RNS Number:8024J
Global Energy Development PLC
09 April 2003
9 April 2003
Global Energy Development PLC
Preliminary Results for the year ended 31 December 2002
'Proved plus probable reserve values increased by 263%'
Global Energy Development PLC, the petroleum exploration and production company
(LSE-AIM: "GED"), is pleased to announce preliminary results for the year ended
31 December 2002.
Key Points
* Operational Review:
- Loss on ordinary activities before taxation reduced by 88% to $1,907,000
(2001: loss $15,754,000);
- Proved reserve volumes increased by 9.7%, as a result of successful
workovers (Bolivar and Torcaz) and construction of the Canacabare
pipeline;
- Reductions in operating expenses and future development costs (along with
improvement in oil prices) substantially increasing reserve values; and
- Proved plus probable reserve values increased by 263%.
* Favourable trends within the oil industry:
- Price recovery by mid 2002 with significant escalation at year end;
- Inability to increase surplus capacity continuing to cause upward
pressure on prices; and
- Recovery of growth in worldwide petroleum demand experienced in last
quarter 2002 continuing into 2003.
* Strength of Latin American Focus:
- Petroleum resource base second only to Middle East;
- Full cost of developing and producing oil among lowest in the world; and
- Closest of all major producing regions to North America, largest oil
consumer in the world.
Commenting on the results, Chairman of Global Energy Development PLC, Mikel D.
Faulkner, said:
"Given current and anticipated industry conditions and Global's quality
developmental properties, high potential exploration projects and experienced
management team, we believe we are strategically well positioned and remain
very excited about the future of the oil industry and Global's role in it."
For further information:
Global Energy Development PLC (www.globalenergyplc.com)
Mikel D. Faulkner, Chairman today only: (0044-207) 466-5000
all other times: (001-817) 424-2424
Buchanan Communications (0044-207) 466-5000
Tim Thompson / Catherine Miles
CHAIRMAN AND MANAGING DIRECTOR'S STATEMENT
We are pleased to report to you on our first year of operations as a U.K.
company. The year 2002 was eventful, not only for Global Energy Development PLC
and its subsidiaries ("Global" or "Group") but also for the business of
international petroleum, and it is likely that 2003 will witness additional
profound events that may alter our industry. We are convinced that the
achievements of Global during the past twelve months have positioned the Group
well for the future and the highlights of some of these achievements, as well as
our comments on industry and economic conditions are set out below.
Initial Listing
On 25 March 2002, Global Energy Development PLC (the "Company") ordinary shares
were formally admitted for trading on the Alternative Investment Market of the
London Stock Exchange ("AIM"), chosen for its receptiveness to internationally
focused companies with potential for growth. Global also successfully completed
its first private placing of ordinary shares in March 2002.
World Economic Conditions
Because of the lingering unsettled conditions relating to the September 11, 2001
tragedy the past year witnessed very little worldwide economic growth as
uncertainty gripped not only the financial markets, but also individual
investors and consumers. Some of this uncertainty seemed to be lifting by the
early fall but has re-emerged as a result of the lead up to and subsequent U.S.
led invasion of Iraq.
Industry Conditions
The Company began 2002 experiencing oil prices below historical trends and
serious concerns in the financial markets that prices would fall even further.
However, OPEC's objective of maintaining the "basket" of oil prices in the
middle to upper U.S.$20 range was and is considered by Global to be a key
determinant of future price levels. Events confirmed the validity of this
conviction as OPEC cut production, which in turn reduced above ground petroleum
inventories. By mid-year prices were recovering and were escalating
significantly at year-end aided by the political turmoil in Venezuela. Even more
encouraging was the recovery of growth in worldwide petroleum demand experienced
in the last quarter of 2002, which has continued into 2003 at a rate of increase
year on year of between 1% and 2%. Given these favourable trends, many oil
industry observers are now forecasting at least a 1 million BOPD increase in
worldwide petroleum demand this year.
Oil price volatility and declining excess production capacity are two very
important factors, which will continue to affect the industry and Global. The
outcome of current and future events in the Persian Gulf as well as Venezuela
will undoubtedly have a significant impact on the price of petroleum. Falling
surplus production capacity worldwide will continue to cause oil price
volatility during periods of high seasonal demand. Because the industry has been
unable to replace its produced reserves for almost two decades, it appears
unlikely that any significant increase in surplus production capacity will
materialize in the near to medium term. This inability to increase surplus
capacity will continue to cause upward pressure on oil prices. Given these
industry conditions and Global's quality development projects, the management
remains very excited about the future of the oil industry and Global's role in
it.
Latin American Focus
According to the United States Geologic Survey in the year 2000, Latin America
has a petroleum resource base second only to that of the Middle East. Moreover,
as reported by John S. Herald, the full cost of developing and producing oil in
Latin America is among the lowest in the world. Latin America is the closest of
all the major producing regions to North America, which is the largest oil
consumer in the world. Given the tensions in the Middle East and North American
concerns over security, proximity to hydrocarbon resources and tanker transmit
times are of increasing importance.
Operational Review
Global achieved a number of important operational goals during 2002:
* Exploitation success was achieved through workovers in Bolivar and Torcaz,
the Company's producing fields in Colombia.
* Construction of a pipeline connecting the Canacabare producing property
with Global's Palo Blanco field was commenced.
* Proved reserve volumes increased by 9.7%, as a result of successful
workovers as well as the construction of the Canacabare pipeline.
* Most importantly, proved plus probable reserve values increased
substantially to $272 million from $75 million due to the improvement in oil
prices, and reductions in operating expenses and future development costs.
Development costs have been significantly reduced as a result of redesigning
future wells to incorporate less expensive slimhole drilling techniques.
Operating costs are lower as a result of continued efforts to reduce field
labour expenses.
SUMMARY
We believe we are strategically well positioned for the future because of our
quality developmental properties, high potential exploration projects and an
experienced, enthusiastic management team that is committed to achieving value
for Global's shareholders.
Mikel D. Faulkner Stephen C. Voss 9 April 2003
Chairman Managing Director
FINANCIAL OVERVIEW
For the year ended 31 December 2002 the Group recorded an operating loss of
$1,898,000 (2001: loss $11,405,000) and a loss on ordinary activities before
taxation of $1,907,000 (2001: loss $15,754,000).
On 25 March 2002 Global's ordinary shares were admitted for trading on the
Alternative Investment Market (AIM) of the London Stock Exchange.
Simultaneously, Global successfully completed its initial private placing of
2,021,902 ordinary shares raising $1,435,000 in the process.
Global held its first Annual General Meeting (AGM) on 7 August 2002. Following
the AGM, Global affected a bonus issue of warrants on the basis of one warrant
for each four ordinary shares held by shareholders as of 7 August 2002.
Turnover
Oil turnover for 2002 was $7,619,000 compared to $8,291,000 for 2001. The
decreased in turnover of $672,000 was the result of reduced production from
Palo Blanco and Bolivar due to anticipated production declines and specific
mechanical problems. Turnover for 2002 was also reduced as a result of a small
decline in the average net price received from the Group's crude purchaser.
Operating Loss
The operating results for 2002 were much improved over 2001. The improvement was
a result of reduced impairments recorded in 2002 compared to 2001. The
impairments recorded in 2001 were related to significant adjustments to our
investment in Costa Rica, where the realisation was in doubt and the impairment
of selected production facilities in Colombia, which were unlikely to be used in
the future. Impairments for 2002 were primarily the result of adjustments in the
carrying value of our oil field inventories in Colombia and other adjustments to
the carrying value of non-evaluated properties in Peru and Panama.
Other revenue increased $304,000 as a result of our ongoing cost review effort
that resulted in the correction of improperly assessed transportation charges in
Colombia.
Additionally, operating results were improved as a result of reduced charges
related to Depreciation, Depletion and Amortisation as a result of lower
production quantities and improvements in operating efficiencies in field
operating costs.
Taxation
Taxation provisions for the current year were the result of local Colombian
taxation charges associated with a special "War Tax" (also known as "Security
Tax") assessment of $295,000 imposed by the Colombian government in August 2002.
The company also made provisions for "Presumptive Income Tax", a local Colombian
tax based on certain equity assumed employed within the country of Colombia.
This provision for 2002 was estimated to be approximately $300,000. A provision
of $620,000 was recorded in 2001.
Net Loss After Tax
The consolidated net loss after tax for the year 2002 amounted to $2,502,000
compared to $16,374,000 for 2001.
Balance Sheet
The net assets of Global decreased by $2,331,000 in 2002 compared to 2001, which
included the effect of the current year depreciation, depletion and
amortisation, along with selected other tangible asset impairments during the
year.
Rodger L. Ehrlish
Finance Director
9 April 2003
GROUP PROFIT AND LOSS ACCOUNT
For the year ended 31 December 2002
2002 2001
$000 $000
TURNOVER 7,619 8,291
Cost of sales (5,729) (15,244)
GROSS PROFIT/(LOSS) 1,890 (6,953)
Administrative expenses (4,178) (4,630)
Exchange (losses)/gains (49) 43
Other Income 439 135
OPERATING LOSS (1,898) (11,405)
Loss on disposal of assets - (3,703)
LOSS ON ORDINARY ACTIVITIES (1,898) (15,108)
Net interest payable (9) (646)
LOSS ON ORDINARY ACTIVITIES BEFORE TAXATION (1,907) (15,754)
Taxation on loss for the financial period (595) (620)
LOSS ON ORDINARY ACTIVITIES AFTER TAXATION (2,502) (16,374)
LOSS ATTRIBUTABLE TO SHAREHOLDERS (2,502) (16,374)
TRANSFER FROM RESERVES (2,502) (16,374)
LOSS PER ORDINARY SHARE (0.09) N/A
There are no recognised gains and losses other than the loss of $2,502,000 for
the year ended 31 December 2002 (2001: loss of $16,374,000).
GROUP BALANCE SHEET
At 31 December 2002
2002 2001
$000 $000
FIXED ASSETS
Tangible assets 51,335 52,082
51,335 52,082
CURRENT ASSETS
Stocks 752 1,213
Debtors and prepayments 441 1,263
Cash at bank and in hand 3,562 4,191
4,755 6,667
Creditors: amounts falling due within one year (1,287) (1,644)
NET CURRENT ASSETS 3,468 5,023
TOTAL ASSETS LESS CURRENT LIABILITIES 54,803 57,105
Provision for liabilities and charges (324) (295)
54,479 56,810
Capital and Reserves
Called up share capital 405 -
Capital reserve 210,844 229,807
Share premium account 18,729 -
Profit and loss account (175,499) (172,997)
54,479 56,810
NOTES TO PRELIMINARY RESULTS
For the year ended 31 December 2002
1.
ACCOUNTING POLICIES
Basis of preparation
The financial statements have been prepared under the historical cost
convention. The financial statements for the year ended 31 December 2002 have
been prepared in accordance with accounting principles generally accepted in the
United Kingdom ('UK GAAP'). As explained below, Companies Act requirements in
respect of the use of merger accounting have been departed from in order to
present a true and fair view.
Basis of consolidation
The financial statements have been prepared using the principles of merger
accounting. One of the conditions for applying merger accounting for a group
reorganisation under Financial Reporting Standard 6 'Acquisitions and mergers'
requires that the use of merger accounting not be prohibited by company
legislation. Whilst part of the reorganisation included the acquisition of the
share capital of the foreign subsidiaries of Global Energy Development Ltd, this
was partially in exchange for cash, which does not meet the requirements of the
Companies Act 1985. The directors consider that it is necessary to use merger
accounting for all of the business combinations within this group reorganisation
in order that the financial statements present a true and fair view.
Under merger accounting, the results of the company are combined from the
beginning of the financial period in which the combination occurred and their
assets and liabilities combined at the amounts at which they were previously
recorded. Profit and loss account and balance sheet comparatives are restated on
the combined basis.
The financial information shown in this publication is unaudited and does not
constitute statutory accounts as defined in section 240 of the Companies Act
1985. Statutory accounts will be sent to shareholders in due course and may be
obtained after the posting date from the Company Secretary, Global Energy
Development PLC, The Little House, Quenington, Cirencester, Gloucestershire GL7
5BW.
2.
Turnover is attributable to one continuing activity, which is oil production
from the Harken de Colombia Ltd. Branch located in Colombia, South America.
3.
The calculation of loss per ordinary share of the year ended 31 December 2002 is
based on the weighted average number of ordinary shares.
4.
The directors do not recommend payment of a cash dividend, however, bonus
warrants were issued to shareholders on 7 August 2002 on the basis of one
warrant for each four ordinary shares held on 7 August 2002. Each bonus warrant
holder may acquire shares at 60p during an exercise period of three years from
the date of their issue.
5.
The Group's external auditors, Ernst & Young LLP, have confirmed they have
reviewed this Preliminary Announcement of results and that it is consistent with
the financial statements of the Group for the year ended 31 December 2002. The
2002 audit examination of the financial statements by Ernst and Young LLP has
been substantially completed for 2002 prior to the release of this unaudited
information.
6.
EVENTS SINCE THE BALANCE SHEET DATE
In February 2003, Global commenced drilling operations on the initial well
required to be drilled in the Cajaro Association Contract, the Cajaro #1 well.
The Cajaro #1 well has a projected depth of approximately 9,300 feet and is
targeting the Ubaque Formation that is productive in Global's Estero #1 and
Estero #2 wells in the Palo Blanco Field within Global's Alcaravan Association
Contract. Global has disassembled the equipment contracted for the drilling
operations and is currently carrying out production testing on the well. The
drilling operation were completed in 22 days and recorded oil shows in the
Mirador and Ubaque formations. If successful, production from the Cajaro #1 well
would be transported through Global's existing Palo Blanco pipeline facilities.
Costs to drill and complete the Cajaro #1 well are estimated at approximately
$2.5 million and will funded out of cash on hand.
The Company's immediate parent undertaking is Global Energy Development Ltd. In
the directors' opinion, the Company's ultimate parent undertaking and
controlling party at 31 December 2002 was Harken Energy Corporation ("Harken"),
a company incorporated in the United States.
Subsequent to 31 December 2002, Lyford Investments Enterprises Ltd. (Lyford), a
private investor acquired approximately 62% of Harken's outstanding common stock
under a Standby Purchase Agreement. The transaction resulted in a change of
control of Harken and consequently, Global Energy Development PLC. Lyford has
the voting power to control the election of Harken's board of directors and the
approval or other matters presented for consideration by the stockholders.
This information is provided by RNS
The company news service from the London Stock Exchange
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