Northern Petroleum Updates Operational, Financial Information
Northern Petroleum has provided a trading update for its 2008 activities and accounting policy changes.
- £7 million in cash received from Star Energy Group Plc for sale of interests in non-core underground gas storage projects
- €34.9 million cash mostly held in Euros and a receivable of €8.5 million deferred consideration
- Waalwijk and P12 revenues of approximately €6 million, 11% above 2007 actual of €5.4 million
- Change in the Company’s functional currency to Euros with effect from July 1, 2008
Northern's net attributable production for 2008 was approximately 0.12 million boe (2007: 0.16 million boe). The majority of this production came from the Waalwijk and P12 gas fields, with a combined total of approximately 0.66 bcf (2007: 0.88 bcf). Production at the Horndean oil field totalled 6,564 barrels for the year, just 2.7% lower than in 2007. Oil production from Avington commenced in early 2009.
During 2008, revenues from the Group's producing fields were obviously enhanced by the higher hydrocarbon prices that persisted for much of the year.
The Waalwijk and P12 fields contributed revenues of approximately €6.0m (2007: €5.4m), 11% higher than during 2007. Oil revenues at Horndean increased to approximately US$0.6m (2007: US$0.45m).
In the 2008 results, the Group will account for its transaction with Star Energy Group Plc, a subsidiary of Petronas International Corporation Limited. Northern sold its entire interests in the Waalwijk underground gas storage projects to Star for an initial consideration of £7m, with further contingent payments payable of up to £3m.
The Group had approximately €34.9m net cash as at December 31, 2008. The majority of that cash is held in Euros, which provides a natural hedge for the Group's ongoing capital expenditure programme. In addition there remains €8.5m of deferred consideration receivable from Dyas B.V, with the next instalment of €4.5m due on 30 April. Since the year end Northern has received back costs of approximately €0.96m from Shell Italia and also back costs plus interest of approximately €4.95m from EBN in respect of the Andel III production licence.
Change in Functional Currency and other accounting policy changes
Following a review of certain accounting policies by the Board, and discussions with the Group's auditors, KPMG Audit Plc ("KPMG"), the following changes have been agreed:
1. The Company has changed its functional currency to Euros with effect from July 1, 2008. As such the 2008 Annual Report and Financial Statements will be presented in Euros. These changes reflect the primary economic environment in which the Northern Group now operates.
The impact on the financial statements will be a restatement into Euros of the 2007 reported results including the opening 2007 balance sheet.
2. An amendment to the Group's accounting policy on capitalisation of directly attributable salaries, with salaries consolidated at the subsidiary level no longer to be written back to the income statement to the extent that they have not been recovered from co-venturers. This change brings Northern's policy in line with most of its industry peers and complies with International Financial Reporting Standards.
The net effect of this change will be to increase consolidated net assets and increase consolidated retained earnings by approximately £2.4m (approximately €3.2m) as at December 31, 2007.
3. In accordance with IFRS 2 'Share-based payments' the charge to the income statement is now to be spread over the period between award and vesting.
This change will have no effect on reported consolidated net assets, but will result in an increase in the share incentive plan reserve and a decrease of approximately £1.7m (approximately €2.2m) in consolidated retained earnings as at December 31, 2007.
More detailed information on these changes will be disclosed in the 2008 Annual Report and Financial Statements.
In addition to the Company, three subsidiaries of Northern have also changed their functional and presentational currencies to Euros from the same effective date.
Notice of Results
The figures in this announcement are unaudited. Northern expects to release its results for the year ended December 31, 2008 in mid May 2009.
Chris Foss, Finance Director of Northern, commented, "2008 has been another year of significant financial and operational progress. Consequently we stand well positioned to deliver on our primary near term objective of bringing our Dutch developments onstream, whilst looking forward with anticipation to exploration success. Northern sees the current market turmoil as a significant growth opportunity, and is delighted to have expanded its Italian footprint by agreeing terms of the acquisition of ATI Oil Plc with its independent directors."
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