Serica Energy plc (SQZ) - Q3 2012 Results RNS Number : 0490R Serica Energy plc 14 November 2012 Serica Energy plc ("Serica" or the "Company") Q3 2012 Results London, 14 November 2012 - Serica Energy plc (TSX & AIM: SQZ) announces its financial results for the three and nine months ending 30 September 2012. The results and associated Management Discussion and Analysis are included below and copies are available at www.serica-energy.com and www.sedar.com. Highlights: Serica has continued to make good progress in developing its portfolio during the third quarter and subsequent period to date: The Company: o reached agreement to farm-out its interests in the Moroccan offshore blocks Foum Draa and Sidi Moussa to Cairn Energy and Genel Energy respectively, with potential for drilling in 2013 o completed the largest single continuous offshore 3D seismic survey in Namibia with excellent quality results, processing of data is now underway o received DECC notice that it is content with Columbus Development Plan and that, subject to certain standard conditions, the Secretary of State is minded to issue consent to the plan o completed the farm-out of its 100% interest in UK North Sea Block 22/19c to JX Nippon o commenced the farm out process for its blocks in the Irish Rockall Basin containing the largeMuckish prospect o ended the quarter with no debt and US$25.1 million unrestricted cash balance Forward prospects: Serica has valuable properties in the UK, Norway, offshore Ireland and offshore West Africa and has received a number of proposals relating to these assets. Whilst Serica's focus is on building and realising the full potential of its business for the benefit of shareholders, the Company is carefully and objectively in line with its previously stated strategy and in the normal course of business, evaluating all proposals which might provide a means of accelerating the value of the Company's assets and enhancing shareholder value whilst also preserving the unrealised upside for future growth. Tony Craven Walker, Chairman and Interim CEO of Serica commented: "Serica has continued to make strong progress throughout Q3 both operationally and through our active asset management programme, which has led to a number of commercial opportunities and transactions. In the year to-date we have reached farm-out agreements with a number of high quality partners, resulting in benefits to Serica of approximately US$40 million. We continue to focus on unlocking the value of the portfolio and realising the potential of the business for shareholders. We recently received support from DECC over Serica's Development Plan for the Columbus field, subject to certain standard conditions. This support is a major part of the sanction process for the field and enables the Company to proceed with the evaluation of financing alternatives. Another important milestone for the Company was the successful completion of a 4,180 km2 3D seismic survey in our Luderitz Basin block, offshore Namibia. The data is of exceptional quality and will allow us to gain further insight into this largely unexplored basin. The good progress achieved in developing the Company's portfolio and accelerating the value of individual properties places the Company in an increasingly strong position to grow its asset base for the benefit of shareholders. Serica is evaluating a number of opportunities to crystallise further value for shareholders." Enquiries: Serica Energy plc Tony Craven Walker, email@example.com +44 (0)20 Chairman 7487 7300 Peter Sadler, Business firstname.lastname@example.org +44 (0)20 Development Director 7487 7300 Chris Hearne, CFO email@example.com +44 (0)20 7487 7300 J.P.Morgan Cazenove Michael Wentworth firstname.lastname@example.org +44 (0)20 Stanley 7588 2828 RBC Capital Markets Matthew Coakes email@example.com +44 (0)20 7653 4871 College Hill Matthew Tyler firstname.lastname@example.org +44 (0)20 7457 2020 Catherine Wickman email@example.com +44 (0)20 7457 2020 Alexandra Roper firstname.lastname@example.org +44 (0)20 7457 2020 The technical information contained in the announcement has been reviewed and approved by Peter Sadler, Business Development Director of Serica Energy plc. Peter Sadler is a qualified Petroleum Engineer (MSc Imperial College, London, 1982) and has been a member of the Society of Petroleum Engineers since 1981. NOTES TO EDITORS Serica Energy was formed in 2004 and, since then, has drilled in locations as diverse as the UK Offshore, the Atlantic margin offshore Ireland, offshore Indonesia (North West Sumatra, East Kalimantan and Java) and offshore Vietnam. Seventeen wells were drilled by the Company as Operator, fourteen of the wells encountered oil or gas and six of these were commercial. The first of the commercial discoveries, the Kambuna field in North West Sumatra, was developed by the Company. The second, the Columbus field in the UK North Sea, is now in the pre-development stage with project sanction pending. The Company also has a residual economic interest in the Bream oil field offshore Norway, which will be crystallised when the field is developed, and licence interests offshore Ireland, Morocco and Namibia. The Company is listed on both the Toronto Stock Exchange and the London AIM under the ticker SQZ. To receive Company news releases via email, please contact email@example.com and specify "Serica press releases" in the subject line. FORWARD LOOKING STATEMENTS This disclosure contains certain forward looking statements that involve substantial known and unknown risks and uncertainties, some of which are beyond Serica Energy plc's control, including: geological, geophysical and technical risk, the impact of general economic conditions where Serica Energy plc operates, industry conditions, changes in laws and regulations including the adoption of new environmental laws and regulations and changes in how they are interpreted and enforced, increased competition, the lack of availability of qualified personnel or management, fluctuations in foreign exchange or interest rates, stock market volatility and market valuations of companies with respect to announced transactions and the final valuations thereof, and obtaining required approvals of regulatory authorities. Serica Energy plc's actual results, performance or achievement could differ materially from those expressed in, or implied by, these forward looking statements and, accordingly, no assurances can be given that any of the events anticipated by the forward looking statements will transpire or occur, or if any of them do so, what benefits, including the amount of proceeds, that Serica Energy plc will derive therefrom. MANAGEMENT'S DISCUSSION AND ANALYSIS The following management discussion and analysis ("MD&A") of the financial and operational results of Serica Energy plc ("Serica") and its subsidiaries (together the "Group") contains information up to and including 13 November 2012 and should be read in conjunction with the attached unaudited interim consolidated financial statements for the period ended 30 September 2012, which have been prepared by and are the responsibility of the Company's management and have not been reviewed by the Company's independent auditors. References to the "Company" include Serica and its subsidiaries where relevant. All figures are reported in US dollars ("US$") unless otherwise stated. The results of Serica's operations detailed below in this MD&A, and in the financial statements, are presented in accordance with International Financial Reporting Standards ("IFRS"). OVERVIEW - QUARTER ENDED 30 SEPTEMBER 2012 Highlights Serica has continued to advance throughout the third quarter both operationally and through active asset management leading to a number of commercial transactions. During the third quarter and subsequently to-date, the Company: · Reached agreements to farm-out two offshore blocks in Morocco for the drilling of two deep water wells. · Completed the largest single continuous offshore 3D survey in Namibia as operator with excellent quality results. Processing of the data is now underway. · Reached agreement to farm-out one block in the North Sea. · Participated in the drilling of the Spaniards East well to test the potential of the Spaniards discovery. The well encountered Jurassic sands but these were water bearing. · Commenced the farm-out process for its blocks in the Irish Rockall Basin which includes the Muckish prospect. The Company has also recently received notice from the Department of Energy & Climate Change ("DECC") that the Department is content with the Development Plan submitted by Serica for the Columbus field and that, subject to certain conditions, the Secretary of State is minded to issue consent for the development and production of the field in accordance with that plan. This support from DECC is a major part of the sanction process for the field, has been received in the time expected and enables the Company to proceed with the evaluation of financing alternatives. The good progress achieved in developing the Company's portfolio and accelerating the value of individual properties, which continued throughout the quarter, places the Company in an increasingly strong position to grow its asset base for the benefit of shareholders. The Company is evaluating a number of opportunities to crystallise further value for shareholders. In addition to the farm-out process which has now commenced in relation to the Company's Rockall Basin blocks in Ireland discussions are taking place which could lead to a farm-out of the Company's interest in the Doyle prospect in the East Irish Sea. The Company is also evaluating opportunities to accelerate value in relation, in particular, to its interest in the Columbus field. Financial Serica is committed to careful and prudent management of its financial resources. Coupled with the Company's programme of selected asset management this has enabled the Company to contain expenditures whilst adding material value to its underlying assets. · The Company ended the third quarter with no debt and an unrestricted cash balance of US$25.1 million. · Farm-out agreements reached during the year to-date have brought resultant benefits to Serica in the form of capital carries for the Company's retained interests totalling approximately US$40 million. · The cash balances, combined with the benefits of the successful farm-outs, provide adequate resources to meet the Company's near and medium term exploration commitments, including the recent Spaniards East well where Serica is contributing 30% of the drilling cost, expected to amount to approximately US$7 million. · Evaluation of financing alternatives for the Company's interest in the Columbus field development continues in parallel with the sanctions process. The Company expects to extend its currently undrawn US$50 million facility and is reviewing options open to the Company for the provision of alternative debt finance to supplement capital requirements. · During the third quarter the Kambuna field contributed sales revenue of US$3.5 million net to Serica. Operations The following gives chronological highlights of operational and asset management events during the third quarter and subsequently to-date. · On 23 August, Serica announced an agreement to farm-out its interest in the Sidi Moussa block offshore Morocco to Genel Energy in consideration for a US$433,000 contribution to Serica's past costs and the funding of a well up to a gross cap of US$50 million. Serica retains a 5% working interest in the block. · On 23 August, Premier Oil, a participant in the Bream offshore oil field in Norway, reported that the Bream project is expected to be submitted for government approval in the second half of the year and that a number of contracts are under tender for the facilities and drilling programme. The actual timing is uncertain but Serica has a significant economic interest in the Bream field and is due a substantial payment on commencement of production. · On 28 August, Serica announced an agreement to farm-out its interest in the Foum Draa block offshore Morocco to Cairn Energy in consideration for a US$500,000 contribution to Serica's past costs and the funding of a well up to a gross cap of US$60 million. Serica retains an 8.33% working interest in the block. Taken together with the Sidi Moussa farm-out this substantially removes downside cost and risk to Serica shareholders whilst retaining meaningful interests in two deep water wells to be drilled in a new exploration area which shows great promise. Subject to rig availability the wells are likely to be drilled in late 2013 or early 2014. · On 18 September, Serica announced an agreement to farm-out its interest in North Sea block 22/19c to JX Nippon in consideration for a payment to Serica of US$250,000 and a carry of Serica's 15% retained share of all future costs associated with the block including, at JX Nippon's discretion, the drilling of an exploration well to the Jurassic or deeper. The transaction was given DECC approval and completed on 22 October. · On 1 October, Serica announced that it had successfully completed a 4,180 square kilometre 3D seismic survey in its Luderitz Basin blocks, offshore Namibia. The full costs of this survey were met by BP under a farm-out agreement which was announced earlier in the year. Processing of the extensive information acquired, which is of excellent quality, has commenced. Serica has a 55% working interest in these blocks. · On 2 October, notice was received from DECC that the Department is content with the Development Plan for the Columbus field and that, subject to certain standard conditions (including the completion of funding arrangements for the project), the Secretary of State is minded to issue consent for the development and production of the Columbus field in accordance with that plan. · On 2 October, BG as Operator for the Lomond Bridge Linked Platform ("BLP"), issued invitations to tender in respect of the BLP. The tenders are a requirement for the BLP sanction process. The BLP is the main export route for gas and gas condensate production from the Columbus field. · On 15 October, Serica announced the commencement of drilling on the Spaniards East well 15/21a-60 to appraise the area adjacent to the Spaniards oil discovery in the central North Sea in which the Company has a 21% interest. In November it was announced the well reached a total depth of 10,694 feet and was plugged and abandoned. The well, operated by Premier Oil, encountered 75 feet of Jurassic sands but these were interpreted to be water bearing. · On 2 November, Serica announced that it had allotted six million new ordinary shares of Serica to National Petroleum Corporation of Namibia (Pty) Limited ("NAMCOR"). The share issue, which was subject to ministerial consents in Namibia, is the outstanding signature payment due to NAMCOR following the award of the Luderitz Basin licences to Serica earlier in the year. Following the allotment, NAMCOR holds approximately 3.3% of Serica's issued share capital. Management · On 5 September, Serica announced that Mitch Flegg, Serica's Chief Operating Officer, became an Executive Director of the Company. Mitch has been Chief Operating Officer for Serica since March 2011. Forward Prospects Serica has valuable properties in the UK, Norway, offshore Ireland and offshore West Africa and has received a number of proposals relating to these assets. Whilst Serica's focus is on building and realising the full potential of its business for the benefit of shareholders, the Company is carefully and objectively, in line with its previously stated strategy and in the normal course of business, evaluating all proposals which might provide a means of accelerating the value of the Company's assets and enhancing shareholder value whilst also preserving the unrealised upside for future growth. In the North Sea, the Company is pleased to have received indication that project sanction is expected to be granted, subject to certain standard conditions, for the Columbus field development, which Serica operates. The required export infrastructure is expected to be in place to enable field development to proceed as planned in 2013/14 with production to commence by mid 2015. The Company looks forward to bringing this project onto production but is also keeping under review ways of bringing forward the full value of the project for the benefit of shareholders. In parallel with ongoing discussions to secure debt finance for field development, Serica is therefore evaluating the possibility of a sale of an interest in the field and has received expressions of interest. Such a sale, if concluded, would be consistent with the Company's strategy to optimise the value of its assets but would also provide Serica with additional funds with which to expand its business. Serica is very well placed to demonstrate further the clear potential of its portfolio of properties and prospects, both in the North Sea and in emerging Atlantic margin basins, and will continue to seek ways to unlock value and build on this position. DETAILED OPERATIONS OVERVIEW Serica is an oil and gas company with exploration and development activities based in the UK, Ireland, Namibia and Morocco, together with a production interest in the Kambuna field in Indonesia and an economic interest in an oilfield offshore Norway. The Company operates a large proportion of its licences. In the UK it is the development operator of the Columbus field. It operates all of its East Irish Sea licences and Northern North Sea Blocks 210/19a and 210/20a. In Namibia it is operator for its Luderitz Basin blocks where it has successfully completed one of the largest continuous 3D offshore seismic surveys in Namibia to-date. In Morocco, pending completion of the farm-outs to Genel Energy and Cairn Energy, it is technical operator for the Foum Draa and Sidi Moussa Blocks. In Ireland it operates twelve blocks in the Rockall Basin and three in the Slyne Basin. This places Serica in a very strong position to unlock the value in its properties. Serica's business activities are focussed in two separate hubs - the UK Offshore area, including an economic interest in the Bream field in Norway, and a substantial portfolio of properties in four distinct Atlantic margin basins. The Company retains an interest in the producing Kambuna field in Indonesia which is nearing the end of its economic producing life. Serica is positioned as a Company with no debt, a development project, near term drilling in the UK and overseas, and an expanding position in new Atlantic Margin plays offshore Europe and Africa which hold great potential. During the third quarter of 2012 the Company continued to make major steps to demonstrate the value of its oil and gas and exploration licences. SUMMARY OF LICENCE HOLDINGS The following summary gives further detailed information on Serica's licence interests in which activities took place during, and subsequent to, the end of the third quarter. United Kingdom Central North Sea: Block 23/16f - Columbus Field Development The Columbus field, containing gas rich in condensates, extends from Block 23/16f to the south into Block 23/21, operated by BG International Limited ("BG"), which includes the Lomond platform and the producing Lomond field. During the first quarter of 2012 all participants in the Columbus field reached agreement on the cost and production sharing arrangements and the detailed terms to provide access for the Columbus field production through the Lomond platform and the CATS and Forties pipeline systems. Under the cost sharing arrangements the participants in the Columbus field (other than BG) will be responsible for the drilling of two production wells, the installation of sub-sea manifolds and the laying of a pipeline to take the two-phase gas and gas-condensate stream to a new Bridge Linked Platform ("BLP") to be constructed by BG adjacent to the Lomond platform. BG will be responsible for the construction and operation of the BLP and provide access for the Columbus field production through the BLP and Lomond facilities. The tariff and cost sharing terms for the BLP and Lomond facilities reflect these cost sharing arrangements. Serica will be the Operator for the Columbus field facilities with an interest of 33.2%. These agreements enable the Columbus project to proceed to project sanction. Application has been made to DECC on schedule for the grant of project sanction which will enable discussions on project financing to be completed. In October, notice was received from DECC that the Department is content with the Development Plan for the Columbus field and that, subject to certain standard conditions (including the completion of funding arrangements for the project), the Secretary of State is minded to issue consent for the development and production of the Columbus field in accordance with that plan. Field development is planned to be completed by the end of 2014 with field production in mid 2015 following installation of the BLP and subsequent hook-up to the Columbus sub-sea system. Independent consultant Netherland, Sewell & Associates ("NSAI") carried out a reserves report on the Columbus field for the end of 2011. This report estimated that the gross Proved plus Probable Reserves of the field are 70.6 bcf of gas and 4.9 mm bbl of liquids, a total of 16.7 mmboe. Serica holds a 50% interest in those Columbus reserves lying in Block 23/16f. After providing for reserves lying in the adjacent Block, NSAI estimates the Company's share of proved and probable reserves in the field to be 23.6 bcf of sales gas and 1.6 mmbbl of liquids, a net 5.6 mmboe to Serica. Central North Sea: Block 15/21g and 15/21a (part) - Spaniards Appraisal In January 2012 an agreement was finalised with the participants of Block 15/21a, which contains the Spaniards oil discovery, to combine the area of Block 15/21a covering the discovery with neighbouring Block 15/21g in which Serica had a 30% interest. As a result of this transaction Serica has a 21% interest in the amalgamated area including the Spaniards discovery. In early October the Operator, Premier Oil plc ("Premier"), spudded Spaniards East well 15/21a-60 to evaluate the down-dip potential of the Spaniards accumulation some 1.2 kilometres to the east of the discovery well. Serica is contributing a 30% share of the drilling cost of the well, with the bulk of this cost being incurred in the fourth quarter. On 6 November, it was announced that the well had encountered 75 feet of Jurassic sands but these were interpreted to be water bearing from the log data and the well was, accordingly, being plugged and abandoned. The well was drilled to a total depth of 10,694 feet. Whilst a full analysis of the well results will be required before a final conclusion can be reached, the initial interpretation now indicates that the accumulation is likely to be confined to a more limited area around the original discovery well. Central North Sea: Block 22/19c In September 2012, Serica announced that it has reached agreement with JX Nippon Exploration and Production (U.K.) Limited ("JX Nippon") for the farm-out of UK Central North Sea Block 22/19c (Licence P.1620), in which Serica presently holds a 100% interest. The transaction was given DECC approval and completed on 22 October.Under the agreement, JX Nippon will acquire an operated 85% interest in the licence, with Serica retaining 15%. As consideration, JX Nippon will pay to Serica US$250,000 and carry Serica's share of all future costs associated with the licence up to and including, at JX Nippon's discretion, the drilling of an exploration well to the Jurassic or deeper.Serica had previously participated in the drilling of the Oates, Palaeocene Forties sand prospect in 22/19c, with its costs carried by Premier.Following lack of success at Oates, Premier relinquished its interest in the licence which was retained by Serica.It is the prospectivity of deeper, older strata which is now being pursued. Northern North Sea: Blocks 210/19a and 210/20a - South Otter Prospects These blocks, in which Serica has a 100% interest, are a contiguous block and part block lying immediately south of the producing Otter oilfield. A number of oil prospects have been provisionally identified at Jurassic Brent Group and Home Sand levels. Two of the Brent Group prospects are down-faulted traps and the other is a conventional Brent fault block. The fourth prospect is in a Jurassic reservoir known as the Home Sand. Drilling of the South Otter blocks remains subject to an ongoing farm-out programme. East Irish Sea: Blocks 113/26b and 113/27c - Doyle Prospect Serica has a 65% operated interest in these blocks. A gas prospect lying in the north of Block 113/27c, the Doyle prospect, has been fully matured as the result of work done in 2011 and is ready to drill. In line with its risk management policy, Serica is in substantive discussions with a view to farming out its interest in the block for transfer of operatorship and a carry on a well to test the Doyle prospect. Plans for the well to be drilled are held pending the final outcome of the UK 27^th Licensing Round, with adjacent open acreage among many blocks as yet not awarded. East Irish Sea: Block 110/8b In December 2011, Serica was awarded a 100% interest and the operatorship of Block 110/8b. The work commitment comprises a 3D seismic reprocessing programme, planned to delineate the Darwen North gas prospect which has been identified in the block. This work is ongoing. The block also contains a small undeveloped oil discovery which will be re-evaluated. Southern North Sea: Blocks 47/2b (Split), 47/3g (Split), 47/7 (Split) & 47/8d (Part) In December 2011, Blocks 47/2b (Split), 47/3g (Split), 47/7 (Split) & 47/8d (Part) in the Southern North Sea were offered under a single licence to a group in which Serica has a 37.5% interest. Centrica is the Operator for the group. These blocks are contiguous part blocks immediately adjacent to the York field, also operated by Centrica. A number of gas prospects, including a possible extension to North York, have been identified on the blocks at both the Leman (Permian) and Namurian (Carboniferous) levels. The work obligation comprises a 3D seismic acquisition survey and reprocessing of existing seismic data. The 3D seismic survey is planned to be undertaken by the partnership in 2013. Norway Serica holds a significant economic interest in the Bream oil field in Norway as the result of the sale, in 2008, of its original 20% interest in the field for a deferred consideration payable upon commencement of production from the field. The field operator announced plans in the second quarter for the drilling of up to seven development wells to commence in the fourth quarter of 2013 and last for about 13 months. It has recently been reconfirmed by a field participant that contracts are under tender for the facilities and wells ahead of formal project sanction however, the actual timing of development is uncertain. Ireland Rockall Basin: Blocks 5/17, 5/18, 5/22, 5/23, 5/27, and 5/28 - Muckish Prospects and Blocks 11/5, 11/10, 11/15, 12/1, 12/6 and 12/11(part) - Midleton and West Midleton Prospects Serica holds a 100% working interest in two licences covering twelve blocks and part blocks over an area totalling 2,220 square kilometres in the north-eastern part of the Rockall Basin in the Atlantic margin off the west coast of Ireland. The presence of a hydrocarbon system in the Basin has been proven by the Dooish gas-condensate discovery. A large exploration prospect, Muckish, has been mapped in Blocks 5/22 and 5/23. Further evaluation of 3D seismic data coverage and the Dooish gas-condensate discovery lying nearby to the south east, gives confidence in the potential of the prospect which covers an area of approximately 30 square kilometres with over 600 metres of vertical closure in a water depth of 1,450 metres. Blocks 11/10 and 12/6 contain two further pre-Cretaceous fault block prospects, Midleton and West Midleton, identified from existing 3D seismic data. Like Muckish these are analogous to the nearby gas-condensate bearing Dooish discovery. Serica is undertaking 2D and 3D seismic reprocessing work and other geological studies to firm up these two additional prospects. A farm-out programme in preparation for drilling the large, high potential Muckish prospect has commenced and is ongoing. Slyne Basin: Blocks 27/4, 27/5 (west) and 27/9 - Liffey & Boyne Prospects These blocks cover an area of 305 square kilometres in the Slyne Basin off the west coast of Ireland. The Company holds a 50% interest in the blocks and operates the Licence. In 2009, Serica drilled the Bandon exploration well 27/4-1 and made a shallow Jurassic oil discovery. The early drilling of this well met the licence obligations for both the first and second exploration periods. Although the discovery was not commercial the well was important as it proved the presence of oil in the Jurassic. Deeper Jurassic oil prospects of potentially commercial size, where the oil would be of much higher quality, have subsequently been identified including two prospects, Liffey and Boyne which also overlay separate, deeper gas prospects in the Triassic Sherwood sandstone. The Company has acquired site survey data in preparation for a drilling programme to test these prospects. Namibia Luderitz Basin: Blocks 2512A, 2513A, 2513B and 2612A (part) In late December 2011, Serica was awarded an 85% interest in a Petroleum Agreement covering Blocks 2512A, 2513A, 2513B and 2612A (part) in the Luderitz Basin, offshore Namibia in partnership with The National Petroleum Corporation of Namibia (Pty) Limited ("NAMCOR") and Indigenous Energy (Pty) Limited. The blocks lie in the centre of the basin and cover a total area of approximately 17,400 square kilometres. During 2012 the Company has completed all payments due to NAMCOR in respect of the initial licence award. These payments comprised an initial cash payment of US$1 million, which was made in January 2012, and a share allotment to NAMCOR of six million new ordinary shares of Serica, which was announced on 2 November 2012. The allotment, which represents 3.28% of the enlarged share capital, was made once NAMCOR received the required consents from the Namibian authorities. During the third quarter the Company successfully completed a major offshore survey in the Luderitz Basin blocks with a final acquisition of 4,180 square kilometres of 3D seismic data to fully delineate prospects identified in the south east of the blocks. The survey, conducted by Serica on behalf of its partners in the Licence, BP, NAMCOR and IEPL, commenced in May and took four and a half months to complete. The survey was undertaken by Polarcus Seismic Limited using the 10-streamer seismic vessel Polarcus Nadia. The completion of this survey more than meets in full the obligations for seismic acquisition under the terms of the licence. The completion of this extensive survey, only nine months after the award of the licence, is an important step in the exploration of this largely unexplored basin. The data is of exceptional quality and has been acquired in the south east of the licence area over a clearly defined prospect which is located in a good setting for potential reservoir development.The data includes a tie line to provide control with existing well 2513/08-1 in which good reservoir sands were encountered in the blocks and is now being processed fully to delineate the prospect and to identify additional prospects associated with locally present channel sands.Initial results are expected to be available around the end of the year and will be amalgamated with regional geological information prior to determining a forward drilling programme. Under the terms of the farm-out to BP, completed during the second quarter, Serica reduced its interest in the licence to 55% in return for a payment to recover past costs and the full cost of the survey being met by BP. Serica has also granted an option for BP to increase its interest in the licence further by meeting the full cost of drilling and testing a deep-water exploration well to the Barremian level before the end of the first four year exploration period. In the event that this option is exercised by BP, the Company's interest in the licence will be 17.5% carried through drilling and testing the first well. Serica will continue to be the Operator of the licence during the initial seismic period with BP taking over as Operator if it exercises its option to drill and test a well. Morocco Sidi Moussa and Foum Draa Petroleum Agreements Serica holds licence interests in the Sidi Moussa and adjacent Foum Draa Petroleum Agreements offshore Morocco. The blocks cover a total area of approximately 12,700 square kilometres in the sparsely explored Tarfaya-Ifni Basin and extend from the Moroccan coastline into water depths reaching a maximum of 2,000 metres. Under the terms of the licence agreements the participants are required to carry the state oil company ONHYM for a 25% interest through the exploration and appraisal phase. The Tarfaya-Ifni Basin is geologically analogous to the oil producing salt basins of West Africa and exhibits significant potential. Sidi Moussa and Foum Draa are covered by over 5,200 square kilometres of modern 3D seismic data and over 7,000 kilometres of 2D seismic data. Serica has completed the evaluation of this data which demonstrates the presence of a large number of salt diapir related prospects, stratigraphic traps and tilted fault block plays. During the second quarter, Serica, in conjunction with its partners, conducted a farm-out exercise in respect of both blocks. This generated considerable industry interest and reached a successful conclusion with the announcements in August of farm-out deals for both blocks. Sidi Moussa Subject to the consent of the Moroccan Authorities, Genel Energy plc ("Genel") will bejoining Sericaand its partners in the exploration of the set of permits which comprise the Sidi Moussa Offshore area.Under the terms of the transaction, Genel will acquire a 60% equity interest in Sidi Moussa, pro rata from each of the Sidi Moussa Participants according to its equity interest. In return Genel will pay a contribution to past costs (US$433,000 net to Serica) and pay for the drilling of the commitment well required in the First Extension Period (including the full costs relating to the ONHYM carried interest), up to a cap of US$50 million.As a result of the farm-out, Serica will hold an ongoing interest of 5% in the Sidi Moussa permits. Confirmation from the Moroccan authorities approving the farm-out to Genel and the commencement of the First Extension Period, which entails the drilling of a commitment well, is anticipated shortly. It is expected that the well will be drilled in late 2013 or early 2014. Foum Draa Subject to the consent of the Moroccan Authorities, Cairn Energy plc "Cairn" will be joining Serica and its partners in the exploration of the set of permits which comprise the Foum Draa Offshore area. Under the terms of the transaction, Cairn will acquire a 50% operated equity interest in Foum Draa, pro rata from each of the Foum Draa Participants according to its equity interest. In return Cairn will pay its equity interest share of past costs (US$500,000 net to Serica) and the first US$60 million towards the drilling of the commitment well required in the First Extension Period (including the costs relating to the ONHYM carried interest). As a result of the farm-out, Serica will hold an ongoing interest of 8.3333% in the Foum Draa permits. Confirmation from the Moroccan authorities approving the farm-out to Cairn and the commencement of the First Extension Period, which entails the drilling of a commitment well, is anticipated shortly. It is expected that the well will be drilled in late 2013 or early 2014. Indonesia Glagah Kambuna TAC - Kambuna Field, Offshore North Sumatra, Indonesia Serica's sole remaining interest in Indonesia is its 25% interest in the Glagah Kambuna Technical Assistance Contract ("TAC") offshore North Sumatra which contains the producing Kambuna gas field. Whilst the Company continues to benefit from the cash flow it receives from this field, it does not consider the asset to be core to its forward strategy. The Kambuna field has commenced its natural decline and production rates are falling in line with reservoir pressure depletion. The partnership is reviewing areas where cost cutting can prolong the economic life of the field but, under current projections, the field is expected to reach the end of its economic life in early 2013. During this final phase, the timing of field handover to Pertamina and hence the remaining volume of reserves to be produced, are dependent both upon commercial considerations and termination arrangements. Based on the outcome of these issues, a final adjustment to the asset carrying value may be made in the Company's full year accounts when it is anticipated that these matters will have been clarified. During the third quarter the field produced at an average rate of 14.3 mmscfd (Q3 2011: 36.4 mmscfd) with approximately 836 bpd of condensate (Q3 2011: 2,342 bpd). Average prices realised during the quarter for gas and condensate sales respectively were US$6.56 per mcf (Q3 2011: US$6.1 per mcf) and US$108.1 per barrel (Q3 2011: US$116.9 per barrel). The highest price achieved during 2012 is US$130 per barrel, achieved in March. Serica commissioned an independent reserves audit on the Kambuna field for its 2011 annual reserves filings. This reserves report, carried out by RPS Energy, the same consultants as used by the Operator, estimates that at 31 December 2011 the gross Proved plus Probable Reserves of the field are 17.5 bcf of sales gas and 1.1 mm bbl of condensate, a total of 4.7 mmboe. In view of the anticipated near term depletion of the field, which is expected to occur in 2013, the Company bases its financial planning and reporting for the Kambuna field on Proved reserves only, which RPS Energy estimated to be, at 31 December 2011, 11.2 bcf of sales gas and 0.6 mm bbl of liquids, a total of 2.9 mmboe. FINANCIAL REVIEW A detailed review of the Q3 2012 results of operations and other financial information is set out below. Results of Operations The results of Serica's operations detailed below in this MD&A, and in the financial statements, are presented in accordance with International Financial Reporting Standards ("IFRS"). The continuing operations comprise the core business hubs of the UK Offshore and Atlantic Margin basin interests, together with the Kambuna field interest in Indonesia. Discontinued operations comprise the Indonesian exploration business disposal group that was sold in October 2011. The financial results of the Kambuna field interest had previously been disclosed in the Q2 2011 and Q3 2011 reports to shareholders as part of discontinued operations but are now disclosed within continuing operations together with the results of the retained core business segments. The three and nine month ended 30 September 2011 financial results detailed below have therefore been restated to only disclose the Indonesian exploration business disposal group as 'discontinued'. Three months ended Nine months ended 30 September 30 September Restated* Restated* 2012 2011 2012 2011 US$000 US$000 US$000 US$000 Continuing operations Sales revenue 3,493 6,579 11,948 21,769 Cost of sales (4,609) (6,235) (13,785) (18,700) Gross (loss)/profit (1,116) 344 (1,837) 3,069 Expenses: Pre-licence costs (6) (192) (251) (1,061) E&E and other asset write offs (382) - (518) - Administrative expenses (1,213) (1,338) (3,968) (4,339) Foreign exchange gain 130 (78) 236 11 Share-based payments (115) (208) (435) (674) Depreciation (85) (87) (254) (262) Operating loss before net finance revenue and taxation (2,787) (1,559) (7,027) (3,256) Gain on disposal - - 1,023 - Finance revenue 4 2 8 12 Finance costs (124) (186) (464) (1,218) Loss before taxation (2,907) (1,743) (6,460) (4,462) Taxation charge - (1,603) - (2,512) Loss for the period (2,907) (3,346) (6,460) (6,974) from continuing operations Discontinued operations Loss for the period from discontinued operations - (624) - (5,836) Loss for the period (2,907) (3,970) (6,460) (12,810) Earnings per share (EPS) US$ US$ US$ US$ Basic and diluted EPS on loss from (0.02) (0.02) (0.04) (0.04) continuing operations Basic and diluted EPS on loss for the (0.02) (0.02) (0.04) (0.07) period * Restated for discontinued operations Continuing operations Serica generated a gross loss of US$1.1 million for the three months ended 30 September 2012 ("Q3 2012") from its retained 25% interest in the Kambuna field (Q3 2011: gross profit of US$0.3 million). Sales revenues The Company currently generates all its sales revenue from the Kambuna field in Indonesia. Revenue is recognised on an entitlement basis for the Company's net working field interest. Entitlement revenues are higher in those periods where the full capped amount of cost recovery entitlement is eligible to be claimed out of gross revenue. In the 2011 periods, the cycle of eligible cost recovery was such that the full capped amount of cost recovery could not be claimed by the contractors, therefore giving lower contractor entitlement revenues and an increased government share of gross revenue. Unclaimed cost recovery amounts are carried forward to future periods and during 2012 the maximum possible contractual cost recovery entitlement is being achieved. The field commenced its anticipated natural decline during 2011 in line with reservoir pressure depletion. In addition, production rates in January and February 2012 were reduced during compression facility work, designed to enhance the production capacity of the field after the first quarter of 2012. In Q3 2012, gross Kambuna field gas production averaged 14.3 mmscf per day (Q3 2011 36.4 mmscf per day) together with average condensate production of 836 barrels per day (Q2 2011 2,342 barrels per day). The Q3 2012 gas production was sold at prices averaging US$6.56 per mscf (Q3 2011 US$6.13 per mscf) and generated US$1.9 million (Q3 2011 US$3.6 million) of revenue net to Serica. Condensate production is stored and sold when lifted at a price referenced to the Indonesia Attaka official monthly crude oil price. Liftings in the period earned US$1.6 million (Q3 2011 US$3.0 million) of revenue net to Serica at an average price of US$108.1 per barrel (Q3 2011 US$116.9 per barrel). Cost of sales and depletion charges Cost of sales were driven by production from the Kambuna field and totalled US$4.6 million in Q3 2012 (Q3 2011: US$6.2 million). The charge comprised direct operating costs of US$1.9 million (Q3 2011 US$1.5 million) and non cash depletion of US$2.7 million (Q3 2011 US$4.7 million). Operating costs per boe increased significantly in all 2012 periods as reducedproduction levels were not offset by corresponding reductions in production costs. The Company revised its accounting estimate of entitlement reserves for depletion purposes from 'proved and probable' to 'proved', with effect from 1 July 2011. This reduction in entitlement reserve base generated further increases in the depletion charge per boe for the second half of 2011 onwards. Other expenses and income The Company generated a loss before tax from continuing operations of US$2.9 million for Q3 2012 compared to a loss before tax of US$1.7 million for Q3 2011. Pre-licence costs include direct cost and allocated general administrative cost incurred on oil and gas interests prior to the award of licences, concessions or exploration rights. No significant expense was incurred in Q3 2012. The pre-licence work performed throughout 2011 (Q3 2011: US$0.2 million) culminated in the following awards; Block 110/8b in the East Irish Sea, four blocks in the Southern North Sea, a further six blocks in the Rockall Basin in Ireland, and four large blocks and part blocks in the Luderitz Basin in Namibia. There were asset write offs of obsolete inventory balances of US$0.4 million in Q3 2012 (Q3 2011: US$ nil). Administrative expenses of US$1.2 million for Q3 2012 decreased from US$1.3 million for the same period last year. The Company continues to reduce overheads and expects savings to give further benefit in 2012. The impact of foreign exchange was not significant in Q3 2012 or Q3 2011. Share-based payment costs of US$0.1 million in Q3 2012 reflected share options granted and compare with US$0.2 million for Q3 2011. Negligible depreciation charges in all periods represent office equipment and fixtures and fittings. The depletion and amortisation charge for Kambuna field development costs is recorded within 'Cost of Sales'. In March 2012 the Company announced that it had agreed to farm-out an interest in its Namibian licence to BP. Under the transaction, BP paid to Serica a sum of US$5.0 million covering Serica's past costs and earned a 30% interest in the licence by meeting the full cost of an extensive 3D seismic survey. The accounting gain of US$1.0 million on disposal recorded in Q1 2012 and disclosed in the nine months ended 30 September 2012 income statement relates to the recognition of recovery for those past costs incurred that had been expensed as pre-licence costs in previous periods. The re-imbursement of those past costs capitalised as E&E assets on the award of the licence in December 2011 or capitalised as incurred in Q1 2012, are treated as a reduction from the book cost of the asset. Completion of the farm-out transaction occurred in June 2012 following the consent of the Ministry of Mines and Energy in Namibia. Finance revenue comprising bank deposit interest income has been negligible in both periods. Finance costs consist of interest payable, arrangement costs spread over the term of the bank loan facility and other fees. All outstanding liabilities were fully repaid in February 2011 causing a reduction in expense to US$0.2 million in Q3 2011 and US$0.1 million in Q3 2012. All facility arrangement costs have been amortised and no interest is currently payable. The only ongoing cost related to other minor fees. Taxation charges typically arise from Kambuna field operations, although there is no tax payable in Q3 2012. The Q3 2011 charge of US$1.6 million also arose from Kambuna and entirely comprised current tax charges. Current tax is typically charged on the profit oil or gas element of sales revenue rather than the cost recovery component. The net loss per share from continuing operations of US$0.02 for Q3 2012 compares to a net loss per share of US$0.02 for Q3 2011. Summary of Quarterly Results 2012 2012 2012 2011 2011 2011 2011 2010 Quarter 30 Sep 30 June 31 Mar 31 Dec 30 Sep 30 Jun 31 Mar 31 Dec ended: US$000 US$000 US$000 US$000 US$000 US$000 US$000 US$000 Sales 3,493 4,417 4,038 5,342 6,579 6,613 8,577 9,413 revenue Loss for the quarter (2,907) (2,162) (1,391) (7,560) (3,970) (6,375) (2,465) (40,112) Basic and diluted loss per share US$ (0.02) (0.01) (0.01) (0.04) (0.02) (0.04) (0.01) (0.22) The fourth quarter 2011 loss includes an impairment charge of US$2.3 million against the Kambuna production asset. The second quarter 2011 loss includes a charge of US$3.7 million recognised on the re-measurement to fair value of the Indonesian exploration disposal group. The fourth quarter 2010 loss includes asset write offs of US$29.5 million attributed to the Kutai and Oates E&E assets and an impairment charge of US$11.8 million against the Kambuna production asset. Discontinued operations The results of discontinued operations below are those generated from Serica's South East Asia exploration business which was disposed of in October 2011. At 30 June and 30 September 2011, as a result of the Board's strategic decision to exit Indonesia, the Group's interests in the region were classified as a disposal group held for sale and therefore included as discontinued operations. In October 2011, the Group completed the disposal of its operated exploration portfolio; however the Group's 25% interest in Kambuna has not been sold. The directors concluded that as at 31 December 2011 and subsequent period ends, whilst still available for sale, Serica's interest in Kambuna no longer meets the IFRS 5 criteria to be classified as an asset held for sale, because an active marketing program is no longer in place, and therefore the results of this part of the disposal group are disclosed within continuing operations together with the results of the retained core business segments. Three months ended Nine months ended 30 September 30 September *Restated *Restated 2012 2011 2012 2011 US$000 US$000 US$000 US$000 Discontinued operations Expenses: Pre-licence costs - (152) - (295) E&E and other asset write offs - (235) - (744) Administrative expenses - (203) - (621) Foreign exchange loss - (4) - (3) Share-based payments - (30) - (90) Operating loss - (624) - (1,753) Other - - - (363) Loss recognised on remeasurement to fair value - - - (3,720) Loss before taxation - (624) - (5,836) Taxation charge - - - - Loss for the period - (624) - (5,836) Earnings per share (EPS) US$ US$ US$ US$ Basic and diluted EPS on loss for the period from discontinued operations - (0.004) - (0.033) * Restated for discontinued operations Asset write-offs in 2011 were in respect of E&E and other expenses from the Kutai PSC in Indonesia, which was sold in October 2011. 2011 expenditure on the asset was expensed as incurred. In October 2011 the Company completed the disposal of its portfolio of operated exploration interests in South East Asia to Kris Energy Limited for base consideration of US$3.4 million and a further contingent payment of US$1.0 million received in December 2011. The transaction generated a loss of US$3.6 million (chiefly comprising a loss recognised on re-measurement to fair value of US$3.7 million as at 30 September 2011) after deducting booked asset costs and other transaction costs and fees. Working Capital, Liquidity and Capital Resources Current Assets and Liabilities An extract of the balance sheet detailing current assets and liabilities is provided below: 31 December 30 Sep 2012 30 June 2012 31 March 2012 2011 US$000 US$000 US$000 US$000 Current assets: Inventories 1,380 1,802 1,672 1,572 Trade and other receivables 7,147 10,576 15,521 9,338 Financial assets 1,282 1,410 669 647 Cash and cash equivalents 25,060 23,277 16,640 19,946 Total Current assets 34,869 37,065 34,502 31,503 Less Current liabilities: Trade and other payables (8,125) (11,082) (9,274) (10,267) Income tax payable - - (284) (302) Total Current liabilities (8,125) (11,082) (9,558) (10,569) Net Current assets 26,744 25,983 24,944 20,934 At 30 September 2012, the Company had net current assets of US$26.7 million which comprised current assets of US$34.8 million less current liabilities of US$8.1 million, giving an overall increase in working capital of US$0.8 million in the three month period. Inventories decreased from US$1.8 million to US$1.4 million over the Q3 2012 period following the write off of minor obsolete items. Trade and other receivables at 30 September 2012 totalled US$7.1 million, a decrease of US$3.5 million from the Q2 2012 balance of US$10.6 million. There were significant cash revenue receipts of US$6.2 million during the third quarter, which included amounts from condensate sales in March and April. The balance as at 30 September 2012 includes; US$2.0 million of trade debtors from gas and condensate sales from the Kambuna field, US$1.2 million of Morocco and UK farm-out back cost contributions, advance payments on ongoing operations, short-term Indonesian VAT receivables, recoverable amounts from partners in joint venture operations in the UK, Morocco and Indonesia, sundry UK and Kambuna asset working capital balances, and prepayments. Financial assets at 30 September 2012 represented US$1.3 million of restricted cash deposits. Cash and cash equivalents increased from US$23.3 million to US$25.1 million in the quarter. During Q3 2012 the Company benefitted from US$6.2 million of cash receipts from Kambuna field revenues, which included US$1.2 million from Q1 2012 oil sales outstanding at 30 June 2012. Cash outflows were incurred on Kambuna field operating costs and ongoing work on the Columbus field development, exploration work across the portfolio in the UK, Ireland and Morocco together with ongoing administrative and corporate costs. Trade and other payables of US$8.1 million at 30 September 2012 include US$2.0 million of signature payment liabilities arising on the award of the Namibian licences in December, a US$1.9 million JV partner advance in Namibia, and trade creditors and accruals from the Kambuna and Columbus operations. Other items include sundry creditors and accruals from the ongoing exploration programmes in the UK and Ireland, payables for administrative expenses and other corporate costs. The current tax payable in prior periods arises in respect of the Kambuna field in Indonesia. First cash tax payments from Kambuna field revenues were made in April 2011 although the field is not currently in a cash tax paying position. Long-Term Assets and Liabilities An extract of the balance sheet detailing long-term assets and liabilities is provided below: 30 September 30 June 2012 31 March 2012 31 December 2012 2011 US$000 US$000 US$000 US$000 Exploration & evaluation assets 67,223 67,114 66,442 69,083 Property, plant and 10,644 equipment 13,945 16,496 18,719 Financial assets - - 274 394 Long-term other 2,178 receivables 2,535 3,377 3,613 Provisions (2,044) (2,040) (2,035) (2,029) Deferred income tax - liabilities - - - During Q3 2012, total investments in petroleum and natural gas properties represented by exploration and evaluation assets ("E&E assets") increased from US$67.1 million to US$67.2 million. These amounts exclude the Kambuna development costs which are classified as property, plant and equipment. The net US$0.1 million increase in Q3 2012 consists of US$1.3 million of additions less US$1.2 million of back cost contributions recognised in Q3 2012. The additions on continuing operations incurred on ongoing exploration work in Morocco, Ireland and the UK, on the Columbus FDP, and G&A. Expenditure on the ongoing 3D seismic survey on the Luderitz basin licence interests in Namibia is being carried by BP. The back cost contributions are recognised in the Q3 2012 period following the Company's farm-outs in Morocco and the UK. Property, plant and equipment chiefly comprise the net book amount of the capital expenditure on the Company's interest in the Kambuna development. During Q3 2012, the Company's investment decreased from US$13.7 million to US$10.5 million, principally due to depletion charges of US$2.7 million arising from the production of gas and condensate. No further capital expenditure is being recorded on the project. The property, plant and equipment also included balances of US$0.2 million (31 December 2011: US$0.5 million) for office fixtures and fittings and computer equipment. All financial assets at 30 September 2012 are classified as short-term. Long-term other receivables of US$2.2 million are represented by value added tax ("VAT") on Indonesian capital spend which is expected to be recovered from the Indonesian authorities. Provisions of US$2.0 million at 30 September 2012 (31 December 2011: US$2.0 million) are in respect of Kambuna field decommissioning payments in Indonesia. There is no deferred income tax liability recorded as at 30 September 2012. Shareholders' Equity An extract of the balance sheet detailing shareholders' equity is provided below: 30 Sep 2012 30 June 2012 31 March 31 December 2012 2011 US$000 US$000 US$000 US$000 Total share capital 207,758 207,758 207,702 207,702 Other reserves 19,910 19,795 19,650 19,475 Accumulated deficit (122,923) (120,016) (117,854) (116,463) Total share capital includes the total net proceeds, both nominal value and any premium, on the issue of equity capital. Other reserves mainly include amounts in respect of cumulative share-based payment charges. The increase from US$19.8 million to US$19.9 million in Q3 2012 reflects proportional charges in the period for options issued in 2012 and prior years. Asset values and Impairment At 30 September 2012 Serica's market capitalisation stood at US$84.3 million (£52.1 million), based upon a share price of £0.295, which was exceeded by the net asset value at that date of US$104.7 million. By 13 November 2012 the Company's market capitalisation had increased to US$86.6 million. Management conducted a thorough review of the carrying value of its assets and determined that no further write-downs were required beyond those already disclosed above. Capital Resources Available financing resources and debt facility Serica's prime focus has been to deliver value through exploration success. To-date this has given rise to the Kambuna gas field development in Indonesia and the Columbus gas field in the UK North Sea, for which development plans are being formulated. Typically exploration activities are equity financed whilst field development costs are principally debt financed. In the current business environment, access to new equity and debt remains uncertain. Consequently, the Company has given priority to the careful management of existing financial resources. The Company's current facility was arranged in November 2009 for a three-year period with J.P.Morgan plc, Bank of Scotland plc and Natixis as Mandated Lead Arrangers. The facility initially covered US$100 million and was principally set up to refinance the Company's outstanding borrowings on the Kambuna field. It was also put in place to finance the appraisal and development of the Columbus field and for general corporate purposes. Following the debt repayments in 2010, management reduced its debt facility to US$50 million total capacity so as to restrict ongoing facility costs. The ability to draw under the facility for development is determined both by the achievement of milestones on the relevant project and also by the availability calculated under a projection model. The outstanding amount under the Company's debt facility was fully repaid in February 2011. The facility expires shortly and negotiations to extend this are in progress. At 30 September 2012, the Company held cash and cash equivalents of US$25.1 million and US$1.3 million of short-term restricted cash in continuing operations. Overall, the current cash balances held, the revenues from the retained 25% Kambuna interest, and the control that the Company can exert over the timing and cost of its exploration programmes both through operatorship and through farm-outs leave it well placed to manage its commitments in the short to medium term. Summary of contractual obligations The following table summarises the Company's contractual obligations as at 30 September 2012; Total <1 year 1-3 years >3 years Contractual Obligations US$000 US$000 US$000 US$000 Operating leases 275 275 - - Other long-term obligations 1,805 500 1,305 - Total contractual obligations 2,080 775 1,305 - Other long-term obligations relate to decommissioning payments in Indonesia. Lease commitments At 30 September 2012, Serica had no capital lease obligations. At that date, the Company had commitments to future minimum payments under operating leases in respect of rental office premises and office equipment for each of the following period/years as follows: US$000 31 December 2012 135 31 December 2013 140 Capital expenditure commitments, obligations and plans As at 30 September 2012, there were no material outstanding capital acquisition costs expected on the Kambuna project. The Company also typically has obligations to carry out defined work programmes on its oil and gas properties, under the terms of the award of rights to these properties. The Company is not obliged to meet other joint venture partner shares of these programmes. Following the finalisation of the amalgamation agreement to combine the Central North Sea Blocks 15/21g and 15/21a in January 2012, as at 30 September 2012 the venture partners were committed to drilling an appraisal well in 4Q 2012. As noted above in the operations review, this was completed in November 2012 and Serica's estimated 30% share of costs is approximately US$7.0 million. Also in the UK North Sea, the partners in Licence P1906 (York Area) have obligations to acquire seismic data in the first licence period. Plans are now advanced to acquire this in 2013 and Serica's estimated 40% paying share is US$3.8 million. The most significant other obligations were in respect of the Namibian licence, awarded in December 2011. Under the terms of this licence, the Company has a minimum obligation expenditure on exploration work of US$15.0 million covering the entire initial four year period of the licence, ending in December 2015. Following the Q1 2012 farm-out transaction with BP noted in the operations review, the Company will incur no significant expenditure towards its work programme obligation. As at 30 September 2012, the value of work done on the 3D Seismic acquisition programme had exceeded the minimum obligation expenditure on the licence. Other less material minimum obligations include G&G, seismic work and ongoing licence fees in the UK and Ireland. Off-Balance Sheet Arrangements The Company has not entered into any off-balance sheet transactions or arrangements. Critical Accounting Estimates The Company's significant accounting policies are detailed in note 2 to the attached interim financial statements. International Financial Reporting Standards have been adopted. The costs of exploring for and developing petroleum and natural gas reserves are capitalised. The capitalisation and any write off of E&E assets, or depletion of producing assets, necessarily involve certain judgments with regard to whether the asset will ultimately prove to be recoverable. Key sources of estimation uncertainty that impact the Company relate to assessment of commercial reserves and the impairment of the Company's assets. Oil and gas properties are subject to periodic review for impairment, whilst goodwill is reviewed at least annually. Impairment considerations necessarily involve certain judgements as to whether E&E assets will lead to commercial discoveries and whether future field revenues will be sufficient to cover capitalised costs. Recoverable amounts can be determined based upon risked potential, or where relevant, discovered oil and gas reserves. In each case, recoverable amount calculations are based upon estimations and management assumptions about future outcomes, product prices and performance. Management is required to assess the level of the Group's commercial reserves together with the future expenditures to access those reserves, which are utilised in determining the amortisation and depletion charge for the period and assessing whether any impairment charge is required. Financial Instruments The Group's financial instruments comprise cash and cash equivalents, bank loans and borrowings, accounts payable and accounts receivable. It is management's opinion that the Group is not exposed to significant interest or credit or currency risks arising from its financial instruments other than as discussed below: Serica has exposure to interest rate fluctuations on its cash deposits and its bank loans; given the level of expenditure plans over 2012/13 this is managed in the short-term through selecting treasury deposit periods of one to three months. Treasury counterparty credit risks are mitigated through spreading the placement of funds over a range of institutions each carrying acceptable published credit ratings to minimise counterparty risk. Where Serica operates joint ventures on behalf of partners it seeks to recover the appropriate share of costs from these third parties. The majority of partners in these ventures are well established oil and gas companies. In the event of non payment, operating agreements typically provide recourse through increased venture shares. Serica retains certain cash holdings and other financial instruments relating to its operations, limited to the levels necessary to support those operations. The US$ reporting currency value of these may fluctuate from time to time causing reported foreign exchange gains and losses. Serica maintains a broad strategy of matching the currency of funds held on deposit with the expected expenditures in those currencies. Management believes that this mitigates much of any actual potential currency risk from financial instruments. Loan funding is available in US Dollars and Pounds Sterling. It is management's opinion that the fair value of its financial instruments approximate to their carrying values, unless otherwise noted. Share Options As at 30 September 2012, the following director and employee share options were outstanding: Expiry Date Amount Exercise cost Cdn$ March 2014 1,000,000 1,800,000 December 2014 200,000 200,000 January 2015 600,000 600,000 June 2015 100,000 180,000 Exercise cost £ October 2013 750,000 300,000 January 2014 228,000 72,960 November 2015 280,000 271,600 January 2016 135,000 139,725 June 2016 270,000 259,200 January 2017 243,000 247,860 May 2017 210,000 218,400 March 2018 594,000 445,500 March 2018 350,000 287,000 January 2020 2,203,500 1,498,380 April 2021 450,000 141,188 January 2022 2,144,960 458,485 In January 2012, 859,690 share options were granted to two executive directors and 1,285,270 share options were granted to certain employees other than directors with an exercise cost of £0.21375 and an expiry date of 10 January 2022. In April 2012, 110,000 share options were exercised by employees other than directors at a price of £0.32, and 1,902,500 share options were cancelled. In August 2012, 1,200,000 share options expired. In September 2012, 1,257,000 share options expired. In October 2012, 1,200,000 share options were granted to three executive directors with an exercise cost of £0.29 and an expiry date of 8 October 2022. Outstanding Share Capital On 2 November 2012, 6,000,000 new ordinary shares in the Company were allotted to NAMCOR in respect of the earlier award of the Namibian licences to Serica. As at 13 November 2012, the Company had 182,770,311 ordinary shares issued and outstanding. Business Risk and Uncertainties Serica, like all companies in the oil and gas industry, operates in an environment subject to inherent risks and uncertainties. The Board regularly considers the principal risks to which the company is exposed and monitors any agreed mitigating actions. The overall strategy for the protection of shareholder value against these risks is to retain a broad portfolio of assets with varied risk/reward profiles, to apply prudent industry practice in all operations, to carry insurance where available and cost effective, and to retain adequate working capital. The principal risks currently recognised and the mitigating actions taken by the management are as follows: Investment Returns: Management seeks to raise funds and then to generate shareholder returns though investment in a portfolio of exploration acreage leading to the drilling of wells and discovery of commercial reserves. Delivery of this business model carries a number of key risks. Risk Mitigation Market support may be eroded · Management regularly communicates obstructing fundraising and lowering its strategy to shareholders the share price · Focus is placed on building an asset portfolio capable of delivering regular news flow and offering continuing prospectivity General market conditions may · Management aims to retain adequate fluctuate hindering delivery of the working capital to ride out downturns company's business plan should they arise Management's decisions on capital · Rigorous analysis is conducted of allocation may not deliver the all investment proposals expected successful outcomes · Operations are spread over a range of areas and risk profiles Each asset carries its own risk · Management aims to avoid profile and no outcome can be over-exposure to individual assets and to certain identify the associated risks objectively Operations: Operations may not go according to plan leading to damage, pollution, cost overruns and poor outcomes. Risk Mitigation Individual wells may not deliver · Thorough pre-drill evaluations are recoverable oil and gas reserves conducted to identify the risk/reward balance · Exposure is selectively mitigated through farm-out Wells may blow out or equipment may · The Group retains fully trained fail causing environmental damage and experienced personnel and delays · The planning process involves risk identification and establishment of mitigation measures · Emphasis is placed on engaging experienced contractors · Appropriate insurances are retained Production may be interrupted · Serica's only producing field, generating significant revenue loss Kambuna, is in the later stages of production and insurance is not considered cost-effective Operations may take far longer or · Management applies rigorous budget cost more than expected control · Adequate working capital is retained to cover reasonable eventualities Resource estimates may be misleading · The Group deploys qualified curtailing actual production and personnel reducing reserves estimates · Ongoing performance is monitored · Regular third-party reports are commissioned Personnel: The company relies upon a pool of experienced and motivated personnel to identify and execute successful investment strategies Risks Mitigation Key personnel may be lost to other · The Remuneration Committee regularly companies evaluates total compensation to ensure the Company remains competitive Personal safety may be at risk in · A culture of safety is encouraged demanding operating environments, throughout the organisation typically offshore · Responsible personnel are designated at all appropriate levels · The Group maintains up-to-date emergency response resources and procedures · Insurance cover is carried in accordance with industry best practice Staff and representatives may find · Company policies and procedures are themselves exposed to bribery and communicated to personnel regularly corrupt practices · Management reviews all significant contracts and relationships with agents and governments Commercial environment: World and regional markets continue to be volatile with fluctuations and access issues that might hinder the company's business success Risk Mitigation Volatile commodity prices mean that · Kambuna gas is sold under the company cannot be certain of the long-term contracts and similar future sales value of its products arrangements will be considered for Columbus production · Such contracts can be supplemented by price hedging although none is currently in place for Kambuna condensate · Budget planning considers a range of commodity pricing The company may not be able to get · A range of different off-take access, at reasonable cost, to options have been considered for Columbus infrastructure and product markets and field partners are currently in when required advanced negotiation Credit to support field development · Serica's existing facility was programmes may not be available at designed to fund part of Columbus capital reasonable cost costs · Funding requirements for Kambuna were significantly mitigated through part disposal Fiscal regimes may vary, increasing · Operations are currently spread effective tax rates and reducing the over a range of different fiscal regimes expected value of reserves in Indonesia, Western Europe and Africa · Before committing to a significant investment the likelihood of fiscal term changes is considered when evaluating the risk/reward balance In addition to the principal risks and uncertainties described herein, the Company is subject to a number of other risk factors generally, a description of which is set out in our latest Annual Information Form available on www.sedar.com. Nature and Continuance of Operations The principal activity of the Company is to identify, acquire and subsequently exploit oil and gas reserves. Its activities are located in the UK, Ireland, Namibia and Morocco, together with a currently retained interest in the Kambuna Field in Indonesia. The Company's financial statements have been prepared with the assumption that the Company will be able to realise its assets and discharge its liabilities in the normal course of business rather than through a process of forced liquidation. During the three month period ended 30 September 2012 the Company generated a loss of US$2.9 million from continuing operations. At 30 September 2012 the Company had US$25.1 million of net cash. The Company intends to utilise its existing cash balances and future operating cash inflows to fund the immediate needs of its investment programme and ongoing operations. Further details of the Company's financial resources and debt facility are given above in the Financial Review in this MD&A. Key Performance Indicators ("KPIs") The Company's main business is the acquisition of interests in prospective exploration acreage, the discovery of hydrocarbons in commercial quantities and the crystallisation of value whether through production or disposal of reserves. The Company tracks its non-financial performance through the accumulation of licence interests in proven and prospective hydrocarbon producing regions, the level of success in encountering hydrocarbons and the development of production facilities. In parallel, the Company tracks its financial performance through management of expenditures within resources available, the cost-effective exploitation of reserves and the crystallisation of value at the optimum point. Additional Information Additional information relating to Serica, including the Company's annual information form, can be found on the Company's website at www.serica-energy.com and on SEDAR at www.sedar.com Approved on Behalf of the Board (Signed) "Antony Craven Walker" (Signed) "Christopher Hearne" Antony Craven Walker Christopher Hearne Chief Executive Officer Finance Director 14 November 2012 Forward Looking Statements This disclosure contains certain forward looking statements that involve substantial known and unknown risks and uncertainties, some of which are beyond Serica Energy plc's control, including: the impact of general economic conditions where Serica Energy plc operates, industry conditions, changes in laws and regulations including the adoption of new environmental laws and regulations and changes in how they are interpreted and enforced, increased competition, the lack of availability of qualified personnel or management, fluctuations in foreign exchange or interest rates, stock market volatility and market valuations of companies with respect to announced transactions and the final valuations thereof, and obtaining required approvals of regulatory authorities. Serica Energy plc's actual results, performance or achievement could differ materially from those expressed in, or implied by, these forward looking statements and, accordingly, no assurances can be given that any of the events anticipated by the forward looking statements will transpire or occur, or if any of them do so, what benefits, including the amount of proceeds, that Serica Energy plc will derive therefrom. GLOSSARY bbl barrel of 42 US gallons bcf billion standard cubic feet boe barrels of oil equivalent (barrels of oil, condensate and LPG plus the heating equivalent of gas converted into barrels at a rate of 4,800 standard cubic feet per barrel for Kambuna, which has a relatively high calorific value, and 6,000 standard cubic feet per barrel for Columbus) boepd barrels of oil equivalent per day bopd or bpd barrels of oil or condensate per day FPSO Floating Production, Storage and Offtake vessel (often a converted oil tanker) LNG Liquefied Natural Gas (mainly methane and ethane) LPG Liquefied Petroleum Gas (mainly butane and propane) mcf thousand cubic feet mmbbl million barrels mmboe million barrels of oil equivalent mmBtu million British Thermal Units mmscfd million standard cubic feet per day PSC Production Sharing Contract Proved Reserves Proved reserves are those Reserves that can be estimated with a high degree of certainty to be recoverable. It is likely that the actual remaining quantities recovered will exceed the estimated proved reserves. Probable Reserves Probable reserves are those additional Reserves that are less certain to be recovered than proved reserves. It is equally likely that the actual remaining quantities recovered will be greater or less than the sum of the estimated proved + probable reserves. Possible Reserves Possible reserves are those additional Reserves that are less certain to be recovered than probable reserves. It is unlikely that the actual remaining quantities recovered will exceed the sum of the estimated proved + probable + possible reserves Reserves Estimates of discovered recoverable commercial hydrocarbon reserves calculated in accordance with the Canadian National Instrument 51‑101 Contingent Resources Estimates of discovered recoverable hydrocarbon resources for which commercial production is not yet assured, calculated in accordance with the Canadian National Instrument 51‑101 Prospective Resources Estimates of the potential recoverable hydrocarbon resources attributable to undrilled prospects, calculated in accordance with the Canadian National Instrument 51‑101 TAC Technical Assistance Contract tcf trillion standard cubic feet Serica Energy plc Group Income Statement For the period ended 30 September Unaudited Three Three Nine Nine months months months months ended ended ended ended 30 Sep 30 Sep 30 Sep 30 Sep Notes 2012 2011 2012 2011 *Restated *Restated Continuing operations US$000 US$000 US$000 US$000 Sales revenue 4 3,493 6,579 11,948 21,769 Cost of sales 5 (4,609) (6,235) (13,785) (18,700) Gross (loss)/profit (1,116) 344 (1,837) 3,069 Pre-licence costs (6) (192) (251) (1,061) E&E and other asset write offs (382) - (518) - Administrative expenses (1,213) (1,338) (3,968) (4,339) Foreign exchange gain/(loss) 130 (78) 236 11 Share-based payments (115) (208) (435) (674) Depreciation (85) (87) (254) (262) Operating loss from continuing operations (2,787) (1,559) (7,027) (3,256) Gain on disposal 7 - - 1,023 - Finance revenue 4 2 8 12 Finance costs (124) (186) (464) (1,218) Loss before taxation (2,907) (1,743) (6,460) (4,462) Taxation charge for the period 11 - (1,603) - (2,512) Loss for the period from continuing operations (2,907) (3,346) (6,460) (6,974) Discontinued operations Loss for the period from discontinued operations 6 - (624) - (5,836) Loss for the period (2,907) (3,970) (6,460) (12,810) Loss per ordinary share (EPS) Loss on continuing operations Basic and diluted EPS (US$) (0.02) (0.02) (0.04) (0.04) Loss for the period Basic and diluted EPS (US$) (0.02) (0.02) (0.04) (0.07) * Restated for discontinued operations - see note 6 Total Statement of Comprehensive Income There are no other comprehensive income items other than those passing through the income statement. Serica Energy plc Consolidated Balance Sheet 30 Sep 30 June 31 Dec 30 Sep 2012 2012 2011 2011 US$000 US$000 US$000 US$000 Note (Unaudited) (Unaudited) (Audited) (Unaudited) Non-current assets Exploration & evaluation 7 assets 67,223 67,114 69,083 65,352 Property, plant and 8 equipment 10,644 13,945 18,719 536 Financial assets - - 394 530 Other receivables 2,178 2,535 3,613 - 80,045 83,594 91,809 66,418 Current assets Inventories 1,380 1,802 1,572 809 Trade and other receivables 7,147 10,576 9,338 1,950 Financial assets 1,282 1,410 647 523 Cash and cash equivalents 25,060 23,277 19,946 18,450 34,869 37,065 31,503 21,732 Assets held for sale 6 - - - 34,531 TOTAL ASSETS 114,914 120,659 123,312 122,681 Current liabilities Trade and other payables (8,125) (11,082) (10,267) (3,688) Income taxation payable - - (302) - Non-current liabilities Provisions (2,044) (2,040) (2,029) - Deferred income tax liabilities - - - - Liabilities associated with 6 assets - - - (4,461) held for sale TOTAL LIABILITIES (10,169) (13,122) (12,598) (8,149) NET ASSETS 104,745 107,537 110,714 114,532 Share capital 9 207,758 207,758 207,702 207,702 Other reserves 19,910 19,795 19,475 19,192 Accumulated deficit (122,923) (120,016) (116,463) (112,362) TOTAL EQUITY 104,745 107,537 110,714 114,532 Serica Energy plc Statement of Changes in Equity For the year ended 31 December 2011 and period ended 30 September 2012 Group Share capital Other reserves Deficit Total US$000 US$000 US$000 US$000 At 1 January 2011 (audited) 207,657 18,428 (96,093) 129,992 Loss for the year - - (20,370) (20,370) Total comprehensive income - - (20,370) (20,370) Share-based payments - 1,047 - 1,047 Proceeds on exercise of options 45 - - 45 At 31 December 2011 (audited) 207,702 19,475 (116,463) 110,714 Loss for the period - - (1,391) (1,391) Total comprehensive income - - (1,391) (1,391) Share-based payments - 175 - 175 At 31 March 2012 (unaudited) 207,702 19,650 (117,854) 109,498 Loss for the period - - (2,162) (2,162) Total comprehensive income - - (2,162) (2,162) Proceeds on exercise of options 56 - - 56 Share-based payments - 145 - 145 At 30 June 2012 (unaudited) 207,758 19,795 (120,016) 107,537 Loss for the period - - (2,907) (2,907) Total comprehensive income - - (2,907) (2,907) Share-based payments - 115 - 115 At 30 September 2012 (unaudited) 207,758 19,910 (122,923) 104,745 Serica Energy plc Consolidated Cash Flow Statement For the period ended 30 September Unaudited Three Three Nine Nine months months months months ended ended ended ended 30 Sep 30 Sep 30 Sep 30 Sep 2012 2011 2012 2011 *Restated *Restated US$000 US$000 US$000 US$000 Cash flows from operating activities: Loss for the period (2,907) (3,970) (6,460) (12,810) Adjustments to reconcile loss for the period to net cash flow from operating activities Taxation - 1,603 - 2,512 Net finance costs 120 184 456 1,206 Gain on disposal - - (1,023) - Depreciation 85 87 254 262 Depletion and amortisation 2,749 4,748 8,440 13,811 Asset write offs 382 235 518 744 Loss on re-measurement to fair value - - - 3,720 Share-based payments 115 238 435 764 Decrease in receivables 4,590 4,135 3,986 8,357 Decrease in inventories 422 820 192 842 Decrease in payables (2,957) (1,813) (2,142) (8,037) Cash generated from operations 2,599 6,267 4,656 11,371 Taxation paid - (1,791) (302) (4,925) Net cash flow from operations 2,599 4,476 4,354 6,446 Cash flows from investing activities: Reclassification/(purchase) of P,P & E 467 (447) (619) (1,286) Purchase of E&E assets (1,301) (477) (3,436) (3,562) Proceeds from disposals - - 5,000 - Interest received 4 2 8 12 Net cash (outflow)/inflow from investing (830) (922) 953 (4,836) Cash proceeds from financing activities: Repayments of loans and borrowings - - - (11,800) Proceeds on exercise of options - - 56 45 Finance costs paid (116) (172) (445) (636) Net cash from financing activities (116) (172) (389) (12,391) Cash and cash equivalents Net increase/(decrease) in period 1,653 3,382 4,918 (10,781) Effect of exchange rates on cash 130 (30) 196 6 Amount at start of period 23,277 15,875 19,946 30,002 Amount at end of period 25,060 19,227 25,060 19,227 *Restated for discontinued operations - see note 6 Serica Energy plc Notes to the Unaudited Consolidated Financial Statements 1. Corporate information The interim condensed consolidated financial statements of the Group for the nine months ended 30 September 2012 were authorised for issue in accordance with a resolution of the directors on 13 November 2012. Serica Energy plc is a public limited company incorporated and domiciled in England & Wales. The Company's ordinary shares are traded on AIM and the TSX Exchange. The principal activity of the Company is to identify, acquire and exploit oil and gas reserves. 2. Basis of preparation and accounting policies Basis of Preparation The interim condensed consolidated financial statements for the nine months ended 30 September 2012 have been prepared in accordance with IAS 34 Interim Financial Reporting. These unaudited interim consolidated financial statements of the Group have been prepared in accordance with International Financial Reporting Standards following the same accounting policies and methods of computation as the consolidated financial statements for the year ended 31 December 2011. These unaudited interim consolidated financial statements do not include all the information and footnotes required by generally accepted accounting principles for annual financial statements and therefore should be read in conjunction with the consolidated financial statements and the notes thereto in the Serica Energy plc annual report for the year ended 31 December 2011. Going Concern The financial position of the Group, its cash flows and available debt facilities are described in the Financial Review in the Q3 2012 Management's Discussion and Analysis. As at 30 September 2012, the Group had US$25.1 million of net cash. The Directors are required to consider the availability of resources to meet the Group and Company's liabilities for the forseeable future. After making enquiries, the Directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. Accordingly they continue to adopt the going concern basis in preparing the interim condensed financial statements. Significant accounting policies The accounting policies adopted in the preparation of the interim condensed consolidated financial statements are consistent with those followed in the preparation of the Group's annual financial statements for the year ended 31 December 2011. The Group financial statements are presented in US dollars and all values are rounded to the nearest thousand dollars (US$000) except when otherwise indicated. Basis of Consolidation The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries Serica Holdings UK Limited, Serica Energy Holdings B.V., Serica Energy Corporation, Asia Petroleum Development Limited, Petroleum Development Associates (Asia) Limited, Serica Energia Iberica S.L., Serica Energy (UK) Limited, PDA Lematang Limited, APD (Asahan) Limited, APD (Biliton) Limited, Serica Glagah Kambuna B.V., Serica Foum Draa B.V., Serica Sidi Moussa B.V., Serica Energy Rockall B.V., Serica Energy Slyne B.V. and Serica Energy Namibia B.V.. Together, these comprise the "Group". All inter-company balances and transactions have been eliminated upon consolidation. 3. Segmental Information The Group's business is that of oil & gas exploration, development and production. The Group's reportable and geographical segments are based on the locations of the Group's assets. The following tables present profit information on the Group's geographical segments for the nine months ended 30 September 2012 and 2011 and certain asset and liability information as at 30 September 2012. Costs associated with the UK corporate centre are included in the UK & Ireland reportable segment. Reportable information in respect of the Group's interest in the producing Kambuna field in Indonesia is disclosed as a separate segment. Nine months ended 30 September 2012 (unaudited) UK & Ireland Africa Kambuna Total US$000 US$000 US$000 US$000 Continuing Revenue - - 11,948 11,948 (Loss)/profit for the period (5,178) 977 (2,259) (6,460) Other segmental information Segmental assets 96,622 1,539 16,753 114,914 Unallocated assets - Total assets 114,914 Segmental liabilities (2,037) (3,942) (4,190) (10,169) Unallocated liabilities - Total liabilities (10,169) Nine months ended 30 September 2011 (unaudited) *Restated UK & Ireland Africa Kambuna Total Discontinued US$000 US$000 US$000 US$000 US$000 Continuing Revenue - - 21,769 21,769 - (Loss)/profit for the period (6,686) (803) 515 (6,974) (5,836) *Restated for discontinued operations - see note 6 4. Sales Revenue Nine months ended 30 September: 2012 2011 US$000 US$000 Gas sales 6,459 12,462 Condensate sales 5,489 9,307 11,948 21,769 5. Cost of sales Nine months ended 30 September: 2012 2011 US$000 US$000 Operating costs 5,552 4,634 Depletion 8,440 13,811 Movement in inventories of oil (207) 255 13,785 18,700 6. Discontinued operations The results of discontinued operations below are those generated from Serica's South East Asia operations which were disposed of in October 2011. At 30 June and 30 September 2011, as a result of the Board's strategic decision to exit Indonesia, the Group's interests in the region were classified as a disposal group held for sale and therefore included as discontinued operations. In October 2011, the Group completed the disposal of its operated exploration portfolio; however the Group's 25% non-operated interest in Kambuna has not been sold. The directors concluded that as at 31 December 2011 and subsequent period ends, whilst still available for sale, Serica's interest in Kambuna no longer meets the IFRS 5 criteria to be classified as an asset held for sale, because an active marketing program is no longer in place, and therefore the results of this part of the disposal group are disclosed within continuing operations together with the results of the retained core business segments. The results of the discontinued operations are presented below: Unaudited Three Three Nine Nine months months months months ended ended ended ended 30 Sep 30 Sep 30 Sep 30 Sep 2012 2011 2012 2011 US$000 US$000 US$000 US$000 *Restated *Restated Expenses: Pre-licence costs - (152) - (295) E&E and other asset write (235) (744) offs - - Administrative expenses The story has been truncated, [TRUNCATED]
Serica Energy plc SQZ Q3 2012 Results
Press spacebar to pause and continue. Press esc to stop.