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We got NEWS here - Preliminary Results 2005
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Imperial Energy Corporation PLC
31 March 2006
Imperial Energy Corporation PLC ('Imperial'), the oil exploration and production
company operating in the Commonwealth of Independent States today reports its
preliminary results for the period ended 31 December 2005. Imperial has a
significant portfolio of acreage in the CIS extending to some 25,800 square
kilometres.
HIGHLIGHTS
Moved into first production:
• Production and oil sales now commenced from Western Siberia, and on track
for 1,500 - 2,000 barrels of oil per day in May 2006
• Operational profitability expected in 2007
• Production of 20,000 barrels of oil targeted by end 2008
Successful exploration and appraisal drilling programme:
• Each of seven wells drilled or re-entered during 2005 found oil
• 16 well drilling programme for 2006 progressing on track with each of the
four wells drilled this year successful with latest well, 139, Snezhnaya
Field, Tomsk Region having net pay ahead of expectations
• New oil discovery on Block 69 from new very productive zone
Continued Development of Portfolio:
• Acquisition in October of 20% of Nord Imperial for US$22m taking ownership
to 100%
• Acquisition of 39.5% of Allianceneftegaz for US$17.83m in August and
remaining 9.5% for US$2.85m in November giving 100% ownership
• Acquisition in March 2006 of large, highly prospective Block 80 in Tomsk
Region with a number of structures. Official C1 and C2 reserves of 16 mmbo
on one structure where oil already discovered
• Seismic obtained on Kazakhstan shows 14 leads
Strengthened Reserves:
• Significant asset base of 2P (P50) reserves of 250m barrels of oil on five
fields.
• Major exploration upside on the remainder of Imperial's acreage with
anticipation of an increase in the proven reserve base.
• New Block 80 adds to exploration upside. Imperial estimates recoverable
reserves on that block could be in excess of 250 mmbo
• Net Present Value discounted at 10% of Imperial's five reported fields
(ignoring value of all exploration prospects) now estimated to be in excess
of US$1.2 billion at US$50 per barrel of oil
Financial Highlights
• Cash balances of £26m at year end (2004: £14m)
• Net assets of £81m (2004: £20m)
• Losses of £6m (2004: £1m )
Peter Levine, Chairman, commented:
'Imperial has made excellent progress in a very short period of time meeting all
its key objectives.
Within one year of active operation Imperial has become a producer with a major
reserve base. The fact that there is also scope for significant exploration
upside is even more encouraging.
Our recent acquisition of the large and highly prospective Block 80 in the Tomsk
region gives Imperial a new core area with proven oil and major exploration
upside and the potential to create a step change in the growth of the business.
We therefore look forward to the future with great confidence as to progress on
both production and exploration.'
31 March 2005
Imperial Energy Corporation PLC
Peter Levine +44(0)207 758 9658
Pelham PR
James Henderson +44(0)207 743 6673/+44(0)777 4444 163
Gavin Davis +44(0)207 743 6673/+44(0)7910 104660
CHAIRMAN AND CHIEF EXECUTIVE'S STATEMENT
Introduction
2005 was a year of rapid and significant progress particularly taking into
account that Imperial was only incorporated in February 2004 and commenced
business in April of that year.
Imperial is now a producer with production and oil sales having now commenced.
Production from Imperial's Block 77, the first of our Blocks to come on stream
is expected to be between 1,500 and 2,000 barrels of oil a day in May 2006,
rising to 20,000 barrels a day by the end of 2008. The Group expects to achieve
operational profitability next year. Oil is currently being sold into the local
market at rates in line with expectations.
Imperial set itself the challenge in 2005 of combining exploration with
assessment and appraisal, proving deliverable and recoverable oil with good flow
rates. I am delighted to report that each one of these objectives has been
achieved.
The first drilling season for Imperial in Western Siberia ended in mid 2005 with
great success. Each one of the seven wells drilled or re-entered found oil.
Whilst only five were able to be fully tested due to seasonal weather change,
each well identified good quality oil with the potential for commercial flow
rates, which we now have every reason to believe are achievable and sustainable.
The result of this programme was that Imperial was independently assessed in
July 2005 to have reported 2P (P50) proven and probable oil reserves of 228 mmbo
on just five fields. This represents a small proportion of Imperials total
acreage and excludes the many other prospects in Imperial's portfolio. In
addition, Imperial has calculated further reserves of 22 mmbo arising from a
very significant new Lower Cretaceous discovery on one of these five fields,
thus giving total reported 2P (P50) oil reserves of 250 mmbo. Net Present Value
discounted at 10% of the five fields reviewed by TRACS on the basis of 2P
reserves is now estimated in excess of US$1.2 billion at US$50 per barrel of
oil.
On the newly acquired Block 80, Official Russian C1 and C2 reserves add a
further 16 mmbo, with Imperial estimating the potential could exceed 250 mmbo.
There also remains very significant upside exploration potential throughout
Imperial's other acreage.
As a result of the successful first drilling season, an aggressive 16 well
programme has been developed for 2006 which is progressing very well and in line
with budget. Already four new appraisal wells at Snezhnaya have been
successfully drilled, with each identifying oil. These will be artificially
stimulated by hydraulic fraccing (fraccing) towards the latter part of April,
then put on production.
Fraccing is a recognised, proven and widely used method of stimulating and
enhancing oil flows from tighter reservoirs. It has been successfully used by
Imperial and the other major oil companies operating in Western Siberia making a
material difference to critical flow rates. Imperial is now investing in its
own frac equipment as well as all terrain tracked transport vehicles and
production rig generators to secure for the Group all year round production and
exploration capability.
The Group has an intense programme ahead focused on increasing production and
strengthening the reserve base through exploration. As well as production and
exploration drilling, Imperial will be obtaining new seismic data, building
production facilities and progressing the planning of its own pipelines to
connect to the Trasnneft system.. We are confident that further discoveries of
oil will be identified in due course on the many prospects in Imperial's acreage
yet to be explored and are planning accordingly.
The year 2005 also saw the very significant acquisitions of the outstanding
minority interests of the Nord Imperial and Allianceneftegaz Blocks for a total
of US$42.7m in aggregate.
Financial Results
• Losses of £6m (2004: £1m)
• Net assets at year end of £81m (2004: £20m)
• Cash balances at year end of £26m (2004: £4m)
• Raised £50.6m, before expenses through a placing with institutional
investors
Dividend
Taking into account the stage of Imperial's development, the Directors do not
recommend the payment of any dividend.
Operations
Imperial has interests in the Tomsk region of Western Siberia, Russian
Federation and North central Kazakhstan. The major part of the work in 2005
was focused on Western Siberia. In Kazakhstan valuable seismic work was also
conducted.
Imperial now has a small administration headquarters in London with the majority
of our employees based in our offices in Moscow and Tomsk and in the field.
There is also a small office in Kazakhstan. In Tomsk we have established a well
resourced infrastructure with strong expert management with local knowledge.
Out of a total of 93 current Group employees 71 are based in the Tomsk region.
It is a tribute to our skilled, experienced employees that Imperial continues to
make such successful and expeditious progress.
Western Siberia
Nord Imperial (100% interest)
Nord Imperial's acreage is situated in the Tomsk region of Western Siberia.
On 25 October 2005, Imperial acquired the remaining 20% interest of Nord
Imperial which it did not already own for US$22m, of which US$6.44m was cash
with the balance paid in new Imperial shares.
As a result of the 2004/5 programme, the two blocks comprising in Nord Imperial,
Blocks 69 and 77, have begun to fulfil their promise.
Six wells were drilled or re-entered on these Blocks in 2005 as part of the
initial programme. Good quality oil in potentially commercially deliverable
quantities was identified. 171 kms of new seismic data was also acquired.
Production has now commenced on Block 77 and is expected to reach between 1,500
and 2,000 barrels of oil a day in May 2006 from seven wells.
Very encouragingly on Block 69, oil has been brought to surface, in potentially
commercial quantities without any fraccing, from the Lower Cretaceous section, a
much more productive zone than the Jurassic intervals which were the basis of
Imperial's July 2005 reserves estimations. This indicates significant potential
for production from this section and from other parts of Imperial's acreage.
Allianceneftegaz (100% net interest)
Allianceneftegaz's acreage is situated in the Tomsk region of Western Siberia.
On 31 August 2005, Imperial acquired a further 39.5% interest in
Allianceneftegaz for US$17.83m of which US$7.325m was in cash with the balance
in new Imperial shares. This was followed by the acquisition of the remaining
9.5% interest for US$2.85m cash on 21 November 2005.
One well was successfully drilled in 2005. 236kms of new seismic data was also
aquired.
As part of the 2006 programme, three new appraisal wells and two new exploration
wells are being drilled and 417kms of new seismic are being shot.
Sibinterneft (43% net interest)
Sibinterneft's acreage is also situated in the Tomsk region of Western Siberia.
In 2005, 210kms of seismic data was acquired which showed considerable promise.
The 2006 programme comprises one new exploration well and 256kms of new seismic.
Sevkazgra, Kazakhstan (75% net interest)
Sevkazgra's North Torgai Block is situated in the Kostanai region of Northern
Kazakhstan.
In 2005, new seismic data was acquired which has identified some 14 leads. A
seismic programme for H2 2006 has been planned with a well projected to be
drilled in 2007.
Block 80, Tomsk Region, Western Siberia
On 16 March 2006, Imperial acquired at auction a 25 year exploration and
production licence for Block 80, Tomsk Region, Western Siberia. Block 80 is a
block of 3,844 square kilometres with a number of potentially large structures.
At least two wells on one of these structures have delivered oil which has been
brought to surface. Imperial is confident that oil can be delivered at
commercial rates through stimulation by fraccing and that Block 80 will
therefore prove to have been a very successful acquisition.
Official Russian authority C1 and C2 reserves are 16 mmbo on the one structure
where oil has so far been discovered, but Imperial estimates potential
recoverable reserves in Block 80 could be as much as 245 mmbo.
Board Changes
On 28 July 2005, Guy Smith was appointed Financial Director. He was previously
Imperial's Financial Manager. A Chartered Accountant, he trained with Price
Waterhouse and spent a number of years in Moscow with companies including
Coopers and Lybrand.
On 4 November 2005 Alexander Ivanovich Korchik was appointed to the Board.
Alexander is well known in the Tomsk region having lived there for many years.
He brings to the Board valuable local experience.
Denis Capelson has today stepped down from the main Board although will remain
in an executive capacity with Imperial as Commercial Manager.
Current Prospects and Outlook
Imperial maintains its rapid pace of development and excellent progress. It now
has an excellent portfolio of acreage in the Tomsk region where its neighbours
include TNK-BP, Sibneft, Gazprom, Russneft, Surgutneftegaz and Yukos.
The aggressive drilling and seismic programme for 2006 currently underway is
proving so far to be very promising.
Since the period end four production or appraisal wells have been drilled on
Block 77 and each has successfully identified oil. Importantly, the latest
well, Snezhnaya 139, has identified a better than expected net pay of 11m from
the Jurassic section.
Imperial expects near-term production of between 1,500 and 2,000 barrels a day
from seven producing wells in Block 77 and is on track to meet its achieving
production target of 20,000 barrels of oil a day by the end 2008 from three of
its five so far identified fields. Significant preparations are already under
way to place Imperial in the best possible position to achieve this with
extensive planning for field development, production facilities and Imperial's
own pipelines to tie-in to the Transneft system in progress.
To date a small proportion of the Group's asset base has been addressed. In the
year ahead we are also anticipating increasing our proven reserve base through
exploration drilling.
We view the future with great confidence and look forward to significant
progress on both production and exploration. Our intention is to achieve
material operational profitability in 2007.
Peter Levine
Chairman and Chief Executive
OPERATIONAL REVIEW 2005 ANNUAL REPORT
Tomsk Region, Western Siberia Russia
Demonstrating potential for commercial production in 2005
Imperial only commenced operations at the beginning of 2005 and moved forward
rapidly to explore and appraise the Company's substantial acreage holding in the
Tomsk region. Our objectives for 2005 were to confirm the presence of
recoverable oil from a selection of the company's numerous prospects and to
demonstrate the potential to produce this oil at commercial rates. We have
successfully achieved these objectives.
The initial programme of re-entering and testing 4 old wells and drilling 3 new
wells achieved 100% success with oil being recovered from all 7 wells. Testing
of these wells has also confirmed the potential for commercial production. As we
anticipated it was necessary to stimulate most of the wells by fraccing in
order to obtain flow rates at commercial levels. As a result we have now moved
from quoting oil in place on prospects last year to reporting P50 recoverable
reserves on fields this year.
Reserves
An independent study by TRACS has confirmed P50 reserves of 228 mmbo net to
Imperial from 5 fields. This study did not include the Lower Cretaceous
discovery on Aikagalskaya described below on which Imperial estimate P50
reserves of 22 mmbo bringing total P50 reserves up to 250 mmbo These five fields
only represent a fraction of the potential of our current Tomsk acreage of
21,800 sq km (equivalent to 90 UK North Sea Blocks). There remain numerous
prospects where oil has been shown to be present during testing in Soviet days
which are similar to the prospects that have now been converted from prospects
to fields by our 2005 exploration programme.
New discovery
In January 2006 Imperial announced a new discovery of oil from the Lower
Cretaceous in the Festivalnaya 252 well, Block 69, from a zone that had not
previously been tested. This is particularly significant in that the shallower
Lower Cretaceous is a much better reservoir than the main Jurassic producing
horizon in the Tomsk region. As a result this reservoir is capable of much
higher production rates, even without stimulation. Having demonstrated there is
oil in the Lower Cretaceous, it is likely that there is greater potential for
discoveries from this horizon throughout much of Imperial's acreage. With the
concentration on the Jurassic in the Tomsk region in the Soviet days this
reservoir may have previously been overlooked and underestimated. The Lower
Cretaceous is a target in several of the exploration and appraisal wells in our
2006 programme.
Production plans
Imperial recognises that the real proof on the commercial viability of its
fields in Western Siberia lies in production. Consequently the Company has moved
rapidly into early production on its first field, Snezhnaya, in March 2006. As
well as providing cash flow the purpose of early production is to demonstrate
that the wells can produce at commercial rates. In September 2005 the Company
began a programme of 4 appraisal/production wells on the Snezhnaya field, Block
77. Early production facilities are being constructed and production from these
4 wells will come on stream in April. Meanwhile, as announced in March 2006
production has already started from the Block 77 wells re-entered or drilled
earlier in 2005. By May 2006 production capacity will be 1500 to 2000 bopd. With
confirmation of anticipated production rates, the Company will move rapidly into
the full development phase with construction of a pipeline connecting to the
main Transneft artery system and commencement of full production drilling in
early 2007.
Imperial is also planning to move to start early production on the Aikagalskaya
field in spring 2007 subject to confirmation of reserves and production
potential by the two appraisal wells which will be drilled on this field during
spring and summer 2006 and the 4 follow-up appraisal/production wells. Target
production from Imperial's fields in Tomsk is 20,000 bopd by end 2008.
2006 Exploration and Appraisal Programme
The full details of Imperial's total end 2005/2006 exploration and appraisal
programme consisting of 3 new exploration wells and 13 appraisal wells are given
below. This is a very aggressive programme, but rigs for all the wells will be
mobilised before the spring thaw. The wells will be drilled throughout the year
using up to 4 separate drilling crews. In support of current and future drilling
the Company is planning to shoot over 800km of 2D seismic and 96 sq km of 3D
seismic. Costs are in line with budgets.
Acquisition of new block
On 16 March 2006 Imperial acquired Block 80 to the east of the Ob River at
auction for US$ 5.25 million. This block of nearly 4000 sq km already has proven
oil discoveries and offers the potential for sizeable fields. With a 25 year
exploration and production licence this block complements Imperial's portfolio
offering attractive future potential while the Company brings its present fields
on to production.
Review of 2005 Operations and 2006 Plans
Nord Imperial (100% net interest)
Nord Imperial's blocks were acquired at a Government auction in November 2004.
As described in the Chairman's report Imperial acquired the remaining 20%
minority shareholding in Nord Imperial in October 2005.
Nord Imperial has two blocks: Block 77 of over 1000 sq km, which is adjacent to
the southern part of Imperial's Sibinterneft Block 74 and Block 69, of over
2,700 sq km,, which borders the northern part of Allianceneftegaz Blocks 70 and
85.
Block 77 Snezhnaya
The 2004-2005 winter exploration programme comprised shooting 150 km of seismic
and testing the Snezhnaya area on Block 77, where previous wells have already
flowed oil at modest rates, by drilling one new well and re-entering and testing
two old wells.
Imperial's first operations were the successful testing of the Dvoinoye 2 and
Snezhnaya 133 wells which were re-entered and stimulated by modest fraccing,
flowing oil at rates of 467 and 243 bopd respectively. The new well Snezhnaya
135 was fracced and tested at a stabilised flow rate of 201 bopd of 39 degree
API oil. This frac was limited by the size of available equipment and it is
believed that at least a 50% improvement in initial production rate could be
achieved with a larger frac. The well tests confirm the commercial potential of
the Snezhnaya field. In their independent study TRACS have reported P50
recoverable reserves of 39 million barrels for the Snezhnaya field.
Imperial has moved rapidly into a programme of appraisal/production drilling in
order to commence early production. In September 2005 the Company commenced a
programme of 4 appraisal/production wells on the Snezhnaya field. These wells
are deviated wells drilled from the Snezhnaya 135 site to bottom hole targets in
a 1500m radius around the Snezhnaya 135 well. All four wells have now been
drilled and have confirmed from wire line logging the presence of reservoir as
good as or better than expected. These wells will be fracced and tested during
April. Meanwhile, as announced in March 2006 production has already commenced
through temporary facilities from the Snezhnaya 135 and the Dvoinoye 2 wells.
Early production facilities are being constructed to handle production from the
6 Snezhnaya wells, while Dvoinoye 2 will continue to be produced from
independent facilities. By May 2006 production is expected to be 1500 to 2000
bopd. In winter oil is taken out by road tanker and in summer by barge on the
navigable Vasugan River which borders the northern edge of the field. Initially
oil is being sold directly from the field to buyers who bring their own trucks.
During the spring thaw there is a period in April and May where oil may only be
produced into storage facilities until the river becomes ice free for barge
transportation.
In March 2006 Imperial completed shooting a 96 sq km 3D seismic survey over the
Snezhnaya field. This will allow better definition of the reservoir to provide
optimum location of production wells. With confirmation of anticipated
production rates from the early production, the Company will move directly into
the full development phase with construction of a pipeline to connect the main
Transneft trunk line, some 43 km to the north-east, and commencement of full
production drilling in early 2007.
Block 69
Imperial's evaluation of this block has concentrated on two fields, North
Festivalnaya and Aikagalskaya. During 2005 two old wells were re-entered and
re-tested and one new exploration well drilled.
North Festivalnaya
In the North Festivalnaya 1 re-entry well the upper interval of the Jurassic
Lower Tyumen was tested after stimulation by limited fraccing and flowed at a
rate of 18,000 cubic metres per day of gas and 29 bpd of condensate with 26%
water. The water was from the fraccing, not from the formation, so the well
could be expected to clean up to flow only gas and condensate. The new North
Festivalnaya 3 well flowed small quantities of oil from a deeper level of the
same reservoir interval at the low rates expected without stimulation, so that
the North Festivalnaya Field is interpreted to comprise an extensive oil leg
with a gas cap.. The low permeability reservoir will need stimulation by large
fracs in order to obtain commercial flow rates. TRACS reported P50 reserves for
the North Festivalnaya field of 32 mmbo.
Aikagalskaya
The re-entry of the Festivalnaya 252 well on the Aikagalskaya field was
especially difficult due to technical problems associated with the condition in
which the well, originally drilled in 1970, was abandoned. This was nevertheless
successfully achieved and an interval covering Basal Jurassic M Reservoir and
the top of the Palaeozoic was tested and flowed at 126 bopd of 37 degree API oil
without stimulation. The oil, although relatively light, has relatively high
viscosity due to its paraffin content. TRACS reported recoverable reserves of 62
million barrels for this reservoir of the Aikagalskaya field.
The Lower Cretaceous section had not previously been tested in the Festivalnaya
252 well but its potential was recognised during Imperial's review of old data.
The Lower Cretaceous reservoir is a much better reservoir than the underlying
Jurassic, the main reservoir in the Tomsk region with consequent potential for
higher production rates even without stimulation.
As a consequence of poor completion in the Soviet era the condition of the well
prevented proper testing of the Lower Cretaceous reservoir section in isolation
from other water bearing sections. Nevertheless during testing of 25m from a
gross interval of 37m the well initially flowed to surface at a rate of 155
barrels of fluid per day comprising 32% oil of 43 degrees API and 68 % water.
The water is thought to originate largely from aquifers above and below the oil
bearing zones. During subsequent testing of the upper part of this section by
pumping a rate of 327 barrels of fluid per day was achieved comprising 24% oil
and 76% water. In a properly completed well it would be expected that it would
be possible to produce clean oil at good commercial rates with little or no
water.
Independent expert interpretation of production and other logs indicates at
least 10m of net oil pay and possibly more. Provisionally estimated most likely
recoverable reserves are 22 million barrels of oil from this section which are
not included Imperial's 228 million barrels of P50 reserves reported by TRACS.
This discovery not only significantly enhances the production potential and
economics of the Aikagalskaya field as well as further increasing Imperial's
reserves in Block 69, but, as importantly, also opens up the possibility of
additional discoveries within the same interval throughout much of Imperial's
acreage in the Tomsk region.
Plans for Block 69 in 2006, include 398 km of new seismic, on which shooting was
completed in March, and the drilling of two appraisal wells on the Aikagalskaya
field which will evaluate both this newly discovered Lower Cretaceous reservoir
as well as the proven Palaeozoic/Basal Jurassic reservoir. Winter road
construction and site preparation for these appraisal wells is in progress and
the first well, Aikagalskaya 256, is planned to be spudded in April with the
second well, Aikagalskaya 257 in July.
With Imperial's focus in Block 69 on Aikagalskaya with its significant potential
from two reservoirs, further work in relation to the North Festivalnaya field
has been deferred until 2007. Accordingly, plans are now being implemented for
a further four new wells to be drilled on the Aikagalskaya field later in 2006
by mobilising in advance, all necessary equipment and raw materials for these
on the winter roads presently in place. These wells will be drilled in a similar
manner to what was done on Snezhnaya, namely as deviated wells from off the
Aikagalskaya 256 and 257 appraisal well sites.
In order to confirm reservoir deliverability Imperial is installing appropriate
facilities to carry out early production testing of the Basal Jurassic/
Palaeozoic reservoir in the Festivalnaya 252 well. Unlike Snezhnaya there is no
all weather road or river access to the Aikagalskaya field, so that this testing
will be limited to the winter season when the produced oil can be trucked out.
Plans are in hand for the construction of Imperial's own pipeline during the
2006-2007 winter along with early production facilities to allow all the year
round production from this field.
Overall Aikagalskaya appears especially promising and the Company believes there
may be further upside potential on Block 69 especially in the Lower Cretaceous.
This will be evaluated by the new seismic so as to provide potential future
exploration targets for next year, while Aikagalskaya moves into production.
Block 80 (100% net interest)
This newly acquired block, lies east of the River Ob. Access for heavy equipment
such as drilling rigs in common with most of the Tomsk region is in the winter
when the ground is frozen. The distance from the block to the main Transneft oil
pipeline is only 120 km to the tie in point, where Imperial is planning to
connect the pipeline from the Snezhnaya field. Compared to the main producing
area in the Tomsk Oblast which lies mostly to the west of the Ob River, this is
a relatively unexplored area that offers the potential for sizeable new
discoveries. A number of wells from Soviet days have confirmed the presence of
oil and two of them successfully flowed small quantities of oil to the surface.
Imperial anticipates that with modern technology it will be able to exploit
these accumulations effectively. Official Russian C1 and C2 proven and probable
reserves on this particular structure are 16 mmbo. Elsewhere on the block old
surveys have identified several other large structures. The initial exploration
programme during the 2006-2007 winter will concentrate on detailing the
Kiev-Egalskaya structure in the SW part of the block with 3D seismic, where the
oil discoveries are, while 2D seismic is shot over the north and east of the
block. Early drilling may be considered following full evaluation of the
existing well and seismic data.
Allianceneftegaz (100% net interest)
Allianceneftegaz owns nine individual licenses representing four separate
Blocks: 70, 85, 86 and 96. The Company's exploration efforts have concentrated
on the more prospective part of the acreage, Blocks 70, 85 and 86 which cover
over 5700 sq km and are located directly between producing Yukos and Sibneft oil
fields. As reported in the Chairman's statement in two separate transactions
Imperial acquired the outstanding 49% shareholding in Allianceneftegaz during
2005.
In the 2004/2005 winter drilling programme Imperial shot 237 km of new seismic
and drilled one new well, Maiskaya 392, on Block 70. Two potential pay zones
within the Jurassic were identified from the cores and wire line logging. The
upper one, in the Vasugan formation, of some 11 meters and the lower one, in the
Lower Tyumen of at least 20 meters.
The Lower Tyumen interval in the Maiskaya 392 well was tested over several weeks
by pumping and production stabilised at around 113 bpd of 46 degree API oil with
a water cut of around 50%. This rate would be expected to be considerably
improved by conducting a larger frac. Furthermore this well is around 40m below
the crest of the structure so that in wells further up dip, a greater portion of
the reservoir than the 15m perforated in this well could be tested and the water
cut would be reduced, resulting in up to several times the rate of oil
production so far obtained from this interval.
The Vasugan interval in this well was tested without stimulation, confirming its
potential by producing clean oil of 43 degrees API at the relatively low rates
expected without stimulation. The Vasugan reservoir overlies and falls within
the larger aerial extent of the Tyumen reservoir so that it will be possible to
produce both reservoirs together.
Further appraisal drilling and testing of the Maiskaya field, which has P50
recoverable reserves of the two reservoirs together as reported by TRACS of 42
million barrels, will be carried out during 2006. The first of these wells
Maiskaya 393 was spudded in March. The second well Maiskaya 394 will be drilled
as a deviated well from the same site. These wells will require fraccing, which
will be carried out during the 2006-2007 winter, when frac equipment can be
brought in by winter roads. It is then planned to commence early production
testing of the Maiskaya field during the same winter.
A new well will also be drilled on the South Festivalnaya field, which straddles
the boundary between Allianceneftegaz Blocks 70 and 86 and Nord Imperial Block
69 during 2006. TRACS reported P50 recoverable reserves on this field of 53
mmbo.
Blocks 70, 85 and 86 have significant other exploration potential. A further 417
km of new seismic is planned to be shot on these blocks and two new exploration
wells drilled during 2006. The first of these, Glukhovskaya 5, will be spudded
in April. This prospect has multiple objectives in the Lower Cretaceous and the
Jurassic Vasyugan and Tyumen. The Lower Cretaceous looks particularly promising
following Imperial's discovery in this horizon in Block 69 to the north. The
second exploration well which will be drilled later in the year, Chagvinskaya 4,
has a primary target in the Jurassic Vasugan reservoir.
In total the 2006 drilling programme on the Allianceneftegaz acreage is very
substantial consisting of 5 new wells, 3 of them appraisal wells and two
exploration wells. Although some of the wells will be drilled later in the year
well sites have been constructed and all rigs and equipment will be on site
before the 2006 spring thaw.
Sibinterneft (43% net interest with effective control)
Sibinterneft has two Blocks: 74 and 95. Exploration efforts to date have
concentrated on Block 74, which comprises some 3,500 sq km and borders the north
side of Block 77, where Imperial's Snezhnaya field is located. In the 2004-2005
winter a seismic programme of 210 km was completed. Following up from this
during 2006 Imperial plans to drill an exploration well, Golovnaya 353,
primarily targeting the Jurassic Vasugan and Upper Tyumen horizons. In addition
a further 256 km seismic programme is planned on the east side of the block
covering an area that has not hitherto been covered by modern seismic. The well
site for Golovnaya 353 bas been built and the rig is being mobilized from where
it has just finished drilling the Snezhnaya 139 well. Drilling will be later in
the year, when the drilling crew is available.
Block 74 has a number of further exploration prospects for future drilling,
including one that has previously flowed oil to surface.
Kazakhstan
Sevkazgra (75% net interest) North Torgai Block
The North Torgai block of over 4000 sq km covering a significant part of a
promising basinal area, where oil has been shown to be present in many of the
shallow stratigraphic wells drilled in the area during Soviet days. The geology
has many close similarities with the western Urals where many large fields have
been found. No modern seismic has been shot in the area, so unlike Imperial's
acreage in the Tomsk region, this is frontier exploration, but as such it offers
the potential to open up a new oil province.
Imperial has now completed the interpretation of the 400 km seismic programme
shot during 2005. This was the first seismic shot on the block. This has
confirmed a large number of interesting leads, which require more detailing by
infill seismic which is planned to be shot during the 4th quarter of 2006. First
drilling can be expected in 2007.
Outlook
In a very short space of time Imperial has moved rapidly toward proving up
significant reserves and demonstrating their commercial viability. As well as
continuing with an aggressive exploration and appraisal programme, including a
new block, Imperial has now entered the production phase, producing and selling
its first oil in March 2006. Plans are in place for rapid expansion of
production towards Imperial's target of up to 20,000 bopd by end 2008.
Rupert Kidd
Chief Operating Officer
FINANCIAL REVIEW
RESULTS FOR THE YEAR
The Group recorded a loss of £6.1 million for the year ended 31 December 2005.
Institutional Placings
On 21 July 2005 Imperial Energy Corporation PLC raised £50.6million before
expenses through an institutional placing of 12,660,000 shares at 400 pence per
share. The money raised has been used to finance the Group's working capital,
exploration and development expenditure and acquisitions.
Capital Expenditure
Capital expenditure in the year was £45 million (2004 £6 million). This
comprises £19 million on exploration and development and £26 million on
acquisitions.
Acquisitions
In August, Imperial increased its stake in OOO Allianceneftegaz by 39.5% to
90.5% for US$ 17.83 million (£ 9.98 million). This was satisfied by the issue
and allotment of 1,225,834 shares at 480 pence per share and US $7.33 million (£
4.09 million) in cash.
In November Imperial acquired the remaining 9.5% stake in OOO Allianceneftegaz
to give it a 100% holding for US$ 2.85 million (£1.64 million) in cash.
In October Imperial acquired the remaining 20% stake in OOO Nord Imperial to
take its total holding to 100% for US$ 22 million (£12.5 million). This was
satisfied by the issue and allotment of 1,762,172 shares at 500 pence per share
and US$ 6.44 million (£ 3.67 million) in cash.
Operating Loss
The operating loss for the year was £8.4 million (2004 £1.7 million) which
includes amounts attributable to minorities interest of £1.3 million (2004 £0.1
million).
Included within the operating loss is an exceptional item related to VAT
suffered in Russia of £3.2 million. Excluding this item the loss would be £5.2
million.
Loss Before Tax and Loss After Tax and Minority Interest
The loss before tax of £7.5 million (2004£1.5 million) and the loss after tax
and minority interests of £6.2 million (2004 £1.4 million) included interest
earned of £0.9 million (2004 £0.2 million). The interest earned reflects the
Group's management of cash reserves.
The results include a foreign exchange loss of £0.1 million (2004 £0.2 million).
CASH FLOW
Net cash outflow from operating activities was £11.4 million (2004 £2.4
million).
As of 31 December 2005 the Group had total cash balances of £26.1 million (2004
£13.8 million)
FINANCIAL INSTRUMENTS
The Group's financial instruments comprise cash and liquid resources, and
various items such as trade creditors that arise directly from its operations.
The main purpose of these financial instruments is to finance the Group's
operations. It is the Group's policy that there no speculative transactions are
undertaken, any transaction involving derivatives must be directly related to
the underlying business of the Group.
The main risks arising from the Group's financial instruments are foreign
currency risk and liquidity risk. The Group policy's for managing these risks
are summarised below
FOREIGN CURRENCY RISK
The Group closely monitors the risks associated with currency exposures and
seeks to manage these uncertainties on an ongoing basis. The Group has raised
funds in sterling but most exploration and development expenditure is based on
the US dollar. To reduce exposure to sterling dollar exchange fluctuations the
Group has entered into a number of sterling dollar option contracts during 2005.
LIQUIDITY RISK
The Group finances its operations through equity. Cash assets are invested
safely to ensure that funding to meet expenditure commitments is available. As
the Group begins to develop production and sales working capital will be closely
monitored with trade debtors collected promptly.
T G K Smith ACA
Finance Director
CONSOLIDATED PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED 31 DECEMBER 2005
2005 2004
£'000s £'000s
Administrative expenses (5,117) (1,557)
Administrative expenses - exceptional (3,241) (105)
OPERATING LOSS (8,358) (1,662)
Interest Receivable 894 162
LOSS ON ORDINARY ACTIVITIES BEFORE TAXATION (7,464) (1,500)
Taxation - -
LOSS ON ORDINARY ACTVITIES AFTER TAXATION (7,464) (1,500)
Minority Interest 1,282 128
LOSS FOR THE FINANCIAL YEAR (6,182) (1,372)
LOSS PER ORDINARY SHARE - Basic (20.71)p (10.98)p
- Diluted (20.71)p (10.98)p
CONSOLIDATED BALANCE SHEET
AS AT 31 DECEMBER 2005
2005 2004
£'000s £'000s £'000s £'000s
FIXED ASSETS
Intangible Assets 50,568 6,134
Tangible Assets 387 81
50,955 6,215
CURRENT ASSETS
Stocks 2,167 -
Debtors due within one year 3,223 1,379
Cash at bank and in hand 26,101 13,823
31,491 15,202
CREDITORS:
Amounts falling due within one year (2,313) (1,416)
NET CURRENT ASSETS 29,178 13,786
TOTAL ASSETS LESS CURRENT LIABILITIES 80,133 20,001
MINORITY INTEREST 456 225
NET ASSETS 80,589 20,226
CAPITAL AND RESERVES
Called up Share Capital 982 577
Share Premium Account 84,621 21,021
Foreign Currency Translation Reserve 2,540 -
Profit and Loss Account (7,554) (1,372)
SHAREHOLDERS FUNDS 80,589 20,226
CONSOLIDATED CASH FLOW STATEMENT FOR THE YEAR ENDED
31 DECEMBER 2005
2005 2004
£'000s £'000s
Cash flow from operating activities (11,438) (2,439)
Returns on investments and servicing of finance 894 162
Capital expenditure and financial investment (17,482) (1,483)
Acquisitions and disposals (9,400) (2,266)
CASH FLOW BEFORE FINANCING (37,426) (6,026)
Financing 49,310 19,849
INCREASE IN CASH IN THE YEAR 11,884 13,823
RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET FUNDS
2005 2004
£'000s £'000s
Increase in cash in the year 11,884 13,823
Exchange differences 394 -
MOVEMENT IN NET FUNDS IN THE YEAR 12,278 13,823
NET FUNDS AT BEGINNING OF YEAR 13,823 -
NET FUNDS AT END OF YEAR 26,101 13,823
SUPPLEMENTARY STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2005
CONSOLIDATED STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES FOR THE YEAR ENDED
31 DECEMBER 2005
2005 2004
£'000s £'000s
Loss for the financial year (6,182) (1,372)
Exchange differences on retranslation of net assets of foreign 2,540 -
currency operations
Total gains and losses recognised for the year (3,642) (1,372)
RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS
FOR THE YEAR ENDED 31 DECEMBER 2005
GROUP
2005 2004
£'000s £'000s
Loss for the financial Year (6,182) (1,372)
Exchange differences on retranslation of 2,540
net assets of foreign currency operations
New Share Capital Subscribed 405 577
Share premium on share issues less issue 63,600 21,021
costs
Net additions to shareholders funds 60,363 20,226
Opening shareholders' funds 20,226 -
Closing shareholders' funds 80,589 20,226
Notes:
1) The preliminary financial information set out above incorporates the
audited results of Imperial Energy Corporation PLC and all its subsidiary
undertakings for the year ended 31 December 2005. The company was incorporated
on 24 February 2004 and accordingly comparative figures are for the period from
24 February 2004 to 31 December 2004.
2) The above financial information does not amount to full accounts within
the meaning of section 240 of the Companies Act 1985. The statutory accounts
for 2005 will be delivered to the Registrar of Companies following the Company's
Annual General Meeting. The auditors have reported on those accounts, their
report was unqualified and did not contain statements under section 237 (2) or
(3) of the Companies Act 1985.
3) The calculation of basic and diluted loss per ordinary share is based
on the loss for the year of £6,182,000 (2004 £1,372,000). The weighted average
number of ordinary shares in issue during the period was 29,847,754 (2004
12,490,706).
4) Reconciliation of losses to net cash inflow from operating activities
2005 2004
£'000s £'000
Operating activities
Operating (loss) (8,358) (1,662)
Depreciation 34 3
Increase in stock (2,167) -
Increase in debtors (1,844) (1,369)
Increase in creditors 897 589
Net cash flow from operating activities
(11,438) (2,439)
5) The results have been prepared on the basis of the accounting policies
set out in the 2004 Annual Report.
6) The Report and accounts will be posted to shareholders in April.
This information is provided by RNS
The company news service from the London Stock Exchange AE
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