RNS Number:7607W
Venture Production PLC
22 March 2004
Venture Production plc
Preliminary Results
for the year ended
31 December 2003
For further information please contact:
Bruce Dingwall, Chief Executive
Mike Wagstaff, Finance Director
VENTURE PRODUCTION plc 01224 619 000
Patrick Handley
Eilis Murphy
BRUNSWICK GROUP LLP 020 7404 5959
22nd March 2004
Venture Production plc
("Venture", "the Company" or "the Group")
Preliminary Results for the Year Ended 31 December 2003
Financial Highlights
* Average annual production increased 53% to 13,310 barrels of oil
equivalent per day ("boepd") (2002: 8,681 boepd)
* Turnover up 35% to #71.0 million (2002: #52.7 million)
* Operating profit up 80% to #25.7 million (2002: #14.3 million)
* Profit on ordinary activities after tax up 90% to #13.7 million
(2002: #7.2 million)
* Diluted earnings per share up 95% to 11.9p (2002: 6.1p)
* Operating cashflow up 25% to #44.0 million (2002: #35.1 million)
* Capital expenditure, including acquisitions, totalled #54.3
million (2002: #63.6 million)
Activity Highlights
* Portfolio diversification and expansion from one to three UK
production hubs
* 'Trees', Venture's initial hub in the North Sea, continued to be
a major contributor to growth producing 7,400 boepd
* Successful three well southern North Sea ("SNS") drilling
campaign on Ann, Annabel and Amanda
* Five acquisitions completed adding 26.4 million of barrels of oil
equivalent ("MMboe") of proven and probable ("2P") reserves at a net acquisition
cost of #0.79/boe
* Total year end 2P reserves increased 89% to 93.7 MMboe (2002:
49.7 MMboe)
* Venture became operator of its first North Sea manned platform -
Kittiwake
Commenting on the results, Bruce Dingwall, Chief Executive of Venture said:
"2003 represented another record year for Venture, during which we maintained
our track record of sustained growth. In addition to delivering material
increases in production, reserves, cashflow and net income, Venture made
important strides in expanding and diversifying its asset base. This was
achieved despite some disappointment on the Sycamore field which, while
production has not met initial expectations, nevertheless remains a very
successful and profitable project for the Company.
This year's growth has, again, been achieved through a combination of
acquisitions, development and drilling operated by Venture. Of particular note
during 2003, our southernNorth Sea gas operations underwent a step change in
scale following three years' building this business. This has been achieved
through seven acquisitions, four major commercial transactions and by
participation in the drilling of four wells. We arenow in a position to control
the development of this hub and realise the value of this investment in the gas
side of our business.
The portfolio growth and diversification achieved during 2003 has enabled
Venture to reduce its risk across its three North Sea production hubs - 'Trees',
the greater Kittiwake area and 'A' Fields. It has also provided a broader and
deeper development inventory through which we can maintain our growth in the
future."
Enquiries:
VENTURE PRODUCTION plc 01224 619 000
Bruce Dingwall, Chief Executive
Mike Wagstaff, Finance Director
BRUNSWICK GROUP LLP 020 7404 5959
Patrick Handley
Eilis Murphy
Chairman's and Chief Executive's Statement
During 2003, Venture continued its rapid growth with average annual production
rising 53%, from 8,681 boepd in 2002 to 13,310 boepd. This increase in
production, combined with favourable commodity prices, led to record financial
performance in2003. During the year, Venture made progress in the development
of its asset base, through bringing on stream the Sycamore field and our
successful drilling campaign in the southern North Sea.
In addition, the Company completed five acquisitions that, together with
drilling activity, allowed it to increase proven and probable reserves by 89%
from 49.7 to 93.7 MMboe at the end of 2003. Venture has also expanded from one
production hub in the North Sea to three, thereby diversifying its asset base
and allowing it to spread the risk while also providing a broad development
inventory, virtually all of which is operated by Venture.
Strategy
Venture's strategy remains focused on the acquisition and exploitation of proven
reserves and thedevelopment of discovered but undeveloped reserves,
collectively known as 'stranded' reserves. The business model is based on adding
value to these 'stranded' reserves through the application of modern technology
and operating practices together with a change in approach to asset management.
In order to achieve this, the Company typically seeks to take large working
interests and act as operator.
Venture has established a track record of realising the 'stranded' reserve
potential of assets in its two geographical areas of focus, the UK North Sea and
Trinidad. This has been achieved through a series of field development and
rejuvenation programmes, which have lead to higher production, longer field life
and increased recoverable reserves.
Financial Results
In 2003, turnover increased to #71.0 million (up 35% from 2002), operating
profit increased to #25.7 million (up 80% from 2002) and profit on ordinary
activities after taxation increased to #13.7 million (up 90% from 2002).
Cashflow from operations increased to #44.0 million (up 25% from 2002). Fully
diluted earnings per share increased by 95% to 11.9p (2002: 6.1p).
In 2003, Venture successfully completed the refinancing of its banking
facilities, which have been expanded from $100 million to $175 million through a
new syndicated credit facility.
Operations
The principal contributor to Venture's increase in production in 2003 was the
'Trees' block 16/12a in the North Sea, which produced 7,400 boepd net,
representing 56% of the Group total. During the year, production from Larch
continued in line with expectations, supplemented by the contribution from the
Sycamore field, which was brought on stream in early March. Sycamore commenced
production ahead ofschedule, however, production from one of the two initial
wells declined faster than anticipated. In addition, the third planned
production well in the northern part of the field encountered the expected oil
column, but the reservoir intersected wasnot of sufficient quality to complete
the well as a producer and it was therefore suspended. During the latter part of
the year production from the field stabilised. In order to optimise development,
in 2004, Venture plans to drill a water injectionwell in the central part of
the field.
During November, the Birch field was brought back on stream, having been shut-in
for over two years, and continues to produce in excess of 650 boepd net. Since
the year-end, Venture has completed the acquisition of an additional interest in
the field bringing its total interest to 64.51%.
Gas production from the 'A' Fields hub in the southern North Sea increased by
161% to 3,400 boepd, or 25% of Group total. This increase was a result of the
new gas sales arrangements entered into for the Ann and Alison fields and the
successful workover on one of the Ann wells, which was brought back on stream in
July. Also during 2003, Venture acquired additional interests in the Audrey, Ann
and Alison fields giving it 100% ownership of all three fields. These
acquisitions were completed late on in the year and so made only a modest
contribution to 2003 production levels.
In addition to the Ann workover, Venture drilled two other successful wells in
the southern North Sea. Firstly, an appraisal well on the Annabel structure
tested at flowrates in excess of 50 million cubic feet per day ("MMcfpd") and
confirmed a substantial gas accumulation. The Company is pursuing a fast track
development of Annabel as a sub-sea tie-back to Audrey. Late in the year Venture
drilled a well on the untested Annie structure. This well encountered greater
than expected volumes of gas, but tested at sub-economic rates from the initial
penetration. Venture is currently evaluating development options for Annie,
which has been renamed Amanda.
In aggregate, this material expansion of the Company's SNS gas position has
created an operating hub with critical mass, where Venture is operator of a
compact business unit with control over access to infrastructure. Over the last
three years, through a total of seven acquisitions, four major commercial
transactions and participation in the drilling of four wells, we have assembled
an asset base with proven and probable reserves of 224 bcf. Net current
production is approximately 65 MMcfpd with the potential to more than double
over the next several years from near term development activity. During 2003,
Venture also benefited, to a degree, from stronger natural gas pricing
reflecting the more favourable supply-demand dynamics in the UK gas market, a
situation that is anticipated to continue and from which Venture is well placed
to benefit.
The acquisition from Shell and ExxonMobil of their interests inthe Greater
Kittiwake Area ("GKA"), which completed in late November, has created a third
Venture operated hub in the North Sea. Given that completion of these
acquisitions occurred late in the year, production from GKA during 2003 came
predominantly from Venture's existing interest in the Mallard field, which
performed in line with expectations throughout the year and averaged 1,100 boepd
net or 8% of Group total. The Kittiwake platform is the Company's first
permanently manned production facility in the North Sea and, as such, represents
a major step forward in its evolution as a North Sea operator. While current
production levels from GKA are modest, the area represents a major investment
opportunity for the Group and brings an important new development portfolio. In
addition, during the year Venture acquired an additional interest in and
operatorship of the Chestnut oil field located close to GKA in the central North
Sea. We are currently pursuing development options for the field.
In Trinidad, production increased during 2003 as a result of completion of the
acquisition of Petrotrin's working interest in the Brighton Marine field in
exchange for an over-riding royalty. Venture's assets in Trinidad continued to
perform inline with expectations and production for 2003 averaged 1,500 boepd,
11% of Group total.
During 2003, Venture conducted a strategic review of its position in Trinidad. A
number of attractive development opportunities have been identified in the
existing asset base. All of these would become more attractive if, as a result
of the Trinidadian Government's current review, the oil and gas tax regime was
changed to improve the economic terms of oil and gas investment. Venture
anticipates that such a change is likely. Apart from a seismic survey on the
Point Ligoure licence, final sanction of further development activity, whilst
approved, has been held back pending the definitive outcome and evaluation of
fiscal reform.
Employees and Contractors
The contribution of employees and contractors to Venture's growth and success
over the past year cannot be overstated. Growth has been achieved through
reaching for and attaining the highest standards of operational performance as
well as of health, safety and respect for the environment. The Board would like
to take this opportunity to thank all staff and contractors for their important
contribution to the Company's progress during the year.
Outlook
As a result of the 2003 development programme, particularly Sycamore, and
completion of the acquisitions, current production levels are more than double
those of 12 months ago, averaging over 19,000 boepd during the first two months
of 2004. This has been achieved despite some disappointment on Sycamore, which
nevertheless remains a major contributor to Venture's production growth.
Development and acquisition activity in 2003 has materially expanded the scale
and diversification of Venture's operations. In addition, it hasprovided a
broad development inventory, which will underpin the Company's growth over the
next several years. Venture is currently pursuing an aggressive development
programme across all its production hubs and, while the impact of this programme
in terms of increased production will largely be seen in 2005, clear development
milestones will be evident in 2004.
This portfolio development and diversification is beginning to have a positive
impact on the Company's risk profile and, in particular, Venture's ability to
absorb individual project disappointments. While short-term volatility will
remain a factor in the growth of a business such as Venture, the increased scale
and diversification of the Company's portfolio gives it greater confidence in
its ability to deliver medium term objectives.
22nd March 2004
John Morgan Bruce Dingwall
Chairman Chief Executive
Review of Operations
During 2003 Venture's average net annual production increased by 53% from 8,681
boepd in2002 to 13,310 boepd in 2003. While all of the Company's four
production units (three in the UK and one in Trinidad) delivered increased
production in 2003, the main contributors to this growth were the Sycamore
field, which came on stream in March,and increased gas production from 'A'
Fields in the southern North Sea.
In addition, 2003 represented a year of expansion and diversification of
Venture's operations. During the year, through a combination of acquisitions,
development and drilling activity the number of production hubs in which we have
an interest has increased from one to three. Of the 21 oil and gas fields in
which the Company has an interest, it operates 19 with an average working
interest of 66%. This expansion has significantly diversified Venture's
portfolio while maintaining a high degree of control over its operations.
UK North Sea
'Trees' (Block 16/12a)
The principal contributor to Venture's increase in production in 2003 was the
'Trees' block 16/12a, which produced 7,400 boepd, representing 56% of Group
total. The Venture operated Sycamore field (Venture 64.51%) was brought on
stream in March. While Sycamore commenced production ahead of schedule,
production from one of the two initial wells declined faster than anticipated.
In addition, the third planned production well in the northern part of the field
encountered the expected oil column, but the reservoir intersected was not of
sufficient quality to complete the well as a producer and it was therefore
suspended. However, since the second half of the year production from the two
wells has stabilised. During 2004, Venture plans to drill a water injection well
in the central part of the field to provide pressure support. In addition, the
Company is currently reviewing options for the development of the southern part
of the field. While production from Sycamore has not met initial expectations,
the field development remains a very successful and profitable project for
Venture.
During the year production from the Larch field (Venture 56.8%) continued to
produce in line with expectations.The Birch field, which was brought back on
stream during November having been shut-in for over two years, is producing in
excess of 650 boepdnet. As a result of this success, Venture plans to pursue
additional field rejuvenation opportunities. Since the year-end the Company has
completed the acquisition of an additional interest in the Birch field bringing
its total interest to 64.51%.
'A' Fields
Gas production from the 'A' Fields hub in the SNS increased by 161% to 3,400
boepd, or 25% of the Group total. During 2003, Venture also benefited somewhat
from stronger natural gas pricing reflecting the more favourable supply-demand
dynamics in the UK gas market.
During 2003, production from the Ann and Alison gas fields (Venture 85.0%)
increased as a result of two factors. Firstly, the Company was able to optimise
the production from the fields through entering into new gas sales arrangements
for the fields, enabling it to sell greater volumes based on spot market related
pricing. This contract renegotiation has enabled Venture to manage these fields
more effectively, reduce uncertainty in production volumes and to makefurther
investment. Secondly, in July the Company successfully completed a workover on
one of the two Ann production wells, which had been shut-in. The well was
brought back on stream at a rate of approximately 10 MMcfpd. In late December
Venture completed the acquisition of the remaining 15% interest in the Ann and
Alison fields and adjacent acreage.
During the major part of 2003, the Audrey field (Venture 29.9%) contributed very
limited production due to the gas imbalance arrangements, which had been in
place since the acquisition of its interest in the field in 2001. However,
during 2003, the Company completed two acquisitions that increased its interest
to 100% and gave it operatorship of the field. These acquisitions were completed
in late October and December respectively and consequently made a limited
contribution to total annual production volumes in 2003.
In order to optimise current production capacity and to enable the Company to
invest in field rejuvenation, during late 2003, Venture entered into
negotiations with Centrica, the buyer of gas from the field, to amend the gas
sales agreements. Venture hopes to conclude these negotiations in 2004. The
Audrey field, which has been developed through two normally unmanned platforms,
has the ability to act as an infrastructure hub to tie-back other satellite
fields in the area. During 2004, rejuvenation activity on Audrey will be centred
on the workover of two of its production wells and tie-back of the Annabel
field. Venture is currently conducting a major sub-surface study of the Audrey
field, which is expected to be completed in the second quarter of 2004. It is
anticipated that this study will identify further field rejuvenation
opportunities, which may be implemented in 2005 and beyond.
During the third quarter of 2003, Venture drilled an appraisal well on the
Annabel structure located in Block 48/10a to fulfil the terms of an earn-in
agreement signed in 2002. The drilling of this well will increase the Company's
interest to 88.88% and give it operatorship of the block. The Annabel appraisal
well was successfully tested at flow rates in excess of 50 MMcfpd and has been
suspended for future completion as a production well. Venture is moving rapidly
to develop the field as a sub-sea tie-back to Audrey located 13km to the south.
The Company anticipates submitting a Field Development Plan for Annabel in the
second quarter of 2004 with first gas production forecast for late 2004 or early
2005.
In addition to the Annabel gas field, Block 48/10a contains an extension of the
Atlas gas accumulation located in the ConocoPhillips operated Block 48/10b.
Atlas, together with the Hyperion field also located in Block 48/10b, constitute
the Saturn Unit development. During 2003 Venture continued technical, commercial
and unitisation negotiations with the 48/10b partners on the development of the
unit. It is anticipated that these negotiations will be concluded and that the
Field Development Plan will be submitted in the second quarter of 2004 with
first gas anticipated in late 2005. The fields will be developed via an unmanned
platform located over the Atlas field, with a sub-sea tie-back of the smaller
Hyperion accumulation. During the first quarter of 2004, the 48/10b partners
drilled a successful appraisal/production well on the eastern part of the Atlas
field, which has been suspended pending future completion as a production well.
Late in the year the Company drilled a well on the untested Annie structure
located in Block 49/11a (Venture 85.0%). This well encountered greater than
expected volumes of gas but tested at sub-economic rates. Venture is currently
evaluating development options for Annie, which has been renamed Amanda. As part
of the Audrey, Ann and Alison acquisitions completed in late December, Venture
increased its interest in Amanda and surrounding acreage to 100%.
Greater Kittiwake Area ("GKA")
In late November, the Company completed the joint acquisition with Dana
Petroleum ("Dana") of the interests of Shell and ExxonMobil in the GKA located
in the central North Sea. GKA includes the producing Kittiwake and Mallard
fields, the Kittiwake platform and associated infrastructure as well as several
undeveloped discoveries. Venture is the operator of the GKA assets and, through
a simultaneous licence swap with Dana, each companies' net interest has been
equalised at 50.0% each. Venture and Dana were also jointly awarded four further
adjacent blocks in the UK 21st Licensing Round. GKA is the Company's third UK
production and development hub.
Given the completion of the acquisition late in the year, production during 2003
came predominantly from Venture's existing interest in the Mallard field, which
produced steadily throughout the year and averaged 1,100 boepd net or 8% of
Group total. The Kittiwake platform is Venture's first permanently manned
production facility in the North Sea and, as such, represents a major step
forwardin the Company's evolution as a North Sea operator. While current
production levels from GKA are modest, the area represents a major investment
opportunity for the Group and brings an extensive portfolio of in-fill drilling
opportunities, satellite tie-back developments and step-out exploration
prospects. The first GKA project planned is the development of the Gadwall field
in 2004.
Other Assets
In June 2003, Venture completed the acquisition of Amerada Hess' 50.0% stake in
the Chestnut field and assumed operatorship, taking the Company's total interest
to 69.9%. Together with the Chestnut partners, Venture is currently pursuing
fast track development options for the field. In addition, the Company has
continued with technical studies to determine development options for the Pilot
field.
Trinidad
In Trinidad, production increased during 2003 as a result of completion of the
acquisition of Petrotrin's working interest in the Brighton Marine field in
exchange for an over-riding royalty. All of Venture's assets continued to
perform in line with expectations and production for 2003 averaged 1,500 boepd,
or 11% of Group total.
As a result of the growth in Venture's UK business, Trinidad now represents a
significantly smaller proportion of the Company's asset base and production than
it did several years ago. Consequently, during 2003, the Company conducted a
strategic review of its position in Trinidad. A number of attractive development
opportunities have been identified in its existing asset base. All of these
would become even more attractive if, as a result of the Trinidadian
Government's current review, the oil and gas tax regime was changed to improve
the economic terms of oil and gas investment. Ventureanticipates that such a
change is likely, although the timing of any such change is uncertain. A
commitment has been made for a seismic survey on the Point Ligoure licence.
Other development activity has been approved, but any commitment of funds is
held pending the outcome of this fiscal reform.
Oil and Gas Reserves
The movements in Venture's proven and probable reserves are summarised below:
Total Group UK Trinidad
Total Oil Gas Oil Gas Oil Gas
Mboe Mbbls MMcf Mbbls MMcf Mbbls MMcf
Total
Proven and
Probable
At 1 January
2003 49,697 34,006 94,144 29,149 94,144 4,857 -
Movements :
Revised
estimates 22,448 2,646 118,808 2,218 118,475 428 333
Acquisitions 26,437 19,388 42,298 17,888 42,298 1,500 -
Production (4,858) (3,223) (9,807) (2,738) (9,684) (485) (123)
44,027 18,811 151,299 17,368 151,089 1,443 210
At 31 December
2003 93,724 52,817 245,443 46,517 245,233 6,300 210
During 2003 Venture's total proven and probable reserves increased by 89% to
93.7 MMboe from 49.7 MMboe. 46% of this increase resulted from net upward
revisions to reserve estimates and 54% from acquisitions, offset by production
during the year. The significant upward revision in UK gas reserves resulted
from two fields. Firstly, the Annabel discovery and secondly, increased
estimates of remaining recoverable reserves from Audrey as a result of the new
gas sales arrangements and Venture's planned rejuvenation activity. Reserve
additions through acquisitions related to the acquisitions of interests in GKA,
'A' Fields and the Chestnut field in the UK and Brighton Marine in Trinidad.
Health, Safety and Environmental
Venture recognises that sustained high quality performance in the areas of
Health, Safety and Environmental ("HSE") is essential in maintaining the
Company's 'licence to operate'. Performance in 2003 was of the highest standard
and HSE will remain a priority for management, staff and contractors. During
2003 Venture took over operatorship of three fixed platforms in the UK North
Sea. Of these, two (Audrey) are not normally manned while the Kittiwake platform
and associated offloading infrastructure represent the Company's first
permanently manned production facilities. As such Venture acknowledges the
increased scope of HSE responsibility associated with these facilities.
Financial Review
Key Results 2003 2002 Increase
Production(boepd) 13,310 8,681 53%
Turnover (# million) 71.0 52.7 35%
Gross profit (# million) 25.3 18.3 38%
Operating profit (# million) 25.7 14.3 80%
Profit after tax (# million) 13.7 7.2 90%
Fully diluted earnings per share (p) 11.9 6.1 95%
Operating cashflow (# million)44.0 35.1 25%
Key Statistics - # per boe 2003 2002 Increase/
(Decrease)
Average realised price 15.10 15.30 (1)%
Lifting costs 5.85 5.00 17%
Lifting costs (excluding well workovers) 4.88 4.85 -
Depreciation, depletion and amortisation 3.35 4.15 (19)%
Administration expenses (excluding
currency exchange variances) 0.65 1.43 (55)%
(Calculated on the basis of rounded numbers)
Turnover increased by 35% to #71.0 million for the year (2002: #52.7 million),
due to an increase of 53% in production volumes to 13,310 boepd and a virtually
unchanged average realised hydrocarbon price. The increase in production was due
to first production from the Sycamore field and additional production from the
"A" Fields. The average realised price for the year in sterling reflected higher
realised oil prices offset by the increased contribution of lower priced gas
production and the increasing strength of sterling relative to the US dollar.
On a per unit basis, lifting costs for the year increased by 17% to #5.85 per
boe (2002: #5.00 per boe). This increase was attributable to well workover costs
incurred during the year and the increase in the proportion of higher per unit
cost gas production. Excluding the cost of such well workovers, unit lifting
costs of #4.88 per boe were almost unchanged from those incurred in the previous
year. The 19% reduction to #3.35 per boe (2002: #4.15 per boe) in the charge for
depreciation, depletion and amortisation reflected the increase in the Company's
hydrocarbon reserve base relative to the cost of acquiring or developing those
reserves.
Due to the increase in turnover, the control over lifting costs and the
reduction in the per unit charge for depreciation, depletion and amortisation,
gross profit for the year was #25.3 million, an increase of #7.0 million or 38%
over that realised in the previous year.
Administration expenses, after adjusting for exchange gains on the Company's US
dollar denominated debt, totalled #3.1 million (2002: #3.5 million) a decrease
of 11%. On a per unit basis the adjusted administration expense of #0.65 per boe
represented a reduction of 42%. This reduction, which reflected in part an
allocation of certain costs that were previously classified as administration to
lifting costs, was achieved despite supporting a significantly increased
operated asset base as well as the increased cost of corporate governance and
compliance. As a result, operating profit for the year increased by 80% to #25.7
million (2002: #14.3 million).
Net interest payable and similar charges increased to #2.2 million (2002: #1.6
million) as a result of greater utilisation of the $175 million loan facility to
provide continuing investment and acquisition funding and the non-cash finance
charges associated with unwinding the decommissioning provision associated with
the Company's assets.
As a consequence of the higher level of profitability the taxcharge for the
year increased by 76% to #9.8 million (2002: #5.5 million). However the
effective tax rate for the year declined to 42% compared with 44% in 2002. This
tax charge for the year comprises a current tax credit of #2.6 million (2002:
#0.4 million charge) offset by a deferred tax charge of #12.4 million (2002:
#5.1 million). The net current tax credit reflected the repayment of Corporation
Tax of #1.9 million, which was received in January 2004, and the release of
prior year provisions through the utilisation of Group relief benefits.
Profit after tax for the year increased by 90% to #13.7 million (2002: #7.2
million) reflecting the start up of the Sycamore field and the contribution from
the additional interests in the 'A' Fields. As a consequence, fully diluted
earnings per share of 11.9p were 95% greater than those for 2002.
Cashflow from operating activities increased by 25% to #44.0 million (2002:
#35.1 million), due to an increase of #14.4 million in the operatingprofit
adjusted for depreciation for the year to #41.9 million (2002: #27.5 million).
This internally generated cashflow was the main source of finance for the
Company's continuing investment in both acquisitions of oil and gas interests
and development of existing assets, which totalled #54.3 million (2002: #63.6
million). During the year the Company invested a total of #14.8 million in
acquisitions. In June 2004, Venture increased its interest in and became
operator of the Chestnut field. Completion of the complex acquisition of licence
interests in the GKA occurred in late November, resulting in a net interest of
50.0% and operatorship of all licences in that area. In the last quarter of the
year, through two acquisitions, Venture tookits working interest in the Audrey
field to 100%, thus becoming operator of that field also, and acquired the
remaining 15% interest in the Ann and Alison fields that it did not already own.
A further #39.5 million was invested in developing existing assets, principally
Sycamore (#12.3 million), drilling a successful appraisal well in the Annabel
field and a well in the Amanda prospect (#23.8 million).
The total capital expenditure in 2003 was lower than in 2002 as a result of the
completionof the Sycamore field development, where capital expenditure was
largely incurred in 2002, and minimal investment in Trinidad in 2003. This was
partially offset by higher expenditures on 'A' Fields and acquisitions. In
addition, total capital expenditures in 2003 were lower than originally budgeted
due to the deferral of the central Sycamore water injection project and drilling
and sub-sea tie-back costs on Amanda/Agatha.
Additional financing was provided through the Company's long-term debt facility.
In 2003, the Company completed the refinancing of its bank credit facilities.
These facilities have been expanded from $100 million to $175 million and have
been provided by a consortium of banks lead by the Royal Bank of Scotland.
Hedging
To manage commodity price risk, Venture's policy is to hedge price exposure up
to 75% of its oil and gas production in the UK and Trinidad. Hedges have been
put in place with a variety of counterparties, details of which are summarised
in the following tables.
Oil hedges
Period Put Options Purchased Call Options Sold Swaps
Volume Price Volume Weighted Volume Weighted
Average Price Average Price
(bbl) ($/bbl) (bbl) ($/bbl) (bbl) ($/bbl)
2003 1,803,000 18.50 825,000 26.13 1,375,000 29.00
2004 1,954,800 26.23
20052,495,600 26.20
2006 1,612,050 25.35
Gas hedges
Period Forward Sale Swaps
Volume Price Volume Weighted Average Price
(therms) (p/therm) (therms) (p/therm)
2003 3,920,880 30.94
2004 920,000 19.00 27,299,100 24.77
2005 35,149,738 26.32
2006 18,900,000 28.85
Group Profit and Loss account - unaudited
for the year ended 31 December 2003
2003 2002
#'000 #'000
------------------------- --------- ----------
Turnover 71,030 52,671
Cost of sales (45,723) (34,345)
------------------------- --------- ----------
Gross profit 25,307 18,326
Administrative expenses 334 (4,034)
Other operating income 44 39
------------------------- --------- ----------
Operating profit 25,685 14,331
Interest receivable and similar income 182 130
Interest payable and similar charges (2,420) (1,736)
------------------------- --------- ----------
Profit on ordinary activities before taxation 23,447 12,725
Tax on profit on ordinary activities (9,750) (5,549)
------------------------- --------- ----------
Profit on ordinary activities after taxation 13,697 7,176
Finance cost of non-equity shares - (192)
------------------------- --------- ----------
Attributable to equity shareholders 13,697 6,984
------------------------- --------- ----------
Earnings per Ordinary Share
Basic Earnings per Share 12.7p 6.8p
------------------------- --------- ----------
Diluted Earnings per Share 11.9p 6.1p
------------------------- --------- ----------
Group Balance Sheet as at 31 December 2003 - unaudited
2003 2002
#'000 #'000 #'000 #'000
---------------- --------- --------- -------- --------
Fixed assets
Tangible assets 178,609 127,527
Investments 175 318
---------------- --------- --------- -------- --------
178,784 127,845
Current assets
Stocks 899 776
Debtors 18,025 12,616
Cash at bank and in hand 3,939 2,775
---------------- --------- --------- -------- --------
22,863 16,167
Creditors - amounts falling due within
one year (19,107) (18,314)
---------------- --------- --------- -------- --------
Net current assets/(liabilities) 3,756 (2,147)
---------------- --------- --------- -------- --------
Total assets less current liabilities 182,540 125,698
Creditors - amounts falling due after
more than one year (42,737) (26,258)
Provisions for liabilities and charges (42,869) (16,403)
---------------- --------- --------- -------- --------
Net Assets 96,934 83,037
---------------- --------- --------- -------- --------
Capital and reserves
Called up share capital 431 431
Share premium 77,428 77,228
Profit and loss account 19,075 5,378
---------------- --------- --------- -------- --------
Total shareholders' funds 96,934 83,037
---------------- --------- --------- -------- --------
2003 2002
#'000 #'000
--------------------------- ---- ----------- -----------
Net cash inflows from operating 44,007 35,078
activities
Returns on investment and servicing of (1,140) (741)
finance
Taxation 201 (1,530)
Capital expenditure and financial (54,281) (63,584)
investment ---- ----------- -----------
---------------------------
Cash outflow before use of liquid
resources and
financing (11,213) (30,777)
Financing 12,377 28,127
--------------------------- ---- ----------- -----------
Increase/(decrease) in cash 1,164 (2,650)
--------------------------- ---- ----------- -----------
----------------------------- ----------- -----------
Reconciliation of operating profit to operating cash 2003 2002
flows
#'000 #'000
----------------------------- ----------- -----------
Operating profit 25,685 14,331
Depreciation charge 16,254 13,154
(Increase)/decrease in stock (123) 1,740
Increase in debtors (3,648) (3,892)
Increase in creditors 5,839 9,745
----------------------------- ----------- -----------
44,007 35,078
----------------------------- ----------- -----------
Analysis of cash flows for headings in the cash flow statement - unaudited
---------------------------------- -------- ---------
2003 2002
#'000 #'000
---------------------------------- -------- ---------
Returns on investment and servicing of finance
Interest received 182 130
Interest paid (1,322) (871)
---------------------------------- -------- ---------
Net cash outflow from returns on investment and
servicing of finance (1,140) (741)
---------------------------------- -------- ---------
Capital expenditure and financial investment
Purchase of tangible fixed assets (54,281) (63,584)
---------------------------------- -------- ---------
Net cash outflow from capital expenditure and financial
investment (54,281) (63,584)
---------------------------------- -------- ---------
Financing
Issue of shares net of expenses - 30,419
Redemption of preference shares - (950)
Exercise of share options held by ESOP 343 276
Increase/(decrease) in loan facility 12,034 (1,618)
---------------------------------- -------- ---------
Net cash inflow from financing 12,377 28,127
---------------------------------- -------- ---------
Analysis of net debt - unaudited
1 January 2003 Cash flows 31 December
2003
# # #
-------------------------- --------- --------- ---------
Cash in hand and at bank 2,775 1,164 3,939
Debt due after 1 year (23,325) (12,034) (35,359)
-------------------------- --------- --------- ---------
Total (20,550) (10,870) (31,420)
-------------------------- --------- --------- ---------
NOTES:
Accounting Convention
The financial information has been prepared on the basis of the accounting
policies set out inthe Group's 2003 statutory accounts. These policies have
been applied consistently, throughout the current year and the preceding year.
Administration Expenses
Administration expenses for the year are stated inclusive of net exchange gains
arising on the revaluation of non-sterling denominated assets and liabilities.
In 2003 such gains totalled #3.5 million (2002: #0.5 million).
Dividend
The Directors do not recommend the payment of a dividend given the Company's
growth strategy and development opportunities, and it is expected that any cash
generated by the Group's operations will be devoted to funding these
opportunities.
Earnings per Share
Basic earnings per share is calculated by dividing the earnings attributable to
ordinary shareholders by the weighted average number of ordinary shares in issue
during the year. For fully diluted earnings per share the weighted average
number of ordinary shares in issue during the year is adjusted to reflect the
potential exerciseof share options by directors or employees.
The calculation of earnings per ordinary share shown is based upon the
following:
2003 2002
------------------------ ---------- ----------
#'000 #'000
Profit attributable to shareholders 13,697 6,984
Weighted average number of ordinary shares for the
year - Basic 107,767,688 102,286,706
- Fully Diluted 114,792,209 113,689,702
------------------------ ---------- ----------
Earnings per share - Basic 12.7p 6.8p
- Fully Diluted 11.9p 6.1p
------------------------ ---------- ----------
Acquisition of Oil and GasInterests
Amounts invested for the acquisition of oil and gas interests are stated
exclusive of the provision for future estimated abandonment costs, as required
under FRS12, "Provisions and Contingencies".
Post Balance Sheet Events
Since 31December 2003 the Company completed the acquisition of a further 17.7%
interest in the Birch field.
Statutory Accounts
The above financial information does not constitute statutory accounts as
defined in Section 240 of the Companies Act 1985 and is unaudited. The
comparative financial information is based on the statutory accounts for the
year ended 31 December 2002. Those accounts, upon which the auditors have issued
an unqualified opinion, have been delivered to the Registrar of Companies.
Full accounts for the year ended 31 December 2003 are due to be posted to
shareholders in April 2004 and will be available thereafter from the Company's
head office at King's Close, 62 Huntly Street, Aberdeen, AB10 1RS.
External Auditors
The Company's external auditors, PricewaterhouseCoopers LLP, have confirmed that
they have reviewed this Preliminary Announcement and it is consistent with the
accounts for the Group for the year ended 31 December 2003 which have not yet
been delivered to the Registrar of Companies. The report of the auditors on
those accounts is expected to be unqualified.
Annual General Meeting
The Annual General Meeting of the Company will be held in Aberdeen in June 2004,
notices for which will be sent out in due course.
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR UAOURSSROUAR
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