tap oil posts lower net profit

Tap Oil posts lower net profit
September 9, 2005 - 12:19PM


Tap Oil Ltd says the outlook for the second half of the year remains strong with its Woollybutt oil field expected to continue outperforming, keeping overall production to target.

The company reported a net profit of $14.2 million for the first half of 2005, down from $22.7 million in the first half of 2004, which was restated under a new accounting system.

The Perth-based company said it expected full year production would be around 2.3 million barrels of oil equivalent (MMboe), and has already produced 1.3 MMboe in the first half.

It said it would achieve these targets despite deferring the development of the Scalybutt well.

Tap Oil had warned its first half profits would be affected by the switch to the new accounting standards, combined with a downgrade in reserves at its Linda gas field.

"The changes in revenue recognition and depreciation charges are non-cash items and hence Tap's strong cash flow position has been maintained with ongoing strong cash flows from its producing assets," the company said.

Under the new accounting standards revenue cannot be counted until the oil is lifted into export tankers and a bill issued, resulting in the first half adjustment in revenue.

In spite of the drop in net profit, Tap Oil increased its revenue by 10.8 per cent to $53.22 million.

Along with the new accounting standards and the Linda downgrade, net profit was affected by an increase in the cost of sales, primarily due to higher petroleum taxes and government royalties, and a $4.95 million loss from oil price hedging.

It has hedged the price of 210,000 barrels of oil for the full year, with 140,000 barrels still hedged for the second half at an average price of $56 a barrel.

Shares in Tap Oil dropped seven cents to $2.61.