2008 Interim Highlights:
- Over 80 anomalies identified and mapped by 3D seismic study in Morocco
- Gas well ONZ4, in which Circle has a 60% interest, will provide the Company with its first revenue
- In Tunisia drilling has commenced on the Serdouk prospect
- In Egypt drilling on the Al-Amir SE 1 well site on the NW Gemsa permit is nearing completion
- Petroholland agrees to take a 70% interest in the Owamba Basin licence in Namibia
- Circle completed a £33 million equity funding – principal subscribers were Libya Oil Holdings and Kaupthing Bank
OPERATIONS
In Morocco the 3D seismic study on the Sebou area has been completed and the results processed and interpreted. In excess of 80 anomalies each of which has the potential to be a gas producer have been identified and mapped. A back to back six well drilling programme has just started to test the first batch of these prospects. Each well is expected to take 4-5 weeks to complete including mobilisation, drilling, testing and demobilisation. Should the drilling discover commercial gas fields the Company has already purchased three completion strings to assist in bringing these wells into production without delay.
A landmark event for Circle has also just occurred in Morocco with the commencement of production from the ONZ4 well. Circle has a 60% interest in this well and its share of production will provide the Company with its first revenue from exploration and development activities. Circle expects that through its drilling programmes over the next two years the production base will expand rapidly in the Rharb Basin with the gas produced being sold locally where there is a significant and growing market.
In Tunisia the drilling of the side-track of the Zita 1 well was suspended in June to allow the drilling of a commitment well on the Grombalia permit in the north of the country and to complete further geological and geophysical studies in the Ras Marmour area. Following rig maintenance and the receipt of the necessary government approvals the rig began drilling the Serdouk prospect. Once the Serdouk well is completed the partners may drill a second well in the Grombalia permit and then intend to return to the Zita prospect to conduct further evaluation there.
In Egypt the drilling on the Al-Amir SE 1 well site on the NW Gemsa permit is nearing completion and results are expected shortly.
In Oman the Ministry of Oil and Gas has given approval to carry out a large 3D seismic study over part of Block 49 to assess the potential prospectivity of the proposed Ghudun Salt Basin. This is thought to be a direct analogy or continuation of the nearby South Oman Salt Basin, a proven oil province with very good production. The 3D study should begin later this year and will cover an area of approximately 900 sq km. We are currently having discussions with a number of interested parties on the possibility of a farm-in to our offshore Block 52.
Following protracted negotiations, the Company recently announced that a farm-in agreement had been signed on our Namibian Owambo Basin licence with Petroholland Limited, a Dutch company, operating out of Bahrain. Petroholland is taking a 70% stake in the licence in return for which it has agreed to pay Circle US$15 million in cash and pay all of the costs associated with Circle’s residual 20% share in the licence through to production.
FINANCIAL
In order to fund the very aggressive and extensive exploration programme planned for the next 18-24 months Circle recently concluded a £33 million equity funding as announced on 5 September 2008. The principal subscribers to the funding were Libya Oil Holdings Limited (“LOH”), a subsidiary of Libya Africa Investment Portfolio, and Kaupthing Bank from Iceland. LOH now hold a 29.6% interest in Circle and Kaupthing have a 15.6% holding.
The Group reports a loss of US$2.15 million for the period (1H 2007: US$1.23 million). The increased loss is mainly due to net financing costs associated with the US$30 million convertible loan which was drawn down in July 2007. The Group remains well funded with cash balances of US$12.25 million at 30 June 2008 which excludes the £33 million proceeds from the equity funding noted above.
