Highlights of the period include
• Revenues of US$132,000 for the six months to 30 June 2006;
• Loss on ordinary activities before taxation of US$339,000;
• Commencement of coal production from the Company’s Naga coal mine operations in Central Cebu in July 2006;
- Operation expanded to target peak production of 300,000 tonnes per year by late 2008 from Naga mine alone;
- Once Naga is fully underway the Company will commence the development of leases in Southern Cebu;
• Results from the interpretation of the 3D seismic programme at the Sampaguita gas discovery show in place gas reserves of 3.4 trillion cubic feet (tcf) with upside reserves of approximately 10 tcf; and
• Acquisition of Basic Petroleum & Minerals, Inc. (”Basic”).
Commenting, Alan Henderson, Chairman of Forum, said:
“Forum has made good progress in the first half of the year with the help of its strengthened management team; with the commencement of oil and coal production as well as very encouraging results from our 3D survey on our Sampaguita gas discovery.”
Financial Report
Forum recorded a loss of US$339,000 (US$1,069,000 for April 1, 2005 to December 31 2005) for the interim period ended June 30, 2006. This loss was primarily attributed to administrative overheads which were in part offset by exchange gains due to a stronger UK Sterling.
Revenues for the period were US$132,000 attributable to oil production from Basic acquired in April 2006.
Forum’s working capital position as of June 30, 2006, was US$9.8 million (US$14.0 million for the period April 1 2005 to December 31, 2005).
General Survey and Exploration Contract 101 (GSEC101)
In August 2005, Forum completed a key 3D seismic survey across the Sampaguita Gas Field within block GSEC101, offshore the Philippines. The seismic was interpreted in the UK, with encouraging results received. In place gas reserves were confirmed at 3.4 TCF with upside reserves of approximately 10 TCF in the tested horizons alone. Additional untested, but gas bearing sands have the potential to double this upside figure. The block also contains eight leads which have the potential to add substantially to the reserves.
This licence will now be converted to a service contract and the Company will be actively seeking a partner to progress this discovery to commerciality through the drilling of a number of wells. Given the potential size of the accumulation the Company views the Sampaguita Gas Field as a possible candidate for Liquefied Natural Gas (”LNG”) production, subject to reaching the necessary reserve threshold with further drilling.
Forum holds 100% of GSEC101, which covers 10,630 square kilometres in water depths of between 8 and 80 metres and lies 250 kilometres south-west of the Malampaya Gas Field, where Shell, the operator, has installed extensive production facilities and pipeline infrastructure that supplies gas to three Philippine power plants.
BPMI
During the first half of 2006 the acquisition of BPMI was completed. This brought an interest in several North-West Palawan fields, a small amount of current production and more importantly a seat at the table to capitalise on any upside in the area. A number of studies were commissioned by PGS Reservoir Consultants (UK) Limited (”PGS”) to quantify this potential and we are still considering the options open to Forum. The acquisition also gave a number of carried interests, one of which, the Galoc field, is forecast to provide revenues in 2008. Similar developments are under discussion for two other discoveries within the portfolio.
Service Contract 40 (SC40)
Progress was also made on the evaluation of SC40 and the seismic acquired in 2005. Structures have been identified within the area covered by this survey, the final results of which are expected in the fourth quarter of 2006 and the Company has already been approached by a number of potential farm-in partners to help fund the exploration. Upon review of the data the Directors will determine the appropriate course of action to maximise the return.
Development of the Libertad Gas Field has been deferred to 2007 in order to satisfy the Government of the Philippines Department of Energy (”DOE”) prescribed commercial requirements regarding gas pricing and to help ensure an adequate return. First gas production from this project is now forecast for 2008/09.
The Workover of the Forum 2X well at Maya was also deferred to allow the Company to concentrate on the near-term cash flow of the coal development. This workover will be recommenced in 2007 thus allowing more economic operation during the dry season.
Coal Operating Contracts
Development of Forum’s 66.7% owned coal operating contracts (”COCs”) in Central and Southern Cebu, COC 131 and COC 132 moved forward in the first half of 2006, with Central Cebu (Naga) commencing coal production in July 2006.
Recognising the market’s demand, and to take advantage of economies of scale, the operation was expanded to target a peak production of 300,000 tonnes per year from the Naga mine alone which is forecast to increase revenues to US$12,000,000 by late 2008 at the targeted price of US$40/tonne. Application has also been made for additional leases adjacent to the Company’s Naga mine to maintain the targeted peak production and increase the reserve base in an area that demonstrates geological continuity, evidenced by shallow small scale mining already in the area.
Once the Company’s operation in Naga is fully underway with five shafts in progress and systems proved, the Company will commence the development of its leases in Southern Cebu where a peak rate of 300,000 tonnes per year will also be targeted.
Other Events
In June 2005, Forum loaned $600,000 to MG Mining and Energy Corporation (”MG”) in the Philippines as part of an option agreement to potentially acquire some or all of MG’s coal mining assets in the country. The Company is pleased to report that $660,000, representing the loan amount plus interest, was received from MG in August 2006.
Outlook
Forum has made solid progress in the first half of 2006. The Company has moved forward and has generated first revenues from oil production in North-West Palawan, commenced coal production with revenues forecast in the second half of 2006 and has made significant progress on GSEC101 following the positive results of the interpretation of 3D seismic over the Sampaguita Gas Field, which the Directors believe is potentially a world-class discovery.
In the second half of 2006 the Company expects to further build and develop its portfolio, positioning itself to exploit opportunities when they arise and introducing partners as appropriate to help fund the program.