Burford Capital Regulatory News (BUR)

19 Mar 2007 07:03

Burren Energy PLC19 March 2007 19 March 2007 Burren Energy Plc ("Burren"or "the Group") Burren Energy, an independent FTSE250 oil and gas company, today announces itspreliminary results for year ended 31 December 2006 and the US$155 millionacquisition of an additional 5.5% interest in the M'Boundi oil field in theRepublic of Congo. HIGHLIGHTS Corporate • US$155 million acquisition in March 2007 of an additional 5.5% stake in the M'Boundi oil field and a 2% interest in the Kouilou exploration licence • Opportunity to increase share in world class oil field on attractive terms • Increases total Group production by 9% (2006 pro-forma) • Boosts Proven & Probable reserves by 15 million bbls (7%), at a cost of US$10.0/bbl • Licence award in Yemen (Block 17) increasing Middle East/North Africa portfolio to six Financial : sixth successive year of record results • Net profit up 13% to US$249 million (2005 net profit: US$221 million) • Underlift position of over 490,000 bbls, representing US$28.4 million of deferred revenue and US$21.2 million of deferred gross profit * • Earnings per share increased 11% to USc 177 (2005 : USc 159) • Operating cash flow after tax up 17% to US$324 million (2005 : US$278 million) • Year end cash balances increased by US$77 million to US$202 million • 17% increase in full year dividend to 14.0p from 12.0p Operational : sixth successive year of production growth • Average production of 34,240 bopd, up by 9% on 2005 • 15 million bbls of reserves added in Turkmenistan, more than replacing 2006 Group production • Water-injection initiated in Turkmenistan and Congo • Independent verification of Turkmen gas gave contingent probable reserves of 395bcf • Discovery of shallow Loufika field in Congo • Record 51 wells drilled, of which 20 exploration wells. 5 of these exploration wells now on production Atul Gupta, Chief Executive Officer, commented: "The Group achieved its sixth successive year of growth in 2006. This is atestament to our technical and financial discipline and our strategy ofinvesting in proven oil and gas plays. Our acquisition of an additional 5.5%stake in the M'Boundi field gives us an increased position in a world classasset on attractive terms and reflects our confidence in the potential growth ofthe field under ENI's operatorship. "With a solid production base, active development and exploration programme anda number of potential investment opportunities in existing regions we have allthe fundamentals in place for continued growth in the years ahead." * assuming sold at December 2006 average realised prices Analysts Presentation At 09:30 the Company will make a Preliminary Results presentation to analysts atthe offices of Pelham PR: No 1 Cornhill, London EC3V 3ND Enquiries: Burren Energy Tel : 020 7484 1900 Atul Gupta, Chief Executive OfficerAndrew Rose, Chief Financial OfficerShona Harvey, Communications Manager Pelham PR Tel: 020 7743 6676James HendersonAlisdair Haythornthwaite CHAIRMAN'S STATEMENT I am very pleased to report that the team at Burren has continued to build onthe success of earlier years and has delivered excellent results during 2006,increasing production, profits and reserves. The Board is recommending a finaldividend of 10.0p per share, giving a total dividend for 2006 of 14.0p pershare, an increase of 17% compared with 2005. During 2006 the oil and gas industry enjoyed another year of increased prices,and Burren's average realised price rose by 24% to US$59.2 / bbl. This riseimpacted Burren's share of gross production. Although our working interestproduction rose, as a result of having recovered our historic expenditure on theGroup's two main producing fields our entitlement production fell, andconsequently revenues increased by a more modest 7% to US$416 million. Howeverour strict cost control enabled us to increase net profits by 13% to US$249million. Our operating cash flow was very strong, up by 17% to US$324 million,improving our year-end cash position to US$202 million, with no debt. At year-end the Group had built up a significant underlift position of over490,000 barrels, the value of which has not been reflected in 2006 profits.Were this underlift to have been converted into sales at the end of 2006 itwould have added US$28.4 million to revenues and US$21.2 million to grossprofit. The long term future for Burren is dependent on our ability to maximise therecovery and production from our existing reserves and to continue to find anddevelop new oil and gas fields. To that end we increased our capitalexpenditure during the year to US$211 million, with an extensive explorationprogramme and expanded the provision of water-injection facilities, both inTurkmenistan and Congo. In Turkmenistan, where we are the operator, we added 15million barrels of proven & probable reserves of oil, more than replacingBurren's total production during the year. We have today announced that Burren has entered into an agreement with Eni topurchase an additional 5.5% interest in the M'boundi field and 2% interest inthe Kouilou exploration licence in Congo, subject to the completion of thepurchase of these assets by Eni from Maurel & Prom. This is a sign of theconfidence that Burren has in the long term value of these assets. Burren was listed on the London Stock Exchange at the end of 2003 and theGroup's achievements over the past three years have been considerable. Themanagement team at Burren has two key objectives: to develop our existingreserves safely and cost effectively and to look for attractive growthopportunities. In 2003 our average production was 10,200 bopd as compared withover 34,000 bopd in 2006, and our revenue has increased fivefold over that threeyear period. Since being listed three years ago, Burren has developed into asignificant and well established independent oil and gas company, with provencapabilities and track record. We are determined to build on that track recordand create sustainable shareholder value. Finian O'Sullivan has been instrumental in establishing Burren and in leadingthe Group through its embryonic years. In September, the Board appointed Finianas President to take full advantage of his undoubted business development skillsby allowing him to focus on pursuing new opportunities for the Group. AtulGupta, who is highly experienced in the industry and was previously ChiefOperating Officer, was appointed Chief Executive. During the year we alsorecruited a number of senior managers and staff to strengthen the team so as tobetter manage our increasing exploration portfolio in Egypt, Yemen, Oman andIndia. I joined Burren as a Non-Executive Director in March 2005 and I took over fromBrian Lavers as Chairman at the AGM in 2006. During my period with the CompanyI have been very impressed by the professionalism, enthusiasm and dedication ofthe executive and staff. On behalf of the Board and our shareholders I wouldlike to thank all our employees for their efforts and for making 2006 anothersuccessful year. Burren has a history and culture of being innovative, both technically in thefield and in developing new ventures. It is the skills of our employees, andthe Burren culture, which will enable us to face future challenges and tocontinue our success in 2007. Keith Henry Chairman CHIEF EXECUTIVE'S STATEMENT During 2006 we made sound progress in all aspects of our business. Group workinginterest production increased for the sixth consecutive year averaging 34,240bopd, 9% above the previous year, whilst the average unit cost of production wasunchanged at US$2.50 per working interest barrel, one of the lowest in thesector. The average discount at which our crude was sold relative to Brent improved toUS$5.20/bbl compared to US$7.20/bbl in the previous year. The Group successfullyreplaced reserves by adding 15 million barrels in Turkmenistan at a finding costof US$2.70/bbl (Turkmenistan exploration costs only), against depletion byproduction of 13 million barrels. The above production and reserves growth came directly as a result of anaggressive drilling programme which saw the Group participate in a record 51development and exploration wells. 30 of these were development wells of which26 were put on production. A total of 21 exploration wells were drilled whichresulted in two discoveries, the Balkan field in Turkmenistan and the Loufikafield in Congo. These discoveries are close to existing fields andinfrastructure owned by Burren and both are already in production. Furtherappraisal drilling is being conducted on both these fields to determine theirpotential size. Significant progress was also made on water-injection projects on our two coreproducing fields, which have the potential to materially increase reservesthrough higher recovery factors. In Turkmenistan, a pilot water-injectionproject in both shallow and deep reservoirs was successful. The shallowreservoirs, in particular, exhibited excellent injectivity and gave earlypositive responses from observation wells. For the deeper layers, injectivity isvariable but a positive response has already been seen and we have enoughconfidence to move ahead with plans to expand the injection programme from thecurrent capacity of 10,000 bwpd to 30,000 bwpd. In Congo, after minor delays inprocuring equipment, injection started at the beginning of 2007 and is plannedto increase to 60,000 bwpd during the year. Our agreement with Eni to purchase a further 5.5% interest in the M'boundifield, along with an additional 2% of the Kouilou, reflects our belief that theM'boundi field in particular has significant future upside potential with acompany like Eni as operator. We expect this deal to be completed at the sametime as Eni's purchase from Maurel & Prom. Gas commercialisation discussions progressed in Turkmenistan with an independentverification of our contingent probable gas reserves (395 bcf), a definedplateau production rate and the selection of the preferred route to link toexport infrastructure. Following the death of President Niyazov in December 2006and the subsequent election of President Berdymukhamedov, the oil and gasauthorities in Turkmenistan have re-affirmed their commitment to continuingthese discussions. We successfully bid for an additional exploration licence in Yemen bringing usto a total of six licences in our Middle East / North Africa portfolio, in fiveof which we are Operator and hold interests close to 100%. Whilst initialexploration drilling of three shallow wells on the East Kanayis licence in Egyptfailed to find commercial hydrocarbons, this represents only a small part of theplanned exploration programme. Finally, in India, Hindustan Oil Exploration Company (HOEC) successfully drilledand tested a horizontal development well in basement reservoir (a first inIndia) on its undeveloped PY-1 gas field offshore south-east India. Since along-term gas sales contract is close to signature, the development of thefield, subject as always to acceptable development costs, can now begin inearnest. Participation in a US $33 million rights issue by HOEC in Q4 resultedin Burren increasing its shareholding from 26% to 27%. Strategy and Objectives Burren's strategy is to create shareholder value by investing in oil and gasprojects in four key hydrocarbon regions of the world: the Caspian, West Africa,Middle East / North Africa and India. We aim to conduct our businesses in asocially responsible manner and seek to attain the highest internationalstandards for health, safety and the environment. Our objectives are to grow our production and reserve base by (i) furtherdevelopment of our existing fields; (ii) exploring our existing concessions; and(iii) acquiring new assets with proven reserves and production. To that end,our growth strategy is not confined to exploration : we are also prepared, as wehave successfully shown in the last five years, to take on and manage reservoirdevelopment risk, political risk and market risk. We believe the areas of the world in which we work offer such opportunities andwe will seek to manage the associated risks through the application of technicaland commercial expertise, maintaining close relationships with governments andpartners who can provide local knowledge and support. We are proud of our record of maintaining cost efficiency and we believe, evenin the current environment of high commodity prices, that cost control is a keypart of performance. To that end we will continue to analyse every aspect of ourcost structure and look for means of reducing costs efficiently. Our immediate objectives for the coming year, as described more fully in theBusiness Review, are to continue the development of our producing fields inTurkmenistan and Congo via increased development drilling and water injection,whilst maintaining the pace of exploration. We intend to focus efforts onprogressing gas commercialisation in Turkmenistan and in identifying newinvestment opportunities to make best use of our strong balance sheet. We continue to place great emphasis on attracting and retaining the best qualitystaff and to that end are delighted to have recruited Simon Gill as OperationsDirector and Ian Bingham as Chief Geophysicist. Outlook Based on sound fundamentals of hydrocarbon reservoir exploration, performanceand development, our outlook for 2007 and beyond remains positive. During 2007 we expect to maintain working interest production at about 35,000bopd. Assuming that the Eni transaction concludes successfully this could add afurther 2,000 bopd. We plan to drill approximately the same number ofexploration wells as in 2006 (including six wells by HOEC), with a particularfocus on Congo before switching to the Middle East / North Africa in 2008. In relation to HOEC, Burren continues to provide shareholder and managementsupport as HOEC seeks to develop its PY-1 gas field and explore its otheracreage. With net cash at year end of over US$200 million, all generated throughoperating cash flow, and no debt, Burren has proven its ability to build aprofitable business. Our focus on fundamentals of the upstream business, with adisciplined approach to cost control, stands us in good stead to achieve ourprogramme of organic growth complemented by new projects. Finally, as of September 2006, I was honoured to have been appointed as ChiefExecutive and will strive to the best of my ability to create value for theGroup and all its stakeholders. Atul Gupta Chief Executive Officer REVIEW OF OPERATIONS In 2006 the Group drilled a record number of wells : 51 compared with 45 in2005. Exploration represented a greater proportion of drilling activity thanever before : 21 wells compared with 7 in 2005 (all well numbers exclude HOEC).The exploration resulted in three discoveries : the Balkan (formerly Nebit DagDeep) and Uzboy fields in Turkmenistan and the Loufika field in Congo. TheTurkmen discoveries added a total of 15.1 million barrels of P+P reserves, andare close to existing Burren-owned infrastructure. The size of the Loufikadiscovery is still being appraised. 2006 also saw the initiation of water injection programmes in both Turkmenistanand Congo, with the aim of sustaining reservoir productivity and improving fieldrecovery factors. By year end the Burun field programme was showing promisingearly results; injection only began on the M'Boundi field in late January 2007and it is still too early to make any assessment. Group working interest production averaged 34,240 bopd for the year, an increaseof 9% on 2005, contributed as to 16,300 bopd by Turkmenistan and 17,940 bopd byCongo. Entitlement production was 19,170 bopd, down from the previous year's22,440 bopd as the state share of production increased owing to the rise in oilprices and the achievement of full recovery of costs on both the Burun and theM'Boundi fields. Turkmenistan Exploration Two exploration drilling programmes were conducted in 2006 : a deep programmetargeting the potential extension of the deeper Burun field reservoirsimmediately to the east of that field and a shallow programme on a series ofprospects in the eastern half of the Nebit Dag PSA area. A total of 15 wellswere drilled of which four found hydrocarbons, resulting in the discovery of thedeep Balkan field and the much smaller shallow Uzboy field. A new Balkan development area, covering an area of 47 km(2), has been approvedby the Turkmen authorities. The Uzboy field is producing 115 bopd from one well. The Balkan discovery and appraisal drilling within the Burun field itself (northand south flank) resulted in a total addition to proven and probable workinginterest reserves of 15.1 million bbls as at 2006 year-end. The total cost of the 15 exploration wells, of which seven were shallow wellsdrilled using a workover rig, was US$43.1 million. Under the terms of the PSAthis cost is fully recoverable against future production from the newdevelopment areas. This represents a finding cost (P+P basis) of US$2.7 / bbl. As per the terms of the PSA, all exploration areas were relinquished as of 1February 2007 leaving four development areas covering 200 km(2). Production 2006 gross production averaged 19,940 bopd compared with 19,200 bopd in 2005.Working interest production, after deduction of the state's "Initial Oil"entitlement, was 16,300 bopd, and entitlement production was 9,780 bopd (2005:12,430 bopd) Owing to the focus last year being on exploration in advance of the licenceexpiry date, only seven development wells were drilled compared with 14 theprevious year. Capital expenditure was focused on water injection and facilityupgrades, the latter aimed at increasing throughput capacity by 2009 to the30,000 bopd level required to handle future production increases and to bringfully in-house the processing activities currently undertaken by Turkmenneft. Last year saw the start of the water injection programme on the Burun field :some 8,500 bwpd is now being injected via a total of nine injector wells.Initial results are encouraging : material increases in production rates havebeen observed in two shallow producer wells and one deep producer as a result ofthis injection. Plans for 2007 are to recomplete a further 12 wells as injectorsand to increase high pressure injection capacity to 30,000 bwpd. The first of the two new deep rigs purchased from China began operations inJanuary 2007. The second rig is expected to be in operation towards the middleof the year, and we intend to release the two existing contracted rigs as soonas practicable. The two new rigs will bring to a total of seven the number ofworkover and drilling rigs owned and manned by Burren in Turkmenistan, and willallow us to complete the development of the three fields without being dependenton third party rig operators. Forward Plans In 2007 we plan to drill around 20 development and appraisal wells on the Burunand Balkan fields. We intend to recomplete 12 existing wells as injectors and tostart expanding the water injection capacity to 30,000 bwpd. Gross productionreached a record 22,250 bopd in February 2006. Congo Exploration In 2006 three exploration wells were drilled, one within the Kouakouala permit(Boubissi-1) and two on the Loufika prospect to the south-east of the M'Boundifield, the first of which resulted in a discovery in the shallow horizons at adepth of some 500 m. Since year end two step-out appraisal wells have been drilled on Loufika, thefirst of which confirmed the oil reservoir and the oil-water content but was oflow permeability and so non-commercial. The second appraisal well was drilledoutside the structure and did not encounter hydrocarbons. The remaining fourwells in the six well appraisal programme will be drilled over the next fewmonths. In addition an unsuccessful exploration well was drilled in Q1 2007 onthe Tioni prospect and has been plugged and abandoned. On the Noumbi licence some 560 km of the planned 812 km 2D seismic has beenacquired and is being processed. Production Gross production on M'Boundi for the full year was 56,100 bopd, compared with44,000 bopd in 2005. A total of 23 wells were drilled, broadly the same as theprevious year, of which 19 were put on production, the remainder being aroundthe perimeter of the field and therefore sub-commercial. Between four and fiverigs were in operation throughout the year. Our 2006 working interest productionin Congo, including our share of the Kouakouala field, was 17,940 bopd, up 12%over 2005. Burren's share of M'Boundi production reduced from 35% to 31.5% with effect from1 January 2006 (as a result of the farm-in by SNPC). We increased our holding inthe Kouakouala field by 8.3% to 33.3% by exercising our pre-emption rights uponsale by Heritage Oil Corporation in order to preserve our position in relationto the export pipeline to the Djeno terminal, which is owned by the Kouakoualapartners. After a short delay owing to the late delivery of certain items of equipment,the water injection programme commenced in January 2007 with injection into twowells. Forward Plans Four further shallow appraisal wells on Loufika are planned to be drilled duringthe first half of the year, following which it is intended to drill anexploration well on two further Loufika-type prospects to the north-west alongthe basin margin. In the deep programme, four further Vandji exploration prospects are planned tobe drilled during 2007: three on the Kouilou licence (Nanga, Zingila andTchivouba), and one on the La Noumbi licence (Dongou). Further 2D seismic willbe acquired on Noumbi in the second half of the year. It is intended to drill and/or convert 18 wells to injector wells in 2007, andto increase the injection capacity of the facilities from 20,000 bwpd to 60,000bwpd during the year and again to 120,000 bwpd in 2008. As a result of thedrilling of injector wells, there will be fewer development wells drilled onM'Boundi this year: 11 net new producers are planned compared to 23 in 2006. Gross production on M'Boundi in February 2007 was 55,400 bopd. Middle East Egypt All three wells drilled on the East Kanayis licence to target the Cretaceouspotential were found to be dry. 550 km(2) of 3D seismic data was acquired duringthe year to evaluate deeper Jurassic targets and several prospects have beendelineated at Cretaceous levels along trend from existing fields and at theJurassic level. On the North Hurghada Marine a high resolution aeromagnetic survey was carriedout to give an overview of the basin. Reprocessing of existing seismic is underway and a contract has been awarded to acquire 200 km(2) of new 3D seismiccommencing in Q2. Yemen The PSA for Block 6 became effective during the year after parliamentaryratification, and a tender for the acquisition of 500 km of 2D seismic is inprogress. We hope to commence acquisition around mid-year. Exploration drillingis not expected to be until early 2008. In December Burren was awarded a licence for Block 17, an onshore/offshore blockwith an area of 19,400 km(2), and negotiations for a PSA will commence shortly. Oman In August Burren received government approval to its farm-in into 40% of Block50, an offshore block of some 16,700 km(2) in water depths of up to 100 metresoperated by Hunt Oil. 2,775 km of 2D seismic was acquired, the processing ofwhich is nearly complete. A decision on drilling will be made in later in theyear. Forward Plans We plan to drill three wells on the East Kanayis block in Egypt, to test bothCretaceous and Jurassic prospects, whilst on the remaining acreage, efforts in2007 will be primarily focussed on seismic and mapping of prospects, inpreparation for drilling in 2008 India (HOEC : Burren 27%) A horizontal well on the PY-1 gas field in the offshore Cauvery basin testedsuccessfully confirming reservoir productivity sufficient to meet contractualrequirements. The associated gas sales agreement has been initiated withexecution expected in the near future. The project will now, subject toacceptable development costs, proceed to full field development which willinvolve the construction of a production platform, a subsea pipeline, an onshoreterminal and the drilling of two further development wells. Two exploration wells drilled by HOEC on the nearby Block CY-OSN-97/1 were dry. HOEC raised US$33million via a rights issue in October, in which Burren wasallotted slightly more than its pro-rata amount thus taking the Group's stake to27%. A further equity raising to finance the PY-1 development is being planned. Shipping The shipping business made a small profit in 2006. Revenues were lower thananticipated owing to the delay of a month in the opening of the summernavigation season in the southern Russian river system owing to extreme lowtemperatures, and operating costs were higher than anticipated. This businesswas partially divested early in the year and it is Burren's ultimate intentionto dispose of the remainder. FINANCIAL REVIEW Trading performance Revenue Revenue grew by 7% to US$416.0 million due entirely to higher realised prices :the average sales price rose by 24% to US$59.2/bbl (2005 : US$47.8 / bbl) inline with the underlying rise in Brent prices. Sales volumes were 14% lower thanin 2005 at 6.8 million barrels (equivalent to an average 18,540 bopd) reflectingthe 15% decline in entitlement production to 19,170 bopd (2005 : 22,440 bopd).The underlift position at year-end increased to 494,000 barrels (2005 : 321,000barrels) owing to sales volumes being lower than entitlement production. Werethis underlift to have been converted into sales at the end of 2006 it wouldhave added US$28.4 million to revenues and US$21.2 million to gross profit. Working interest production increased in 2006 by 9% to 34,240 bopd but Burren'sentitlement share of this production fell to 56% compared with 72% in 2005, asthe state's share of production increased in both Turkmenistan and Congofollowing the achievement of full recovery of historic costs on the Burun andM'Boundi fields. The sale of a 3.5% participating interest in the M'Boundifield to SNPC, the Congolese state oil company, became effective as of thebeginning of 2006: but for this Burren's working interest production would havebeen 36,100 bopd, a like-for-like increase of 15%. The average sales price discount to Brent improved to US$5.2 / bbl (2005 :US$7.2 / bbl) primarily as a result of a change in blending arrangements for ourCongo crude at the beginning of the year, which significantly improved thepricing structure. The average discount for Congo crude last year was US$1.6 /bbl (2005 : US$6.9 / bbl) compared with US$8.5 / bbl (2005 : US$7.5 / bbl) forour Turkmen crude. The export discount currently applicable to our Turkmen crudeis US$8.0 / bbl. Operating Profit Cost of sales fell from US$118.4 million to US$111.4 million owing to thenon-recurrence of US$13.8 million of oil price hedging losses expensed in 2005,which resulted in a gross profit for the year of US$ 304.6 million (2005 :US$271.9 million). Excluding the prior year hedging losses, the underlyingincrease in gross profit was 7%. Within cost of sales, depreciation comprised US$69.8 million, modestly up on2005 (US$ 66.1 million), as the higher unit charge of US$10.0 / bbl (2005 :US$8.1 / bbl) was offset by its application to lower entitlement production. Theincreased unit depreciation charge arises from an increase in estimated futurecosts to produce our reserves. The remaining costs of sales, comprisingproduction costs and potential of shipping operations, amounted to US$41.6million (2005 : US$38.6million), an increase of 8%. Excluding costs attributableto the shipping business, Burren's production cost per working interest barrel,adjusted for movements in underlift and overlift, was unchanged from theprevious year at US$2.5/bbl. Administrative expenses, including charges relating to employee incentiveschemes, decreased 10% to US$13.9 million (2005: US$15.4 million). Incentivescheme charges, at US$5.3 million, were US$2.1 million less than in 2005primarily because of lower accruals for NIC liabilities on deferred shareawards, which are linked to Burren's share price performance over the year.Other administrative expenses rose by US$0.6 million. Other operating expenses of US$19.3 million (2005 : US$1.4 million) comprisedthe write off of certain pre-licence expenses related to potential new venturesin the FSU (US$8.8 million), unsuccessful exploration in Egypt (US$6.0 million)and a provision of US$4.5 million for the settlement of a dispute concerningcertain insurance arrangements in Turkmenistan, which Burren is appealing .Thecontribution from our associate HOEC increased from US$1.6 million to US$3.4million, and a loss of US$0.6 million was incurred on the part disposal of ourshipping business. As a result of the above operating profit increased by 7% to US$274.2 million(2005: US$256.7 million). Net Profit and Earnings Per Share Interest income, net of finance charges, was US$8.3 million as a result ofincreased average cash deposits and rising interest rates. In 2005 there werenet finance costs of US$2.1 million which included the arrangement fees on a newmedium term loan facility. The taxation charge was unchanged at US$33.6 million, all but US$0.7 million ofwhich relates to Turkmenistan. In Congo no tax charge was incurred since underthe terms of PSAs the state's share of oil satisfies all tax liabilities.US$11.3 million of the tax charge was deferred tax. Profit after tax increased by 13% to US$248.9 million (2005 : US$220.9 million).The increase in earnings per share was slightly less at 11% to US cents 177.2(2005 : US cents 159.0), as a result of the increase in share capital arisingfrom issue of shares under share scheme awards. Dividend A final dividend of 10.0 pence per share has been proposed, making a total inrespect of the 2006 financial year of 14.0 pence, a 17% increase on the 12.0pence dividend in respect of 2005 and representing a payout ratio of 15.4% ofnet profits based on the average US$/£ exchange rate for the year. This finaldividend will be recorded for accounting purposes in 2007. Burren's policy is to raise dividends at least in line with profits so as topass on the benefits of higher oil prices to shareholders. Cash flow and Capital Expenditure Net cash from operations, after payment of US$26.2 million of tax and a workingcapital increase of US $2.3 million, was US$324.0 million, an increase of 17%over 2005 (US$277.8 million). Investment expenditure totalled US$218.8 million (2005 : US$176.5 million). Ofthis total capital expenditure on E&P assets accounted for US$210.6 million(2005: US$142.0 million) cash pledged as collateral to guarantee minimum workobligations under new licences in Middle East / North Africa accounted forUS$3.1 million, and the balance represented the cost of participating in HOEC'sUS$33 million rights issue (US$9.9 million) net of dividends received from HOECand the proceeds of the part disposal of our shipping business (together US$4.8million). The US$210.6 million investment in E&P assets comprised US$68.0 million ofexploration expenditure (2005 : US$18.6 million), US$5.6 million of licenceacquisition costs, and US$16.9 million stage payments for the purchase of twodrilling rigs for use in Turkmenistan, with the balance being developmentexpenditure. Of the total approximately US$105 million related to Turkmenistanand approximately US$90 million to Congo, with the balance being primarily inthe Middle East/North Africa. Of the US$68 million exploration expenditure,US$27.0 million was accounted for as additions to intangible fixed assetspending determination of commerciality and the balance being expenditure infields already at the development/production phase, was accounted for asadditions to property plant and equipment. These figures exclude the US$6.0million cost of unsuccessful wells in Egypt, which was charged to the incomestatement during the year. Interest received, net of interest and finance charges paid, was US$6.8 million.US$35.7 million was paid in dividends. Share capital movements wereinsignificant The above elements resulted in a net increase in cash balances during 2006 ofUS$76.8 million. Financial Position Liquidity At year-end 2006 Burren had cash of US$202.2 million and no outstanding debt.Cash surplus to immediate requirements is placed on deposit with banks withcredit ratings of no less than A or in money market funds of equivalent rating.The Group's policy is not to place deposits for periods of longer than 6 monthsand the average maturity of cash investments at year end was below three months. In 2005 Burren put in place a US$150 million standby loan facility secured onour two principal assets in Turkmenistan and Congo, which is currently undrawn.The available amount of this facility is currently US$70 million and it maturesin 2009. Capital Structure Burren is currently financed entirely from shareholders' equity and retainedearnings, with no debt. If we were to incur debt to finance asset acquisitionsor other investments the Group's policy is to ensure that our capacity toservice that debt, having regard to any oil price or interest rate hedges takenout, could withstand a range of adverse scenarios relating to oil prices,production shortfalls and cost increases. Consolidated income statement For the year ended 31 December 2006 Note 2006 2005 $'000 $'000 Revenue 3 416,022 390,333Losses on oil price derivative contracts - (13,760)Other cost of sales (111,405) (104,678)Total cost of sales (111,405) (118,438)Gross profit 304,617 271,895Charge in respect of incentive schemes (5,306) (7,431)Other administrative expenses (8,620) (7,995)Total administrative expenses (13,926) (15,426)Loss on disposal of subsidiary (563) -Other operating expenses (19,300) (1,411)Share of results of associates 3,362 1,612Operating profit 274,910 256,670Investment revenue 9,722 1,998Finance costs (1,456) (4,069)Profit before tax 282,456 254,599Tax 4 (33,583) (33,670)Profit attributable to equity holders of parent company 248,873 220,929Dividends declared 5 (35,689) (13,697)Retained profit for the year 213,184 207,232Earnings per shareBasic (US cents) 6 177.25 159.04Diluted (US cents) 6 172.80 154.12 All operations were continuing throughout both periods presented. Consolidated balance sheet 31 December 2006 Note 2006 2005 $'000 $'000Non-current assetsIntangible assets other than goodwill 44,600 27,500Property, plant and equipment 7 448,915 329,728Interests in associates 40,248 27,294 533,763 384,522Current assetsInventories 14,319 12,667Trade and other receivables 68,504 64,133Cash and cash equivalents 202,170 124,781 284,993 201,581Total assets 818,756 586,103Current liabilitiesTrade and other payables (68,051) (57,793)Tax liabilities (22,215) (26,216)Obligations under finance leases - (789) (90,266) (84,798)Net current assets 194,727 116,783Non-current liabilitiesDeferred tax liabilities (38,289) (26,944)Obligations under finance leases - (1,993) (38,289) (28,937)Total liabilities (128,555) (113,735)Net assets 690,201 472,368EquityShare capital 46,745 46,448Share premium account 91,772 90,752Revaluation reserve 24,018 25,865Merger reserve (12,716) (12,716)Other reserve 3,096 3,096Shares to be issued 5,458 2,745Retained earnings 531,826 316,178Equity attributable to equity holders of the parent 8 690,199 472,368Minority interest 2 -Total equity 690,201 472,368 Consolidated cash flow statement For the year ended 31 December 2006 Note 2006 2005 $'000 $'000Operating activitiesCashflow generated by operations 9 350,211 279,443Taxation paid (26,239) (1,625)Net cash from operating activities 323,972 277,818Investing activitiesPurchases of intangible assets other than goodwill (27,099) (18,638)Purchases of property, plant and equipment (183,469) (123,366)Deposits in respect of exploration commitments (3,100) (8,838)Interest received 8,307 2,089Cash received on disposal of subsidiary 4,461 -Acquisition of interest in associates (9,932) (26,022)Dividends received from associates 340 340Net cash used in investing activities (210,492) (176,524)Financing activitiesInterest paid (179) (1,331)Arrangement and facility fees (1,195) (1,592)Interest element of finance lease rentals (82) (1,146)Dividends paid (35,689) (13,697)Repayments of borrowings - (1,500)Capital element of finance lease rentals (44) (420)Issue of ordinary share capital 491 1,492Net cash used in financing activities (36,698) (16,105)Net increase in cash and cash equivalents 76,782 85,189Cash and cash equivalents at beginning of year 124,781 39,962Effect of foreign exchange rate changes 607 (370)Cash and cash equivalents at end of year 202,170 124,781 Notes to the preliminary financial information For the year ended 31 December 2006 1 General Information The financial information set out in this announcement does not constitute theCompany's statutory accounts for the years ended 31 December 2006 or 2005, butis derived from those accounts. Statutory accounts for 2005 have been deliveredto the Registrar of Companies and those for 2006 will be delivered following theCompany's annual general meeting. The auditors have reported on those accounts;their reports were unqualified and did not contain statements under section 237(2) or (3) of the Companies Act 1985. Whilst the financial information includedin this preliminary announcement has been computed in accordance withInternational Financial Reporting Standards (IFRSs), this announcement does notitself contain sufficient information to comply with IFRS. The Company expectsto publish full financial statements that comply with IFRS in its Annual Reportand Accounts 2006. This preliminary financial information is presented in US dollars because thatis the currency of the primary economic environment in which the Group operates. This preliminary announcement was approved by the Board on 16 March 2007. 2 Basis Of Preparation The preliminary financial information has been prepared in accordance with therecognition and measurement criteria of IFRSs and with IFRSs adopted for use inthe European Union. The financial statements have been prepared on a historiccost basis except for the revaluation of certain properties and financialinstruments. 3 Business and Geographical Segments Geographical segments The Group's primary operations are located in the Caspian and West Africa. TheCaspian comprises Turkmenistan and Russia. The West Africa region comprises theRepublic of Congo. These regions are the basis on which the Group reports itsprimary segment information. The Group also has activities in India, Egypt,Yemen and Oman which are not separately reportable due to their size. Segment information about these businesses is presented below. Income statement 2006 Caspian West Africa Consolidated 2006 2006 2006 $'000 $'000 $'000Revenue (external) 216,558 199,464 416,022 Segment result 151,374 137,822 289,196Share of results of associates 3,362Unallocated other operating expenses (7,986)Unallocated administrative expenses (10,382)Operating profit 274,190Investment revenue 9,722Finance costs (1,456)Profit before tax 282,456Tax (33,583)Profit after tax 248,873 Balance sheet 2006 Caspian West Africa Unallocated Consolidated 2006 2006 2006 2006 $'000 $'000 $'000 $'000AssetsSegment assets 297,141 237,606 243,761 778,508Interests in associates - - 40,248 40,248 Total assets 297,141 237,606 284,009 818,756LiabilitiesSegment liabilities (38,561) (15,968) (13,522) (68,051)Taxation provision - - (60,504) (60,504) Total Liabilities (38,561) (15,968) (74,026) (128,555) Income statement 2005 Caspian West Africa Consolidated 2005 2005 2005 $'000 $'000 $'000Revenue (external) 223,627 166,706 390,333 Segment result 165,324 104,109 269,433Share of results of associates 1,612Unallocated administrative expenses (14,375)Operating profit 256,670Investment revenue 1,998Finance costs (4,069)Profit before tax 254,599Tax (33,670)Profit after tax 220,929 Balance sheet 2005 Caspian West Africa Unallocated Consolidated 2005 2005 2005 2005 $'000 $'000 $'000 $'000AssetsSegment assets 220,038 188,223 150,548 558,809Interests in associates - - 27,294 27,294 Total assets 220,038 188,223 177,842 586,103LiabilitiesSegment liabilities (39,559) (13,109) (7,907) (60,575)Taxation Provision - - (53,160) (53,160) Total Liabilities (39,559) (13,109) (61,067) (113,735) Business segments The Group's operations relate to upstream oil and gas, and shipping. Thefollowing table provides an analysis of the Group's sales, segment assets andcapital additions by business segment: Revenue Carrying amount Capital Additions of segment assets 2006 2005 2006 2005 2006 2005 $'000 $'000 $'000 $'000 $'000 $'000Upstream 400,846 374,235 611,212 422,142 235,840 159,020Shipping 15,176 16,098 7,128 12,225 34 358Unallocated - - 200,416 151,736 285 4,920Total 416,022 390,333 818,756 586,103 236,159 164,298 4 Tax The tax charge is made up as follows: 2006 2005 $'000 $'000Current tax:UK corporation tax 747 (235)Foreign tax 21,491 26,229 22,238 25,994Deferred tax 11,345 7,676Tax charge for the year 33,583 33,670 5 Dividends 2006 2005 $'000 $'000Amounts recognised as distributions to equity holders in the period:Final dividend for the year ended 31 December 2005 of 9.5p (2004: 3.0p) per share 24,955 7,550Interim dividend for the year ended 31 December 2006 of 4.0p (2004: 2.5p) per share 10,734 6,147 35,689 13,697Proposed final dividend for the year ended 31 December 2006 of 10p (2005:9.5p) per share 27,562 24,995 The proposed final dividend is subject to approval by shareholders at the AnnualGeneral Meeting and has not been included as a liability in these financialstatements. 6 Earnings per share The calculation of the basic and diluted earnings per share is based on thefollowing data: Earnings 2006 2005 $'000 $'000Earnings for the purposes of basic earnings per share being profit 248,873 220,929attributable to equity holders of the parent 2006 2005 Number NumberNumber of sharesWeighted average number of ordinary shares for the purposes of basic earnings 140,408,108 138,915,811per shareEffect of dilutive potential ordinary shares: Executive Share Option Scheme 2,220,262 2,780,343 Annual Profit Share Scheme 835,759 245,647 Long Term Incentive Plan 81,745 989,637 Performance Share Plan 478,761 415,804 Weighted average number of ordinary shares for the 144,024,635 143,347,242purposes of diluted earnings per share The calculation of basic earnings per share is based on the profit attributableto ordinary shareholders and the weighted average number of ordinary shares inissue during the year. Diluted earnings per share is calculated using theweighted average number of ordinary shares in issue on the assumption ofconversion of all dilutive potential ordinary shares. 7 Property, plant and equipment Development & Development & Barges Other Total production production & tugs(a) $'000 $'000 assets assets Caspian Caspian West Africa $'000 $'000 $'000CostAt 1 January 2005 142,487 160,847 7,011 1,489 311,834Additions 75,634 64,268 - 5,277 145,179Exchange differences - - - (6) (6)At 1 January 2006 218,121 225,115 7,011 6,760 457,007Additions 88,267 96,869 - 171,173 202,309Transfer from intangible assets 9,757 975 - - 10,732Disposal - (17,340) (7,011) (395) (24,746)Exchange differences - - - 11 11At 31 December 2006 316,145 305,619 - 23,549 645,313Accumulated depreciationAt 1 January 2005 37,651 22,516 163 867 61,197Charge for the year 25,958 39,574 351 199 66,082At 1 January 2006 63,609 62,090 514 1,066 127,279Disposal - - (514) (198) (712)Charge for the year 25,596 43,957 - 278 69,831At 31 December 2006 89,205 106,047 - 1,146 196,398Carrying amountAt 31 December 2006 226,940 199,572 - 22,403 448,915At 31 December 2005 154,512 163,025 6,497 5,694 329,728 (a) Held under finance leases Disposals in the current year represent the sale of Prime Shipping and the saleof an interest in the M'Boundi field in the Republic of Congo. During 2003, certain of the Group's property, plant and equipment were revalueddue to the piecemeal acquisition of a subsidiary relating to the Group's WestAfrican operations. On an historical cost basis, the carrying value of theGroup's development and production assets - West Africa would have beenUS$175,934,000 (2005: US$137,541,000). The Group has pledged all its development and production assets in Turkmenistanand Congo, which account for substantially all of the development and productionassets in the above table, as security for a medium-term loan facility grantedto the Group. 8 Share Capital and reserves 2006 2005 $'000 $'000At 1 January 472,368 262,760Retained profit for the year 213,184 207,232Shares issued in the year 491 1,492Share based payments 3,539 1,261Exchange adjustments 617 (377) At 31 December 690,199 472,368 9 Notes to the cash flow statement 2006 2005 $'000 $'000Operating profit 274,190 256,670Adjustments for:Gain on derivatives - (10,528)Depreciation of property, plant and equipment 69,831 66,082Impairment of exploration expenditure 6,018 -Non cash charge for incentive schemes 5,306 7,431Loss on disposal of subsidiary 563 -Share of associates profit (3,362) (1,612)Operating cash flows before movements in working capital 352,546 318,043Increase in inventories (1,652) (8,463)Decrease / (increase) in trade and other receivables 143 (17,714)Increase / (decrease) in trade and other payables (826) (12,423)Cashflow generated by operations 350,211 279,443 10 Events after the balance sheet date During February 2007, payment was made in respect of the deferred purchaseagreement for Turkmenistan. On 16 March 2007, Burren Energy (Congo) Limited concluded a heads of agreementwith Eni Congo SA ("Eni") to acquire additional interests of 5.5% in theM'Boundi oil field and 2% in the Kouilou exploration licence in the Republic ofCongo. Consideration of US$155,000,000 is payable in cash. The transaction issubject to a number of conditions precedent, the most significant of which arethe completion by Eni of its acquisition of interests in M'Boundi and Kouiloufrom Maurel & Prom and approval by the Congolese authorities. Followingcompletion Burren will have a 37% interest in both the M'Boundi field and theKouilou licence. This information is provided by RNS The company news service from the London Stock Exchange