Global Energy Issues Audited 2006 Results

Global Energy Development PLC on Thursday announced its audited final results for the year ended 31 December 2006.

Financial Highlights:

--Turnover up 10.5% to $21,053,000 (2005: $19,045,000);
--Gross profit up 23.2% to $11,509,000 (2005: $9,344,000);
--Profit on ordinary activities before tax up 7.3% to $5,170,000 (2005 (restated): $4,817,000);
--Average operating netback per barrel of $38.77 (2005: $30.03); and
--Capital expenditure in 2006 of $15,166,000 (2005 (restated): $17,890,000).

Operational Highlights:

--Improvement in all reserve categories in 2006;
--Independently audited proved plus probable reserves net to the Company increased 11.1% to 19.4 million barrels of oil equivalent (2005: 17.5 million barrels of oil equivalent);
--582% proved plus probable reserve replacement rate in 2006 (2005: 332%);
--Successful initial drilling program in Rio Verde contract area in 2006;
--Positive well test result from the Luna Llena contract area drilling program in early 2007; and
--Discussions ongoing with a number of notable potential partners for several different projects held by the Company.

Statement by Mikel Faulkner, Executive Chairman:

2006 presented both successes and challenges for the Company. These challenges, both Company specific and industry-wide, did not alter the continued growth in the fundamentals of the Company. The industry continues to suffer from shortages ranging from personnel to the well documented lack of rig availability but the Company was still able to undertake selected drilling in the year, add to the senior management team, deliver improved financials in every category and materially build on its reserves.

The Company offers considerable asset value through a large and diverse portfolio of acreage focused in Latin America that features strong historical data from previous activity by many international oil companies over the past few decades.

This strategy of following in the footprint of the "majors" and the yearly audit performed on the Company's portfolio by independent petroleum consultants gives the management every confidence in the current and future value of the Company.

In 2006 the Company was able to increase its reserves in every category through activity undertaken during the year. In addition, the Company was able to control costs and maintain margins on its producing operations despite continued escalating industry costs. The Company's countries of focus remain very compelling with good prospectivity, highly favourable contract terms and increasingly low political and economic risk. 2006 saw elections held in Colombia and Peru with both outcomes perceived as beneficial to the investment community and offering continued stability.

The Company began 2007 with a two well drilling program with the second well delivering positive test results and providing an encouraging outlook for the Colombian Luna Llena Exploration and Production Concession contract. This program plus efforts to advance other areas of the portfolio should help the underlying value of the Company to continue to be realized at a greater pace.

Review by Managing Director Stephen Voss:


Turnover for the year ended 31 December 2006 was $21,053,000, an uplift of 10.5% against the prior year (year ended 31 December 2005: $19,045,000), with gross profit 23.2% higher at $11,509,000 (year ended 31 December 2005: $9,344,000).

Operating profit, after administrative expenses, stock options expense and other income, was 16.4% higher at $5,628,000 (year ended 31 December 2005 (restated): $4,835,000). Profit on ordinary activities before taxation was 7.3% higher at $5,170,000 (year ended 31 December 2005 (restated): $4,817,000) with net income to the Company of $4,185,000 (year ended 31 December 2005 (restated): $4,102,000).

These financial results continue the solid upward trend since the Company's shares were admitted to trading on AIM in 2002 ("Admission") and were achieved on production during 2006 of 401,298 barrels of oil net to the Company and sales of 399,000 barrels of oil (year ended 31 December 2005: production of 451,000 barrels of oil net to the Company), and influenced by the prevailing historically high oil prices during 2006. Net cash inflow from operating activities for the year was $10,738,000 (year ended 31 December 2005 (restated): $4,597,000). The average price for West Texas Intermediate ("WTI") in 2006 was $66.23 per barrel and the Company averaged an operating netback per barrel of oil of $38.77 for the year. This compares with an average WTI price in 2005 of $56.56 per barrel and an average operating netback per barrel for the Company of $30.03. This demonstrates that the Company was able to control costs and maintain gross margins despite continued escalating costs in 2006 within the industry. Capital expenditure for the year, funded out of cash flow from production and cash available, totalled $15,166,000 (2005 (restated): $17,890,000), this being slightly lower than anticipated due to the lack of rig equipment causing the Company to delay drilling some wells until 2007.

Reserve Report

The independent petroleum consultants Ryder Scott Company, LP ("Ryder Scott") have prepared a Reserve Report on the Company's portfolio of contracts annually since Admission. All three categories of the 2006 Reserve Report, namely the proved, probable and possible reserves, showed a material improvement over the prior year. Ryder Scott reported that as at 31 December 2006, proved reserves net to the Company totalled 5.5 million barrels of oil equivalent, an uplift of 10.1% against the prior year (as at 31 December 2005: 5.0 million barrels of oil equivalent). Proved plus probable ("2P") reserves net to the Company totalled 19.4 million barrels of oil equivalent, an uplift of 11.1% against the prior year (as at 31 December 2005: 17.5 million barrels of oil equivalent). Proved plus probable plus possible ("3P") reserves net to the Company totalled 81.8 million barrels of oil equivalent, an uplift of 21.1% against the prior year (as at 31 December 2005: 67.5 million barrels of oil equivalent).

This growth in reserves was in addition to production in 2006 detailed above. In 2006 the Company achieved a 582% proved plus probable reserve replacement rate (2005: 332%).


The Company was hampered by delays in 2006 as were numerous others in the industry. Unforeseen adverse weather conditions and issues in securing equipment and drilling rigs were the primary causes of these delays and resulted in the planned 2006 drilling program largely being deferred to 2007. As a consequence the expected uplift in production for 2006 against 2005 was not realized. However, it is worth noting that it was purely delays in timing and not unsuccessful drilling efforts that caused production growth to stall in 2006.

Production net to the Company in the second half of 2006 was up 33% compared to the first half of 2006 and this was largely due to the Company successfully drilling and placing on production the Tilodiran 2 well within the Colombian Rio Verde contract which has averaged production of approximately 700 barrels of oil per day ("bopd") since the end of July 2006 with a low rate of decline. The Tilodiran 2 well came on to production approximately three months later than the management had originally planned due to delays and this was by far the largest component of 2006 production shortfall.

Whilst 2006 was characterised by slowness of planned drilling, good progress was made elsewhere which has strengthened the Company considerably and laid the foundations for increased activity in 2007 and beyond. New contracts were signed in the country of Colombia, other potential contracts were evaluated and progressed, seismic was acquired and processed, key personnel were added, a subsidiary office established and a rig was contracted in August 2006 and then mobilized early in 2007 for a drilling program within the Colombian Luna Llena contract area.

Two new contracts were signed during 2006, one being the Colombian Los Sauces contract which is contiguous with the northern boundary of the Rio Verde contract that contains the Tilodiran 2 well as detailed above. It is hoped that this contract area will prove to be an extension of the producing Tilodiran field and will also offer relatively predictable drilling with high daily production rates. Due to these characteristics, the Rio Verde and Los Sauces contracts will be a principal area of focus for the Company in the second half of 2007 and 2008 as they should provide strong cash flow. At the end of 2006 new 2D seismic was acquired over both these contract areas and subsequently processed and it is the Company's intention to commence a multi-well drilling program on these two contract areas as soon as possible after the current negotiations to secure the necessary heavy drilling rig are concluded. Heavy drilling rigs capable of drilling to the 16,000 feet depth necessary for the planned wells remain in short supply with this situation set to continue at least for the short to medium term.

The other new contract signed in 2006 was the Colombian Caracoli contract. Geological and geophysical activities undertaken in 2006 largely indicated the absence of hydrocarbons and as such the Company took the decision to relinquish this contract. The Company avoided substantial capital expenditures as a result of the early termination of this contract and the pre-allotted 2007 capital expenditure on this contract can now be allocated to other projects.

As mentioned above, the Company successfully secured a drilling rig for its Colombia Luna Llena contract area drilling program in August 2006. A rig for this area was easier to secure owing to the shallowness of the proposed wells. After a month's delay due to adverse weather conditions in the Llanos Basin, well location construction was initiated in December 2006 and the rig mobilized in January 2007. The first well, Luna Llena 1, was spudded in February 2007 and tested fresh formation water, albeit with small traces of hydrocarbons, and was suspended pending results from the next well, Luna Llena 2. The Luna Llena 2 well was spudded in March 2007 and drilled directionally to a total depth of 2,980 feet to reach the "El Miedo" sandstone in the upper Carbonera C3 formation. Oil shows and oil stained cuttings were recovered in the drilling process from the upper C3 'El Miedo' sandstone. Using nuclear and resistivity measurement devices the "El Miedo" sandstone was determined by the management to be a high porosity reservoir consisting of clean, well developed sands and favourable calculated oil saturation. The oil saturation calculations and other field data indicated the 'El Miedo' reservoir has the potential to flow a high percentage of oil. Due to the highly positive data collected, the Company is now looking to appoint an independent technical consultant to estimate the reserves associated with the Luna Llena area which will be used to design a field development program.

Two of the Company's other Colombian contract areas, Bolivar and Bocachico, were the subject of ongoing improved recovery project designs in 2006 with these planning efforts continuing into 2007 as the Company works with a number of service companies to implement a cost-effective development plan leading to future drilling activity in these reserve-rich fields.

Outside of Colombia, the Block 95 contract in Peru was subject to micro-magnetic acquisition and analysis during 2006 in addition to environmental plan preparation. In Panama, the pending Garachine contract has been subject to lengthy, detailed contract negotiations which are now very near conclusion with the Panamanian government publicly indicating the contract is very close to being signed.

The Company is pursuing a unitization procedure with Ecopetrol, a Colombian state-owned oil company, in relation to production from the Cajaro 1 and Los Hatos 1 wells within two of its contract areas. In November 2004, Ecopetrol took a 50% working interest in the Cajaro 1 well through a commerciality declaration. The Company soon thereafter advised Ecopetrol that the Carajo 1 well was producing from both the Cajaro 1 commercial area and the abutting Los Hatos contract held by the Company through a concession contract with the National Hydrocarbons Agency of Colombia ("ANH"). As a result, the Company's management believes that under Colombian law the Cajaro 1 commercial area and the Los Hatos 1 field are subject to unitisation. Ecopetrol agrees that the field should be unitised but has not agreed to the location of the fault giving rise to the unitisation proceedings. Ecopetrol and the Company have agreed to appoint a technical expert to rule on the formation in order to determine the proper partner division of the field. In accordance with the agreement for unitisation, the Company has recorded a receivable related to corresponding 'overlift' of production by Ecoptrol and has valued the receivable according to conservative outside technical consultants estimations. The proceedings are deemed to be within the normal course of business and could be resolved within the next year with the management positive on the outcome.

The Company currently owns 100% of all its contract areas and is seeking partners for some of its exploration and/or exploitation projects in order to expedite progress on these areas and realize their value more quickly. Discussions are ongoing with a number of suitable and highly notable partners for several of these projects.

The Company also made further advances during 2006 in the appraisal of what the management believe to be a significant natural gas developmental opportunity within the Bolivar and Buturama contracts located in the Magdalena River Valley. Ryder Scott has fully assessed the areas and the scope of the opportunities appears to be significant and should be attractive to potential partners.

In order to properly support, control and oversee the current and future activity of the Company, a number of key personnel were recruited in 2006, particularly in Bogotá, Colombia, and a new subsidiary office opened in Lima, Peru, at the beginning of 2006. Notable was the addition of Francisco Suarez as director of Exploitation in August 2006. Francisco has over 19 years experience with Halliburton, predominately in Latin America, and is now responsible for managing drilling and production operations, overseeing engineering studies and interfacing with service companies to ensure utilisation of latest applicable technologies.


2007 has begun very encouragingly with increased reserves and the positive well test result of the Luna Llena 2 well on the Colombian Luna Llena contract. The Luna Llena 2 well importantly demonstrated the main field reservoir, the 'El Miedo' sandstone, to be of high quality and a productive and attractive developmental opportunity for the Company. The Luna Llena contract adds to the developmental opportunities defined in 2006 through the successful drilling of Tilodiran 2 on the Colombian Rio Verde contract area.

The Company has many highly attractive projects under its control and through ongoing activity and partnering efforts the management believes that during 2007 further value will be realized.

Global has been listed on AIM, a market operated by the London Stock Exchange, since March 2002 (LSE-AIM: "GED"). The Company held as at 19 April 2007, eight contracts in the countries of Colombia and Peru and an exclusive option over a contract in Panama.

The Company's balanced portfolio of contracts comprises a base of production, developmental drilling and workover opportunities and several high-potential exploration projects.

Proven and probable oil and gas reserves are estimated quantities of commercially producible hydrocarbons which the existing geological, geophysical and engineering data show to be recoverable in future years from known reservoirs. The proved reserves reported by Ryder Scott Company, LP ("Ryder Scott"), independent petroleum consultants, conform to the definition approved by the Society of Petroleum Engineers ("SPE") and the World Petroleum Congress ("WPC"). The probable and possible reserves reported by Ryder Scott conform to definitions of probable and possible reserves approved by the SPE/WPC using the deterministic methodology.

The information contained within this announcement has been reviewed by Ryder Scott.

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