Kea Petroleum PLC KEA Preliminary Results

  Kea Petroleum PLC (KEA) - Preliminary Results

RNS Number : 8669P
Kea Petroleum PLC
30 October 2012




For Immediate Release 30 October 2012

                                      

                              Kea Petroleum plc

                            ("Kea" or the "Group")

                                      

              PRELIMINARY RESULTS FOR THE YEAR ENDED 31 MAY 2012



Kea Petroleum plc (AIM:KEA) is pleased to present its Preliminary Results for
the year ended 31 May 2012.



Operational Highlights



· Successful discovery  at Puka  1 following drilling  and testing  which 
intersected a 40 metre interval of Mt. Messenger reservoir quality sands  with 
a net pay of  between 4.5m and 9m  with sampling indicating excellent  quality 
light oil with a density of 43.7  degrees API and a relatively low pour  point 
of 15 degrees centigrade



· Testing  confirmed that  Puka is  an oil  and gas  field of  commercial 
dimensions with maximum flow rates  of 310 bopd and  1.8 mmcf/d from Puka  1. 
Kea intends to drill  a second well  in the coming weeks  that will allow  for 
higher flow rates and flexibility with completion and production



· As  previously  announced, Methanex  will  fund  50% of  the  cost  of 
drilling and testing  at Mauku  in return  for access to  all the  gas from  a 
discovery. Methanex do not take a stake in the licence



· The directors believe  that the Douglas 1  well has implications for  a 
number of  the deeper  oil  and gas  plays along  the  eastern margin  of  the 
Taranaki Basin



· Farm  out discussions  proceeding for  Mercury, Kea's  seven  kilometre 
offshore field which is expected to be drilled in 2014



· Board strengthened with appointment of Richard Parkes as Managing
Director to manage the day to day running of the Group.



Financial Highlights



· £6.7m cash held at 31 May 2012 (2011 : £12.5m)



· In September 2012 £3.5m of warrants were exercised



· Loss before tax: £3.03m (2011 : £4.09m)



· Loss per share: 0.60p (2011 : 0.82p)



Strategy



· Kea intends to complete a 50  km^2 3D seismic survey over Puka and  the 
surrounding area following  recent geological analysis  suggesting the  strong 
possibility of a greater Puka field



· Kea's ambition is to achieve production of 2,000 bopd from the Puka
field which is located nearby to the required infrastructure, pipelines, roads
and sea oil terminal



· Drilling of Mauku 1 is expected to commence in January 2013



· Further  testing of  Douglas 1  well delayed  until 2013  as  resources 
focused on Puka



· Mercury is expected to be drilled in 2014 following a 3D seismic study
next year



· Kea is planning to carry out a further seismic programme jointly funded
with Methanex at its Angus site located on PEP 51155





Chairman, Ian Gowrie-Smith said:



"The discovery at Puka  has been a  landmark achievement for  Kea and a  vital 
step in our ambition to become a major player in oil and gas production in the
Taranaki region. Over the next 12 months, Kea will concentrate on moving  from 
a solely exploration led model to a balance of production and exploration. The
coming months represent immediate exciting opportunities for the Company  with 
the development of the Puka field and the concurrent drilling of Mauku 1."





For further information please contact:



Kea Petroleum plc              Tel: +44 (0)20 7340 9970

David Lees, Executive Director 


RBC Capital Markets (NOMAD)    Tel: +44 (0)20 7653 4000

Stephen Foss                   

Daniel Conti


WH Ireland Limited             Tel: +44 (0)20 7220 1666

James Joyce


Buchanan                       Tel: +44 (0)20 7466 5000

Tim Anderson

Sophie Cowles



CHAIRMAN'S STATEMENT





Kea Petroleum Plc's ("Kea", the "Company" or the "Group") recent  announcement 
that the Puka discovery was  commercial in size and  nature is a landmark  for 
the Company. Prospectively,  shareholders can  now look forward  to a  healthy 
cash flow as well as an ongoing  exploration program. The next 12 months  will 
be concentrated on moving from solely an exploration led model to a balance of
production and exploration. The  appraisal and development  of the Puka  field 
and  the  concurrent  drilling  of  Mauku,  which  per  management  estimates, 
potentially un-risked prospective resources of  485Bcf of gas and 28Mmbbls  of 
condensates during the coming months represent an exciting opportunity in  the 
immediate future.



Puka

On 10 April 2012  Kea announced that  it had made  a discovery and  subsequent 
testing, in September 2012,  confirmed that Puka  is an oil  and gas field  of 
commercial dimensions with maximum flow rates  of 310 BOPD and 1.8 Mmcf/d  and 
no confining  boundaries.  Puka 1  was  drilled  with a  small  rig  primarily 
designed for exploration but not ideal for production or establishing reliable
long term production data. Plans are well advanced for extending the Puka site
and the existing Wingrove  production facilities are in  the process of  being 
moved to the  Puka production  site in order  to commence  production and  oil 
sales. Installation work is expected to be undertaken during the drilling  of 
Puka-2. The Puka 2 well, is scheduled to be drilled in the coming weeks,  and 
will be drilled by a larger capacity rig with a wider diameter production well
bore that will allow for higher flow rates and flexibility with completion and
production.



Kea intends commencing a  50 square kilometre  three dimensional (3D)  seismic 
survey  over  Puka  and  the  surrounding  area.  Recent  geological  analysis 
incorporating data learned from drilling Puka 1, suggests the possibility of a
greater Puka field. The drilling of Puka 2 and the 3D seismic will enable  the 
Company to assess if this analysis is correct.



Kea's ambition is  to achieve  production of 2,000  BOPD from  the Puka  field 
which is located nearby to  the required infrastructure, pipelines, roads  and 
sea oil terminal.



Mauku

Drilling Mauku, which has an estimated cost of US$15million (before  testing), 
is now expected  to commence  in early January  2013, if  not earlier,  having 
suffered delays  through  an extended  consent  process, extreme  weather  and 
challenging access.  The NRG  rig  has been  engaged  to drill  following  the 
drilling of Puka 2.



As previously  announced  Kea  has a  financial  partnering  arrangement  with 
MethanexNew Zealand Limited (a subsidiary  of Methanex Corporation of  Canada) 
("Methanex") providing 50% of the cost of drilling and testing Mauku in return
for access to all the gas from a discovery. Methanex does not take a stake  in 
the licence.



Additionally Kea  has  is in  advanced  negotiations  to farm  out  a  further 
interest in Mauku.



Douglas 1

Drilling of  Douglas 1,  on permit  51153,  was completed  in May  2012  after 
reaching  a  depth  of  3,000metreswhich  intersected  the  target   Tikorangi 
Limestone that  hosts oil  in the  adjoining Waihapa  oil field.  As the  well 
encountered extensive  open fractures  together  with hydrocarbon  shows,  Kea 
moved directly to testing.

However, testing was inconclusive due to  an inability to close off the  lower 
formation water from the more prospective higher hydrocarbon shows.



The well is  suspended to  see if the  pressures can  equilibrate and  further 
testing is not expected  to be resumed until  2013 with financial,  managerial 
and rigs resources being focussed on the Puka development.



Despite the lack of clarity from  testing, the directors believe the well  has 
implications for a number  of the deeper  oil and gas  plays on the  Company's 
existing permits along the eastern margin of the Taranaki Basin.



Mercury

The Board  believe that  the Mercury  prospect (located  on PEP  52333) is  as 
attractive a prospect as Mauku with in house estimates of up to 159Mmbbls.  It 
is seven kilometres offshore and is expected to be drilled in 2014 following a
3D seismic study next  year. The Company  is in discussions  to farm down  its 
interest in this prospect in order preserve funds for its onshore activities.





Angus

Following on from the success at Puka, the decision by the board was made  not 
to drill Angus (located on PEP 51155) and instead carry out additional seismic
studies. Kea is planning to carry out a further seismic program jointly funded
with Methanex.



Relinquishments

In November 2011, following an internal  review of the prospects within  Kea's 
New Zealand acreage  the Company  relinquished two permit  areas PEP52200  and 
PEP51339 as well as a  10% share in PEP38524 in  order to focus more fully  on 
the drilling  of Mauku,  Puka and  Douglas and  the longer  term appraisal  of 
Mercury together with other potential prospects on our remaining four permits.



Further in May  2012 the  Company signed a  deed of  termination agreement  to 
dispose of its interests and obligations  in its two Australian licences.  The 
interest in  deepening the  Hoadleys  well did  not  materialise into  a  more 
concrete offer  and the  results from  the original  drill did  not  encourage 
further expenditure on the  prospect. All of the  costs associated with  these 
licences were written off during the financial year ended 31 May 2012.



Board and Management

There have been a  number of management changes  during the year. The  Company 
appointed Richard  Parkes as  Managing  Director in  July 2012.  Richard  was 
subsequently appointed to  the board in  October 2012. We  are delighted  with 
this appointment as we believe that his experience in the oil and gas industry
will help in the transition of Kea from explorer to producer. Whilst I carried
out a substantial work load during this period of change, the proposed  change 
of my appointment  to Executive  Chairman from  Non-Executive Director  proved 
unnecessary following Richards' appointment.



During the last financial year, our Finance Director, Peter Wright,  relocated 
to New  Zealand from  the UK  and this  move has  brought increased  financial 
controls  to  the  operations  and  alongside  Richard  we  believe  that  the 
management and technical team we have  assembled in New Zealand is strong  and 
with the capability to drive forward the board's vision for the Group.



John Dennehy's move to a non-executive role ensures that the Company continues
to have access to  his valuable contributions both  within New Zealand and  at 
board level.



John Conolly has decided not to stand  again for re-election and we thank  him 
for his help during the Company's formative years.



Funding

In September 2012 £3.5million  warrants were exercised  and together with  the 
decision by Methanex to fund 50% of  the cost of drilling and initial  testing 
of Mauku, the directors believe Kea now has a greater flexibility in  planning 
and executing  appraisal and  development  programmes to  enhance  shareholder 
value.



Conclusion

Finally I would like to thank our shareholders, advisors and particularly  our 
staff for their meaningful support and contribution during the year.





Ian Gowrie-Smith

Chairman

30 October2012

                                                  Year ended 31 May Year ended

                                                                       31 May
                                                              2012       2011
                                                             £'000      £'000
                                                                  
                                            Notes                  
Revenue                                                          37          -
Cost of sales                                                     -          -
Gross profit                                                     37          -
Administration expenses                                     (2,604)    (1,994)
Operating loss before exploration costs                     (2,567)    (1,994)
written off
Exploration costs written off                               (1,316)    (2,418)
Operating Loss                                              (3,883)    (4,412)
Finance Income                                4                 105        314
Foreign Exchange gains / (losses)                               742          -
Loss before taxation                          2             (3,036)    (4,098)
Taxation                                      5                   -       (79)
Loss for the year                                           (3,036)    (4,177)
Other comprehensive income:
Exchange differences on translating foreign                   (608)        570
operation
Total comprehensive loss for the year                       (3,644)    (3,607)
Loss per share
Basic and diluted (pence per share)           6             (0.60)p    (0.82)p



The loss for the year and total comprehensive loss for the year are 100%
attributable to equity

shareholders of the parent undertaking.







                                   31 May  31 May
                                   2012    2011
                                   £'000   £'000
                                            
                             Notes        
Current Assets
Cash and cash equivalents      9     6,692  12,547
Trade and other receivables   10       743   2,394
                                     7,435  14,941
Non-Current Assets
Property, plant &equipment     8       700     760
Oil &gas exploration assets    7    10,108   4,022
                                    10,808   4,782
Total Assets                        18,243  19,723
Current Liabilities
Trade and other payables      11     2,572   1,477
Total liabilities                    2,572   1,477
Shareholders' Equity
Issued capital                12     5,094   5,094
Share premium                 12    16,787  16,787
Merger reserve                13       125     125
Share option reserve          14     2,069   1,000
Translation reserve                   (38)     570
Retained earnings                  (8,366) (5,330)
Total equity                        15,671  18,246
Total Equity and Liabilities        18,243  19,723



The financial statements were approved by the Board of Directors on30
October2012









P. Wright

Director





                    Share  Share   Merger   Share Translation Retained   Total
                  capital premium Reserve option     reserve earnings  equity
                                          reserve
                   £'000   £'000   £'000   £'000       £'000    £'000   £'000
At 01 June 2010     5,037  16,390     125     187         157  (1,153)  20,743
Issue of shares        57     397       -       -           -        -     454
Equity settled          -       -       -     813           -        -     813
share options
Transactions with
owners                 57     397       -     813           -       -   1,267
Loss for the year       -       -       -       -           -  (4,177) (4,177)
Other                                                                  
comprehensive
income:
Exchange                -       -       -       -         413        -     413
differences on
translation of
foreign
operations
Total
comprehensive
loss for the year       -       -       -       -         413  (4,177) (3,764)
At 31 May 2011      5,094  16,787     125   1,000         570  (5,330)  18,246
                                                                      
Issue of shares         -       -       -       -           -        -       -
Equity settled          -       -       -   1,069           -        -   1,069
share options
Transactions with
owners                  -       -       -   1,069           -       -   1,069
Loss for the            -       -       -       -           -  (3,036) (3,036)
period
Other                                                                  
comprehensive
income:
Exchange                -       -       -       -       (608)        -   (608)
differences on
translation of
foreign
operations
Total
comprehensive
loss for the year       -       -       -       -       (608)  (3,036) (3,644)
At 31 May 2012      5,094  16,787     125   2,069        (38)  (8,366)  15,671
                                             



                                                  Year ended 31 May Year ended

                                                                       31 May
                                                              2012       2011
                                                             £'000      £'000
                                                                  
                                                                  
Net cash outflow from operating activities                      847    (6,389)
Cash flows from investing activities
Interest received                                               105        314
Expenditure on oil and gas exploration assets               (6,230)    (1,585)
Purchase of property, plant and equipment                      (49)      (755)
                                                                            
Net cash used in investing activities                       (6,174)    (2,026)
Cash flows from financing activities
Proceeds from share issues                                        -        454
Net cash generated from financing activities                      -        454
Net decrease in cash and cash equivalents                   (5,327)    (7,961)
Cash and cash equivalents at beginning of year               12,547     20,095
Foreign exchange differences - net                              528        413
Cash and cash equivalents at balance sheet date               6,692     12,547
Reconciliation of cash flows from operating
activities with loss for the year
Loss for the year                                           (3,036)    (4,177)
Movements in Working Capital
Trade and other receivables                                   1,651      (924)
Trade and other payables                                      1,095    (1,800)
Depreciation                                                    109         13
Derecognition unsuccessful expenditure                           64          -
Interest received                                             (105)      (314)
Share option expense                                          1,069        813
Net cash outflowfrom operating activities                       847    (6,389)







The financial information set  out in this  preliminary announcement does  not 
constitute statutory  accounts  within  the  meaning of  Section  434  of  the 
Companies Act 2006 for the  year ended 31 May 2012  but is derived from  those 
accounts. The financial statements for 2012 will be delivered to the Registrar
of Companies following the Company's Annual General Meeting. The auditors have
reported on the 2012 accounts and have issued an unqualified opinion.



NOTES TO THE FINANCIAL STATEMENTS



For The Year Ended 31 May 2012



1. Revenue and segmental reporting

In the opinion of  the Directors the Group's  single operating segment is  the 
exploration for hydrocarbons, comprising oil and gas. An operating segment  is 
a component of an entity that engages in business activities from which it may
earn revenues and incur expenses and  whose results are regularly reviewed  by 
the Board of Directors.  The Board of Directors  reviews operating results  by 
reference to the core  principle of geographic  location. The Group  currently 
has oil and  gas exploration in  one market, New  Zealand, and it  has a  head 
office and associated corporate expenses in the UK.



Revenue of £37,625 has been earned through the sale of oil to Shell Todd Oil
Services Limited, in New Zealand, during the period.



The following table provides a breakdown of the Group's capital expenditure
based on the area of operation:



             2012  2011
            £'000 £'000
New Zealand 6,275 2,337



The following table provides a breakdown of the Groups total segment non
current assets based on

the area of operation:

                 2012  2011
                £'000 £'000
New Zealand    10,802 4,777
United Kingdom      6     5
               10,808 4,782



2. Loss before taxation

                                                                    2012  2011
Loss before taxation has been arrived at after charging /          £'000 £'000
(crediting):
                                                                           
Foreign exchange differences                                       (742)  (12)
                                                                           
Depreciation of property, plant and equipment                        109    13
                                                                           
Employee benefits expense:                                                  
Employee costs (Note 3)                                              881   551
                                                                           
Operating leases rentals:
Land and buildings                                                   133    89

Audit and non-audit services:
Fees payable to the Company's auditor for the audit of the Group      32    30
accounts

Fees payable to the Company's auditor and its associates for other
services:
The audit of the Company's subsidiaries, pursuant to legislation      15    10
Tax services                                                          10    10

Revenue from sub-letting part of Group head office in London        (74)  (95)



3. Employee numbers and costs

                                                                    2012  2011
                                                                   £'000 £'000
Employee costs (including directors):                                       
Wages and salaries                                                   573   382
Social security costs                                                274   142
Pension costs - defined contribution plans                            34    27

                                                                    881   551


The average number of employees (including directors) during the
year wasas follows:


Management                                                             6     7
Administration                                                         4     2
Exploration and Mining                                                 7     3
                                                                     17    12



                                          £'000 £'000
Remuneration of key management personnel:          
Emoluments                                  441   330
Pension costs                                26    22
                                            467   352



Included in the figure of £467,000 are costs of £50,000 relating to time spent
by the CEO and other employees that have been capitalised against specific
projects.



The total directors' emoluments for the year were £366,000. In addition
directors' total pension contributions for the year were £22,000. The
emoluments of the highest paid director were £121,000.



4. Finance income

                 2012  2011
                £'000 £'000
                         
Interest income   105   314



5. Taxation



There is no income tax expense due to losses incurred in the year. The tax
assessed for the year differs from the standard rate of corporation tax as
applied in the respective trading domains where the Group operates.

                                                                  2012    2011
                                                                 £'000   £'000
                                                                            
Loss for the year before tax                                   (3,036) (4,098)
                                                                            
Loss for year multiplied by the standard rate of corporation         
tax applicable in the UK, 25.67% (2011:28%)                            (1,134)
                                                                 (779)
                                                                            
Effects of:                                                                 
Expenses not deductible for tax purposes                           285     130
Differences in rates of taxation                                     -    (21)
Unprovided deferred tax adjustment for prior year                    -      80
Unrelieved tax losses and other deductions raised in the year     (59)   1,024
Tax losses for future utilisation                                  533       -
Tax (charge) / credit for the year                                  -      79



                                                                 2012    2011



Deferred tax
                                                                 £'000   £'000
Deferred tax assets:                                                        
Short term timing differences                                     (24)    (14)
Tax losses available for offset against future taxable profits (2,375) (1,112)
Deferred tax liabilities:
Timing differences on capitalised exploration expenditure       2,399   1,126
Net deferred tax asset recognised                                    -       -

The Group has a deferred tax asset of £1,444,013 (2011: £3,464,000)which is
unrecognised as the likelihood of sufficient future taxable profits being
generated within the Group does not yet meet the definition of "probable".



6. Loss per share

                                            Year ended 31 May       Year ended

                                                                       31 May
                                                         2012             2011
                                                                        £'000
Loss for the year attributable to equity              (3,036)          (4,177)
shareholders
                                                               Pence per share
Basic and diluted loss per share                      (0.60)p          (0.82)p
                                                              Number of shares
Issued ordinary shares at start of the year       509,355,000      503,690,000
Ordinary shares issued in the year                          -        5,665,000
Issued ordinary shares at end of the year         509,355,000      509,355,000
Weighted average number of shares in issue        509,355,000      508,011,014
for the year.

The diluted loss per share does not differ from the basic loss per share as
the exercise of share options

would have the effect of reducing the loss per share and is therefore not
dilutive.



7. Oil and gas exploration assets





Exploration and evaluation expenses capitalised     £'000
Cost                                                     
Net book value at 31 May 2010                      2,437 
Additions 2011                                     1,585 
Net book value At 31 May 2011                      4,022 
Additions 2012                                     6,230 
Exchange Differences on translation                 (80) 
Impairment of unsuccessful expenditure              (64) 
Net book value at 31 May 2012                     10,108 
                                                         



All of the Group's operating expenses and other assets and liabilities are
derived from the exploration

and evaluation of hydrocarbon resources, unless stated otherwise in these
financial statements.









8. Property, plant and equipment

                              Office & computer equipment
Cost                                                £'000
Opening Balance                                        22
Additions                                             755
At 31 May 2011                                        777
Additions                                              49
At 31 May 2012                                        826
Depreciation
Opening Balance                                         4
Charge for the year                                    13
At 31 May 2011                                         17
Charge for the year                                   109
At 31 May 2012                                        126
Net Book Value at 31 May 2011                         760
Net Book Value at 31 May 2012                         700



9. Cash and cash equivalents

                          2012   2011
                         £'000  £'000
                                   
Cash at bank and in hand 6,692 12,547



10. Trade and other receivables

                                                     2012  2011
                                                    £'000 £'000
                                                             
Other receivables                                     122   590
Value added taxes                                     410    30
Prepayments                                           211 1,774
                                                      743 2,394
There were no financial assets overdue for receipt.



11. Trade and other payables

                                      2012  2011
                                     £'000 £'000
                                              
Trade payables                       2,304   465
Social security and other taxes         60    89
Accrued expenses and other creditors   208   923
                                     2,572 1,477







12. Share capital

                                 Shares      Nominal      Premium  Total
                                        Value (1.0p) net of costs
                                               £'000        £'000  £'000
Opening Balance 31 May 2010 503,690,000        5,037       16,390 21,427
Warrants exercised            5,665,000           57          397    454

                            509,355,000        5,094       16,787 21,881
31 May 2011 and 31 May 2012
                                                                      
                                                                      

The market price of the ordinary shares at 31 May 2012was 9.65p and the range
during the year was 4.125p to 12.75p.







13. Merger reserve

                              £'000
At 31 May 2011 and 31 May 2012   125



In October 2009, the Company acquired the entire issued share capital of the
recently incorporated KPHL by way of a share for share exchange with the then
shareholders of KPHL. The difference between the nominal value of the shares
issued by Kea Petroleum to the shareholders of KPHL and the nominal value of
the shares of KPHL taken in exchange has been credited to a merger reserve on
consolidation.







14.Share based payments

The Group has an unapproved share option plan for the benefit of
employees.Details of the number of share options and the weighted average
exercise price (WAEP) outstanding during the period are as follows:



                                             2012 WAEP        2011 WAEP
                                              Number Pence     Number pence
Outstanding at the beginning of the year  42,000,000  9.14 30,000,000  8.00
Granted during the year                       -          - 12,000,000 12.00
Forfeited during the year                (4,000,000)     -          -     -
Outstanding at the balance sheet date     38,000,000  8.84 42,000,000  9.14
Exercisable at the balance sheet date              -     -          -     -



The fair value of options granted has been arrived at using a Binomial model.
The assumptions inherent in the use of this model are as follows:



§ The option life is assumed to be at the end of the allowed period.

§ There are no vesting conditions.

§ No variables change during the life of the option (e.g. dividend yield).

§ Expected volatility was determined by calculating the weighted average share
price movement of 4 comparable companies. Expected life was based on the
contractual life of the options, adjusted, based on management's best
estimate, for the effects of exercise restrictions and behavioural
considerations.



Date of  Vesting Life  Exercise Risk-free Share   Volatility Fair    Number
grant    period  in    price    rate      price   of share   value   outstanding
         (Yrs)   years (pence)            at      price      (pence)
                 from                     grant
                 grant                    (pence)
                 date
15/02/10 Min 3    10     8.0      2.95%    9.15      85%     6.49     30,000,000
         years
07/01/11 Min 3    10     12.0     2.44%    14.5      85%     10.05    12,000,000
         years

The Group recognised total expenses of£1,069,514 (2011:£813,549) related to
equity-settled share based payment transactions during the year. A
corresponding credit has been made to the share option reserve. Further
details of share based payments are set out in the Remuneration Report.







15. Financial instruments and risk management



Risk management

The Group manages its capital to ensure that entities within the Group will be
able to continue as a going concern whilst maximising the return to
stakeholders through the effective management of liquid resources raised
through share issues. The principal risks faced by the Group resulting from
financial instruments are liquidity risk, foreign currency risk and, to a
certain extent, interest rate risk. The directors review and agree policies
for managing each of these risks and they are summarised below.



Capital risk management

The Group's objectives when managing capital are to safeguard the Group's
ability to continue as a going concern in order to provide returns for
shareholders and benefits for other members. The Group will also seek to
minimise the cost of capital and attempt to optimise the capital structure.
Currently no dividends are paid to shareholders and capital for further
development of the Group's products is achieved by share issues. The Group
does not carry significant debt.



Categories of financial instrument

                                         2012   2011
                                        £'000  £'000
Loans and receivables                             
- Cash and cash equivalents        6,692 12,547
- Trade receivables                    -      -
                                        6,692 12,547
Financial liabilities at amortised cost
- Payables                         2,304  1,476
                                                  

There is no material difference between the fair values and the book values of
these financial instruments. All financial liabilities are due within one
year.

Foreign currency risk

The cash balances carried within the Group comprise the following foreign
currency holdings:



             2012  2011
            £'000 £'000
NZ dollars  1,994 4,670
US Dollars  2,371 3,182
AUS Dollars   180 1,305
            4,545 9,157



The Group operates within the UK and New Zealand. All transactions are
denominated in Sterling, NZ Dollars or US dollars. As such the Company is
exposed to transaction foreign exchange risk. The mix of currencies and terms
of trade are such that the directors believe that the Company's exposure is
minimal and consequently they do not specifically seek to hedge that
exposure. A significant portion of the Group's funds are in Sterling with
only sufficient funds held overseas to meet local costs. Funds are
periodically transferred overseas to meet local costs when required.



The table below demonstrates the sensitivity of the Group's consolidated loss
before tax to reasonably possible changes in the value of the US dollar and
the NZ Dollar with respect to Sterling, all other variables held constant.
The sensitivity analysis includes only the US dollar and NZ Dollar because the
effect of other currencies is not significant. The sensitivities reflect only
those changes in consolidated loss before tax that arise from translation of
the value of US dollar and NZ dollars denominated financial assets and
liabilities.



                                                                Effect on loss
     Change in value  Effect on loss before tax Change in value before tax and
       of USD vs. £                 and equity   of NZD vs. £         equity
                  %                      £'000               %          £'000
                                                                          
2012              10                        237              15            299
2011              15                        477              15            700



Interest rate risk

The Group finances its operations through equity fundraising and therefore
does not carry significant borrowings. Interest rate risk is therefore
considered to be immaterial. The Group's cash balances and short term deposits
are held at floating interest rates based on LIBOR and are reviewed to ensure
maximum benefit is obtained from these resources. Risk is additionally reduced
by ensuring two or more banks are used for deposits.



Liquidity risk

The Group is dependent on equity fundraising through private placing which the
directors regard as the most cost effective method of fundraising. The
directors monitor cash flow on a daily basis and at monthly board meetings in
the context of their expectations for the business to ensure sufficient
liquidity is available to meet foreseeable needs.



16. Capital commitments



As at 31 May 2012 the Group had no capital expenditure commitments. The terms
of the petroleum exploration permits which the Group holds require it to carry
out certain exploration activities within specified time frames. The actual
costs of these activities are dependent on a number of factors including the
scope of the work and whether farm out or similar arrangements are entered
into with other parties. Estimated commitments for the minimum exploration
work program obligations are as follows:



Within 1 year

· PEP 52333 Acquire 100 square km marine seismic over the Mercury
prospect - £1,225,000

· PEP 381204 Drill Mauku 1 exploration well - £3,900,000

· PEP 51155 Onshore Taranaki; Acquire seismic to value -
£730,000

Later than 1 year but not later than 5 years

· PEP 51155 Onshore Taranaki; Drill one additional well and collect
geochemistry and gravity samples - £875,000



17. Subsidiary companies consolidated in these accounts and associates



                 Country of    % interest in ordinary shares at 31 Principal
                 incorporation May 2012                            activity
Kea Petroleum      New Zealand                                 100 Oil and gas
Holdings Limited                                                   exploration
Kea Exploration    New Zealand                                 100 Oil and gas
Limited                                                            exploration
Kea Oil and Gas    New Zealand                                 100 Oil and gas
Limited                                                            exploration
Kea Australia        Australia                                 100 Oil and gas
                                                                   exploration
Kea Oil and Gas    New Zealand                                 100     Dormant
(Kahili) Limited



18. Operating lease commitments



At the balance sheet date, non-cancellable outstanding operating lease rentals
are payable as follows:

                     2012  2011
                    £'000 £'000
Land and buildings:          
One year              117   117
Two to five years     117   234
                      234   351



The lease is on the property at 5-8 The Sanctuary in London and rental and
service charge are payable in advance on a quarterly basis. The lease expires
in July 2016, with the option of a break clause in July 2014.





19. Related party transactions

The New Zealand head  office previously operated  from premises in  Wellington 
that were  leased  from  a trust  in  whom  DJ  Bennett is  a  trustee  and  a 
beneficiary. The lease terms and conditions were at arm's length.

During the period Ventutec Limited, a company in which DJ Lees is a  director, 
charged an amount of £684 (2011:  £1,057) for web based services. The  balance 
outstanding at year end was nil.





20. Events after the balance sheet date

In August 2012 the Company flow tested the Puka-1 well achieving maximum flow
rates of 310 bopd.

In August 2012 officers and staff members exercised 480,000 warrants at 8p
each.

In September 2012 a total of 38,232,500 warrants of 8p were exercised.

In October 2012 the Company appointed Richard Parkes as a Director.

In October 2012 Dr John Conolly decided not to stand for re-election as a
Director.

                     This information is provided by RNS
           The company news service from the London Stock Exchange

END


FR BXBDGBSXBGDG -0- Oct/30/2012 13:46 GMT
 
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