* Turnover of Stg£484,000 from gas sales
* August 2004 - Island executed an option agreement with Marathon Oil Ireland Ltd giving the Company an exclusive option to explore the oil and gas bearing reservoirs underlying the Kinsale gas accumulation.
* October 2004 - Island acquired Island Expro Ltd, adding Licensing Options 03/4 (Old Head of Kinsale) and 04/2 (Schull Prospect) and the benefit of an August 2004 15% farm-out agreement with Petroceltic International plc over 03/4.
* November 2004 - Island raised Stg£8.24 million by way of a private placing at 40p per share.
* December 2004 - Island completed its successful admission to AIM. Island also executed a sale and purchase agreement with Lundin Petroleum AB which was subsequently completed in June 2005.
* January 2005 - Island executed a farm-in agreement with Ramco Donegal Ltd and Sunningdale Donegal Basin Ltd over Frontier Exploration License 1/05 in the Donegal Basin, gaining a 26% interest in the License
* April 2005 - Island announced its interim results for the six months ended 31 January 2005, reporting a loss before tax of Stg£545,000 and retained cash balances of Stg£8.472 million.
* June 2005 - Island announced the completion of the Lundin Transaction, adding important acreage and commercial agreements related to the use of Celtic Sea infrastructure and gas sales agreements, as well as net production and revenue from Seven Heads after 1 October 2004. Also in June, License Extensions were granted for Licensing Options 03/5 and 03/6 both acquired as part of the Lundin Transaction.
Post year end:
* August 2005 - Island was awarded Frontier Exploration License 3/05 in the Northeast Rockall Basin.
* October 2005 - Island executed a rig contract with Petrolia Drilling Limited for the Petrolia semi-submersible drilling unit for a three-well program offshore Ireland in 2006.
* December 2005 - Island successfully raised Stg£8.31 million by way of a private placing at 70p per share, with a further Stg£4.15 million receivable in April 2006 if all the warrants associated with the placing are exercised.
We expect the Annual Report to be posted on 27 January 2006. This will be sent to all shareholders whose names appear on the register at the date of posting.
Commenting upon the results, Paul Griffiths, Island's Chief Executive, said:
"Over the past year, we have successfully developed a portfolio of Irish oil and gas interests that includes nine previous oil and gas discoveries and an interest in a producing field. We operate and have large equity interests in most of these projects.
"During the year we have matured three projects which are ready for drilling in 2006 and, most importantly, have secured a drilling rig and substantial funding and support from the investment community in Ireland and the United Kingdom to implement and execute a sustained drilling program during the first half of 2006. This program places the Company in an excellent position to enhance shareholder returns during 2006."
We have spent the past year rapidly developing a portfolio of Irish oil and gas interests that includes nine previous oil and gas discoveries and an interest in a producing field. We operate and have large equity interests in most of these projects.
During the year we have matured three projects which are ready for drilling in 2006 and, most importantly, have secured a drilling rig and substantial funding and support from the investment community in Ireland and the United Kingdom to implement and execute a sustained drilling program during the first half of 2006. This program places the Company in an excellent position to enhance shareholder returns during 2006.
In the months preceding our successful AIM Admission, we added a number of important projects to our portfolio. In August 2004, we executed an option agreement with Marathon Oil Ireland Ltd giving us an exclusive option to explore the oil and gas bearing reservoirs underlying the Kinsale gas accumulation. In October 2004, Island acquired Island Expro Ltd, adding Licensing Options 03/4 (Old Head of Kinsale) and 04/2 (Schull Prospect), strategically adjacent to the Seven Heads and Kinsale Head gas infrastructure, and also the Company acquired the benefit of an August 2004 farm-out agreement with Petroceltic International plc.
November 2004 saw Island successfully complete a private placing at 40p per share, raising Stg£8.24 million ahead of its Admission to AIM in December 2004. We believe that the AIM listing has been extremely important in the development of the Company.
Following the AIM Admission, Island has continued to deliver upon its stated strategy. In December 2004, we executed a sale and purchase agreement with Lundin Petroleum AB for a portfolio of offshore Irish assets. In January 2005, the Company executed a farm-in agreement with Ramco Donegal Ltd and Sunningdale Donegal Basin Ltd for Frontier Exploration License 1/05 in the Donegal Basin, gaining a 26% interest in the License and adding important acreage in the under-explored but highly prospective Atlantic Margin.
In June 2005, Island reached an important milestone in the development of the Company's project portfolio with the announcement of the completion of the Lundin Transaction. The Transaction added important acreage, including a 12.5% participating interest in the Seven Heads Petroleum Lease (Seven Heads gas) and a 12.5% debt-free interest in the Seven Heads infrastructure; a 12.5% interest in Licensing Option 03/5 covering Seven Heads oil; a 22% participating interest in Licensing Option 03/6 (Roscarberry Licensing Option), and an Option, which Island exercised post year end, to acquire a further 5% groundfloor interest in Frontier Exploration License 1/05 in the Donegal Basin. In June 2005, License Extensions were granted for Licensing Options 03/5 and 03/6 both acquired as part of the Lundin Transaction. The Transaction also gave us important commercial agreements with Marathon Oil Ireland Limited for access to the Kinsale production facilities for the processing of our share of Seven Heads production, and with RWE Trading (Ireland) Limited to provide a sales outlet for gas production. In addition, it provided net production and revenue from Seven Heads gas from October 1, 2004.
Post year end, in August 2005, Island has been awarded Frontier Exploration License 3/05 (the 'Killala License') in the Northeast Rockall Basin, adding important acreage in the Atlantic Margin. The Company has a 100% interest and operatorship in the License which is located approximately 70 kilometers off the west coast of Ireland and approximately 35 kilometers north of the Corrib gas field. The License contains one very significant exploration prospect covering an area of up to 80 square kilometers, together with a number of other prospects and leads.
In October 2005, we successfully executed a rig contract for a three-well program offshore Ireland in 2006 with Petrolia Drilling Limited despite a highly competitive market for offshore drilling rigs. The drilling program will see us drill two Celtic Sea wells and one Donegal Basin well. It is planned that the Celtic Sea wells will include a well on the Old Head of Kinsale Prospect in Licensing Option 03/4, which can now be converted into an Exploration License. The second Celtic Sea well, subject to government and partner approvals, may be an appraisal well on the Seven Heads Petroleum Lease close to existing infrastructure and designed to extend the area of proven reserves and significantly increase Island's production revenues from 2007 onwards. Alternatively, a well may be drilled to test the Schull South Prospect on Schull Licensing Option 04/2 which can now also be converted to an Exploration License. In the Atlantic Margin, we will be drilling a well on the Inishbeg Prospect in Frontier Exploration License 1/05 in the Donegal Basin during 2006. The Inishbeg Prospect is in shallow water and any production could either be exported to Northern Ireland, or via existing pipelines to the United Kingdom mainland.
Outside Ireland, we have been pursuing strategic opportunities where the Company and its key management can apply their technical skills and country experience. These include an offshore exploration permit application in the Aquitane Basin in southwest France for the Arcachon (formerly Cap Feret) Permit. Island is competing for the exploration permit with Vermilion REP SAS ("Vermilion"), a Canadian company and currently the largest oil producer in France. Island awaits a response from the French Ministry on the timing of a potential award of the exploration permit. The Company is also pursuing potential new projects in Libya, the Netherlands and East Timor, all of which are at an early stage.
The funds required to facilitate the expansion of the Company, and the realization of our planned exploration program, have been raised in two tranches. In November 2004, prior to Island's Admission to AIM, a private placing raised some Stg£8.24 million in new equity finance. These shares were issued at 40p per share.
In December 2005, a further placing was arranged at a price of 70p per share to raise Stg£8.31 million gross. A further Stg£4.15 million is receivable by the Company in April 2006, if the warrants attached to the placing shares are exercised.
Both of these placings expanded our shareholder base and brought in investment from both existing and new institutional and private investors.
Meantime, the gross gas revenue from our interest in Seven Heads from the effective date, October 1, 2004, through to the July 31, 2005 year end amounted to some Stg£484,000. The profit arising from the gas sales has helped us achieve a substantial reduction in the Stg£545,000 loss before tax as reported in our interim accounts (for the six months ended January 31, 2005) down to the Stg£127,000 loss before tax for the year ended July 31, 2005.
I am also pleased to report that our cash balances at the year end remained at a healthy Stg£8.366 million (which of course excludes the Stg£8.31 million raised via the December 2005 private placing). This compares favorably with the Stg£8.472 million in our balance sheet at 31 January 2005 given the level of expenditure on both exploration and corporate activity during the period.
During the year under review we outsourced most of our exploration and administration requirements. Now with more projects and the development of our 2006 drilling program, over a very short time scale, we are actively recruiting more personnel, mostly on short-term contracts, to assist us to successfully manage and operate our drilling program. The acquisition of the Seven Heads producing gas interest provides us with cashflow to help meet our projected personnel and administrative expenses.
Post year end, we are expanding the Board with the appointment of Terry Jones as Finance Director. Terry joins Island with a wealth of commercial and financial experience and negotiating skills arising from his management under very difficult circumstances of the Seven Heads Gas Sales Contract for Ramco Energy plc. Our Acting Finance Director, Jack McKinney, will replace Phil Beck as Commercial Director whilst Phil will move to take up the role of New Ventures Director. These changes will end the temporary arrangements put in place on listing the Company in 2004 and will result in the above individuals being able to focus on those areas of the business to which their expertise is most suited.
We also are taking steps to appoint a further new Director with responsibility for operations, including the 2006 drilling program and the planning and execution of a 2007 drilling program, subject to rig availability, on our Atlantic Margin licenses.
The year under review has seen Island successfully pursue our stated strategy; adopting our synergy-based approach to appraisal and exploration, complemented by strategic acquisitions.
We are optimistic about the future. After many years of low energy prices and oversupply the market has stabilized with medium term forecasts being made of a sustainable oil and gas price at a level significantly higher than those prevailing when Island's portfolio of oil and gas discoveries were first made. Our increased production revenues from the Seven Heads gas field during the past year reflect this new energy pricing environment and have established Island's position as a producer of natural gas in Ireland.
Worldwide the oil and gas industry is in a growth phase with high energy prices and there is now an increased interest in new oil and gas projects, particularly those where previously non-commercial or technically challenging oil and gas discoveries have been made but remain undeveloped. Economic thresholds for the development of such discoveries have been adjusted to reflect higher energy prices. Our experience over the last year demonstrates this with the Company receiving a number of unsolicited approaches to review and evaluate its portfolio of Irish oil and gas interests.
The investment market is also supportive of exploration and production companies. Investment continues at a high level and many investors have seen substantial returns from the sector in the last two years. This is supported by the fact that post year end we successfully completed a private placing (at 70p per share) within a very short timescale to raise Stg£8.31 million inclusive of expenses and a further Stg£4.15 million if warrants are exercised by April 2006.
The 2006 drilling program is focused on gas exploration and appraisal and is designed to present a well-balanced profile of low to high risk prospects with the potential to secure at the low end of the risk profile early cash flow, through tie-back of new discoveries to existing Celtic Sea infrastructure, and to secure at the high end of the risk profile, through the Inishbeg Prospect in the Donegal Basin, the potential to transform the Company through the discovery of a major new gas resource in shallow water.
Notwithstanding the above we are also beginning the process of planning, subject to rig availability, our 2007 drilling program which will focus on exploring our deepwater Killala Prospect in the Rockall Basin which, if successful, has the potential to be the largest hydrocarbon discovery made to date in Irish waters as well as continuing appraisal and development of our Connemara and Seven Heads oil discoveries.
We will continue to seek to expand the geographic spread of our oil and gas interests during 2006 and we look forward as a first step in this process to the possible award of an exploration permit in France.
The substantial progress made by the Company during the past year would not have been possible without the dedication and total commitment shown by the Board of Directors of the Company to deliver that which we set out to achieve in our AIM admission document. We would also like to thank the Company's many professional and technical advisors for their advice and assistance during what has been an extraordinarily active year for the Company
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