Abridged Chairman’s Statement

Chairman's Statement for year to 31 December 2008

Business Review

2008 was an exceptional year for Fishermen’s Petroleum Company. Turnover increased 64% to almost $4.4m as strong gas production from new wells drilled in the Justin field coincided with the highest gas prices experienced in recent years. Gas prices peaked in the period May-July. The record-high oil prices witnessed in spring/summer also contributed to the company’s record performance. Cost of sales increased in line with turnover. Justin accounted for $1.5m of amortisation/write-off charges.

Profit before tax increased to $2m while post-tax profit at $1.4m exceeded the $1m barrier for the first time, marking another notable achievement in the company’s history. The weakening of sterling against the dollar in the second half of the year helped reduce the impact of UK costs and the servicing and repayment of UK director/shareholder loans.

Shareholders’ funds increased to $5.6m at the year-end ($4.2m in 2007).

United Kingdom Assets

Lensoil Ltd

In an effort to diversify the company’s portfolio of assets, an investment of £87,500 ($166,950) was made in Lensoil Ltd during the year. Your company has a 25% equity share in that company which was formed in early 2008 to apply for licenses in the UKs 25th Seaward Licensing Round and to purchase a UK onshore production opportunity. Negotiations relative to that proposed acquisition are continuing. They have been both involved and protracted due to the current global economic problems.

25th Seaward Licensing Round

Lensoil submitted an application to BERR for licenses in two Blocks in this UK offshore licensing round. However it was decided that it would be unwise to offer a work commitment on these blocks given the priority to conclude the negotiations for the UK onshore production assets. BERR was notified and agreed that the application could stand as an “Out of Round” application and also that it could be varied, especially if either of the Licenses was awarded in the 25th Round which occurred.

United States of America Assets

Justin

The Justin Project is an ongoing Barnett shale gas development project in Denton County, Texas approximately 20 miles north west of Dallas. J W Operating’s affiliate company Cohort Energy Company became operator in 2004. Our interest was acquired in 2001.

At 31 December 2008 the number of wells in which FPC had an interest had increased to 51 some of which were in the process of being drilled at the year end. As at June 2009, the number of wells had increased to 53.

There are estimated to be up to 27 locations still to be drilled.

Green Canyon

Green Canyon continues to be an important asset for the company. The record-high oil price for part of 2008 enhanced revenue and compensated for reduced production and a temporary shut-in of the wells due to hurricane damage to sub-sea infrastructure towards the end of the year.

Other producing assets

The company retains working interests in a number of minor producing assets in Oklahoma including Kleckner, Harrison, and BF Wells as well as an ORI in the Vernon gas field, Louisiana.

Conclusion

The company benefited from favourable economic conditions during 2008 as the increased gas production from some excellent new Justin wells came on stream during a peak in gas prices. Trading conditions have changed remarkably since then however and the global economic downturn has affected all sectors of industry. Reduced demand for oil and gas has seen a spectacular drop in prices over the last 12 months although there are now signs of a reversal of the downward trend, particularly in oil. In the meantime, the company was party to and fully concurred with the Operator’s decision to postpone the drilling of new Justin wells until the gas price recovers when the drilling programme will recommence. The company continues to have an excellent asset in Justin.

In the meantime, the board of directors has ensured that the influx of cash in 2008 has been used to reduce borrowings and the company is better placed than most to withstand economic fragility and stagnant credit markets.

Although the company’s exceptional financial performance in 2008 is not likely to be repeated in the short-term due to external economic factors, the directors continue to look forward to the future with confidence.

Thank you for your continued support.

Alexander West
Chairman
26 June 2009

Click here for Chairmans Statement December 2007