Circle Oil plc, the international oil & gas exploration, development and production company with a growing portfolio of assets in Morocco, Namibia, Oman and Panama, has announced its Interim Results for the period to 30 June 2006.
Highlights
• Acquisition, reprocessing and reinterpreting of available data for each of Circle’s four existing licences in Oman, Namibia and Panama continues. Results to date give considerable encouragement in each of the areas.
• The award of Sebou, a small but significant licence in the Rharb Basin, Morocco, is Circle’s first success in its new evolving strategy of investing in more advanced projects. A low risk concession, Sebou, has potential for low cost, fast track development and production.
• Circle also signed an agreement with ONHYM to participate in a two well programme for the Sebou area which has since resulted in a gas discovery, initial interpretation of which indicates it to be typical of those in the Rharb. Testing is ongoing.
Mr Thomas Anderson, Chairman of Circle Oil, said:
“I am very pleased with the results of the compilation programme on Namibia, Oman and Panama and I’m confident that the aggressive exploration strategy being pursued on these areas will bear fruit.
I am however particularly delighted with the gas discovery currently being tested in the Sebou area, Morocco. This area is an ideal investment at this stage of Circle’s development as it potentially allows us to build up cash flow, on a long term basis, at a low entry cost whilst we still have the opportunity of bigger discoveries elsewhere.”
Operations
Regarding our existing licences in onshore and offshore Oman, Namibia and Panama, the Company’s Houston based exploration team, led by Jack Keyes and Bob LoPiccolo, have been extremely busy acquiring, reprocessing and reinterpreting all available data for each of the four licence areas involved. This task has been painstaking but the results of our efforts so far have given us considerable encouragement in each of the areas. Our exploration going forward will focus on the results of this new work.
A number of very interesting but untested anomalies have been identified and these will be investigated further. Work has already begun on our onshore Oman and Namibian licences and a seismic survey will be undertaken later this year on the offshore Oman area and on the Panama area once a suitable seismic ship is available locally.
In onshore Oman, Fugro Aerosurveys, Johannesburg, S.A. has successfully completed a 4,800 kilometre airborne survey of the gravity and magnetic fields over our Block 49 licence. Block 49 is on the southern edge of the Rub al Khali Basin and on the eastern flank of the Ghudun Salt Basin. Circle has the exclusive right to explore for oil and gas on this 15,438 square-kilometre block.
Initial processing of the results is very encouraging and analysis of the gravity and magnetic data will be integrated with ongoing studies to optimise the design of a 2D seismic survey which is scheduled to commence next year. The preliminary analysis already indicates that the eastern edge of a postulated InfraCambrian salt basin, analogous to the nearby highly-oil productive South Oman Salt Basin, extends into Block 49.
The successful completion of this survey marks the first step in Circle’s exploration effort on its onshore Oman concession. The data fills a critical gap in our knowledge of the geometry of the Ghudun Basin and will be invaluable to us in designing the forthcoming 2D seismic programme.
In Namibia, an environmental impact study is well underway over the initial areas of interest. This study is a necessary precursor to the seismic survey which is currently being planned.
A 6,000 kilometre seismic survey on our offshore Oman licence Block 52 has been awarded to TGS Nopec and this survey will commence within the next two months.
Discussions are ongoing regarding the carrying out of a regional seismic survey on our offshore Panama licence. The Company has concluded a joint venture on the Panama licence with Montage Petroleum Limited, a private Australian company currently preparing for public floatation. We have farmed out a one third interest in the licence to Montage.
Acquisitions
As part of our portfolio management we are investing in some more advanced projects. This programme is being directed out of our London office by Prof. Chris Green and Shamil Daoud, our Middle East manager. They are focusing on projects in the Middle East and North Africa. Projects have already been examined in Morocco, Libya, Tunisia, Syria, Jordan, Yemen and Kurdistan in Northern Iraq and negotiations are ongoing on several of these projects.
Our first success in this regard was the awarding in June of a small but significant licence in the Rharb Basin, inland from Rabat in northern Morocco. The Sebou licence covers an area of over 269 square kilometres and is for a period of 8 years with the right of automatic conversion to a minimum (but extendable) 25 year exploitation period upon the discovery of exploitable hydrocarbons. Under the terms of the agreement the percentage interest in the permit is Circle 75% and Office National des Hydrocarbures et des Mines (ONHYM) 25%. Circle has agreed to carry out a 3D seismic survey to fully assess and rank the many prospects already identified in the area before commencing a 6 well drilling programme in 2007 and 2008 drilling periods. This equates to the minimum work programme for the first 3 years of the permit.
This agreement is significant in that it provides Circle with a low risk project and the potential for low cost, fast track development and production. This area has a history of production from a number of small shallow-depth natural gas deposits, most of which have given a very good return on investment. There is an existing local market with good demand for gas in the region and an established pipeline network through the permit area. Success here will provide a long term continuing earnings contribution to the Company.
Side by side with the awarding of the Sebou licence, Circle signed an agreement with ONHYM to participate in a two well programme already planned by ONHYM for the Sebou area. I am very pleased to inform you that this drilling campaign has resulted in a gas discovery initial interpretation of which indicates it to be typical of those in the area. Well testing by ONHYM is ongoing and further announcements will be made to shareholders once the testing, analysis and discussion about these results is complete.
Circle is interested in further investment in Morocco. We are currently examining a number of other potential projects there and discussions are ongoing with a potential local partner.
Financial results
The Group recorded an operating loss before tax of €1,464,398 for the half year period. The increased loss reflects costs associated with additional staffing and related office and travel, foreign exchange losses and the implementation of Financial Reporting Standard 20 Share Based Payment (“FRS 20”). FRS 20 requires an estimate of the non-cash costs associated with the issuing of share options to be charged to the profit and loss account. These non-cash costs amounted to €342,000 for the half year.
At June 30, the Group had cash balances of €13.3 million (including €1.99 million of restricted cash) and no debt. The Group had a working capital surplus of €13.1 million at the end of the reporting period.
