OilVoice - Leed Petroleum Reports Annual Results

Leed Petroleum Reports Annual Results

Wednesday, November 25, 2009

Leed has a portfolio of 16 offshore properties and 1 onshore property all of which contain excellent potential to increase proved developed producing reserves.

The company has reported results for the year ended 30 June 2009.

Operational
• Drilling programme completed on Eugene Island.
- Successful A-7 and A-8 wells drilled in year to June 2009.

• Material increase in net production to 2,022 boepd compared to previous period.
- 51% oil and balance natural gas and liquids.
• Increase in proven and probable reserves to 21.6 mmboe.
• Two new blocks awarded following MMS Lease Sale in March 2009.

Financial
• Revenue from continuing operations $33.8 million (Year ended March 2008 $12.8 million).
• Net loss for period $3.5 million (Year ended March 2008 $14.7 million).

Post Balance Sheet Events
• November 2009 £20 million fundraising completed.
- 400 million ordinary shares (5p) issued to restart exploration and development programme in Gulf of Mexico region.
• November 2009 amended bank credit facility.

Financial and Operational Overview
Leed’s strategy of developing resources and reserves in the shallow offshore waters of the Gulf of Mexico has taken a step forward during the year. The initial drilling programme at the Eugene Island field, which commenced in 2007 and concluded in December 2008, has seen Leed’s production profile increase steadily via three new wells. As a result, Leed’s proven reserves increased from 8.8 mmboe at 1 April 2008 to 11.3 mmboe at 1 June 2009.

Leed incurred a loss of $3.5 million for the year ended 30 June 2009 on revenues of $33.8 million: this resulted principally from the low oil and gas prices experienced in the period. This loss compares to an income of $2.0 million for the three months ended 30 June 2008 (Leed changed its accounting reference date in 2008). The poor industry background has required the Company to defer its growth plans, resulting, inter alia, in the relinquishment of leases at South Marsh Island 5 and 6 and the suspension of drilling activity, as Leed sorts to manage its cash flows conservatively. However, Leed now plans to resume its drilling activity to take advantage of significantly reduced drilling and development costs.

The picture is brighter on reserve performance. Despite the reduction in drilling activity and as a result of Leed’s drilling efforts at Eugene Island, 1P reserves increased by 29% at the year ended 30 June 2009 over those reported in last year’s report as at 1 April 2008; 2P reserves increased by 5%; and 3P reserves by 2%. In a year where the Company produced continuously but curtailed drilling activity, these numbers demonstrate the success of the Eugene Island drilling programme.

To expedite the development of Leed, Leed undertook an equity issue. That effort, which completed on 24 November 2009, resulted in Leed issuing 400 million ordinary shares (5p) at 5p per share to raise net proceeds of £19.14 million. A portion of the proceeds will be used to reduce bank debt by $6 million from its present amount of $41 million. The remaining proceeds, together with cash generated from operations, will be used to drill and complete a development well at Ship Shoal 201, refurbish the platform facility expected to be acquired at Ship Shoal 202, hook-up an existing well and sidetrack a second well at the Sorrento field, recomplete the Eugene Island 184 A-8 well, drill and complete a development well at Grand Isle 95, drill and complete two development wells at South Marsh Island 8 and complete pre-drill preparations for the West Cameron 106 field.

Production
The operational focus for the Group has been to maximise production at the Eugene Island field, with a successful drilling programme being completed in the period. For the year ended 30 June 2009 the Company’s total net production averaged 2,022 boepd, (51% oil and natural gas liquids) as compared to 1,606 boepd (60% oil and natural gas liquids) for the three months ended 30 June 2008.

Reserves
Leed has an independent oil and natural gas reserves assessment prepared at least annually. In January 2009, Leed announced that following the drilling programme on Eugene Island, the Company had increased its proven and probable (2P) reserves by 53% and proved developed reserves by 154% since June 2007, just prior to their listing on AIM.

At period end, 2P reserves were adjusted to 21.6 mmboe due to the relinquishment of the South Marsh Island block 6, production in the period, performance issues in the Main Pass and Eugene Island fields and an extended field shut in of the East Cameron field.