Thursday 21 June 2007
Star Energy Group plc
(“Star Energy” or “the Company”)
AGM Trading and Strategy Update
First Half Performance In Line With Expectations
Star Energy, the gas storage and onshore UK oil and gas E&P company, provides the
following trading update ahead of its AGM which will be held today at 12 noon at the
offices of Norton Rose, 3 More London Riverside, London SE1 2AQ.
Trading Update
Oil production averaged just below 4,000 bopd during the first half of 2007 and the
Company benefited from slightly higher than forecasted oil prices. During the second
half of the year, the Company will continue to increase its expenditure on gas storage development activities. The Company expects the out-turn for the full year to be in line with market expectations, adjusted for the previously announced disposal of its Singleton oil field.
Gas Storage
· The mild winter and warm start to the second quarter resulted in relatively
low levels of activity at the Humbly Grove gas storage facility. The annual
maintenance shutdown is currently underway as planned.
On future storage projects, there has been good progress on a number of fronts:-
· Planning permission for the appraisal well at Bletchingley was received from
Surrey County Council. Drilling of this well is expected to commence in Q4
of this year.
· Hampshire County Council gave planning permission for the installation of a
booster compressor and related equipment at the Humbly Grove wellsite A,
an important step in the plan to expand storage capacity by up to 2 bcf over
the next 12-18 months.
· Progress on the offshore Forbes/Esmond project was further enhanced by the
commissioning of a conceptual design study to be completed by September 2007.
· A scoping report that covers the proposed location of all major elements of
the Albury gas storage project (wellsite, plant and pipelines) has been
published. A new site for the topside facilities for the Albury gas storage
project has been acquired. This proposed plant site is in a well screened more
remote area outside the Area of Outstanding Natural Beauty (AONB), and is
close to the planned pipeline route to connect the store to the gas distribution
network.
Oil Production
Oil production has been slightly lower than anticipated, but this has been compensated for by better sales prices.
Strategy
At the announcement of the Company’s preliminary results on 2 April 2007, the Board
stated that it was undertaking ‘a strategic review to identify the optimum structure and funding approach to developing the gas storage business.’
With the help of external advisers, the Board has now completed that review and is
implementing a number of changes to the structure, management and reporting of the Star Energy Group’s activities.
The key conclusions of the review were:-
The Board remains firmly committed to the strategy of building a significant multi-site European gas storage business. The Company currently has 5 onshore projects at variousstages of development – Albury (Phases 1 and 2); Welton; Gainsborough; Bletchingley; and also the offshore Forbes/Esmond project.
The successful delivery of operational facilities from these projects will involve
substantial capital expenditure. The Board believes that the future nature of these
facilities as long-lived assets with full planning permits and suitable capacity sales agreements should enable the Group to fund the projects predominantly through debt facilities when required. The Board reviewed the potential for further non-core asset sales to contribute to future funding requirements. Whilst concluding that there was no immediate benefit from such
sales, they are clearly an important option for raising cash when needed, and will be
considered at the appropriate time.
The following changes will be made to ensure that the Group’s resources are clearly
focussed on gas storage development and that it can swiftly and efficiently commence
work on projects once planning permissions are achieved:-
· Two separate Business Units will be created – a Gas Storage Division
and an Oil Production Division. With effect from 1 July 2007, each
business will be reported segmentally. This move will provide shareholders
with greater transparency.
· Roger Pearson, currently Group Operations Director, will be appointed
Managing Director of the Gas Storage Division.
In recognition of the need to focus on planning applications, the position of
Director of Planning has been established, reporting directly to Roger. The
new position, which is a non-Board appointment, has been successfully filled
by an individual with significant relevant experience.
· The position of Managing Director of the Oil Production Division will
be subject to a separate announcement in due course. This will be a
non-Board appointment.
· Melvyn Horgan will continue in his role as Technical Director whilst
Adrian Fernando will now focus entirely on business development.
Board Changes
Following the AGM today, Charles Carter is stepping down as a Non-Executive Director.
Charles has been on the Board since the IPO in 2004 and his input and experience has
been greatly valued, and the Board wishes him well for the future. We expect to make an
announcement regarding a replacement for Charles in the near future.
Enquiries:
Star Energy 020 7925 2121
Roland Wessel, Chief Executive
Financial Dynamics 020 7831 3113
Ben Brewerton / Ed Westropp
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