Petrel records increased losses

EXPLORATION firm Petrel Resources has reported a significant increase in losses for 2004.

The company said pre-tax losses came in at €350,000 in the year to 31 December 2004, up from €244,000.

Iraq is the exploration group’s main target market, where conditions are still very difficult, chief executive David Horgan said yesterday.

“Iraq is still very inhospitable, but it is where the oil is, which is why the group targeted the country in the first instance,” he said. Since it was founded in 1997 from a shell company, Petrel has seen its shares rise to £1.50 in early Autumn last year. It is currently trading at 38p on London’s AIM where it floated in 2000 having been undermined by the continuing uncertainty in its operational zone.

Petrel hasn’t paid any dividends since it started.

Mr Horgan remains optimistic, but warns that the investment in the group is a long-term play.

“This has to be viewed over a 10- to 20-year time span.”

Shareholders should not hold their breath in anticipation of a dividend any time soon, he cautioned. It is unlikely they will see dividends anytime over the next five years, said Mr Horgan.

Investors are 30% institutional and 70% private of which there are about 2,000.

Britain accounts for the institutional investors with the exception of one Italian investor that keeps a low profile.

On the current state of play in Iraq, Mr Horgan said the environment is still very unstable, but it has to be put right eventually.

Iraq’s oil production is running at 1.2 million barrels per day well below the 3 million output level it was at before the war.

“Iraq’s production collapsed and it has no other real source of income. The country is a mess,” he said. “There is an urgency to get the oil pumping again and for new oil discoveries to be brought on stream. For that reason Petrel is optimistic that Iraq will justify its commitment to the region, but it has to be given time to re-establish itself.”

The current government is just coming to terms with the basic administration and has demonstrated interest in some of the proposals put before it by the company, he said.

He added that the government is understood to have recommended one of four major tenders because it was the best commercial and technical proposal.

In March Petrel, which is chaired by Dr John Teeling, raised £1m to help fund its ongoing plans that have extended to Jordan to incorporate a site close to the Iraq border.

Last year, the group lost potential contracts to an Arab/Turkish consortium and this year lost another tender to an Arab/Canadian group.

Petrel also has a long standing pre-war agreement relating to the highly prospective area in the Western Desert.

Given the circumstances that is now “highly sensitive”, that deal has been suspended until future policy on drilling and exploration contracts have been decided by the new government, said Mr Horgan.