LASMO plc Preliminary Results for the 12 Months Ended December 31, 1999.
Business Editors
LONDON--(BUSINESS WIRE)--March 1, 2000--LASMO plc (NYSE: LSO), the
international oil and gas exploration and production company, today
announced
LASMO Reports Record Profits of (pound)154 million
-- Underlying profit of (pound)113 million, exceptional profits of
(pound)41 million
-- Record post-tax cash flow from operations of (pound)308 million
-- After tax margins increased from $1.55 per barrel to $4.78 per
barrel
-- Recommended 9 percent increase in dividend to 2.5p
-- New distribution policy - approvals sought for share buy back
-- Successful integration of Monument Oil and Gas
-- Significant improvements in business efficiency
- unit costs of sales down 4 percent to(pound)6.18 ($10.01 )
per barrel
-(pound)15 million overhead savings achieved
-- Production more than doubled in Venezuela o Projects approved in
Algeria and Libya.
1999 1998
restated
Financial Highlights
Turnover ((pound)million) 647 536
Profit/(loss) for the year
before exceptional items ((pound)million) 113 (44)
After exceptional items ((pound)million) 154 (404)
Net cash flow from operations
after tax ((pound)million) 308 147
Average cost of sales per boe((pound)) 6.18 6.41
Gearing percent 33 74
Dividend per share pence 2.5 2.3
RoACE percent 9.7 -
Operational Highlights
Average net production (Mboepd) 178 185
Reserves (MMboe) 1,242 1,091
Reserves replacement
3 year average percent 152 159
Rudolph Agnew, Chairman, said:
"I am pleased to report these record levels of cashflow and
earnings. LASMO's performance in 1999 was due to the dramatic recovery
in oil prices underpinned by our strict financial discipline, a
significant program of overhead reduction and the growing benefits of
our strategic focus on low cost areas."
"The increased dividend indicates our confidence in the underlying
business. We have a strong balance sheet, improving near-term
financial performance, good development projects and an exploration
and new business portfolio offering world-class opportunities. LASMO
continues to generate value and profit from trading assets; this year
we report (pound)41 million in exceptional profits. We want
shareholders to benefit directly from this success. Our new
distribution policy reflects this and we will be seeking approvals to
allow us to buy back shares during 2000."
Chief Executive's Review
This last year has marked an impressive turnaround in financial
performance of the business against a backdrop of dramatic changes in
the industry and volatility in the oil market. During 1999, LASMO kept
tight control of expenditure and produced record levels of cash flow
and earnings whilst making significant progress in its operating
activities and new business efforts around the world.
The Business Environment
Despite the remarkable rebound in oil prices during 1999 to above
$25 per barrel at the year end and the consequent improvement in cash
flows and earnings, companies in general have remained cautious,
reducing expenditure and continuing overhead reduction programs. As we
enter the year 2000, oil prices remain high, primarily due to
continued OPEC restraint. Whilst we expect some increase in output
over the course of the year, we anticipate that prices can be managed
down to a level that satisfies host governments, producers and
consumers.
In this environment, it is surprising that oil company share
prices remain depressed. Whether due to continued uncertainty
surrounding oil prices or the flight of capital out of value stocks
into the technology, internet and communication sectors, it has
resulted in the establishment of an unsustainable gap between company
values and share prices.
Business Performance
Attention in 1999 was focused on the efficient development of our
assets to increase value and improve current and future profitability.
Production for the year averaged 178 Mboepd, marginally below
expectations after adjustment for asset sales, largely as a result of
shortfalls in oil and gas production from the Liverpool Bay fields,
following minor oil spills. The volumes, approximately five barrels on
two separate occasions, were small, but the fields were shut down for
prolonged periods to ensure protection of the environment, resulting
in a disproportionate financial impact. These incidents underline the
importance of zero operating tolerance in this environmentally
sensitive area. Elsewhere, I am pleased to report good progress in
production build-up of new fields, especially Venezuela and Algeria,
cost control in our existing operations and reduced risks around
project delivery.
On the exploration front, the year saw reduced drilling activity
as LASMO, like other companies, responded to the low oil price
environment of 1998 by deferring or cancelling many programmed wells.
Nevertheless, through exploration successes in Venezuela and the UK,
together with upward revisions in existing fields, we have replaced 94
percent of production net of acquisitions, even after downward
adjustments to reflect PSC entitlement under higher prices, prior to
which our reserves replacement ratio was 134 percent. All in all,
LASMO added 151 MMboe to its reserve base during the year, including
acquisitions, and have on average replaced 152 percent of our
production annually over a three year period.
Our exploration program for 2000 will test substantial prospects
in Indonesia, Libya and Pakistan as well as low risk, high value
prospects in the UK and Venezuela. One success has already been
delivered: the Gendalo-1 gas discovery, offshore Kalimantan in
Indonesia.
We have continued to actively manage our portfolio in order to
focus on material projects where LASMO can add significant value,
whilst realizing value for peripheral assets through disposal. During
1999, we completed the sale of assets in Algeria and the Southern and
Central North Sea, as a result of which we have booked (pound)41
million of exceptional profits, and initiated the disposal of our
interests offshore Azerbaijan. In October, we announced a further
renegotiation of our gas sales agreement with Powergen for the sale of
our gas production from the Liverpool Bay fields. This yielded a
(pound)84 million cash receipt and reduced the gas sales price to a
level which creates potential for further spot sales.
The Acquisition of Monument Oil and Gas
In the first half of 1999, while oil prices were still below $17
per barrel, LASMO announced the acquisition of Monument Oil and Gas,
thereby strengthening the Company's financial position and building
upon our positions in the UK, North Africa and Pakistan. We are
currently enjoying cash flows from the acquired producing assets at
prices in excess of $25 per barrel, and at the same time are
benefiting from the delivery of the cost synergies forecast at the
time of acquisition.
Financial Results
The average Brent price for the year of $17.86 per barrel helped
produce record cash flow from operations of (pound)308 million and
record profit before exceptional items of (pound)113 million. Profit
including exceptional items of (pound)154 million represents a return
on average capital employed of 9.7 percent for the year.
Operating margins have been increased through the continual
improvement in cost structure and business efficiency. Unit cost of
sales has fallen by a further 4 percent to (pound)6.18 per barrel and
reductions have been recorded in exploration expense, down 35 percent
to (pound)34 million. Cost savings of (pound)15 million projected from
the Group reorganization during the year have been achieved, and I am
pleased to report that we are on track to deliver annual savings of
(pound)20 million in overhead costs from 2000 onwards. Overall, we
estimate our breakeven price to have fallen to approximately $12.75
per barrel, from $15.00 per barrel in 1998.
At the year-end, debt to equity stood at 33 percent, down from 74
percent at year-end 1998. We are committed to reshaping our portfolio
to maintain the financial capacity to respond to opportunities at all
stages of the oil price cycle, while pursuing greater capital
efficiency by replacing high cost debt and carrying lower levels of
cash. During December 1999 we announced our intention of redeeming
$250 million of preference shares as a part of that process.
Strategy and Financial Framework
LASMO will continue to pursue its long-term strategy of building a
business that is robust at low prices which has taken the Company into
material projects in prolific hydrocarbon provinces where unit costs
are low. Through this strategy, we have built a high quality portfolio
of assets with the potential to deliver further growth and attractive
financial returns.
As a mid-sized exploration & production company, we believe LASMO
needs to offer through-cycle performance while retaining the
flexibility and creativity that can deliver step changes in the
profile of the business. The framework is based on three principles.
Firstly that we will place a greater emphasis on returns, aiming to
achieve a return on average capital employed in excess of our cost of
capital at mid-cycle prices. Secondly, that we will maintain a robust
and flexible financial position and lastly, achieve a balance between
cash flow from operations and investment.
Our financial framework will ensure capital discipline at the top
of the price cycle as well as financial capacity during low cycle
periods, in order to take advantage of value creative opportunities.
The combination of improved financial performance and step change
increase in value of our business will, in our view, lead to
competitive total shareholder returns.
Distribution Policy
As in the past, earnings in the Company will be generated from
both production and from the trading of oil and gas assets. Our
distribution policy will reflect this. We have chosen to increase our
cash dividend as a signal of continuing progress in our underlying
business, and intend to seek approvals from shareholders and
convertible bondholders to buy back shares during 2000. In future, we
shall continue to consider the direct return of value to shareholders
when appropriate, the scale, timing and method depending upon the
Company's investment requirements, tax position and the business
environment.
Price Risk Management
Given the volatility in the oil market, managing oil price
exposure is critical to ensuring the availability of funds for
investment and limiting excessive financial risk. For 2000 LASMO has
put in place a series of dated Brent collars at zero cost for 40
percent of its net production. These instruments provide downside
price protection between $15 and $18 and set average ceiling prices at
$25.80 and $28 per barrel for first half and second half 2000
respectively. This program is designed to protect the capital budget
this year irrespective of price volatility, safeguard against a low
oil price scenario and reap the rewards of current high oil prices.
Outlook
Operationally, the year in prospect looks very favourable, with
growing production, development activity gathering momentum, the
potential to secure valuable new business opportunities and an
exciting exploration program. Financially, of course, much depends
upon the oil price but we are forecasting strong cashflow and
earnings.
Operational Review
During 1999 LASMO focussed on improving the financial performance
of its assets, whilst continuing to position the Group for material
business growth. Production averaged 178 Mboepd for the year (185
Mboepd in 1998) and the unit cost of sales was reduced for the sixth
year running to (pound)6.18 per barrel, reflecting a greater
contribution from international production and increased reserve
bookings in the UK and Algeria and asset writedowns in 1998.
The year saw significant operational progress in Venezuela, where
drilling costs were reduced by over 30 percent and production reached
30 Mbopd. In Algeria, two major project contracts were awarded,
marking an important step towards the realization of value from
LASMO's interests in the Berkine basin fields. In Indonesia,
outstanding results have been delivered on Sanga Sanga, where capital
and operating costs have been dramatically reduced. Production and
development expenditure for 1999 was tightly controlled at (pound)204
million excluding capitalized interest, and is forecast to rise to
approximately (pound)300 million in 2000 as we develop our resource
base in Venezuela, Algeria, Libya and Pakistan.
Over the year LASMO added 151 MMbbls to its commercial reserve
base, replacing 331 percent of produced reserves. Excluding
acquisitions and disposals, the reserves replacement ratio was 94
percent, comprising 28 MMbbls from discoveries and 33 MMbbls from
field revisions. After adjustment for international concession terms,
which in some instances reduce the Company's reserves entitlement at
high oil prices, the replacement ratio was 134 percent.
Exploration and appraisal successes were recorded during 1999 in
the UK, Venezuela, Pakistan and Indonesia and commercial reserves have
been booked from discoveries in the UK (Goldeneye) and Venezuela
(Tortola and Ganso). Further reserves bookings are anticipated from
discoveries in Pakistan (Badhra) and Indonesia (Kutei) pending field
appraisal activities. Exploration and appraisal expenditure during
1999 was limited to (pound)63 million, of which (pound)34 million has
been written off (a 35 percent reduction compared to 1998).
UK
The UKCS provided 56 percent of the Group's production in 1999 and
continues to be an important element of LASMO's portfolio. Production
averaged 100 Mboepd (108 Mboepd in 1998) reflecting a decline in the
Fourth Round fields and unexpected downtime on Liverpool Bay, partly
offset by increased production from Galley and the Ross field which
came on-stream in April1999. The Monument acquisition contributed an
average of 10 Mboepd for the year, through increased participation in
Liverpool Bay, and interests in Hudson and Ravenspurn North.
Liverpool Bay averaged 69.4 Mboepd of gross production for the
year. The unit operating costs on this asset still have room for
improvement and they are being reduced through the introduction of a
new operating management structure, innovative contracting strategies
and measures to improve the oil production uptime (82.5 percent in
1999). The potential for reserves additions has also been identified
through further development drilling and lowering the oil field's
economic production threshold. This potential has started to be
realized with a net increment of 7 MMboe booked at year-end 1999.
During 1999 Elf and ARCO sold their equity in the Fourth Round
fields to Talisman, who have assumed operatorship of the assets. The
new partnership plans to rejuvenate these material fields through
additional exploration and infill drilling (commencing in 2000),
facilities modifications and operating cost reductions.
The Monument acquisition provided LASMO with exposure to
additional exploration acreage around the Andrew field, which
continues to be one of the best managed assets in the UKCS. An
exploration well is planned for 2000 in block 16/23 in which LASMO has
a 16.67 percent equity interest.
A two well appraisal program on the Goldeneye discovery in the
Central North Sea was completed in 1999. The Group also participated
in the Glenelg gas/condensate discovery in the Central North Sea. This
asset was viewed as peripheral within the context of the Group
portfolio, and therefore value was realized through sale to Gaz de
France for (pound)6 million. We continue to manage our investments in
the Atlantic Margin and further exploration drilling is anticipated,
with the large Vrackie prospect in block 204/28 in mid 2000.
In order to accelerate financial performance and crystallize
value, LASMO's Southern North Sea assets (with the exception of
Markham and Hewett) were sold to Gaz de France for a consideration of
(pound)95 million. This resulted in an exceptional profit of (pound)21
million. In addition, during October agreement was reached with
Powergen to reduce the Liverpool Bay gas sales price to 10p per therm
for a period of 5 years. This resulted in a premium payment of
(pound)84 million to LASMO and aligned the gas price to spot market
rates, hence creating the opportunity to increase gas offtake rates in
the future.
Indonesia
Sanga Sanga PSC
The economic recovery in South East Asia was reflected in
increased exports of LNG from the Bontang plant, which shipped a
record 324 LNG cargoes during 1999. Expansion of the Bontang plant
facilities was completed with the commissioning of the Train H in
October 1999. However, the Group's entitlement production fell to 48
Mboepd (58 Mboepd in 1998) as a result of lower entitlement volumes
due to higher oil prices and a change in contract terms introduced
when the PSC life was extended to 2018.
A major strategic review of the future of the Sanga Sanga fields
was undertaken during 1999 with the key objective of improving
financial performance whilst meeting gas supply obligations. As a
result, future capital expenditure will be reduced by 35 percent (from
(pound)200 million to (pound)130 million net) by optimizing drilling
and facilities upgrade plans. In addition, savings in cumulative
future field operating costs of 40 percent (from (pound)400 million to
(pound)240 million net) have been identified.
The results of the cost reduction initiatives are already being
delivered with a net capital cost saving of (pound)10 million in 1999.
The net capital budget for 2000 is (pound)22 million (representing a12
percent decrease relative to 1999) and the net operating cost budget
is (pound)15 million (a 27 percent decrease).
Exploration & New Business
In late 1997, LASMO embarked on a strategic initiative to build a
high potential exploration portfolio in Indonesia. This has led to the
Group accessing three new ventures involving six licenses during 1999.
Each of these opportunities is located in a deepwater extension of a
proven hydrocarbon basin and benefits from the attractive license
terms on offer in Indonesia for deepwater exploration.
LASMO farmed into the Rapak (10 percent interest), Ganal and
Sesulu (20 percent) licenses offshore East Kalimantan in the Kutei
Basin in May 1999. The operator, Unocal, is using proprietary drilling
techniques to explore the acreage with a continuous program of low
cost wells (average well cost in 1999 of $4.7 million in water depths
up to 5,300 feet).
To date several modest oil and gas discoveries have been made in
Rapak (in the Janaka North, Aton and Bangka structures) and Ganal (in
Gandang) and these indicate the potential for significant
accumulations in the area. Further drilling is planned in the Kutei
Basin during 2000 and it is noteworthy that this program has already
resulted in the significant 1 to 3 TCF gross Gendalo discovery in
Ganal.
During September 1999, LASMO farmed into Shell's Bukat license
(12.5 percent) in the Tarakan Basin offshore East Kalimantan and
acquired an option to enter the adjacent Ambalat license. LASMO has
also been awarded the Krueng Mane license (100 percent) which is
located offshore North Sumatra, 100 kilometers from the Arun LNG plant
where excess capacity will become available after 2005. Drilling is
planned in both Bukat and Kreung Mane in 2000. Elsewhere, exploration
activities continued on the Malagot license in Irian Jaya with the
acquisition of 280 kilometers of 2D seismic and drilling is planned
for early 2001.
During March, LASMO drilled Mako-1 in the Cumi Cumi license in the
West Natuna Sea. The well encountered non-commercial gas shows and
following a review of the prospectivity on the acreage LASMO has
withdrawn from this area.
Venezuela
LASMO's exploration and development activities in the Dacion
contract area continue to yield encouraging results. Production
increased from 11 Mbopd at take-over of operations in March 1998 to 30
Mbopd in September 1999 following an intensive two rig drilling
program, the upgrading of existing facilities and construction of the
first phase of a new export pipeline. Over the year production
averaged 22 Mbopd and LASMO is now one of the leading international
oil producers in the country.
The timing of further increases in production is dependent on the
construction of the new surface facilities which were delayed in 1999
when capital expenditure was halved from budgeted levels to
approximately (pound)100 million because of oil price uncertainty.
Currently, new facilities are being built in the Ganso area and in the
Dacion field itself, which will result in end 2000 production rates of
between 40 Mbopd and 45Mbopd being achieved, with more rapid build up
thereafter towards the target of 90 Mbopd by 2002.
On the drilling front, using custom-built Precision drilling rigs,
LASMO has drilled 42 infill wells to date, and in the process, reduced
costs from over $1 million to $650,000 per well. Costs are set to fall
further with a target of $550,000 per well. Likewise, drilling times
have fallen, with the fastest well being drilled in 8 days as opposed
to the 15 days anticipated when LASMO took over operatorship. Average
initial well rates of 1,200 bopd are being observed, a significant
increase compared to 500 bopd anticipated in the initial development
plan.
A 3D seismic program was completed in April 1999 and seismic
interpretation will continue through 2000 in support of field and
exploration drilling. This work has already identified 10 exploration
prospects and numerous field extensions. The first exploration well on
the Tortola structure, drilled in September 1999, came in on prognosis
and tested at a cumulative flow rate of 3,600 bopd from the Middle -
Lower Miocene Oficina formation. The second, targeting a deeper,
higher risk Cretaceous play beneath the Dacion fieldwas drilled by
deepening a Dacion development well. It encountered oil shows in the
target zone, but was not tested. Exploration results to date have
confirmed LASMO's view of 100 MMbbl of additional risked reserves
potential in the Dacion contract area. A multi-well exploration
drilling program will continue in 2000.
LASMO's profile as a committed foreign investor within Venezuela
has been raised significantly during 1999 by the progress that has
been made. The Group is well positioned to capture new business in the
Oficina trend within the East Venezuela basin, an area with attractive
opportunities where LASMO has significant competitve advantage.
North Africa
LASMO has developed a balanced portfolio of assets across North
Africa, from frontier exploration offshore Morocco to development
projects and production in the world-class Berkine and Murzuk Basins
in Algeria and Libya.
Algeria
LASMO commenced production from the HBNS field in the Berkine
basin in May 1998 and during 1999 the gross production from the field
averaged 50 Mbopd from a single 68 Mbopd capacity process train.
Further increases in the production rate may be achievable during 2000
by improving the field facilities and implementing a water injection
program. However, averaged annual rates are currently capped at 54
Mbopd gross due to OPEC constraints and may remain so.
Plans to increase HBNS production to 135 Mbopd by 2001 have been
approved by Sonatrach and a contract for the Engineering, Procurement
and Construction (EPC) of a second 75 Mbopd process train was signed
in September. Development approval for the HBN field was also gained
during the 4th Quarter of 1999 and an EPC contract for the
construction of a third 75 Mbopd process train is in place. This field
is expected to be on-stream in early 2002.
EPC bids for the Ourhoud (previously Qoubba) field facilities are
currently under review and contracts will be awarded for this
development during 2000. Development plans for the remaining block 404
satellites and 208 discoveries have been submitted to Sonatrach for
approval.
Elsewhere in the Berkine basin, LASMO operates the IAN appraisal
and El Ouar II exploration areas in block 212. A 300 square kilometer
3D seismic survey was completed over IAN in March 1999 and conceptual
development plans for the discovery are being reviewed. A seismic
survey will be acquired on El Ouar II in 2000.
In order to focus on its material Algerian development projects
and realise early value, LASMO entered into an agreement to sell its
interests in the BHP operated blocks 401a and 402a to a subsidiary of
ENI. The disposal yielded (pound)26 million and resulted in an
exceptional profit of (pound)17 million.
Libya
The F-NC174 (Elephant) field in the Murzuk Basin was declared
commercial in February 1999 and the development plan subsequently
approved. The front end engineering and design for the project has
been completed, including a detailed environmental assessment of the
field area and full field development is expected to progress in 2000.
Further attractive exploration prospects have been identified within
the F-NC174 license and we anticipate drilling in late 2000.
The Group is also actively pursuing new business opportunities in
Libya. Concentrating on high-graded exploration basins, LASMO has
recently conducted geological studies and field trips to the Murzuk
and Kufra basins, the latter as part of a Technical Evaluation
Agreement signed with NOC in May 1999. The Company has also registered
its interest with NOC for acreage on offer in the forthcoming
licensing round and is in discussion with potential partners.
Morocco and Tunisia
Elsewhere in North Africa, a 1,500 kilometer offshore seismic
program was completed on the deepwater Ras Tafelney Reconnaissance
License in Morocco. Funding for this program was provided by VANCO
Energy as part of a successful farmout which will leave LASMO with a
40 percent interest in the license. In Tunisia, LASMO has acquired a
100 percent operated interest in the Borj El Khadra license. This
block represents an extension of the prolific Berkine Basin which
contains the Anadarko operated fields in neighboring Algeria and new
data will be acquired on the block in 2000. Exploration drilling is
also planned in 2000 in the adjacent South Jenein license, in which
LASMO holds a 40 percent non-operated interest.
Pakistan
LASMO has developed a commanding upstream gas position in
Pakistan, where exploration successes in the Kirthar Foldbelt have
been complemented by the acquisition of Monument assets to create a
high growth potential business.
Progress towards developing the LASMO operated Bhit gas field has
continued during 1999. The appraisal program has been successfully
completed, field commerciality declared and Government approval is
currently being sought for the development plan. First gas is expected
in early 2002 at rates of approximately 90 MMscfd net. Meanwhile the
Gas Sales Agreement is being finalized with SSGC, one of the
state-owned gas utility companies.
In March this year LASMO recorded a discovery in the Badhra
prospect which lies approximately 10 kilometers from the Bhit field.
Gas was encountered in the Mughal Kot formation, a previously untested
reservoir in the Kirthar area. This discovery further enhances the
already significant exploration potential in the area and both the Pab
and the Mughal Kot formations will be tested by two Kirthar Foldbelt
exploration wells drilled in 2000.
Through the Monument acquisition, the Company acquired an interest
in the Zamzama field located 50 kilometers to the northeast of Bhit.
Zamzama is estimated to contain gross mean risked reserves of 1.5 Tcf
and following a successful appraisal well test in 1999 (which flowed
at 94 MMscfd gross) a 21 month Extended Well Test scheme has been
approved by the Government.
In the Middle Indus LASMO has developed a strong exploration
position by acquiring two new highly prospective licences (Mubarak and
East Kadanwari) in partnership with Petronas Carigali. In the
LASMO-operated Kadanwari gas field, remaining reserves are expected to
be upgraded following the success of a new producer in the eastern
flank of the field and recompletions into undrained reservoir layers.
The technical evaluation of LASMO's offshore Indus acreage was
completed in 1999 and both the Indus `A' and `F' licenses were
relinquished.
The Caspian Region
Through the Monument acquisition, LASMO acquired interests in both
the Nebit Dag and Garashsyzlyk PSAs located onshore western
Turkmenistan.
In Nebit Dag, where LASMO operates, production from the Burun
field averaged 9.5 Mbopd gross through 1999. During the year, the
asset management focus was on adding value and assessing the scale of
the technical and commercial opportunities presented by the field.
Success was achieved enhancing the value through the utilization of
lateral drilling techniques and reducing transportation costs by 25
percent. Notwithstanding these results, LASMO has elected to reduce
its equity interest in this asset as it looks to balance capital
expenditure with cash flow within the context of competing investment
opportunities from its broad development portfolio.
Elsewhere in Turkmenistan, a 300 kilometer 2D seismic campaign
commenced over the Mobil operated Garashsyzlyk license in December
1999.
In Georgia, LASMO has acquired the right to farm into Block 12 at
an interest level of up to 40 percent, depending on capital
contribution. An exploration well was drilling on the Taribani
prospect at year-end and is scheduled to complete in the first half of
2000.
With the Group holding an extensive inventory of offshore southern
Caspian exploration, the decision was taken to dispose of LASMO's
interests in the Inam block, offshore Azerbaijan in 1999. A sale and
purchase agreement for the disposal was signed with Shell early in
2000.
Middle East
Following award of the Exploration Study Agreement for the Iranian
sector of the Southern Caspian, work has continued on the technical
assessment of the region. The study group comprises LASMO, Shell, Veba
and the Khazar Exploration and Production Company. A 10,000 kilometer
2D seismic program was conducted in 1999 with interpretation scheduled
to be completed by mid 2000. Preliminary negotiations have begun with
the National Iranian Oil Company (NIOC) on a suitable service contract
to allow further exploration activity to commence.
LASMO has been evaluating the investment opportunities on offer as
part of the second Iranian Buyback Round announced in 1998. This
process led to the submission of proposals for Darquain and Ab-Teymur
field redevelopments and negotiations with NIOC to secure either of
these opportunities are progressing.
In Kuwait, LASMO is part of the BP Amoco consortium, which is
jointly evaluating the North Project. This very significant project,
which is likely to be awarded in late 2000, will involve taking
management responsibility for the future development of all the
producing fields in Northern Kuwait (with a goal of increasing
production from current levels of around 400 Mbopd to 800 Mbopd by the
year 2005).
Financial Review
Introduction
The Group's financial performance improved significantly in 1999.
Record profits and cash flows were achieved during the year and the
year end balance sheet was strong, with gearing at 33 percent.
Monument acquisition
The recommended offer for Monument Oil and Gas plc was declared
wholly unconditional on June 14, 1999 and the acquisition method of
accounting has been adopted. The consideration for the acquisition was
378.4 million new LASMO ordinary shares of 25p each and the fair value
of the consideration using the closing mid-market price on 10 June of
(pound)1.2175 per share was (pound)461 million. Costs of the
acquisition amounted to (pound)13 million. A provisional fair value
exercise has been carried out to allocate the consideration between
intangible and tangible assets consistent with industry practice. This
exercise will be completed in 2000. No goodwill arose on the
acquisition.
Accounting policies
The provisions of Financial Reporting Standard ("FRS") 12
"Provisions, Contingent Liabilities and Contingent Assets" have been
adopted in preparing the 1999 Group accounts. FRS 12 requires the full
discounted cost of decommissioning to be recognized as an asset and
liability when the obligation to rectify environmental damage arises.
Previously the provision for decommissioning costs was built up over
the life of the field. The unwinding of the discount is included in
the profit and loss account as a financial item and is added to the
net interest charge. The implementation of FRS 12 has had the effect
of increasing the net book value of tangible fixed assets by (pound)16
million, reducing the decommissioning provision by (pound)8 million
and increasing reserves by (pound)24 million as at 31 December 1998.
There has been no material effect on current year earnings. Prior year
figures have been restated.
Turnover
Turnover for the year, including the Group's share of joint
venture's turnover, totaled (pound)647 million (1998 (pound)536
million) up 21 percent as a result of higher average realized prices
partially offset by a 4 percent decrease in production.
Brent oil price averaged $17.86 in 1999, an increase of 40 percent
over 1998 levels. Sales realizations for 1999 averaged (pound)10.09
(US$16.35) per boe (1998 (pound)7.79 (US$12.91) per boe) up 30 percent
due to an increase of 27 percent in average realized US dollar prices
and a 3 percent strengthening of the US dollar against sterling. The
effect of the Group's oil price risk management program was to reduce
sales realizations in 1999 by approximately 26 cents per boe (1998
nil).
Total production levels for 1999 averaged 178 Mboepd which
represents a decrease of 7 Mboepd over production in 1998 of 185
Mboepd. Production from North Sea fields fell by 8 Mboepd mainly as a
result of the natural decline in the production rate of mature fields,
partially offset by second half contribution from the acquired
Monument assets and new production from the Ross field. Production
from the Sanga Sanga field in Indonesia fell by 10 Mboepd. This
expected reduction was due to the full year impact of the revised PSC
terms effective from August 1998. Production from the LASMO - operated
Dacion oil field increased by 15 Mboepd as rehabilitation work
continued, and a full year contribution from Algeria increased Group
production by almost 4.5 Mboepd. The effect of the disposal of the
Group's interests in Colombia in the second half of 1998 accounted for
8 Mboepd of the total reduction in Group production.
Operating profit
Operating profit of (pound)161 million before exceptional items
increased from (pound)9 million in 1998 due to higher realizations and
lower costs.
Cost of sales averaged (pound)6.18 per boe (1998 (pound)6.41 per
boe), down 4 percent primarily due to lower depletion charges as a
result of the asset write downs in 1998, partially offset by higher
PRT charges arising from higher production revenues from the Piper and
Claymore fields.
There have been no indications that the carrying value of the
Group's oil and gas assets have been impaired, other than on the
Hewett field where a write down of (pound)3 million has been made
(1998 (pound)341 million exceptional charge in total).
A total of 19 exploration and appraisal wells were completed in
the year and net exploration and appraisal expenditure totaled
(pound)63 million (1998 (pound)85 million) with (pound)34 million
being written off (1998 (pound)52 million). At the year end,
capitalized exploration expenditure carried forward pending
determination amounted to (pound)144 million (1998 (pound)62 million),
the increase due to the acquisition of Monument and ongoing
investment.
Underlying administrative expenses totaled (pound)27 million
(1998 (pound)31 million) including (pound)3 million in relation to the
Monument reorganization. The cost savings of (pound)15 million
projected from the Group reorganization in early 1999 have been
achieved, and in 2000 the Group is set to establish over (pound)20
million per annum savings in addition to the (pound)6 million per
annum organizational synergies arising from the Monument acquisition.
Profit for the year
The Group's share of the operating profit of its Unimar joint
venture was (pound)27 million (1998 (pound)16 million), the increase
due to higher realizations partially offset by lower production.
Rationalization of the Group's portfolio of oil and gas assets
gave rise to a net profit on disposal of fixed assets of (pound)41
million (1998 (pound)40 million) comprising gains on the sale of
certain Southern North Sea gas assets ((pound)21 million) peripheral
Algerian assets ((pound)17 million) and the Glenelg discovery in the
Central North Sea ((pound)3 million).
Net finance charges for 1999 amounted to (pound)18 million
compared with (pound)24 million in 1998, the decrease being primarily
due to the (pound)9 million release of an accrual for interest payable
on corporation tax for prior years following the settlement of the tax
position in 1999. Interest receivable on cash, deposits and
investments declined due to lower average balances and lower average
interest rates. Interest capitalized on development activities, mainly
the Dacion field in Venezuela, increased by (pound)5 million to
(pound)39 million.
The Group's tax charge for the period was (pound)57 million (1998
(pound)45 million). The increase arose from higher taxable profits
generated in the UK and Indonesia.
As a result the profit for the year before exceptional items
amounted to (pound)113 million (1998 loss (pound)44 million). The
profit for the year after exceptional items amounted to (pound)154
million (1998 loss (pound)404 million).
Amount transferred to reserves
After deducting minority interests of (pound)6 million (1998 nil)
the profit for the year amounted to (pound)148 million (1998 loss of
(pound)404 million).
After deducting preference dividends of (pound)12 million (1998
(pound)12 million) and ordinary dividends of (pound)34 million (2.5 p
per share) (1998 (pound)22 million (2.3 per share)), retained profit
before preference share redemption costs amounted to (pound)102
million (1998 loss withdrawn from reserves of (pound)438 million).
On December 17, 1999 the Group announced its intention to redeem
all of the outstanding US$250 million 10% preference shares. After
deducting costs associated with the redemption of (pound)12 million,
an amount of (pound)90 million has been transferred to reserves.
Earnings per share for the year was 10.8 p (1998 loss of 43.7p).
Adjusted to exclude exceptional items, earnings per share for 1999 was
8.3p (1998 loss per share 5.8p).
Cash flow
Group net cash inflow from operations after interest and tax
amounted to (pound)308 million compared with (pound)147 million in
1998. The increase was mainly due to higher sales realizations and the
receipt of (pound)230 million following the renegotiations of the gas
sale agreement for the Liverpool Bay fields. This was partially offset
by lower production volumes and non-recurring cash outflows in respect
of a settlement of Indonesian taxes ((pound)25 million) and
reorganization costs ((pound)26 million). Operating working capital
balances increased by (pound)67 million mainly due to higher
outstanding trade debtors as a result of the significantly higher year
end oil price compared with 1998. The net cash inflow before use of
liquid resources and financing was (pound)227 million (1998 net cash
outflow of (pound)116 million).
Capital expenditure
Exploration and appraisal expenditure in 1999 amounted to
(pound)63 million compared with (pound)85 million in 1998. Development
and production expenditure, including capitalized interest, reduced
slightly to (pound)243 million from (pound)246 million in 1998.
Financial instruments
At December 31, 1999 the Group had entered into zero cost collars
covering 75,000 bopd of first half 2000 oil production and 20,000 bopd
of second half 2000 oil production. The floor price for the collars is
US $15.00 per barrel and the ceiling price ranges between US $23.60
per barrel and US $28.00 per barrel.
At December 31, 1999 the Group had entered into agreements to swap
fixed interest rates for floating interest rates on US $700 million of
outstanding US public market debt.
Net debt and gearing
At the year end the Group had (pound)225 million of committed but
undrawn bank facilities (1998 (pound)150 million) and held short term
bank deposits and cash balances of (pound)378 million (1998 (pound)450
million).
During the year the Group repaid (pound)395 million of bank
borrowings, including (pound)171 million acquired on the acquisition
of Monument, and (pound)59 million of US public debt finance.
The Group's net debt at December 31, 1999 was (pound)489 million
(1998 (pound)672 million) which represents a balance sheet gearing
(net debt as a percentage of capital employed) of 33 percent (1998 74
percent). On a pro forma basis, adjusting for the redemption of the
US$250 million preference shares, gearing at December 31, 1999 was 49
percent.
Distribution policy
The Board recommends the payment of a 2.5p gross cash dividend to
shareholders. This ordinary dividend has been increased from 2.3p to
reflect the improved operating fundamentals of the business. Subject
to approval at the Annual General Meeting on May 5, 2000, the dividend
will be paid on May 10, 2000 to ordinary shareholders on the register
on April 7, 2000. The Board will annually review the level of this
dividend.
A fundamental part of LASMO's business is the trading of oil and
gas assets. Periodically, and specifically when portfolio management
has given rise to significant exceptional profits, the Board will
consider returning value to shareholders. The scale, timing and method
of such return will be based upon the Group's business plans including
capital required to release value through investment, the
macro-economic outlook and the Group's tax position.
Going concern
After reviewing the Group's budget for 2000 and its medium term
plans, the directors have a reasonable expectation that the Group has
adequate financial resources to continue in operational existence for
the foreseeable future. They therefore continue to adopt the going
concern basis in preparing accounts.
Year 2000
The Group has, since mid 1997, been addressing the Year 2000 issue
as a significant threat to business continuity. A Group-wide project
has been in place that has systematically managed the issue both at
Group headquarters and at Business Units throughout the world.
Progress has been routinely reported to the Board and this will
continue until such time as the issue is no longer considered to be a
threat.
During the period leading up to December 31, 1999 and over the
millennium itself, the Group did not experience any interruptions to
business due to the Year 2000 issue. Whilst this represents the
achievement of a major milestone, the project will remain in place for
some time to come to monitor the performance both of critical business
systems and also of key supply chain companies. The project has
addressed other significant calendar dates and work will continue to
ensure that these also pass without incident.
Based on current information the total cost to the Group will be
approximately (pound)4 million.
CONSOLIDATED PROFIT AND LOSS ACCOUNT
for the year ended December 31, 1999
1999 1998
(restated)
Notes (pound)million (pound)million
----- -------------- -------------
Turnover 2
Group and share of joint venture 647 536
Less share of joint venture's turnover (53) (52)
-------------- -------------
594 484
Cost of sales 3 (369) (392)
Provision for oil and gas assets (3) -
Exceptional provision for oil and
gas assets 4 - (307)
----- -------------- -------------
Gross profit/(loss) 222 (215)
Exploration costs written off (34) (52)
Exceptional write-off of
intangible assets 4 - (19)
Administrative expenses 5 (27) (37)
----- -------------- ------------
Operating profit/(loss) 161 (323)
Share of joint venture's
operating profit/(loss) 27 (18)
Profit on disposal of fixed
assets 4 41 40
Restructuring costs 4 - (34)
Interest receivable and similar
income 6 52 52
Interest payable and similar
charges 7 (70) (76)
Profit/(loss) on ordinary activities
before taxation 2 211 (359)
Taxation on profit/(loss) on
ordinary activities 8 (57) (45)
------------- ------------
Profit/(loss) for the year 154 (404)
Non-equity minority interests 9 (6) -
------------- ------------
Profit/(loss) for the year after
minority interests 148 (404)
Dividends on
: preference shares 9 (12) (12)
: ordinary shares 9 (34) (22)
------------- ------------
Amounts transferred to/(withdrawn from)
reserves before preference
share redemption costs 102 (438)
Preference share redemption
costs 9 (12) -
------------ ------------
Amount transferred to/(withdrawn from)
reserves 90 (438)
------------ ------------
Earnings/(loss) per ordinary
share 10 10.8p (43.7)p
Diluted earnings/(loss) per
ordinary share 10 10.7p (43.7)p
------------- -----------
Earnings/(loss) per ordinary share
before exceptional items 10 8.3p (5.8)p
Dividend per ordinary share 2.5p 2.3p
------------- -----------
CONSOLIDATED BALANCE SHEET
as at December 31, 1999
1999 1998
(restated)
Notes (pound)million (pound)million
Fixed assets
Intangible assets 144 62
Tangible assets 1,949 1,474
Investment in joint venture:
Share of gross assets 144 127
Share of gross liabilities (12) (9)
132 118
Other investments 209 213
2,434 1,867
Current assets
Consumable stores 23 14
Debtors 291 432
Unlisted investments 6 9
Cash at bank and in hand 378 450
698 905
Creditors: amounts falling due
within one year
Bank loans, overdrafts and loan capital 58 79
Other creditors 317 294
Net current assets 323 532
Total assets less current
liabilities 2,757 2,399
Creditors: amounts falling due after
more than one year
Bank loans - 203
Loan capital (includes convertible
bonds) 1,002 1,036
Other creditors 187 136
Provisions for liabilities and charges 100 111
Total net assets 1,468 913
Capital and reserves
Called up share capital 492 392
Share premium 12 928 556
Other reserves 12 90 90
Profit and loss account 12 (103) (184)
Total shareholders' funds
(includes non-equity
interests) 1,407 854
Non-equity minority
interests 61 59
Capital employed 1,468 913
CASH FLOW STATEMENT
for the year ended December 31, 1999
1999 1998
Notes (pound)million (pound)million
Net cash inflow from
operating activities 13 482 271
Returns on investments
and servicing of finance:
Interest paid (110) (100)
Dividends paid - preference shares (12) (12)
- minority interests (5) -
Interest received 34 33
(93) (79)
Taxation:
UK corporation tax paid (18) (17)
Overseas tax paid (63) (28)
(81) (45)
Net cash inflow from
operations after
interest and taxation 308 147
Capital expenditure and
financial investment:
Capital expenditure:
exploration and appraisal (63) (72)
production and development (192) (239)
other fixed assets (5) (12)
Disposal of oil and gas interests 182 76
Disposal of other fixed assets 7 -
Net cash receipts from joint venture 22 6
Net cash outflow from
capital expenditure
and financial investment (49) (241)
Acquisitions (note 1)
Acquisition costs of
subsidiary undertaking (13) -
Net cash acquired with
subsidiary undertaking 3 -
(10) -
Dividends paid -
ordinary shares (22) (22)
Cash inflow/(outflow)
before use of liquid
resources and financing 227 (116)
Management of liquid
resources (213) 65
Financing 454 (195)
(Decrease)/increase in cash (14) 14
14 227 (116)
STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES
for the year ended December 31, 1999
1999 1998
(restated)
(pound)million (pound)million
Profit/(loss) for the year 148 (404)
Currency translation
loss on foreign currency
net investments (4) (4)
Total recognised gains and
losses relating to the year 144 (408)
Prior year adjustment 24
Total gains and losses
recognised since last
annual report 168
NOTES
1 Acquisition of Monument
The Company's recommended offer for Monument Oil and Gas plc was
declared wholly unconditional on June 14, 1999 and the acquisition
method of accounting has been adopted. The consideration for the
acquisition was 378.4 million new LASMO ordinary shares of 25p each.
The fair value of the consideration using the closing mid-market price
on 10 June of (pound)1.2175 per share was (pound)461 million. Costs of
the acquisition amounted to (pound)13 million. A provisional fair
value exercise has been carried out to allocate the consideration
between intangible and tangible fixed assets consistent with industry
practice.
The assets acquired are set out below:
Provisional Provisonal
Book Accounting fair value fair value
value alignment adjustments to the Group
(pound)million (pound)million (pound)million (pound)million
Intangible assets - 48 46 94
Tangible assets 414 (98) 113 429
Consumable stores 6 - - 6
Debtors and
prepayments 138 (113) (4) 21
Cash at bank and
in hand 42 113 - 155
Creditors falling due
within one year (47) - - (47)
Creditors falling due
after more than
one year (278) - 107 (171)
Provisions for
liabilities
and charges (18) 5 - (13)
Net assets 257 (45) 262 474
NOTES : continued
2 Segment information
Profit/(loss)
Turnover by source before taxation
------------------- -----------------
1999 1998 1999 1998
(restated)
(pound)million (pound)million (pound)million (pound)million
----------- ------------ ------------ -------------
UK
395 332 112 12
Indonesia
117 118 51 41
Venezuela
46 4 7 (1)
Other International -
36 30 (33)
----------- ------------ ------------ -----------
594 484 170 19
Share of joint venture - Indonesia
53 52 27 16
Unallocated administrative
expenses - -
(9) (10)
Exceptional items
(note 4) - -
41 (360)
Net interest
expense - -
(18) (24)
----------- ------------ ------------ -----------
647 536 211 (359)
----------- ------------ ------------ -----------
3 Cost of sales
1999 1998
(restated)
(pound)million (pound)million
-------------- --------------
Operating costs 173 172
Depletion 169 210
Decommissioning 4 3
Royalties 12 7
PRT charge 11 -
---------- ----------
369 392
---------- ----------
4 Exceptional items
1999 1998
(pound)million (pound)million
----------- ------------
Operating items:
Write-down of tangible oil and gas
assets (a) -
(307)
Write-off of intangible exploration and
appraisal assets (a) -
(19)
Write-off of tangible non-oil and gas
assets (b) -
(6)
----------- ------------
-
(332)
Non-operating items:
Profit on disposal of oil and gas assets (c) 40
41
Restructuring costs (d) -
(34)
----------- ------------
41 6
Share of joint venture's exceptional
item (a) -
(34)
----------- ------------
41 (360)
----------- ------------
(a) Write-off of tangible oil and gas assets in 1998 included
(pound)146 million for fields in production and under development
in the North Sea, (pound)111 million for fields in production in
Indonesia (of which (pound)34 million is dealt with through the
Group's interest in the Unimar joint venture) and (pound)84
million for fields under development in Venezuela. Write-off of
intangible exploration and appraisal assets of (pound)19 million
in 1998 relates to the Mariner project in the North Sea.
(b) In 1998 the carrying value of certain non-oil and gas assets
located in the United States of America was reduced by(pound)6
million.
(c) In 1999 the Group disposed of its interests in certain
Southern North Sea gas fields to a subsidiary of Gaz de France for
a cash consideration of (pound)95 million giving rise to a profit
on disposal of (pound)21 million. Also in 1999 the Group disposed
of its interests in Algeria blocks 401a and 402a to a subsidiary
of ENI for a cash consideration of US$42 million giving rise to a
profit on disposal of (pound)17 million. The Glenelg discovery in
the Central North Sea was sold to Gaz de France for a cash
consideration of (pound)6 million, generating a profit on disposal
of (pound)3million. 1998 disposals related to the Group's
interests in Colombia and Italy.
(d) Restructuring costs in 1998 related to the restructuring of
the Group's head office in London and the closure of the Group's
office in Rome.
5 Administrative expenses
1999 1998
(pound)million (pound)million
---------- ----------
Administration costs 27 31
Exceptional provision for non-oil
and gas assets (note 4) - 6
---------- ----------
27 37
---------- ----------
6 Interest receivable and similar income
1999 1998
(pound)million (pound)million
Bank interest receivable 28 30
Income from listed investments 11 14
PRT interest 2 2
Other income 11 6
----------- -----------
52 52
----------- -----------
Other income includes (pound)9 million (1998 nil) in respect of
the release of an accrual for interest payable on corporation tax for
prior years following the settlement of the tax position in 1999.
7 Interest payable and similar charges
1999 1998
(restated)
(pound)million (pound)million
---------- ----------
Bank loans and overdrafts 11 9
Loan capital 91 90
Other finance charges 2 7
FRS 12 unwinding of discount 5 4
---------- ----------
109 110
Less: capitalised interest (39) (34)
---------- ----------
70 76
---------- ----------
8 Taxation
1999 1998
(pound)million (pound)million
UK corporation tax:
Current year charge 63 50
Less: double tax relief (27) (25)
Deferred taxation 2 2
Prior year items (1) -
----------- -----------
37 27
Advance Corporation Tax written
back (29) (25)
----------- -----------
8 2
Overseas taxation:
Current year charge 32 29
Share of joint venture's tax
charge 17 14
----------- -----------
49 43
----------- -----------
57 45
9 Dividends and other appropriations
Dividends
1999 1998
(pound)million (pound)million
----------- -----------
i Minority interests
Preference shares:
US$100 million Series A 8.15 percent
Cumulative Preference Shares 6 -
ii Non-equity shares
Preference shares:
US$250 million Cumulative Dollar Preference
Shares, Series A 12 12
iii Equity shares
Ordinary shares:
Final 2.5 pence per share
(1998 interim 2.3 pence) 34
22
Other appropriations
Exceptional charge for preference
share redemption -
12
On December 17LASMO announced it's intention to redeem all of the
US $250 million Cumulative Dollar Preference Shares, Series A. The
exceptional charge reflects the premium payable on early redemption of
approximately (pound)6 million and unamortized issue costs of (pound)6
million. The shares were redeemed in February 2000.
10 Earnings per share
The calculation of earnings per ordinary share is based on the
profit for the year, after minority interests, preference dividends
and other appropriations, of (pound)124 million (1998 loss of
(pound)416 million). Earnings per ordinary share before exceptional
items is based on a profit of (pound)95 million (1998 loss of
(pound)56 million). The weighted average number of ordinary shares in
issue during the year was 1,156,702,255 shares (1998 965,966,362
shares), adjusted by the weighted average number of own shares held of
13,657,450 (1998 15,355,572). There were 3,859,850 dilutive potential
ordinary shares at the end of the year (1998 nil)
11 Net debt: capital employed
1999 1998
(restated)
(pound)million (pound)million
Net debt:
Long term debt 1,002 1,239
Short term debt 58 79
Cash at bank and in hand (378) (450)
Unlisted
investments (6) (9)
AUK Loan Notes (187) (187)
---------------- ----------------
489 672
---------------- ----------------
Capital employed 1,468 913
---------------- ----------------
Net debt as a percentage of
capital employed 33% 74%
---------------- ----------------
12 Movement on reserves
1999 1998
Profit
Share Share Other and Total
loss
capital premium reserves account Total (restated)
(pound) (pound) (pound) (pound) (pound) (pound)
million million million million million million
Group
At 1 January (restated)
392 556 90 (184) 854 1,296
Profit/(loss)
for year - - -
154 154 (404)
Dividends and
appropriations
- - -
(64) (64) (34)
Issue of shares - - -
95 366 461
Issue expenses
- - - -
6 6
Exchange adjustments - -
5 (9) (4) (4)
----------- ----------- ----------- ----------- ------- -------
At December 31
492 928 90 (103) 1,407 854
13 Reconciliation of operating profit/(loss) to net cash inflow
from operating activities
1999 1998
(restated)
(pound)million (pound)million
Operating profit/(loss) 161 (323)
Exploration costs written off 34 71
Decommissioning 4 3
Depletion and depreciation 173 528
Provision for oil and gas assets 3 -
Utilization of provisions for
reorganization costs (26) (1)
Movement in operating working
capital balances (67) (6)
Deferred income 200 (1)
------------ ------------
Net cash inflow from operating
activities 482 271
------------ ------------
14 Reconciliation of net cash flow to movement in group net debt
1999 1998
(pound)million (pound)million
(Decrease)/increase in cash in the year (14) 14
Cash outflow/(inflow) from financing 454 (195)
Cash (inflow)/outflow from change in
liquid resources (213) 65
---------- -----------
Changes resulting from cash flow 227 (116)
Exchange difference (25) (1)
Receipts from minority interest - 59
Liquid resources arising on acquisition 152 -
Borrowings arising on acquisition (171) -
---------- -----------
Movement in debt net of cash and
liquid resources in the year 183 (58)
Movement in Group net debt 183 (58)
Group net debt at 1 January (672) (614)
---------- -----------
Group net debt at 31 December (489) (672)
---------- -----------
15 Basis of preparation/statutory accounts
The above financial information does not constitute statutory
accounts; it has been extracted from the 1999 Group accounts that have
been approved by the directors but not yet delivered to the UK
Registrar of Companies.
In accordance with FRS 12 the full discounted cost of
decommissioning has been recognized as an asset and liability when the
obligation to rectify environmental damage arises. Previously the
provision for decommissioning costs was built up over the life of the
field. The unwinding of the discount in the profit and loss account as
a financial item is added to the interest charge.
The implementation of FRS 12 has had the effect of increasing the
net book value of tangible fixed assets by (pound)16 million, reducing
the decommissioning provision by (pound)8 million, and increasing
reserves by (pound)24 million at 31 December 1998.
Forward-looking statements
Except for the historical information contained herein, this
Preliminary Announcement includes forward-looking statements as
defined in the United States Securities Exchange Act of 1934 that
involve risks and uncertainties, including commodity price,
exploration development and operational risks, and other risk factors
detailed from time to time in the Company's publicly available
Securities and Exchange Commission reports which could cause actual
results to be materially different.
OIL AND GAS RESERVES
Oil Gas Total
MMbbl Bcf MMboe
------------ ------------- ----------
Net proven and probable oil and gas reserves
LASMO reserves
At beginning of year 690 1,902 1,007
Changes during year:
Revisions to previous estimates 40 (14) 38
Extensions, discoveries and other
additions 20 49 28
Purchase of reserves 113 483 194
Sale of reserves (18) (127) (39)
Production (39) (122) (60)
------------ -------------- -----------
At end of year 806 2,171 1,168
------------ -------------- -----------
Indirect interest in Unimar Company
reserves 12 371 74
------------ -------------- -----------
Total direct and indirect
interests in reserves 818 2,542 1,242
------------ -------------- -----------
of which:
Fields in production 250 1,761 544
Fields under development 461 459 538
Fields awaiting development 107 322 160
------------ -------------- -----------
818 2,542 1,242
------------ -------------- -----------
Direct and indirect reserves by region are as follows:
UK 162 598 262
Indonesia 39 1,214 241
Venezuela 367 - 367
Other International 250 730 372
------------ -------------- -----------
818 2,542 1,242
------------ -------------- -----------
PRODUCTION STATISTICS
1999 1998
LASMO production:
Crude oil (bopd):
UK 73,000 77,800
Indonesia 6,200 8,900
Venezuela 22,000 6,700
Other International 6,400 9,100
------------ ------------
107,600 102,500
------------ ------------
Natural gas (Mcfd):
UK 160,800 180,700
Indonesia 162,900 188,800
Other International 11,900 20,400
------------ ------------
335,600 389,900
------------ ------------
------------ ------------
Total LASMO production (boepd) 163,500 167,500
------------ ------------
Share of Unimar Company production
(boepd) 14,700 17,700
------------ ------------
Total direct and indirect production
(boepd) 178,200 185,200
------------ ------------
Gas quantities have been converted
at 6Mcf/boe
LASMO's shares trade on the London and New York Stock Exchanges.
Shares are quoted on the SEAQ System, and prices may be accessed on
the Reuter Equities 2000 Service under the symbol LSMR.L and on
Quotron under the symbol LSMRU.EU. For further information, visit
LASMO's web page at http:\\www.lasmo.com.
--30--emb/ny*
CONTACT: James Menzies
LASMO plc
011-44-171-892-9000
- or -
Brian J. Rafferty
Taylor Rafferty Associates
212-889-4350
KEYWORD: INTERNATIONAL EUROPE
INDUSTRY KEYWORD: ENERGY UTILITIES ENVIRONMENT OIL/GAS EARNINGS
COPYRIGHT 2000 Business Wire
No portion of this article can be reproduced without the express written permission from the copyright holder.
Copyright 2000, Gale Group. All rights reserved. Gale Group is a Thomson Corporation Company.
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