report for first quarter 2007 - vpffotc.nfmf.no/public/news/6644.pdf · report for first quarter...

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Report for first quarter 2007

Highlights Q1 2007Ener’s share of Jotun production was 5 175 boepd, compared with 6 232 boepd in the first quarter last year. The average realized oil price was 59.20 USD/barrel.

Operating revenues are NOK 182 million (0).

Operating income is NOK 31 million, compared with minus NOK 5 million last year. The quarter is negatively influenced by proportionally higher operating cost than what is expected for the full year.

The Dana Petroleum voluntary offer to purchase all outstanding shares, warrants and options of the Company was withdrawn on January 12.

The final financial settlement with Shell regarding the PL027B transaction is completed.

Signed agreement with British Gas to acquire its 25 per cent interest of PL 337 on the Norwegian Continental Shelf.

The Company has been informed by the MPE that the license Ener Petroleum applied for in the APA 2006 is intended to be awarded in a second phase of the APA license round expected to take place during the second quarter of 2007.

Events after Q1Ener completed on 25th of May a bond issue of NOK 300 million.

Applied for listing on Oslo Axess.

Ener’s 2P reserve estimates per 31.12.2006 for the Jotun field increased from 11.3 to 11.7 million barrels.

Ener’s estimate for risked prospective resources (prospects and leads) increased to 31.9 million barrels.

OutlookAn exploration well is approved to be drilled on PL 337 in the third quarter of 2007.

Continuing equity funding and IPO.

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MAKING A DIFFERENCE


MAKING A DIFFERENCE �

Key figures (NGAAP)

FinancialsOperating revenues amounted to NOK 182.3 million in the first quar-ter 2007 and comprise revenues from sales of oil and gas from the Jotun field, as well as tariff revenues from the Ringhorne field. Revenues for the same period last year was recorded as part of the acquisition price for the Jotun field. The operat-ing income is influenced by higher operating cost for the first quarter than what is budgeted for the sec-ond half of 2007. This is explained by lower contractual lease cost for the Jotun FPSO effective from July 2007.

Operating income has increased to NOK 31.5 million in first quarter 2007 from minus NOK 4.7 million in first quarter previous year, mainly due to the operations of the Jotun field.

EBITDA was increased to NOK 58.7 million in the first quarter 2007 compared to minus NOK 4.7 million last year. This increase is caused by the inclusion of the operational results from the Jotun field.

Net financial items of NOK 1.4 mil-lion together with a total tax charge of NOK 37.4 million reduced the net income to minus NOK 4.5 million in the first quarter 2007 compared to minus NOK 1.9 million in 2006.

The Company therefore can report an operating income margin and EBITDA margin of 17 per cent and 32 per cent respectively for the first quarter of 2007. No similar margins can be reported for the same period last year as Ener had no financial operating revenues for that period.

Exploration expenses amounted to NOK 1.5 million in the first quarter this year compared to NOK 0.1 mil-lion last year.

Development investments related to the Jotun field amounted to NOK 9 million in the first quarter this year.

Of taxes payable reported in the balance sheet an amount of NOK 388 million is taxes for 2006 that are payable in December 2007. Hereof

Full year

Figures in MNOK Q1 2007 Q1 2006 2006 2005Operating revenues 182.3 0 12.4 0EBITDA 58.7 (4,7) (17.5) (7.3)Operating income 31.5 (4.7) (30.9) (7.3)Net income (4.5) (1.9) (14.6) (2.3)

EBITDA margin (%) 32% - - -Operating income margin (%) 17% - - -

Oil and gas production (boe) 465 763 560 904 *)

Proved reserves, P50 (mill. barrels) 11.7 **)

*) Jotun production for corresponding first quarter 2006 for comparison.**) Remaining reserves as per 31.12.2006

an amount of NOK 138 million was for the “profit-and-loss-account” related to the Jotun FPSO. Conse-quently, the taxes from operating activities in 2006 were NOK 250 million. For the first quarter 2007, taxes payable are amounting to NOK 77 million, of which an amount of NOK 28 million is related to the “profit-and-loss-account” related to the Jotun FPSO.

Cash flow from operating activities was negative with NOK 31.5 million in the first quarter 2007, mainly caused by a significant increase in accounts receivable related to sale of crude oil, compared with a negative cash flow from operating activities of NOK 4.7 million in the first quarter 2006.



*) The 50% share in PL 027B give Ener a 45% share in the unitized Jotun Field.**) Pending MPE approval.***) License period can be extended depending upon exploration success.

OperationsLicence portfolioEner Petroleum has a participating interest in two production licenses on the Norwegian Continental Shelf:

Production License Block Field Interest share % Operator License periodPL 027B 25/8 Jotun *) 50% ExxonMobil -2015PL 337 **) 15/11,15/12, 16/10 25 Petera -2009 ***)

Reserves and resourcesEner Petroleum’s asset portfolio consists of a balance of reserves in production in the Jotun Field together with exploration acreage with exiting prospects and leads in PL 027B and PL 337.

Resource category 8 and 9 com-prises prospects and leads that have been mapped and thus allow

estimation of volumes. These pro-spective resources have then been multiplied by a probability of dis-covery calculated by Ener Petroleum in accordance with normal industry practice.

Ener Petroleum’s current estimate for Proved plus Probable reserves from the Jotun Field is 11.7 million

Figures in million barrels

NPD Resource category

NPD’s Classification

Proved (1P) reserves (P90)

Proved plus Probable (2P) reserves (P50)

Proved plus, Prob-able plus, Possible

(3P), reserves (P10)

Risked Prospective

resources1 In production 9.6 11.7 16.68 Prospects 22.69 Leads 9.3

barrels, compared to earlier report-ed numbers of 11.3 million barrels (as per 31.12.2006). The increase in the Company’s reserve estimate for Jotun is a result of an increased understanding of the sub-surface of the field. Ener’s reserves estimates for the Jotun field has been inde-pendently verified by Aker Kvaerner Geo AS.

ProductionJanuary February March 1Q 2007 1Q 2006

Oil (barrels) 145 600 133 720 147 217 426 537 521 418Gas (boe) 13 332 11 355 14 539 39 226 39 486Total (boe) 158 932 145 075 161 756 465 763 560 904Average (boepd) 5 127 5 181 5 218 5 175 6 232

Ener’s share of oil and gas produc-tion from it’s 45 per cent ownership of the Jotun field was 465 763 boe. This includes an in kind compensa-tion element from the Ringhorne field to the Jotun owners as a function of the tie-in and service agreement between Ringhorne and Jotun.

The Jotun production during the first quarter of 2007 has been somewhat unstable as a result of demobilization activities on the Jotun B platform following the drill-ing campaign in the second half of 2006. The Jotun Field is planned to produce until 2015.

The average crude oil sales price in the first quarter of 2007 was (USD/bbl):

January: 55.91 February: 58.68 March: 64.01 1Q Average: 59.20



Business developmentThe acquisition of the Jotun Field has given Ener an excellent produc-tion base and pre-tax cash flow to build and expand it’s activities in a tax efficient way on the Norwegian Continental Shelf as well as in other mature areas of the North Sea basin, such as the UK shelf. Ener’s strategy is to use the considerable pre-tax cash flow generated by the Jotun production for tax efficient invest-ments in particular directed towards strengthening the Company’s portfolio of exploration assets. In addition Ener will continue to par-ticipate in licensing rounds such as the APA and 20th rounds.

In March 2007 Ener Petroleum signed a sales and purchase agree-ment with British Gas Norge AS for the acquisition of it’s 25 per cent license share of PL337. The acquisi-tion is subject to partner acceptance and MPE approval. The license cov-ers parts of block 15/11, 15/12 and 16/10, and contains several pros-pects and leads. Drilling of two of the most interesting prospects will be commenced in the third quarter of 2007 by the jack-up Mærsk Giant.

Ener Petroleum prime license applied for in APA 2006 was not awarded in the authorities regular

license award in January 2007. Ener has been informed by the Ministry of Petroleum that this license is intended to be awarded in a second phase of license awards expected to take place during the second quarter of 2007.

Special eventsDana Petroleum’s offer of December 2006 was withdrawn on January 12, 2007.



OutlookEner’s strategic focus is the second hand market for licenses in the more mature areas of the Norwe-gian Continental Shelf, and to some extent in the broader North Sea area. As the availability of inter-esting projects is limited and the competition high, Ener will follow closely the merger of Statoil/Hydro in order to be in position to capture any business opportunities follow-ing a potential portfolio restructur-ing in the wake of the merger.

Ener has an asset base dominated by late life production, and a more balanced portfolio of assets is now actively being targeted. Ener is cur-rently negotiating with other licens-ees on the Norwegian Continental Shelf regarding possible acquisition or farm-in to new licenses with ac-tive exploration programs and/or production ongoing. In addition, the Company has already started

technical screening work for the 2007 APA round in Norway.

Ener will continue to work with the Jotun operator, ExxonMobil, both to identify upside opportunities as well as to investigate various solutions to arrest the production decline of the field.

On PL027B the Company is working with the operator ExxonMobil with the common aim of drilling an ex-ploration well on one of the license prospects in 2008. Ener Petroleum will also continue it’s independent subsurface work on the license in order to mature other prospects towards a possible drilling decision.

Ener is currently in the process of re-cruiting more experienced person-nel, in order to handle the Compa-ny’s increased activity level as well as our strong growth ambitions.

Ener has issued a bond amounting to NOK 300 million. The proceeds from the bond issue will be made available to the Company upon injection of minimum NOK 250 mil-lion new equity and will be used to refinance existing debt and general corporate purposes (Fondsfinans and Pareto managers). The company has applied for listing on Oslo Axess and is planning to raise a minimum of NOK 250 million in equity (Fonds-finans manager). This should secure a good financial position with nec-essary flexibility to take advantage of new opportunities coming up in the near to medium term future.

The Company’s auditor has not reviewed this report.

Lysaker, 30 May 2007The Board of Directors of Ener Petroleum ASA



Interim Income Statement (NGAAP)for the three months ended 31 March

(Amounts in NOK 1000)Three months ended

31 March 2007Three months ended

31 March 2006Year ended

31 December 2006

Sale of petroleum products 163 158 - -

Tariff revenues 19 147 - 9 258

Other operating revenues - - 3 228

Operating revenues 182 305 - 12 486

Production expenses (111 890) - (34 784)

Change in stocks (1 349) - 37 351

Exploration expenses (1 454) (137) (6 113)

Depreciation (27 227) (24) (13 360)

Salaries and related (5 380) (1 942) (9 997)

Other operating expenses (3 537) (2 625) (16 464)

Operating expenses (150 838) (4 728) (43 367)

Operating income 31 467 (4 728) (30 881)

Interest income 1 503 419 3 053

Other financial income 8 181 - 4 837

Interest expense (6 293) - (1 101)

Other financial expense (2 028) (10) (24 668)

Net financial items 1 364 409 (17 879)

Ordinary income before taxes 32 830 (4 319) (48 760)

Income tax (charge) / credit (37 351) 2 458 34 189

Net income for the period (4 521) (1 861) (14 571)

Attributable to:

Equity holders of the Company (4 521) (1 861) (14 571)

Earnings / (loss) per share:

basic (4.11) (1.69) (13.25)

diluted (4.11) (1.69) (13.25)

Ener Petroleum ASAIncome Statement Unaudited



Ener Petroleum ASABalance SheetUnaudited

Interim Balance Sheet (NGAAP) at 31 March 2007

(Amounts in NOK 1000) 31 March 2007 31 March 2006 31 December 2006

ASSETS

Non-current assets

Deferred tax asset 13 351 - 3 878

Production rights 436 921 - 463 674

Production facilities 301 510 - 300 604

Property, plant and equip-ment

456 469 492

Pension rights - - 172

Other financial assets 5 716 599 -

Total non-current assets 757 954 1 068 768 820

Current assets

Accounts receivable 99 289 - 1 991

Other receivables 58 011 7 103 56 115

Cash and cash equivalents 111 717 90 087 174 559

Total current assets 269 017 97 190 232 665

TOTAL ASSETS 1 026 971 98 258 1 001 486

EQUITY AND LIABILITIES

Equity

Share capital 7 370 7 370 7 370

Share premium 92 163 92 163 92 163

Other paid-in-capital 1 158 - -

Retained earnings (21 397) (4 167) (16 877)

Total equity 79 295 95 367 82 657

Liabilities

Non-current liabilities

Provision for asset retirement obligation

283 343 - 280 823

Deferred tax - - -

Pension liabilities 83 - -

Total non-current liabilities 283 426 - 280 823

Current liabilities

Interest-bearing loan 188 985 - 225 184

Trade and other payables 1 905 1 119 3 228

Income tax payable 464 545 - 387 812

Other current liabilities and overlift 8 814 1 774 21 783

Total current liabilities 664 251 2 891 638 006

TOTAL EQUITY AND LIABILITIES 1 026 971 98 258 1 001 486



Ener Petroleum ASACash Flow StatementUnaudited

Interim Cash Flow Statement (NGAAP)for the three months ended 31 March

(Amounts in NOK 1000)Three months ended

31 March 2007Three months ended

31 March 2006

Cash flow from operating activities

Profit before income tax 32 830 (4 319)

Depreciation 27 227 24

Share-based expense 1 158 -

Other 1 369 (479)

Interest received 1 503 419

Interest paid (6 293) -

Amortized cost - -

Changes in assets and liabilities:

Trade and other receivables (104 910) (2 788)

Trade and other payables 15 618 2 429

Cash flow from operating activities (31 498) (4 714)

Cash flow used for investment activities

Investment in production rights, adjustment 8 436 -

Purchases of property, plant and equipment (PPE) (9 780) (32)

Cash flow used for investment activities (1 344) (32)

Cash flow from financing activities

Proceeds from issuance of shares - -

Proceeds from issuing shares to employees - -

Proceeds from issuance of bank loan - -

Repayment of interest-bearing loan (30 000) -

Proceeds from exercise of options - -

Cash flow from financing activities (30 000) -

Net change in cash and cash equivalents (62 842) (4 746)

Cash and cash equivalents beginning of the period 174 559 94 833

Cash and cash equivalents end of the period 111 717 90 087



Ener Petroleum ASAChanges is EquityUnaudited

Interim Statement of Changes in Equity for the three months ended 31 March 2007

(Amounts in NOK 1000) Share capital Share

premiumOther paid-

in-capitalRetained earnings Total

Equity at 1st January 2007 7 370 92 163 - (16 877) 82 657

Profit / (loss) for the period (4 521) (4 521)

Share-based payment, options 1 158 1 158

Equity at 31st March 2007 7 370 92 163 1 158 (21 397) 79 295

for the comparable three months ended 31 March 2006


premiumOther paid-




Share-based payment, options - -

Equity at 31st March 2006 7 370 92 163 - (4 167) 95 367

Interim Statement of Changes in Equity for the year ended 31 December 2006


premiumOther paid-




Share-based payment, options - -

Equity at 31st March 2006 7 370 92 163 - (16 877) 82 657


MAKING A DIFFERENCE �0

Ener Petroleum ASANotes to the interim financial statementsfor the three months ended 31 March 2007

Note 1 - Basis of preparationThese financial statements are the interim condensed financial statements of Ener Petro-leum ASA for the three months ended 31 March 2007.

The interim financial statements of the Company have been prepared in accordance to NGAAP.

These financial statements do not include all the information and disclosures required in the annual financial statements, and should be read in conjunction with the Company’s an-nual financial statements for the year ended 31 December 2006.

These financial statements and the associated depreciation charges have been prepared using an independent third party verification of the reserves that was carried out in May 2007.

Note 2 - Significant accounting policiesThe accounting policies adopted are consistent with those followed in the preparation of the Company’s annual financial statements for the year ended 31 December 2006, except for share-based payment, see note 9 below.

Note 3 - Segment reportingThe Company has identified its reportable segments based on the nature of the risk and return within its business. The only business segment is oil and gas, and the only geographi-cal segment at 31 March 2007 is the Norwegian Continental Shelf.

Note 4 - Other financial assetsThe Company has paid NOK 5.7 million in returnable annual funding related to decommis-sioning security.

Note 5 - Other receivables1000 NOK 31.03.2007 31.12.2006

Prepayments 4 297 1 477

Over-/under cash call 9 264 23 158

Underlift - -

Value added tax 443 866

Working capital in the licenses 15 623 -

Accrued settlement from acquisition of Jotun 28 385 30 615

Total 58 011 56 115

Note 6 - Interest-bearing loanThe liability comprise a loan amounting to USD 36 million. USD 5 million has been repaid in first quarter 2007. The residual loan is due for payment during 2007, with the last repayment in August 2007.

1000 NOK 31.03.2007 31.12.2006

Principal (USD 36 mill.) 219 550 219 550

Accumulated unrealized exchange loss / (gain) (564) 5 634

Repayment (30 000) -

Carrying amount at balance date 188 985 225 184


MAKING A DIFFERENCE ��

Note 7 - Other current liabilities and overlift1000 NOK 31.03.2007 31.12.2006

Working capital in the licenses - 3 165

Overlift 1 889 10 301

Accrued vacation pay 1 018 823

Other accruals 5 908 7 494

Total 8 814 21 783

Note 8 - ComparativesNet Profit Interest (NPI) tax in the Income Statement is classified as production expenses in the first quarter 2007. For the financial year 2006, this was classified as tax expenses. Amounts for the financial year 2006 are not reclassified. NPI-tax in first quarter 2007 was NOK 12.6 million (charge), and NOK -9.6 million (credit) for 2006.

Note 9 - Share-based compensationThe Company has changed the accounting principle for Share-Based Payment under NGAAP in 2007, which is in accordance with IFRS 2 “Share-Based Payment. The Company has issued equity settled share-based compensation to its employees and the fair value of share option plans are calculated at grant date using the Black Scholes model. In accordance with IFRS 2 “Share-Based Payment,” the resulting cost is recognized in the income statement, together with a corresponding increase in equity, over the vesting period of the options, based on the number of options that are expected to vest.

Expense arising from share-based payment, equity settled options, is NOK 1.063 from finan-cial year 2006 and NOK 0.095 million in first quarter 2006. The total of NOK 1.158 is expensed in first quarter 2007. The Company has approved 1 option plan under which equity settled options are granted to employees. The plan was approved in 2006 and the options under this plan were granted in 2006 at an exercise price above the market value per share. The options vest over a period of 6 months from the grant. Options granted generally expire 4 years after the grant date.

The outstanding options at 31 March 2007 are subject to the following conditions:

Expiry date Number of options Exercise price

20 June 2010 40 000 100

20 June 2010 5 000 150

Outstanding at 31 March 45 000

The fair value calculations of the options are based on the following assumptions:Estimated volatility 60 %

Expected life (in years) 2

Risk free interest rate 3.8 %

Share price at grant (NOK) 1) 83 - 127

Exercise price (NOK) 2) 100 - 150

1) NOK 83 for 40 000 options and NOK 127 for 5 000 options

About Ener PetroleumEner Petroleum ASA was incorporated in 2005 and received pre-qualification as a licencee on the Norwegian Continental Shelf in 2006. Ener’s ambition is to build a balanced portfolio of producing, developing and exploration assets in Norway and abroad through commercial transactions and participation in licensing rounds. Ener Petroleum’s headquarter is located at Lysaker outside Oslo, Norway.

Post Office Box 128N 1325 LysakerNorway

Lysaker Torg 5Lysaker(Oslo)Norway

+ 47 67 52 90 20+ 47 67 52 90 30www.1petro.com

OFFICE MAIL ADDRESS:

VISITING ADDRESS:

Phone: Fax:

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report for first quarter 2007 - vpffotc.nfmf.no/public/news/6644.pdf · report for first quarter...

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