Abridged Chairman’s Statement
Chairman’s Statement for year to 31 December 2009 Business Review
The financial results for 2009 were very disappointing for Fishermen’s Petroleum Company for reasons largely outwith management’s control. Although gas production from the company’s primary asset, the Justin field, continued to be strong, the price received for gas sales averaged around $3.70 during 2009 compared to $8.50 the year before caused by over-supply and reduced demand in the US domestic market. This hit revenues hard and turnover fell to $1.75m.
- Cost of sales rose to $2.53m and included amortisation costs of $1.16m and additional impairment charges of $966k for Justin. The operating loss for 2009 came in at $1.095m helped a little by reduced administrative expenses. The loss after tax came in at $901k.
- Shareholders’ funds stood at $4.67m at the year-end. Given the deterioration in trading during 2009, no dividend was declared.
United Kingdom Assets
Lensoil Ltd
In an effort to diversify the company’s portfolio of assets, an investment was made in Lensoil Ltd during 2008. A loan was extended to Lensoil in 2009 to fund ongoing acquisition work as well as further investment. The risk remains that negotiations might be unsuccessful .
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. The field is operated by J W Operating’s affiliate company Cohort Energy Company and our interest was acquired in 2001.
At 31 December 2009, the number of wells in which FPC had an interest had increased to 53 at and no new wells have been drilled in 2010 to date as development has been placed on hold pending an improvement in the gas price. There are estimated to be up to 27 further potential locations.
Green Canyon
Green Canyon continues to be an important asset for the company.
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 ORRI in the Vernon gas field, Louisiana
Conclusion
A very large part of the operating loss for 2009 was due to impairment changes on the Justin asset to take account of lower valuation of the wells given the fall in forecasted gas prices. Write-downs of this scale are not expected to recur.
The company was party to and supports the decision of the Operator in the Justin field to cease drilling activity until there is an improvement in US natural gas prices. This is not expected to happen in the short-term. However, after a good trading in the period from 2003 to 2008 the company finances are sound and the board feels able to exercise patience as it believes that the Justin asset remains good quality with substantial future potential.
The directors are aware that the company’s portfolio of assets is weighted heavily towards US natural gas and continues to seek out opportunities to address this, including the investment in Lensoil.
Your continued support is appreciated.
Alexander West
Chairman
16 June 2010
Click for Chairmans Statement for year to 31 December 2008
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