Abridged Chairman’s Statement
Chairman's Statement for year to 31 December 2006
Business Review
The Company’s turnover in 2006 was $1.9m, slightly down on 2005 as the Justin drilling programme slowed down and less new wells came on stream. Oil and gas prices remained strong resulting in assets performing well, particularly Justin and Green Canyon. Cost of sales decreased by $530k to $675k largely due to a reduced Justin amortisation charge.
Despite an unrealised exchange loss of $95k caused by adverse movement in the sterling/dollar exchange rate the Company’s profit before taxation was $736k as against a pre tax profit of $640k in 2005. The post tax profit came in at the very pleasing figure of $635k compared to a profit of $434k in the previous year.
Shareholders funds stood at $3.3m at the end of 2006 ($2.7m in 2005).
United Kingdom Assets
Block 13/22b
The company has a 1% working interest in this Block, the operator of which is BG International (NSW) Ltd. A forward work programme has been proposed to the DTI in order to retain the licence for an extended period.
United States of America Assets
Justin
 The Justin Project is an ongoing Barnett shale gas development project in Denton County, Texas approximately 20 miles west of Dallas. J W Operating’s affiliate company Cohort Energy Company became operator in 2004. Our interest was acquired in 2001.
An Engineering Report was commissioned from Hass Petroleum Engineering Services to obtain an estimate of the natural gas reserves owned by your company in the Justin field as at 31 December 2006.
Green Canyon
2006 production was 1.39m barrels of oil (6,991 net to FPC) and 1.42m mcf of gas (7,140 net to FPC) compared with 1.33m barrels of oil (6,658 net to FPC) and 1.05m mcf of gas (5,271 net to FPC) in 2005. Green Canyon continues to be a major source of income for the company.
Vernon
The company originally owned an ORRI in 20 wells in Jackson Parish, Louisiana operated by Anadarko. Current well count has increased from the original 20 to 63 with a minimum of 6further wells projected.
Other producing assets
- Kleckner: The company holds a 20% working interest in oil and gas wells in South East Seward, Logan County, Oklahoma.
- Harrison: The company holds a 15% interest in gas wells in Pittsburgh County, Oklahoma.
LBJ
The company sold its interest in this prospect in February 2007. The prospect is in the northern extension of the Barnett Shale play north of our Justin development project. The purchaser was Barnett Exploration Inc, Allen Texas.
Conclusion
The company’s turnover was once again very healthy mainly due to increased Justin revenues from new wells. The expertise of the current operator continues to be a major factor in continuing to realise the true value of this asset.
Within Justin, there are still an estimated 44 wells to be drilled but that may increase as technology develops and infill drilling on leases is undertaken. The high energy prices experienced in 2006, coupled with the strong performance of the new Justin wells, has significantly improved the company’s cash flow and the board is presently confident that sufficient funding will be raised to develop our full working interest in the remaining wells.
The Board is looking forward with considerable confidence to the continuation of the progressive improvement in your company’s fortunes during 2007.
Thank you for your continued support.
Alexander West
Chairman
31 May 2007
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