Revus Energy Group generated total revenues of NOK 130.1 million (USD 25.6 million) in the first quarter of 2008, up from NOK 77.7 million (USD 12.8 million) in the first quarter of 2007. The acquisitions of Palace UK and StatoilHydro's interest in Murchison provided a strong revenue growth in the quarter. In addition and since the end of the first quarter, the Company has agreed to sell a 10% share in the current field development project Yme for USD 52.5 million.
The income statement and production for the first quarter reflects revenues and costs related to the acquisition of Palace Exploration (UK) Limited (renamed to Revus Energy (UK North Sea) Limited) for the period after completion of the acquisition on February 27, 2008 and the acquired interest in the Murchison Unit (11.516%) for the period after completion of the acquisition on February 29, 2008.
The first quarter gave an operating income of NOK 15.2 million, compared with an operating loss of NOK 7.5 million in the first quarter 2007. This was largely because of a significant increase in revenues due to production from the Broom field (the main asset acquired in the Palace acquisition). Including financial items, the first quarter 2008 gave a net loss before tax of NOK 22.5 million, compared to a loss of NOK 16.8 million in first quarter of 2007. The net loss of NOK 37.7 million in net financial items is caused mainly by unrealised foreign exchange losses and increased interest expenses following debt raised in connection with the Palace acquisition.
Cash flow from operations for the first quarter 2008 was negative at NOK 361.1 million, compared with a negative cash flow from operations of NOK 59.2 million in the first quarter 2007. The negative cash flow in first quarter 2008 is caused mainly by elimination of short term liabilities in connection with consolidating Palace Exploration (UK) Limited into the Group accounts.
In the second and third quarter of 2008, several exploration and appraisal wells will be drilled, and the recent strengthening of the financial position following the sale of a 10% stake in Yme will enable the Company to accelerate projects in the portfolio as well as actively pursue new business opportunities. It remains the Company's ambition to build a large Norwegian based E&P business applying a twin engine growth strategy, organic growth through exploration and appraisal and combined with an M&A strategy to target companies and assets with growth potential.
Revus' production for the second quarter of 2008 is estimated to be 6,450 boepd against actual production of 5,896 boepd in the first quarter. The guided production for Q2 is largely influenced by a planned 3 weeks shut down on the Heather and Broom fields. The annual estimated production is still 6,600 boepd.
On the Broom field the Company is currently building its own reservoir model with the intention to use this to agree infill well locations with the operator Lundin. Revus' internal ambitions are to include such wells in the 2009 budget.
On the financial side the sale of 10% in Yme has provided the Company with sufficient cash to actively pursue new opportunities focusing as always on creating value to shareholders.
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