- ---------
93,149 86,848 179,997
----------- --------- ---------
Trade payables (9,348) - (9,348)
Other current liabilities (7,480) (1,363) (8,843)
Provision for decommissioning costs (8,935) 4,214 (4,721)
Deferred income tax liability (699) (41,972) (42,671)
Deferred income and consideration (633) - (633)
Liabilities classified as held for sale (1,093) - (1,093)
----------- --------- ---------
Net assets 112,688
Goodwill arising on acquisition 41,785
---------
Total consideration 154,473
---------
Cost: #000
---------
Cash paid 17,841
Shares issued, at fair value 70,364
Costs associated with the acquisition 456
Loans settled subsequent to acquisition 65,812
---------
Total consideration 154,473
---------
Cash outflow on acquisition: #000
---------
Net cash acquired with subsidiary (including held for sale assets) 10,157
Cash paid (17,841)
Costs associated with the acquisition (456)
Loan settled subsequent to acquisition (65,812)
---------
Net cash outflow (73,952)
---------
The results of the Group, as if the above acquisition had been made at the
beginning of the year, would have been as follows:
#000
Revenue 384,931
Profit for the year 82,923
The acquired business earned cumulative revenues of #24.7 million from the
beginning of the year to the acquisition date. From the date of acquisition to
31 December 2006, the acquisition contributed #14.6 million to revenues and #4
million to profit for the year.
4. Gross profit and operating profit
The following items have been charged/(credited) in arriving at gross profit:
2006 2005
#000 #000
-------------------------- ---------- ---------
Underlift (1,791) (7,966)
Operating expenses 74,288 45,742
Well workover expenses 7,706 1,228
Depreciation, depletion and amortisation 88,242 44,314
4. Gross profit and operating profit (continued)
The following items have been charged/(credited) in arriving at operating
profit:
2006 2005
#000 #000
-------------------------- --------- ---------
Employee expenses (Note 29) 8,282 7,312
Share based payments (Note 14) 10,169 5,879
Operating lease rentals:
- Land and buildings 384 289
Foreign currency losses 2,465 1,552
Services provided by the group's auditor and network firms
During the year the group obtained the following services from the group's
auditor at costs as detailed below:
2006 2005
#000 #000
----------------------------- --------- ---------
Audit services:
- fees payable to company auditor for the audit of
parent company and consolidated accounts 182 113
Non-audit services:
- fees payable to the company's auditor for the audit of 63 20
company's subsidiaries pursuant to legislation
- other services pursuant to legislation 15 49
- tax services 74 142
----------------------------- --------- ---------
334 324
----------------------------- --------- ---------
5. Other operating income
Other operating income of #3.4 million (2005: #6.8 million) consists of #2.3
million proceeds from an insurance claim (2005: #6.5 million) relating to lost
revenue on the Mallard field (2005: Brae Riser) and the remainder relates to the
disposal of excess equipment.
6. Finance income and expense
2006 2005
Finance Income #000 #000
----------------------------- --------- ---------
Bank interest 2,277 1,296
Interest receivable from commodity hedges - 128
Interest receivable on convertible loan notes 270 -
----------------------------- --------- ---------
2,547 1,424
----------------------------- --------- ---------
2006 2005
Finance Expense #000 #000
----------------------------- --------- ---------
Interest payable on loans repayable in less than 5 years 4,476 4,030
Interest payable on convertible bonds (Note 31) 531 536
Unwinding charge for decommissioning provision (Note 22) 3,991 3,771
Amortisation of loan facility expenses 1,638 3,452
Other interest 101 805
----------------------------- --------- ---------
10,737 12,594
----------------------------- --------- ---------
7. Income tax expense
Analysis of charge for the year
2006 2005
#000 #000
-------------------------- --------- ---------
Current tax - current tax charge - UK 45 185
Current tax - adjustments in respect of prior years 15,914 -
Current tax - current tax charge - Overseas 711 -
--------- ---------
16,670 185
--------- ---------
Deferred tax - relating to origination and reversal of
timing differences 86,289 27,514
Deferred tax - adjustments in respect of prior years (7,817) (2,948)
--------- ---------
78,472 24,566
-------------------------- --------- ---------
Tax charge for the year 95,142 24,751
-------------------------- --------- ---------
Adjustments to current tax relate to the disclaimer of capital allowances in
2005. Adjustments to deferred tax relate to the net impact of disclaiming
capital allowances and restating the opening deferred tax liability for the
increase in supplementary tax from 10% to 20%.
The tax for the period is higher (2005: higher) than the standard rate of
corporation tax in the UK (30%). The differences are explained below:
2006 2005
#000 #000
-------------------------- --------- ---------
Profit on ordinary activities before tax 176,735 55,849
-------------------------- --------- ---------
Tax @ 30% 53,021 16,755
Effects of:
Supplementary tax charge 37,122 7,605
Adjustments to tax in respect of prior periods 8,097 (2,948)
Unrecognised deferred tax asset - 4,381
Expenses not deductible for tax purposes 1,315 554
Trinidad disposal/impairment provision - 458
Share options exercised (1,328) (2,100)
Other - 46
Prior year losses not recognised utilised in period (3,085) -
-------------------------- --------- ---------
Total taxation 95,142 24,751
-------------------------- --------- ---------
Disallowable items mainly represent capital acquisition costs that are
depreciated but are not eligible for capital allowances.
8. Earnings per ordinary share
Basic earnings per share is calculated by dividing the profit attributable to
equity holders of the Company by the weighted average number of ordinary shares
in issue during the year, excluding ordinary shares purchased by EBT trusts and
treasury shares.
2006 2005
Profit attributable to equity holders of the Company
(#000) 81,593 31,098
Weighted average number of ordinary shares in issue
(thousands) 126,565 123,004
--------- ---------
Basic earnings per share (pence per share) 64.5 25.3
--------- ---------
Diluted earnings per share is calculated by adjusting the weighted average
number of ordinary shares outstanding to assume conversion of all dilutive
potential ordinary shares. The Company has two categories of dilutive potential
ordinary shares: convertible debt and share options. The convertible debt is
assumed to have been converted into ordinary shares and the net profit is
adjusted to eliminate the interest expense less the tax effect. For the share
options a calculation is performed to determine the number of shares that could
have been acquired at fair value (determined as the average annual market share
price of the Company's shares) based on the monetary value of the subscription
rights attached to outstanding share options.
8. Earnings per ordinary share (continued)
The number of shares calculated as above is deducted from the number of
outstanding share options to give the number of share options with dilutive
effect.
2006 2005
#000 #000
----------------------------- --------- ---------
Profit attributable to equity holders of the Company 81,593 31,098
Interest expense on convertible debt (net of tax) 265 322
--------- ---------
Profit used to determine diluted earnings per share 81,858 31,420
Weighted average number of ordinary shares in issue
(thousands) 126,565 123,004
- Adjustments for: 6,118 3,059
- assumed conversion of convertible debt (thousands) 5,971 5,169
- share options (thousands)
Weighted average number of ordinary shares for diluted
earnings per share (thousands) 138,654 131,232
--------- ---------
- Diluted earnings per share (pence per share) 59.0 23.9
--------- ---------
9. Profit for the financial year
As permitted by section 230 of the Companies Act 1985, the Company's Income
Statement has not been included in these financial statements. The Company's
profit for the financial year was #15,149,162 (2005: profit - #4,360,000).
10. Property, plant and equipment
Group Exploration Development Buildings Plant equipment Office Total
assets & Producing & motor equipment
assets vehicles
#000 #000 #000 #000 #000 #000
-------------- ---------- ----------- --------- ---------- --------- ---------
Cost
At 1 January
2006 2,718 525,046 324 - 1,829 529,917
Additions 5,280 157,964 49 - 421 163,714
Acquisitions - 157,715 - - - 157,715
Disposals - (9,956) - - - (9,956)
-------------- ---------- ----------- --------- ---------- --------- ---------
At 31 December
2006 7,998 830,769 373 - 2,250 841,390
-------------- ---------- ----------- --------- ---------- --------- ---------
Depreciation
At 1 January
2006 - 87,141 62 - 1,311 88,514
Charge for the
year - 87,728 18 - 496 88,242
-------------- ---------- ----------- --------- ---------- --------- ---------
At 31 December
2006 - 174,869 80 - 1,807 176,756
-------------- ---------- ----------- --------- ---------- --------- ---------
Net book amount
At 31 December
2006 7,998 655,900 293 - 443 664,634
-------------- ---------- ----------- --------- ---------- --------- ---------
10. Property, plant and equipment (continued)
Group Exploration Development & Buildings Plant equipment Office Total
assets Producing & motor equipment
assets vehicles
#000 #000 #000 #000 #000 #000
-------------- ---------- ----------- --------- ---------- --------- ---------
Cost
At 1 January
2005 - 334,692 352 264 2,117 337,425
Additions 2,718 213,359 20 725 154 216,976
Disposals - (23,005) (48) (989) (442) (24,484)
-------------- ---------- ----------- --------- ---------- --------- ---------
At 31 December
2005 2,718 525,046 324 - 1,829 529,917
-------------- ---------- ----------- --------- ---------- --------- ---------
Depreciation
At 1 January
2005 - 52,515 69 98 1,393 54,075
Charge for the
year - 43,918 18 91 287 44,314
Relating to
disposals - (9,292) (25) (189) (369) (9,875)
-------------- ---------- ----------- --------- ---------- --------- ---------
At 31 December
2005 - 87,141 62 - 1,311 88,514
-------------- ---------- ----------- --------- ---------- --------- ---------
Net book amount
At 31 December
2005 2,718 437,905 262 - 518 441,403
-------------- ---------- ----------- --------- ---------- --------- ---------
Included in property, plant and equipment at 31 December 2006 is an amount of
#199,817,194 (2005: #132,497,583) relating to expenditure for assets under
construction.
Additions within producing assets include capitalised interest of #6,192,171
(2005: #3,112,000). Interest for the year has been charged at a weighted average
of 5.77% (2005: 5.26%) on that proportion of Group loan balances drawn down to
finance assets during their development phase.
Company Buildings Office Total
equipment
#000 #000 #000
--------------------- -------- -------- -------
Cost
At 1 January 2006 324 1,829 2,153
Additions 49 421 470
--------------------- -------- -------- -------
At 31 December 2006 373 2,250 2,623
--------------------- -------- -------- -------
Depreciation
At 1 January 2006 62 1,311 1,373
Charge for the year 18 496 514
--------------------- -------- -------- -------
At 31 December 2006 80 1,807 1,887
--------------------- -------- -------- -------
Net book amount
At 31 December 2006 293 443 736
Company Buildings Office Total
equipment
#000 #000 #000
--------------------- -------- -------- -------
Cost
At 1 January 2005 324 1,761 2,085
Additions - 68 68
--------------------- -------- -------- -------
At 31 December 2005 324 1,829 2,153
--------------------- -------- -------- -------
Depreciation
At 1 January 2005 46 1,079 1,125
Charge for the year 16 232 248
--------------------- -------- -------- -------
At 31 December 2005 62 1,311 1,373
--------------------- -------- -------- -------
Net book amount
At 31 December 2005 262 518 780
--------------------- -------- -------- -------
11. Intangible assets
Additions during the year relate to goodwill arising on the acquisition of CH4
Energy Ltd (#41,785,000) and the establishment of North Sea Gas Partners Ltd
(#1,430,000).
The Group tests goodwill annually for impairment, or more frequently, if there
are any indications that goodwill may be impaired. Goodwill acquired through
business combinations is allocated, at acquisition, to cash generating units
(CGUs), that are expected to benefit from that business combination. The CGU
related to the CH4 acquisition is the Greater Markham Area.
The recoverable amounts of the CGUs are determined from value in use
calculations. The key assumptions for the value in use calculations are those
regarding future production, oil and gas prices, operating costs and discount
rates.
Group Company
2006 2005 2006 2005
Goodwill #000 #000 #000 #000
--------------------- -------- -------- -------- --------
Cost
At 1 January - - - -
Additions 43,215 - - -
--------------------- -------- -------- -------- --------
At 31 December 43,215 - - -
--------------------- -------- -------- -------- --------
Aggregate impairment
At 1 January - - - -
Impairment for the year - - - -
--------------------- -------- -------- -------- --------
At 31 December - - - -
--------------------- -------- -------- -------- --------
Net carrying amount
At 31 December 43,215 - - -
--------------------- -------- -------- -------- --------
12. Assets classified as held for sale and disposal groups
On completion of the acquisition of CH4 Energy Limited, the Group decided to
dispose of its interest in CH4 Pipelines Limited to its associate company, North
Sea Infrastructure Partners Limited. At 31 December 2006, negotiations were at
an advanced stage and the disposal of the Group's interest in the Company was
expected to complete in early 2007.
The major classes of assets and liabilities of CH4 Pipelines Limited classified
as held for sale as at 31 December are as follows:
2006 2005
#000 #000
------------------------------ --------- ---------
Assets of subsidiary held for sale: 2,218 -
Property, plant and equipment; 170 -
Trade and other receivables; 1,003 -
Cash and cash equivalents
------------------------------ --------- ---------
Total assets 3,391 -
------------------------------ --------- ---------
------------------------------ --------- ---------
Liabilities of subsidiary held for sale: (4) -
Trade and other payables; (615) -
Deferred tax; (335) -
Deferred income; (139) -
Provisions:
------------------------------ --------- ---------
Total liabilities (1,093) -
------------------------------ --------- ---------
13. Investments
Associates
Group Company
2006 2005 2006 2005
#000 #000 #000 #000
--------------------- -------- -------- -------- --------
At 1 January 5,516 - 5,516 -
Acquisition of associate 4,978 4,624 - 4,624
Acquisition of additional share capital - 892 - 892
Share of profit 604 - 604 -
--------------------- -------- -------- -------- --------
At 31 December 11,098 5,516 6,120 5,516
--------------------- -------- -------- -------- --------
Subsidiaries and joint ventures
Group Company
2006 2005 2006 2005
#000 #000 #000 #000
--------------------- -------- -------- -------- --------
At 1 January - - 15 15
Acquisition of subsidiaries - - 158,756 -
--------------------- -------- -------- -------- --------
At 31 December - - 158,771 15
--------------------- -------- -------- -------- --------
Acquisitions of subsidiaries during the year relate to the acquisition of CH4
for #154.5 million (Note 3) and Hummingbird Oil PTE Ltd for #4.2 million.
Acquisitions of associates relate to the acquisition of North Sea Infrastructure
Partners Ltd for #5.0 million.
The Company's principal subsidiaries and joint venture undertakings at 31
December 2006 were as follows:
-------------------- -------------- --------- ----------
Name Nature of business Country of Percentage of
registration/ nominal
incorporation share capital &
voting rights
Venture Production Trustee company Scotland 100%
Trustees
Limited
Venture Production
Company Oil and natural gas Scotland 100%
(North Sea) Limited production
Venture Production
(North Oil and natural gas Scotland 100%
Sea Developments) production
Limited
Venture Production
(Services) Limited Services Scotland 100%
Venture Infrastructure
Limited Investment Scotland 100%
Venture Investment
Holdings Investment Scotland 100%
Limited
North Sea Gas Partners Natural gas production Jersey 33.3%
Ltd*
CH4 Energy Limited Oil and natural gas England 100%
production
Hummingbird Oil PTE Investment Singapore 100%
Limited
* North Sea Gas Partners Ltd is a joint venture undertaking.
All subsidiary undertakings are consolidated in the Group financial statements,
whilst interests in joint ventures are accounted for using proportional
consolidation. In the financial statements of the Company shares in subsidiary
undertakings are stated at cost.
The gross result of the group's associates and joint ventures, all of which are
unlisted, and its gross assets (including liabilities) are as follows:
13. Investments (continued)
------------ --------- ------ ------- ------- -------- ------
Name Country of Assets Liabilities Revenues Profit/ Interest
incorporation (loss)
#000 #000 #000 #000
------------ --------- ------ ------- ------- -------- ------
2005
Ten Degrees
North Ltd Trinidad 22,003 (8,620) - - 40%
2006
Ten Degrees
North Ltd Trinidad 22,874 (9,577) 11,833 1,510 40%
North Sea
Infrastructure
Partners Ltd Scotland 19,076 (9,088) - - 49.9%
Sevan
Production PTE
Ltd Singapore 35,951 (15,840) - (296) 20%
North Sea Gas
Partners Ltd* Jersey 37,261 (11,081) - (407) 33.3%
------------ --------- ------ ------- ------- -------- ------
14. Share based payments
The Group currently has various share based payment schemes for its employees,
details of which are given in the Directors' Remuneration Report.
The charge in the Group and Company income statement for these schemes is
#10,169,054 (2005: #5,878,934) of which #5,611,887 (2005: #3,846,351) related to
the 2003 Long Term Incentive Plan ("2003 LTIP"), #678,955 (2005: Nil) related to
the Long Term Share Incentive Plan 2006 ("2006 LTIP"), #1,718,307 (2005:
#537,656) related to the Annual Deferred Share Bonus Plan, #614,307 (2005: Nil)
related to the Employee Annual Bonus Plan, and #1,545,598 (2005: #1,494,927)
related to other schemes.
2003 Long Term Incentive Plan
There are currently 11 employees participating in this scheme. For the purposes
of calculating the fair value of the awards a binomial pricing model has been
used. The share price volatility of 40% (2005: 40%) is based on the expected
volatility from historic volatilities of other similar companies, together with
the limited historical data of the Group. The risk free rate of return of
4%-4.5% (2005: 4%-4.5%) is based on the spot yield gilts with a term equal to
the expected lifetime of the awards. A dividend yield of 0% (2005: 0%) is used
in the calculation.
The weighted average of the Group's estimate of the proportion of the awards
that will vest under the three performance targets in 2006 is approximately 125%
(2005: 92%). Awards are provisional because they are dependent on the
performance targets being met and also on continuing employment of the
participants. All outstanding awards under the LTIP will vest after 31 December
2006 subject to all performance targets being met.
50,000 awards were made under the 2003 LTIP during the year (2005: 1,275,000)
with a fair value of #6.82 (2005: #2.02 to #4.37). No awards were forfeited in
the year (2005: 75,000). At 31 December 2006 the number of outstanding awards
was 4,375,000 (2005: 4,325,000). 600,000 of the awards outstanding at 31
December 2006 which are in respect of leavers from the Group between 2004 and
2006, are now restricted to a maximum of 100% of the award on vesting.
2006 Long Term Share Incentive Plan
There are currently 12 employees participating in this scheme. For the purposes
of calculating the fair value of the awards subject to market-based performance
conditions a Monte Carlo pricing model has been used. The share price volatility
of 34% is based on the historical data of the Group. The risk free rate of
return of 4.7% is based on the implied yield available on zero coupon gilts with
a term remaining equal to the expected lifetime of the awards. A dividend yield
of 0% is used in the calculation.
14. Share based payments (continued)
The weighted average of the Group's estimate of the proportion of awards that
will vest under the three performance targets in 2006 is 75%. This does not
allow for failure to satisfy market-based performance conditions, as these are
built into the fair value. Awards are provisional because they are dependent on
the performance targets being met and also on continuing employment of the
participants. All outstanding awards under the LTIP will vest after 31 December
2010 subject to all performance targets being met and the individuals remaining
in employment.
828,323 awards were made under the 2006 LTIP during the year with an average
fair value of #5.03. No awards were forfeited in the year.
Annual Deferred Share Bonus Plan (ADSBP)
Nine Executive Directors and Senior Managers are members of the ADSBP, which was
introduced in 2005. The scheme comprises both share and cash awards as
individuals awarded grants under the ADSBP can elect to take a proportion of the
bonus in cash and the remaining awards as deferred shares.
Shares in respect of the 2006 award will be released on 1 January 2009. If the
individual leaves before 1 January 2009 then the shares are forfeited. The
estimated proportion of awards to be taken as shares and cash are 70% and 30%
respectively.
For the purposes of calculating the fair value of the share based awards a
binomial pricing model has been used. The share price volatility used of 31%
(2005: 40%), the risk free rate of return of 4.4% (2005: 4%) and the dividend
yield of 0% (2005: 0%) are derived in a consistent manner to those used for the
2006 LTIP. The charge for awards to be taken in shares is calculated using a
fair value of #105 per #100 of bonus to be taken as shares (2005: #110 per #100
of bonus).
Employee Annual Bonus Plan (EABP)
All staff excluded from participation in the ADSBP are eligible to participate
in the EABP. The scheme comprises both share and cash awards as individuals
awarded grants under the EABP can elect to take a proportion of the bonus in
cash and the remaining awards as deferred shares.
Shares in respect of the 2006 award will be released on 1 January 2009. If the
individual leaves before 1 January 2009 then the shares are forfeited. The
estimated proportion of awards to be taken as shares and cash are 30% and 70%
respectively.
For the purposes of calculating the fair value of the share based awards a
binomial pricing model has been used. The share price volatility used of 31%,
the risk free rate of return of 4.4% and the dividend yield of 0% are derived in
a consistent manner to those used for the 2006 LTIP. The charge for awards to be
taken in shares is calculated using a fair value of #105 per #100 of bonus to be
taken as shares.
Other Schemes
Details of the Group's other share based plans are included in the Directors'
Remuneration Report.
In respect of these plans 45,000 options were granted during the year with a
weighted average fair value of #2.59. The fair value was calculated using a
binomial pricing model. The volatility of 40%, risk free discount rate of 5.0%
and dividend yield of 0% have been calculated consistently with the assumptions
used for the 2006 LTIP. Early exercise has been allowed for by assuming 50% of
awards are exercised when they are 20% in the money.
14. Share based payments (continued)
690,342 options were exercised during the year (2005: 1,930,514) and 450 options
lapsed during the year (2005: 27,150). The weighted average price of options
exercised during the year was #1.70 (2005: #0.89). The number of options to
subscribe for shares outstanding at 31 December was 2,821,300 (2005: 3,473.391).
The range of exercise prices for options outstanding at 31 December was #0.44 to
#5.88 (2005: #0.44 to #4.77). The weighted average remaining contractual life of
outstanding share options is 5.5 years (2005: 5.6 years).
The charge in the Group income statement for these schemes is #520,305 (2005:
#296,181).
National Insurance charges relating to these schemes totalled #1,025,293 (2005:
#1,198,746).
15. Inventories
Group Company
2006 2005 2006 2005
#000 #000 #000 #000
---------------------- -------- ------- -------- -------
Crude oil 1,385 1,500 - -
Materials and supplies 1,798 620 - -
---------------------- -------- ------- -------- -------
3,183 2,120 - -
---------------------- -------- ------- -------- -------
16. Trade and other receivables
Group Company
2006 2005 2006 2005
#000 #000 #000 #000
---------------------- -------- ------- -------- -------
Amounts falling due within one year:
Trade receivables - net 25,822 23,739 - -
Other debtors and accrued income 53,108 55,519 2,724 888
Prepayments 11,497 4,560 49 4,391
Amounts due from subsidiary undertaking - - - 33,975
---------------------- -------- ------- -------- -------
90,427 83,818 2,773 39,254
---------------------- -------- ------- -------- -------
Group Company
2006 2005 2006 2005
#000 #000 #000 #000
---------------------- -------- ------- -------- -------
Amounts falling due after one year:
Amounts due from subsidiary - - 227,995 261,982
undertakings
Convertible loan notes receivable 5,376 5,805 5,376 5,805
---------------------- -------- ------- -------- -------
5,376 5,805 233,371 267,787
---------------------- -------- ------- -------- -------
The Company has confirmed that amounts due from subsidiary undertakings will not
be repayable within one year.
The convertible loan notes receivable of $10,000,000 were issued by Ten Degree
North Energy Ltd (TDNEL) on 19 December 2005 as part consideration in respect of
the disposal of Venture Production Trinidad Ltd (VPT). The notes are denominated
in US Dollar and are redeemable by TDNEL in $500,000 tranches in each year from
2010 to the final redemption date in 2014. TDNEL may redeem $5,000,000 of the
notes at par value at any time in the first 24 months after issue. The notes
accrue interest at rates of 2% in the period to 31 December 2006, 3% from 1
January 2007 to 31 December 2009 and 9% from 1 January 2010 to the final
redemption date.
A conversion event is a sale or qualifying IPO or private placement of TDNEL.
Upon a conversion event and subject to the valuation of TDNEL meeting certain
criteria at that time, the Company can convert up to $5,000,000 of the notes
into ordinary share capital of TDNEL at a conversion price of $1,500 per share.
The loan notes are valued at the year end at #5,376,000 using year-end exchange
rates.
17. Cash and cash equivalents
Group Company
2006 2005 2006 2005
#000 #000 #000 #000
-------------------- -------- -------- -------- --------
Cash in hand and at bank 19,342 13,153 7,608 15,539
Short term deposits 39,825 - 36,492 -
-------------------- -------- -------- -------- --------
59,167 13,153 44,100 15,539
-------------------- -------- -------- -------- --------
For the purposes of the cash flow statements, cash and cash equivalents comprise
the following at 31 December:
Group Company
2006 2005 2006 2005
#000 #000 #000 #000
-------------------- -------- -------- -------- --------
Cash in hand and at bank 19,342 13,153 7,608 15,539
Short term deposits 39,825 - 36,492 -
Net cash in hand and at bank of disposal
group held for sale 1,003 - - -
-------------------- -------- -------- -------- --------
60,170 13,153 44,100 15,539
-------------------- -------- -------- -------- --------
18. Trade and other payables
Group Company
2006 2005 2006 2005
#000 #000 #000 #000
-------------------- -------- -------- -------- --------
Amounts falling due within one year:
Trade payables 7,015 6,098 265 541
Accruals and deferred income 42,981 39,132 11,831 6,350
Other payables 25,491 16,166 9,571 3,740
Social security and other taxes 384 374 276 374
Deferred consideration 5,718 - - -
-------------------- -------- -------- -------- --------
81,589 61,770 21,943 11,005
-------------------- -------- -------- -------- --------
19. Financial liabilities - borrowings
Group Company
2006 2005 2006 2005
#000 #000 #000 #000
-------------------- -------- -------- -------- --------
Bank loan (secured) (Note 23) 216,120 172,703 216,120 172,703
Convertible bond (Notes 23 and 31) 29,801 29,122 29,801 29,122
-------------------- -------- -------- -------- --------
245,921 201,825 245,921 201,825
-------------------- -------- -------- -------- --------
The bank loan is secured by a bond and floating charge over the assets of the
Group. The loan bears rates of interest, based on relevant national LIBOR
equivalents, which are fixed in advance for periods of between one month and six
months. The loan is repayable on 30 June 2010.
During the year the Group took on additional loans of #83.0 million to assist
with the funding of the acquisition of CH4 Energy Ltd (Note 3).
20. Deferred income tax liability/(asset)
Group Company
2006 2005 2006 2005
#000 #000 #000 #000
--------------------- -------- -------- -------- --------
At 1 January 46,953 39,539 (6,520) (3,684)
Profit and loss charge (Note 7) 78,472 24,566 308 1,401
Taken to equity:
- Employee share benefits (8,398) (4,287) (8,398) (4,287)
- Derivative financial liabilities 26,160 (14,356) - -
Deferred tax liability arising on
licence acquisitions 1,516 1,491 - -
Deferred tax on business combination 43,286 - - -
Other 1,311 - 1,245 -
Liability classified as held for sale (615) - - -
--------------------- -------- -------- -------- --------
At 31 December 188,685 46,953 (13,365) (6,570)
The total deferred tax liability at 31 December 2006 comprised accelerated
capital allowances of #211,715,000 (2005: #121,914,000), IAS 12 deferred tax
liability of #58,450,000 (2005: #18,076,000), partially offset by tax losses of
#63,451,000 (2005: #57,885,000) and other deferred tax assets of #18,029,000
(2005: #35,152,000).
Deferred tax assets of #1,164,000 (2005: #4,381,000) have not been recognised.
Deferred tax assets and liabilities are only offset where there is a legally
enforceable right of offset and there is an intention to settle the balances
net.
21. Other non-current liabilities
Group Company
2006 2005 2006 2005
#000 #000 #000 #000
-------------------- -------- -------- -------- --------
Deferred consideration 5,158 11,933 - -
-------------------- -------- -------- -------- --------
Deferred consideration relates to amounts payable in respect of the purchase of
various interests in oil and gas assets, the timing of which is dependent upon
the attainment of certain field development and production milestones. The
expected maturity of these amounts are included in Note 23.
22. Provisions
Provisions for decommissioning Group Company
2006 2005 2006 2005
#000 #000 #000 #000
--------------------- ------- -------- -------- --------
At 1 January 52,505 47,649 - -
Liability relating to disposal of - (3,014) - -
subsidiaries
Liability on acquisition of subsidiary 4,860 - - -
Increased provision on existing assets 614 4,099 - -
Liability classified as held for sale (139) - - -
Unwinding charge for the year (Note 6) 3,991 3,771 - -
--------------------- ------- -------- -------- --------
At 31 December 61,831 52,505 - -
--------------------- ------- -------- -------- --------
These decommissioning costs are expected to be incurred in the period from 2007
to 2023. The provision has been based upon existing technology, current
legislation requirements and discounted using a rate of 7.5% (2005: 7.5%). The
estimated decommissioning costs and the pre-tax discount rate applied take into
account the effects of inflation and risks and uncertainties concerning amounts
to be settled in the future.
23. Financial instruments
The main risks arising from the Group's financial instruments are commodity
price risk, foreign currency risk, interest rate risk, liquidity risk and credit
risk. The Board reviews and agrees policies for managing each of these risks and
they are summarised below.
Commodity price risk
To manage commodity price risk and deliver stability to the investment programme
the Group's policy is to allow hedging of commodity price exposure up to 50% of
its oil and gas production in the UK. In exceptional circumstances, and only
with the prior approval of the Board, up to 75% of such production may be
hedged. Hedges have been put in place with a variety of providers.
Foreign currency risk
In general, the Group's revenues in crude oil sales are denominated in US
dollars while its gas sales revenues are denominated in pounds sterling. Where
possible, the Group's policy is to reduce significant exposures to movements in
foreign currency exchange rates through hedging foreign currency exposure for up
to 50% of forecast net US dollar revenues.
The Group marks to market these forward contracts and thus changes in the
forward contract fair values are booked to the income statement and reverse in
the income statement over the term of the contracts.
Interest rate risk
The Group finances its operations through a mixture of retained profits, bank
borrowings and convertible bonds. Group policy permits fixing of interest rates
on borrowings up to a maximum of #100 million. The Group borrows at rates of
interest, which are fixed in advance for periods of between one month and six
months. At 31 December 2006, approximately 88% (2005: 86%) of the Group's
borrowings were at floating rates. However, interest rate swaps have been
entered into during the year, which reduce the exposure to interest rate
movements.
Liquidity risk
The Group actively maintains a mixture of long-term and short-term committed
facilities that are designed to ensure the Group has sufficient available funds
for operations and planned developments. This includes a review of the Group's
borrowing base annually.
Credit risk
The Group's credit risk primarily relates to its trade receivables. The Group's
major customers are typically large companies which have strong credit ratings
assigned by international credit rating agencies. The Group performs ongoing
credit evaluations of its customers and, generally does not require collateral
from its customers.
Numerical financial instrument disclosures are set out below.
Fair value of derivative financial assets and financial liabilities
The book value and net fair value of the Group's derivative financial
instruments at the balance sheet date were as follows:
23. Financial instruments (continued)
2006 2005
#000 #000
---------------------------------- ------- -------
Assets/(liabilities):
Forward oil price contracts - cash flow hedge 9,676 (33,157)
Forward gas price contracts - cash flow hedge 13,932 (9,221)
Forward foreign currency contracts 772 (575)
Interest rate swaps 1,629 -
---------------------------------- ------- -------
26,009 (42,953)
---------------------------------- ------- -------
Forward oil price and forward gas price contracts were designated as being cash
flow hedges at the balance sheet date.
Forward oil price contracts
At 31 December 2006 the Group had a number of forward oil price contracts in
place to hedge cash flows from oil production in accordance with the Group's
hedging strategy. These contracts comprised forward swaps, put and call options
and forward sales.
The fair value assets of #9,676,000 relating to the forward oil price contracts
which are deferred in the cash flow reserve at 31 December 2006 will reverse in
the income statement over the term of the contracts. At 31 December 2006 the
forward oil price contracts covered the period January 2007 to December 2008.
Forward gas price contracts
At 31 December 2006 the Group had a number of forward gas price contracts in
place. These contracts comprised forward swaps and forward sales.
The fair value assets of #13,932,000 relating to the forward gas price
contracts, which are deferred in the cash flow reserve at 31 December 2006, will
reverse in the income statement over the term of the contracts. At 31 December
2006 the forward gas price contracts covered the period January 2007 to
September 2008.
Changes in the fair value of derivative financial instruments that do not
qualify for or are not designated in hedging relationships are recognised
immediately in the current period income statement when they occur as shown
below:
2006 2005
#000 #000
---------------------------------- ------- -------
Loss in the income statement - (6,487)
---------------------------------- ------- -------
Market values have been used to determine the fair value of derivative financial
instruments based on estimated amounts the Group would receive or pay to
terminate the agreements, taking into account the forward commodity prices and
forward foreign exchange rates at 31 December 2006.
In accordance with IAS 39 the Group has reviewed all significant contracts for
embedded derivatives that are required to be separately accounted for if they do
not meet certain requirements set out in the standard. Based on this review the
Group has not identified any embedded derivatives which need to be separately
accounted for.
Forward foreign currency contracts
The notional principal amount of the Group's outstanding forward foreign
currency contracts at 31 December 2006 was $198 million (2005: $100 million).
These contracts hedge foreign exchange exposure of forecast net US Dollar income
by fixing the forward exchange rate on a monthly basis.
At 31 December 2006 the forward contracts covered the period January to December
2007 at an exchange rate varying between $1.8375 and $1.8650 to #1.
23. Financial instruments (continued)
The fair value assets of #772,000 relating to the forward foreign currency
contracts and which are marked to market in the income statement at 31 December
2006, will reverse in the income statement over the term of the forward currency
contracts.
Interest rate swaps
The notional principal amount of the interest swap contracts at 31 December 2006
was #100,000,000. The fair value assets of #1,629,000 relating to the interest
rate swap which are marked to market in the income statement at 31 December 2006
will reverse in the income statement over the term of the interest swap
contract.
At 31 December 2006 the interest rate swaps covered the period January 2007 to
March 2009 at interest rates of 4.6%.
Fair value of non-derivative financial assets and financial liabilities
The following table provides a comparison by category of the book values and the
fair values of the Group's financial assets and financial liabilities at the
balance sheet date.
Group Book value Fair value Book value Fair value
2006 2006 2005 2005
#000 #000 #000 #000
------------------------- ---------- ---------- ---------- ----------
Fair value of non-current
financial assets and financial
liabilities held or issued to
finance the Group's operations:
Bank loan (Note 19) (216,120) (216,120) (172,703) (172,703)
Convertible bonds (Note
31) (29,801) (29,801) (29,122) (29,122)
Loan notes receivable
(Note 16) 5,376 5,376 5,805 5,805
Deferred consideration
(Note 21) (5,158) (5,158) (11,933) (11,933)
Fair value of other financial
assets and financial liabilities
held or issued to finance the
Group's operations:
Trade and other payables
(Note 18) (75,871) (75,871) (61,770) (61,770)
Deferred consideration
(Note 18) (5,718) (5,718) - -
Trade and other
receivables (Note 16) 90,427 90,427 83,818 83,818
Cash at bank and in hand
(Note 17) 19,342 19,342 13,153 13,153
Cash on short term deposit
(Note 17) 39,825 39,825 - -
------------------------- ---------- ---------- ---------- ----------
Company Book value Fair value Book value Fair value
2006 2006 2005 2005
#000 #000 #000 #000
------------------------- ---------- ---------- ---------- ----------
Fair value of non-current
financial assets and financial
liabilities held or issued to
finance the Company's operations:
Bank loan (Note 19) (216,120) (216,120) (172,703) (172,703)
Convertible bonds (Note
31) (29,801) (29,801) (29,122) (29,122)
Trade and other
receivables (Note 16) 227,995 227,995 261,982 261,982
Loan notes receivable
(Note 16) 5,376 5,376 5,805 5,805
Fair value of other financial
assets and financial liabilities
held or issued to finance the
Company's operations:
Trade and other payables
(Note 18) (21,943) (21,943) (11,005) (11,005)
Trade and other
receivables (Note 16) 2,773 2,773 39,254 39,254
Cash at bank and in hand
(Note 17) 7,608 7,608 15,539 15,539
Cash on short term deposit
(Note 17) 36,492 36.492 - -
------------------------- ---------- ---------- ---------- ----------
23. Financial instruments (continued)
Maturity of financial liabilities
The maturity profile of the carrying amount of the Group's non-current
liabilities at 31 December was as follows:
Group Bank loan Convertible Deferred Total
bonds consideration
#000 #000 #000 #000
--------------------------- --------- ---------- ----------- ---------
31 December 2006
In more than
one year but
less than two
years - - 2,085 2,085
In more than
two years but
not more than
five years 216,120 29,801 3,073 248,994
In more than five years - - - -
--------------------------- --------- ---------- ----------- ---------
216,120 29,801 5,158 251,079
--------------------------- --------- ---------- ----------- ---------
31 December 2005
In more than
one year but
less than two
years - - 7,343 7,343
In more than
two years but
not more than
five years 172,703 29,122 4,090 205,915
In more than
five years - - 500 500
--------------------------- --------- ---------- ----------- ---------
172,703 29,122 11,933 213,758
--------------------------- --------- ---------- ----------- ---------
Company Bank loan Convertible Deferred Total
bonds consideration
#000 #000 #000 #000
--------------------------- --------- ---------- ----------- ---------
31 December 2006
In more than
two years but
not more than
five years 216,120 29,801 - 245,921
--------------------------- --------- ---------- ----------- ---------
216,120 29,801 - 245,921
--------------------------- --------- ---------- ----------- ---------
31 December
2005 172,703 29,122 - 201,825
In more than two years but not
more than five years --------- ---------- ----------- ---------
---------------------------
172,703 29,122 - 201,825
--------------------------- --------- ---------- ----------- ---------
Borrowing facilities
The Group has the following undrawn borrowing facilities available at the
balance sheet date in respect of which all conditions precedent had been met at
that date:
2006 2005
--------------------------------- --------- -------
#000 #000
--------------------------------- --------- -------
Expiring in more than two years 128,880 197,297
--------------------------------- --------- -------
The borrowing base is reviewed annually and is based on the Group's valuation of
its oil and gas assets. The main purpose of the facilities is to finance the
acquisition of new assets and the development of new and existing assets.
24. Called up share capital
--------------------------------- --------- -------
Number 2006 2005
000 000
--------------------------------- --------- -------
Authorised:
Ordinary shares of 0.4p each 165,000 165,000
Allotted, called up and fully paid:
Ordinary shares of 0.4p each 133,496 124,335
--------------------------------- --------- -------
2006 2005
Value #000 #000
--------------------------------- --------- -------
Authorised:
Ordinary shares of 0.4p each 660 660
Allotted, called up and fully paid:
Ordinary shares of 0.4p each 534 497
--------------------------------- --------- -------
During the year the Company issued 9,050,000 shares as part consideration for
the acquisition of CH4 Energy Ltd and 111,105 shares to honour share options
exercised by employees. A further 157,003 shares were provided by the EBT and
403,934 treasury shares utilised to honour share options exercised by employees.
25. Share premium account
Group Company
#000 #000
-------------------------- -------------- ---------
At 1 January 2005 103,195 103,195
Gain on exercise of share options 1,711 1,711
-------------------------- -------------- ---------
At 1 January 2006 104,906 104,906
Gain on exercise of share options 178 178
-------------------------- -------------- ---------
At 31 December 2006 105,084 105,084
-------------------------- -------------- ---------
26. Retained earnings
Group Company
#000 #000
-------------------------- -------------- ---------
At 1 January 2005 12,072 5,456
Profit for the year 31,098 4,360
-------------------------- -------------- ---------
At 1 January 2006 43,170 9,816
Disposal of treasury shares 405 405
Profit for the year 81,593 15,149
Purchase of treasury shares (12,033) (12,033)
-------------------------- -------------- ---------
At 31 December 2006 113,135 13,337
-------------------------- -------------- ---------
The Company acquired 1,795,780 of its own shares during the year for a
consideration of #12,033,000. As the shares are held as treasury shares, the
amount shown has been deducted from retained earnings.
The Company reissued 403,934 treasury shares in respect of share options
exercised for consideration of #405,000.
27. Other reserves
Group Merger Cashflow Employee EBT Total
Reserve reserve benefit reserve
reserve
#000 #000 #000 #000 #000
-------------------- ------- ------- -------- ------- -------
At 1 January 2006 - (22,109) 8,541 (1,173) (14,741)
Cash flow hedges:
- Fair value gains net of tax - 19,862 - - 19,862
- Reclassified and reported in
net profit - 14,051 - - 14,051
Credit relating to share based
charges - - 11,600 - 11,600
Shares issued on acquisition
of CH4 69,905 - - - 69,905
(net of issue costs)
Shares disposed of by EBTs - - - 45 45
Shares acquired by EBTs - - - (14,100) (14,100)
-------------------- ------- ------- -------- ------- -------
At 31 December 2006 69,905 11,804 20,141 (15,228) 86,622
-------------------- ------- ------- -------- ------- -------
The cash flow reserve relates to the accounting for derivative financial
instruments under IAS 39. Fair value gains and losses in respect of effective
cash flow hedges are recognised in the cash flow reserve.
The employee benefit reserve comprises the credit entry relating to share based
charges included in the income statement and calculated in accordance with IFRS
2.
The Company funds its Employee Share Ownership Trust and its Offshore Employee
Benefit Trust (together 'the EBTs') with funds being used to acquire shares
which will be granted to certain employees under the share option scheme. The
cost of shares acquired by the EBTs is recorded in the EBT reserve. Gains from
the disposal of such shares on exercising of the options are credited to the
share premium account when such options are exercised.
Shares acquired by the EBT can either be allocated to the EBTs by the Company or
purchased in the open market by the EBTs. The costs of administering the schemes
are charged to the income statement in the period to which they relate. The EBTs
have waived their rights to the receipt of dividends.
During the year 157,003 (2005: 87,044) ordinary shares were disposed of by the
EBTs to satisfy the exercise of share options. During the year the Company
transferred #14.1 million to the EBTs, which was used to purchase 1,844,739
ordinary shares in the market.
At 31 December 2006, the EBTs held 2,054,053 ordinary shares (2005: 366,317),
which represented a market value of #18,137,288 (2005: #1,893,859) based on the
closing share price of #8.83 (2005: #5.17).
Company Merger Employee EBT Total
Reserve benefit reserve
reserve
#000 #000 #000 #000
---------------------- -------- -------- -------- --------
At 1 January 2006 - 8,541 (1,173) 7,368
Credit relating to share
based charges - 11,600 - 11,600
Shares disposed of by EBTs - - 45 45
Shares acquired by EBTs - - (14,100) (14,100)
Shares issued on acquisition
of CH4 (net of issue costs) 69,905 - - 69,905
---------------------- -------- -------- -------- --------
At 31 December 2006 69,905 20,141 (15,228) 74,818
---------------------- -------- -------- -------- --------
The merger reserve comprises the premium on nominal value of ordinary shares
issued as part consideration for the acquisition of CH4 Energy Ltd. 9.05 million
shares were issued at a value of #7.775 per share. The balance is net of share
issue costs of #442,400.
28. Cash flow from operating activities
Reconciliation of operating profit to net cash inflow from operating activities:
------------------------------- --------- ---------
Group 2006 2005
#000 #000
------------------------------- --------- ---------
Operating profit 181,920 73,506
Depreciation charge 88,242 44,314
Gain on sale of foreign subsidiary - (438)
Share-based transactions 10,072 6,722
Changes in working capital:
- Inventories (1,063) (1,249)
- Trade and other receivables 3,778 (78,496)
- Trade and other payables 1,461 42,489
------------------------------- --------- ---------
Operating cashflow 284,410 86,848
------------------------------- --------- ---------
------------------------------- --------- ---------
Company 2006 2005
#000 #000
------------------------------- --------- ---------
Operating (loss)/profit (598) 171
Depreciation charge 514 248
Loss on sale of Trinidad - 12,188
Fair value losses on other financial assets 698 -
Share-based transactions 10,072 6,722
Changes in working capital:
- Trade and other receivables 1,970 432
- Trade and other payables 4,863 8,514
------------------------------- --------- ---------
Operating cashflow 17,519 28,275
------------------------------- --------- ---------
The principal non-cash transaction occurring during the year was the issue of
shares as part consideration of the acquisition of CH4 Energy Ltd (Note 3).
29. Employees and directors
Employee benefit expenses for the Group during the year:
2006 2005
#000 #000
-------------------------- --------- ---------
Wages and salaries 6,402 6,056
Social security costs 1,263 874
Retirement benefit liabilities (Note 30) 617 382
-------------------------- --------- ---------
8,282 7,312
-------------------------- --------- ---------
The average number of employees during the year was:
2006 2005
-------------------------- --------- ---------
UK 76 60
Trinidad - 12
Netherlands 33 -
-------------------------- --------- ---------
109 72
-------------------------- --------- ---------
Key Management Compensation:
-------------------------- --------- ---------
Group and Company 2006 2005
#000 #000
-------------------------- --------- ---------
Salaries and short-term employee benefits 1,761 1,809
Share based payments 838 184
-------------------------- --------- ---------
2,599 1,993
-------------------------- --------- ---------
In addition #1,718,307 (2005: #537,656) relating to the ADSBP (Note 14) has been
charged to the income statement.
The key management compensation figures above include Executive Directors.
29. Employees and directors (continued)
Directors' Emoluments:
-------------------------- --------- ---------
Group and Company 2006 2005
#000 #000
-------------------------- --------- ---------
Aggregate emoluments 1,979 1,542
Company contributions to defined contribution pension 81 59
schemes
-------------------------- --------- ---------
2,060 1,601
-------------------------- --------- ---------
Included in aggregate emoluments is #1,046,212 (2005: #794,300) relating to the
ADSBP, which is being charged to the income statement over the vesting period.
Further details of Director's emoluments are provided in the Directors'
Remuneration Report.
30. Retirement benefit liabilities
The Group contributes to personal pension schemes on behalf of certain
employees. These schemes are administered independently of the Group. The total
pension cost which is charged against profit represents contributions payable by
the Group and amounted to #617,000 (2005: #382,000).
31. Convertible bond
The Company issued #29 million 4.25% convertible bonds at a nominal value of #29
million on 19 July 2005. The bonds mature on 26 October 2010 at 110% of par or
can be converted into shares at the holder's option at the rate of 1 share per
474 pence.
The convertible bond recognised in the balance sheet is calculated as follows:
#000
------------------------------- ---------
Face value of convertible bond issued on 19 July 2005 29,000
Issue costs (654)
------------------------------- ---------
Net proceeds from convertible bond issue 28,346
Interest expense (Note 6) 536
Accrued redemption premium 240
------------------------------- ---------
Liability component at 31 December 2005 (Note 23) 29,122
------------------------------- ---------
Interest expense (Note 6) 531
Accrued redemption premium 148
------------------------------- ---------
Liability component at 31 December 2006 (Note 23) 29,801
------------------------------- ---------
32. Operating lease commitments - minimum lease payments
The Group has commitments under operating leases to make payments as set out
below:
Restated
------------------------------- --------- ---------
2006 2005
#000 #000
------------------------------- --------- ---------
Plant and machinery and motor vehicles
within 1 year 137 11
Land and buildings
within 1 year 729 514
within 2-5 years 1,864 2,056
in more than 5 years - 514
------------------------------- --------- ---------
33. Capital commitments
At 31 December 2006 the Group has commitments of #56,171,403 (2005: #30,408,305)
relating to capital expenditure.
34. Contingent liabilities and assets
The Company has provided credit guarantees totalling #21.4 million for
decommissioning security for assets in the North Sea.
35. Related party transactions
Group:
Intra-group related party transactions, which are eliminated on consolidation,
are not required to be disclosed in accordance with IAS 24.
The financial statements include the financial statements of Venture Production
plc and the subsidiaries listed in Note 13.
The following table provides the total amount of transactions, which have been
entered into with related parties for the relevant financial year.
Sales/purchases from Sales to Purchases Amounts owed Amounts owed
related party related from related by related to related
parties parties parties parties
-------------------- ------ ------- -------- ------- -------
#000 #000 #000 #000
-------------------- ------ ------- -------- ------- -------
Joint Venture:
North Sea Gas
Partners 2006 17,701 - 3,843 (945)
2005 - - - -
Associate:
North Sea
Infrastructure
Partners 2006 4,602 - 1,876 -
2005 - - - -
-------------------- ------ ------- -------- ------- -------
Sevan
Production PTE
Ltd 2006 4,282 - 4,282 -
2005 - - - -
-------------------- ------ ------- -------- ------- -------
-------------------- ------ ------------- -------------
Loans from/to related party Interest Amounts owed by
received related parties
#000 #000
-------------------- ------ ------------- -------------
Associate:
Ten Degrees North
Energy Ltd 2006 269 269
2005 - -
-------------------- ------ ------------- -------------
Joint Venture
North Sea Gas Partners Ltd
Venture Production (North Sea Developments) Ltd owns 33.33% of the ordinary
shares in North Sea Gas Partners Ltd (2005: 0%).
Transactions during the year included the sale of 75% of the Ensign asset for
#10 million.
Associate
North Sea Infrastructure Partners Ltd
Venture Infrastructure Ltd has a 49.9% interest in North Sea Infrastructure
Partners Limited (2005: 0%)
Sevan Production PTE Ltd
Hummingbird Oil PTE Limited owns 20% of the ordinary shares of Sevan Production
PTE Ltd (2005: 0%).
Ten Degrees North Energy Ltd
Venture Production plc owns 40% of the ordinary shares of Ten Degrees North
Energy Limited (2005: 40%)
35. Related party transactions (continued)
Company
During the year the Company received income of #18,597,000 (2005: #13,367,000)
from wholly owned subsidiary undertakings in respect of management charges and
interest receivable. Amounts due to the Company by subsidiary undertakings are
shown in Note 16.
36. Events after the balance sheet date
Disposal of CH4 Pipelines Limited
On 22nd January 2007, the Group disposed of CH4 Pipelines Limited, to North Sea
Infrastructure Partners (Holdings) Ltd. CH4 Pipelines Limited was a wholly owned
subsidiary of CH4 Energy Limited. The purchase consideration amounted to some
#2.3 million.
Treasury Shares
During January 2007, the Group purchased a further 2,173,250 treasury shares at
an average share price of #7.22.
Proposed Dividends
Subsequent to the year end the directors propose an ordinary dividend of #0.10
per share and a special dividend of #0.40 per share. The dividend will be
submitted for formal approval at the Annual General Meeting to be held on 6th
June 2007. This dividend will be accounted for in shareholders' equity as an
appropriation of retained earnings in the year ending 31st December 2007.
Glossary
Bcf billions of cubic feet
boe barrels of oil equivalent
boepd barrels of oil equivalent per day
bopd barrels of oil per day
km kilometres
Mboe thousands of barrels of oil equivalent per day
MMcfpd millions of cubic feet per day
MMbo millions of barrels of oil
MMboe millions of barrels of oil equivalent
Unit lifting costs are defined as: Royalty costs, Production Expense, Workover
and Projects, Transport and Process costs, Dry Well expenses and General Lease
expenses.
Effective Realised Price is defined as: Revenue divided by Sales Volume
Note: 6 Bcf = 1 Mmboe
Reserve replacement ratio
The reserve replacement ratio for any given period is calculated by dividing the
sum of reserve additions by the production for the corresponding period and is
expressed as a percentage.
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
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