Tuesday 13th August 2002
VENTURE PRODUCTION plc
("Venture", "the Company" or "the Group")
Interim Results for the Half Year Ended
30th June 2002
Record Results from Strong Operational Performance in the North Sea and
Trinidad
Financial Highlights
* Turnover up 250% to �30.3m (2001: �8.2m)
* Operating profit up to �9.2m (2001: �0.4m)
* Pre-tax profit of �8.4m (2001: loss �0.3m)
* Strong growth in cashflow to �17.8m (2001: �0.4m)
* Total capital expenditure, including acquisitions, of �27m
* Listed on London Stock Exchange, raising �32m
Activity Highlights
* Average production increased by 220% to 9,072 boepd (2001: 2,829 boepd)
* Larch field continues to produce above expectations
* DTI approval to develop Sycamore, drilling proceeding
* Unfavourable conditions in the UK gas market lead to lower than expected
gas sales from the southern North Sea
* Acquisitions of three additional interests in North Sea:
- Sycamore; further 17.78%
- Annabel; earn-in, operatorship, further 11.11%
- Chestnut; further 14.85%
* Aggregate increase in reserves of 8.6 MMboe at $0.8/boe
* Drilling programme progressing successfully in offshore Trinidad
* Acquisition of 45% stake in Brighton Marine from Petrotrin in exchange
for royalty agreement
Commenting on the results, Bruce Dingwall, Chief Executive, Venture Production,
said:
"The first half of 2002 saw the continuation of Venture's growth with
significantly increased production, cashflow and earnings. Venture's successful
listing on the London Stock Exchange has supported an active acquisition and
investment programme, which during the period has added 8.6 MMboe to the
Company's reserves.
"Following approval from the DTI in May, the development of our key growth
asset, the Sycamore Field, is proceeding on schedule and budget. Furthermore,
an intensive assessment of our "A" Fields portfolio has identified extensive
development potential across a series of accumulations in the area over the
next three years.
"Our commercial and acquisitions team continue to examine a range of attractive
opportunities for asset and value enhancement in the North Sea and Trinidad."
Enquiries:
Bruce Dingwall, Chief Executive 01224 619 000
Mike Wagstaff, Finance Director
VENTURE PRODUCTION plc
Patrick Handley 020 7404 5959
Eil�s Murphy
BRUNSWICK GROUP
Chairman's and Chief Executive's Statement
The first half of 2002 has seen very positive developments for Venture, both in
its current performance and in its positioning for the future. Average daily
production of oil and gas for the period was 9,072 boepd, a 220% increase over
the same period in 2001. Revenues increased to �30.3 million (2001: �8.2
million). This was reflected in operating profitability up by �8.8 million to �
9.2 million. The Company also completed the acquisition of a number of assets
and gained Government consent for the development of the Sycamore field in UK
Block 16/12a. In March, Venture secured its listing on the London Stock
Exchange, raising �32.5 million before expenses.
Operational Highlights
The increase in production volumes was due to a first time contribution from
our recently acquired assets in the North Sea and strong performances from the
company's operated Larch field in Block 16/12a. Production from Venture's
Trinidadian assets was in line with expectations. Production and sales volumes
of gas from our interests in the "A" Fields in the southern North Sea were
lower than anticipated due to contractual terms and weak market conditions. The
reduced gas volumes represent a deferral of production and sales.
In May, UK Government consent was received to develop the Sycamore field in the
"Trees" Block 16/12a. This �94 million project, in which the Company is
operator and has a 64.5% interest, is scheduled to deliver first oil in April
2003 with anticipated gross production rates in excess of 20,000 bpd.
In Trinidad, the offshore drilling campaign that commenced in 2001 has
continued. The objectives of this campaign are to delineate and test the extent
of the proven reserves trend through the use of a purpose built production test
barge in the Point Ligoure licence and to drill additional replacement wells in
Brighton Marine.
Financial Highlights
Revenue for the period was �30.3 million (2001: �8.2 million) on production
totalling 1.6 MMboe and on sales of 0.4 MMbo from inventory acquired on the
acquisition of Mallard. This increase reflected the full impact of Larch
production, a significant contribution from the sale of gas from the "A" Fields
(although lower than previously anticipated) and production from our newly
acquired interest in the Mallard field. With up to 75% of our production for
2002 and the first part of 2003 hedged at a floor price for Brent of $18.50 we
have ensured that this revenue increase can be sustained regardless of volatile
commodity prices.
Operating profit of �9.2 million for the period was �8.8 million higher than
for the first half of 2001. Depreciation, depletion and amortisation charges of
�7.5 million for 2002 were �6.2 million greater than for the same period last
year reflecting the large increase in production volumes in the first half of
the year.
Net administrative expenses amounted to �2.1 million in the first half of 2002
compared with �0.6 million in the first half of 2001. Of this increase, �0.3
million relates to exchange losses while the remainder reflects the greater
asset base that is now requiring support.
The increased profitability has resulted in an increased tax charge. With
Venture generating pre-tax profits of �8.4 million for the six months ended 30
June 2002, compared with a loss of �0.3 million in the same period last year,
coupled with a supplementary UK corporation tax, a provision of �2.7 million
for deferred taxes has been made. It should be noted that, as a result of the
acceleration of capital allowances for corporate taxation purposes introduced
in 2002, with its current investment plans Venture does not expect to pay
corporation tax until after 2003.
As a result of the above, profit after taxation was �5.6 million for the first
half of 2002 compared with a loss of �0.3 million for the same period last
year. Net debt fell from �19.5 million at the start of 2002 to �1.4 million at
the end of the period as a result of the funds raised at flotation. Despite the
associated increase in operating cash flow debt levels are forecast to rise in
the second half of 2002 as a result of higher levels of capital expenditure
largely on the Sycamore Field.
Business Development
During the first half of 2002 Venture made a number of asset acquisitions in
developing its business in line with its strategy. As previously announced, we
concluded the acquisitions of interests in the Pilot and Mallard fields in
January and March respectively. In addition, Venture increased its interests in
core North Sea fields: in March we acquired a further 17.78% in Sycamore, to
bring our total interest to 64.51% and in May we acquired an additional 11.11%
in and operatorship of the Annabel feature in UK Block 48/10a, increasing our
interest to 88.89%. Also in May, we entered into an agreement to acquire an
additional 14.85% interest in the Chestnut field, bringing our total interest
in that field to 19.85%. In Trinidad we have reached agreement with Petrotrin
to convert its 45% working interest in the Brighton Marine field area into an
overriding royalty interest.
In aggregate, with the newly completed Chestnut acquisition, for a total
consideration of �4.8 million we have increased our proven and probable
reserves by 8.6 MMboe with an estimated additional 8.4 MMboe of possible
reserves. More importantly these acquisitions consolidate our position in four
core largely undeveloped assets which have the potential to deliver an
additional 6,500 boepd net to Venture when in peak production in 2004/5.
Venture continues to evaluate new business opportunities in line with its
strategy and negotiations are ongoing on a number of other significant assets.
Current Trading and Outlook
Production from the Larch and Mallard fields continues to exceed our original
forecasts. With oil prices remaining firm, resultant revenues and operating
profitability continue to be strong. The weak conditions in the UK gas market
continue to make forecasts of production volumes from the "A" Fields difficult,
as these are largely at the buyers' discretion and are a function of the UK gas
market and weather conditions. The uncertainty in gas sales volumes from our
"A" Fields interests is likely to result in lower production volumes, revenues
and profitability over the remainder of 2002 than was expected earlier in the
year. However, we have entered into discussions with the buyers with a view to
amending the contracts to more mutually agreeable terms.
Development activity in Sycamore continues on track with the re-entry of the
first production well already underway and continuing construction of the
pipeline bundle. In the fourth quarter of this year we expect to take an
important step in realising further value from our southern North Sea assets
with the drilling of an appraisal well on the Annabel gas accumulation to prove
up the mapped but untested extension of the proven Amy/P6 accumulation in Block
48/10b to the north.
Over the last six months sub-surface work conducted by Venture on its "A"
Fields portfolio has identified an inventory of low-risk development
opportunities that will be accessed by in-fill and step-out wells in the "A"
Fields area over the next three years. The company plans to drill the first two
wells on these accumulations in late 2002 and early 2003.
During the first half of 2002 Venture's production volumes, revenues and cash
flows all grew strongly over the corresponding period last year. The second
half of 2002 will be a period of consolidation in respect of Venture's
producing asset base. The Board expects that production volumes from these
assets are likely to remain stable at around the levels achieved during the
first half of the year, and is confident that current development projects are
on track to deliver further significant increases in production volumes,
revenues and cash flow in 2003 and beyond.
John Morgan Bruce Dingwall
Chairman Chief Executive
12 August 2002
Consolidated Profit and Loss Account
For the six months ended 30 June 2002
Unaudited Unaudited Audited
6 months 6 months Year ended
ended ended 31 December
30 June 2002 30 June 2001 2001
Note � � �
Turnover 2 30,320,335 8,245,393 25,242,056
Cost of sales (19,150,835) (7,398,672) (18,375,375)
Gross profit 11,169,500 846,721 6,866,681
Administrative expenses (2,148,951) (602,964) (2,935,822)
Other operating income 196,490 124,832 21,535
Operating profit 9,217,039 368,589 3,952,394
Interest receivable and 83,152 38,473 140,535
similar income
Interest payable and similar (930,248) (694,965) (2,324,312)
charges
Profit/(loss) on ordinary 8,369,943 (287,903) 1,768,617
activities before taxation
Tax on profit on ordinary 3 (2,725,424) - (828,167)
activities
Profit/(loss) on ordinary 5,644,519 (287,903) 940,450
activities after taxation
Finance cost of non-equity (192,184) (36,068) (72,136)
shares
Attributable to equity 5,452,335 (323,971) 868,314
shareholders
Earnings per Ordinary Share
Basic Earnings per Share 4 5.6p (1.2p) 2.1p
Diluted Earnings per Share 4 5.0p (0.3p) 0.9p
All items dealt with in arriving at the profit/(loss) for the period relate to
continuing activities.
Statement of Group Recognised Gains and Losses
Profit /(loss) on ordinary 5,644,519 (287,903) 940,450
activities after taxation
Prior year adjustment - - 755,000
Total recognised gains and losses 5,644,519 (287,903) 1,695,450
Consolidated Balance Sheet
As at 30 June 2002
Unaudited Unaudited Audited
30 June 30 June 31 December
2002 2001 2001
� � �
Fixed assets
Tangible assets 97,138,438 41,223,482 76,235,946
Investments 323,008 455,000 421,750
97,461,446 41,678,482 76,657,696
Current assets
Stocks 3,776,642 1,178,885 2,516,403
Debtors 14,078,570 4,643,183 11,411,635
Cash at bank and in hand 5,913,061 2,718,900 5,424,700
23,768,273 8,540,968 19,352,738
Creditors (amounts falling due (18,033,991) (7,224,767) (11,462,784)
within one year)
Net current assets 5,734,282 1,316,201 7,889,954
Total assets less current 103,195,728 42,994,683 84,547,650
liabilities
Creditors (amounts falling due after (9,090,136) (17,101,059) (26,755,559)
more than one year)
Provisions for liabilities and (12,872,096) (5,643,641) (11,573,230)
charges
Net assets 81,233,496 20,249,983 46,218,861
Capital and reserves
Called up share capital 431,071 245,443 333,228
Share premium 76,955,900 21,217,528 47,208,627
Profit and loss account 3,846,525 (1,212,988) (1,322,994)
Total shareholders' funds (including 81,233,496 20,249,983 46,218,861
non equity interests)
Group Cash Flow Statement
For the six months ended 30 June 2002
Unaudited Unaudited Audited
6 months 6 months Year ended
ended ended 31 December
30 June 2002 30 June 2001 2001
� � �
Operating profit 9,217,039 368,589 3,952,394
Depreciation charge 7,500,679 1,303,299 5,629,400
Increase in stock (1,260,239) (694,082) (2,031,600)
Increase in debtors (4,352,798) (157,390) (4,912,959)
Increase/(decrease) in creditors 6,902,298 (478,435) 2,409,634
Abandonment expenditure - 15,439 15,439
(Gain)/loss on sale of fixed assets (192,941) 7,434 (38,759)
Net cash flow from operating 17,814,038 364,854 5,023,549
activities
Returns on investment and servicing (408,697) (496,929) (1,676,650)
of finance
Taxation (1,370,652) (100,498) (836,807)
Capital expenditure and financial (27,251,024) (10,703,522) (44,374,854)
investment
Cash outflow before use of liquid (11,216,335) (10,936,095) (41,864,762)
resources and financing
Issue of shares net of expenses 30,320,118 (215,913) 23,769,612
(Decrease)/increase in loan facility (17,665,422) 13,081,972 22,736,700
Redemption of preference shares (950,000) - -
Capital element of finance lease - (9,128) (14,914)
rental payments
Increase in cash 488,361 1,920,836 4,626,636
Cash flow from decrease/(increase) 17,665,422 (13,072,844) (22,721,786)
in debt
Net debt at 1 January (19,518,443) (1,423,293) (1,423,293)
Net debt at end of period (1,364,660) (12,575,301) (19,518,443)
Analysis of net debt 5,913,061 2,718,900 5,424,700
Cash in hand and at bank 5,913,061 2,718,900 5,424,700
Debt due after 1 year (7,277,721) (15,288,415) (24,943,143)
Finance leases - (5,786) -
Total (1,364,660) (12,575,301) (19,518,443)
Notes to the Interim Financial Statements
1. Basis of preparation of interim financial information
The results for the six months to 30 June 2002 and the comparative results for
the six months to 30 June 2001 are unaudited and have been prepared on a basis
consistent with the accounting policies set out in the statutory accounts for
the year ended 31 December 2001. The comparative figures for the year ended 31
December 2001 do not constitute statutory accounts for the purpose of Section
240 of the Companies Act 1985 and have been extracted from the Company's
published accounts, a copy of which has been delivered to the Registrar of
Companies and on which an unqualified audit report has been made by the
auditors under Section 235 of the Companies Act 1985.
2. Analysis of turnover
In the opinion of the directors the operations of the Group comprise one class
of business, the production and sale of hydrocarbons in the following
geographical locations:
(I) Turnover represents the invoiced amount of goods sold during the year
stated net of associated sales tax and is analysed as follows:
6 months 6 months Year ended
ended ended 31 December
30 June 2002 30 June 2001 2001
� � �
United Kingdom 27,947,805 5,262,708 20,070,887
Trinidad 2,372,530 2,982,685 5,171,169
30,320,335 8,245,393 25,242,056
There is no material difference between sales by destination and origin.
(2) Group operating profit is analysed as follows:
Operating profit 6 months 6 months Year ended
ended ended 31 December
30 June 2002 30 June 2001 2001
� � �
United Kingdom 10,544,675 1,068,416 7,010,131
Trinidad (1,327,636) (699,827) (3,057,737)
9,217,039 368,589 3,952,394
(3) Group net assets are analysed as follows:
Net assets/(liabilities) 6 months 6 months Year ended
ended ended 31 December
30 June 2002 30 June 2001 2001
� � �
United Kingdom 85,519,816 22,944,515 49,996,006
Trinidad (4,286,320) (2,694,532) (3,777,145)
81,233,496 20,249,983 46,218,861
3. Taxation
In respect of the Group's UK operations, tax has been calculated at a rate of
30% for the period to 31 March 2002 and thereafter at 30 % plus the
supplementary tax of 10% (2001: 30%). The Trinidad tax rate remains 55% (2001:
55%).
4. Earnings per ordinary share
The calculation of earnings per ordinary share shown is based upon the
following:
6 months 6 months Year ended
ended ended 31 December
30 June 2002 30 June 2001 2001
Profit/(loss) for the period �5,452,335 �(323,971) �868,314
Weighted average number of ordinary
shares for the period
- Basic 96,795,964 26,867,250 40,845,409
- Fully Diluted 109,971,648 92,959,250 95,196,059
Earnings per share
- Basic 5.6p (1.2p) 2.1p
- Fully Diluted 5.0p (0.3p) 0.9p
Independent Review Report to Venture Production plc
Introduction
We have been instructed by the company to review the financial information set
out on pages 4 to 8. We have read the other information contained in the
interim report and considered whether it contains any apparent misstatements or
material inconsistencies with the financial information.
Directors' responsibilities
The interim report, including the financial information contained therein, is
the responsibility of, and has been approved by the directors. The directors
are responsible for preparing the interim report in accordance with the Listing
Rules of the Financial Services Authority which require that the accounting
policies and presentation applied to the interim figures should be consistent
with those applied in preparing the preceding annual accounts except where any
changes, and the reasons for them, are disclosed.
Review work performed
We conducted our review in accordance with guidance contained in Bulletin 1999/
4 issued by the Auditing Practices Board for use in the United Kingdom. A
review consists principally of making enquiries of group management and
applying analytical procedures to the financial information and underlying
financial data and, based thereon, assessing whether the accounting policies
and presentation have been consistently applied unless otherwise disclosed. A
review excludes audit procedures such as tests of controls and verification of
assets, liabilities and transactions. It is substantially less in scope than an
audit performed in accordance with United Kingdom Auditing Standards and
therefore provides a lower level of assurance than an audit. Accordingly we do
not express an audit opinion on the financial information.
Review conclusion
On the basis of our review we are not aware of any material modifications that
should be made to the financial information as presented for the six months
ended 30 June 2002.
PricewaterhouseCoopers
Chartered Accountants
Aberdeen
12 August 2002
Notes:
a. The maintenance and integrity of the Venture Production plc website is the
responsibility of the directors; the work carried out by the auditors does
not involve consideration of these matters and, accordingly, the auditors
accept no responsibility for any changes that may have occurred to the
interim report since it was initially presented on the website.
b. Legislation in the United Kingdom governing the preparation and
dissemination of financial information may differ from legislation in other
jurisdictions.
END
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