Indago Petroleum Limited, the independent oil and gas production and exploration company with operations in the Sultanate of Oman announces its unaudited interim results for the six months ended 30 June 2007.
The Company has adopted International Financial Reporting Standards (IFRS) with effect from 1 January 2007 and these interim results are drawn up under IFRS.
Financial Highlights for first half of 2007
• Disposal of production and development assets and 50% of exploration assets for $382 million
• Profit on disposal of $306 million
• Special dividend of $318 million (60 pence per share)
• Cash at 30 June 2007 $54 million
Operational Highlights
• Al Jariya-1 well on the Jebel Hafit prospect at almost 3600m depth - TD of 5900m
• Hawamel well encountered gas, but suspended pending further evaluation & feasibility
• Extensive seismic acquired in Blocks 47 and 43A
Outlook
• Al Jariya-1 : expected to penetrate the objective reservoirs towards the end of the 4th Quarter.
• Zad – 1 on the Adam prospect will be drilled after Al Jariya with same rig
• Evaluating seismic on blocks 47 and 43A with a view to refining the prospect inventory
• AMI agreement with RAK Petroleum: opportunities being considered
Tim Eggar, Chairman of Indago, commented:
“Progress on the Al Jariya-1 well has been slower than planned. Jebel Hafit, where the well is located, is a very large prospect, however it is a deep, high pressure well that demands constant and painstaking care. It has the potential to transform the company and we are looking forward to determining its value.
The programme extends beyond Jebel Hafit: we have a half share in three very interesting blocks and we should be drilling the Zad well on the Adam prospect early next year. Meanwhile we are gearing up our capability to move ahead swiftly once we know the outcome at Jebel Hafit.”
Chairman’s report
Introduction
Since I last updated you at the time of our Preliminary results we have made just one operational announcement on progress at the Al Jariya-1 well on the Jebel Hafit prospect, as the Company’s primary focus has been this well. At that time, an 11 ¾“ liner had been set between 2,000 and 2,600 metres in order to stabilize the well, which was being adversely affected by tectonic movements. The decision to do so appears to have been vindicated, as progress, although slow, has been steady since then. A consequence of inserting the liner has been the need for a two-stage drilling process, whereby an 8 ½” pilot hole is drilled initially, followed by a reaming operation, opening out the hole to 12 ¼”. This maintains the operational capability to set 9 5/8” casing before drilling into the reservoir in 8 ½” hole. This would ultimately permit a conventional testing programme to be run in the event that hydrocarbons are encountered. However, this two-stage drilling operation has led, inevitably, to slower progress. The operator has advised a further uplift in cost (Indago share expected to be circa $2 million) since our last announcement. The additional cost has been fully recognised in our forecasts and we are fully funded for our foreseeable programme.
Financials
The dominant event in the first half has clearly been the disposal in April of the Company’s production and development assets, plus just over half of its exploration assets, to RAK Petroleum PCL for a gross consideration of $382 million (£194.2 million) yielding a profit on disposal of $306 million.
The Board then resolved to pay a special dividend of $317.7 million to shareholders, being 60 pence per share. This was achieved partly through the cancellation of the share premium account. Following the payment of the dividend, the number of shares in issue was rationalised via a 1 for 5 consolidation. Shareholders approved the various transactions at an EGM held on 3 April this year.
The Company’s cash position, as at 30 June 2007, was $54 million; more than sufficient for Indago’s foreseeable work programme.
Operational Update
As mentioned above, the drilling at Al Jariya-1 on the Jebel Hafit prospect is still progressing. We are now approaching 3600 metres depth and expect to be drilling into the first reservoir late in the 4th Quarter.
After Al Jariya-1, the focus moves to the Zad well on the Adam prospect. The current estimate is that this will spud early next year. This is the third of the firm, three well drilling programme, but, following an extensive seismic campaign in the first half of 2007 in Blocks 47 and 43A, Indago, together with the Operator, RAK Petroleum PCL, are working to refine the prospect inventory in these blocks which may lead to additional drilling opportunities.
The Operator continues to evaluate the Hawamel well on the Izz prospect drilled in 2006. Gas was interpreted as being present, but it appeared that porosities and permeabilities were low. The next step is to evaluate the feasibility of either carrying out conventional testing or of drilling an underbalanced, horizontal leg from the existing wellbore through the prospective formations. The well is currently suspended.
Management
Following the sale of assets, the team in the Middle East moved across to RAK Petroleum. Martin Groak, our CFO, stepped in as acting CEO and we recruited Stephen Lambert from Chevron as Group Commercial Director. David Bremner and Nick Zana, two of our non-executive directors, have increased their input considerably. Further strengthening of the management team is planned pending the result of the Al-Jariya well.
Outlook
The result from Jebel Hafit will obviously have an enormous impact on the future direction of the Company. We are, however, also working to develop new opportunities for Indago regardless of the outcome of Al Jariya. We are rapidly rebuilding our technical and commercial capabilities to be in a position to deal with the challenges and capitalise on the opportunities that may emerge.
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