8 08:52:13 /0 26/4/08 08:52:1326/426/4/08 re rial Energy Corporation PLC rial Energy roduction nfrastructu mpe I Annual Report 2007 and Accounts Exploration P I Imperial Energy Corporation PLCAnnual Report and Accounts 2007 14831IE_COV_AW.indd 114831IE_COV_AW.indd 1 Imperial Energy Corporation PLC Imperial Energy Corporation is an independent oil and gas exploration and production company focused on the CIS and in particular, Russia. Imperial Energy operates in the Tomsk region of Western Siberia, Russian Federation and north-central Kazakhstan. Contents 01 Highlights 26 Directors’ Report 41 Notes to the Group Financial 08 Imperial at a Glance 28 Corporate Governance Statements 10 Chairman’s Statement 30 Remuneration Report 65 Company Balance Sheet Business Review 35 Independent Auditors’ Report 66 Company Statement of Changes 12 Operational 37 Consolidated Income Statement in Equity 16 Financial 38 Consolidated Statements of Changes 67 Company Cash Flow Statement 18 Market in Equity 68 Notes to the Company Financial 20 Corporate Social Responsibility/ 39 Consolidated Balance Sheet Statements Sustainable Development 40 Consolidated Cash Flow Statement 73 Directors and Advisers 24 Board of Directors 74 Glossary ImperialEnergy Corporation PLC Annual Report and Accounts 2007 01 Highlights Operational ■ SPE 2P reserves at 920 mmboe as at 31 December 2007 ■ 2P oil reserves rise to 863 mmbbls (2006: 802.6 mmbls) ■ New 2P gas net reserves of 56 million boe (2006: nil) ■ C1+C2 Russian Registered Reserves have grown by 630% to current 432 mmboe in the last two years ■ All Imperial’s Russian exploration licences extended in 2007 and early 2008 for two more years ■ A total of 34 new wells drilled in 2007 ■ Reached the 10, 000 bopd year-end target production rate in December 2007 ■ Built and commissioned two wholly-owned pipelines 208 km in length with oil flowing directly to the Transneft system through Imperial’s own tie-ins and custody transfer stations at Luginetskoye and Zavyalovo Corporate and Financial ■ Moved to the Official List of the London Stock Exchange in May 2007 ■ Entered FTSE 250 Index in November 2007 ■ Revenue of US$20 million (2006: US$3.1 million) ■ Seven-year convertible bond for US$191.3 million successfully issued in December 2007 ■ RIG autonomous group within Imperial ■ Approximately US$600 million Rights Issue announced in April 2008 ImperialEnergy Corporation PLC ImperialEnergy Corporation PLC 02 Annual Report and Accounts 2007 Annual Report and Accounts 2007 03 Exploration Successful exploration of our substantial acreage base Imperial Energy Corporation PLC Imperial Energy Corporation PLC 04 Annual Report and Accounts 2007 Annual Report and Accounts 2007 05 Production Increasing production by development of our signiÞ cant reserves Imperial Energy Corporation PLC Imperial Energy Corporation PLC 06 Annual Report and Accounts 2007 Annual Report and Accounts 2007 07 Infrastructure Ongoing infrastructure programme for pipelines and Þ eld facilities Imperial Energy Corporation PLC Imperial Energy Corporation PLC 08 Annual Report and Accounts 2007 Annual Report and Accounts 2007 09 Imperial at a Glance Strezhevoy Kiev-Eganskoye !eld 80 Imperial Energy’s operations Block 69 Block 70 Block 74 Strezhevoy “ are focused on the Tomsk Zavyalovo Festivalnoye, Maiskoye, Middle Glukhovskoye, Golovnoye and Kiev-Eganskoye !eld 80 Central Festivalnoye and and North Chertalinskoye Þ elds Buranovskoye Þ elds region of Western Siberia, transfer station 74 North Festivalnoye Þ elds Russian FedSnezhnoyeeratio !eldn and Kargasok SigniÞ cant development work was carried Golovnoye oil Þ e ld was successfully production facility Three wells at Festivalnoye and one well out at Maiskoye with Þ ve horizontal wells tested and registered as a discovered north-central Kazakhstan 77 Parabel and one vertical well drilled and the Þ e l d. During 2007 Imperial also drilled at North Festivalnoye were production with the major part of work Zavyalovo construction of phase one of the Þ eld a well at Buranovskoye successfully tested in 2007 in preparation for Þ e ld Festivalnoye !eld 69 transfer station facilities. In December 2007, the new identifying and testing commercial rates taking place in Tomsk. Kolpashevo74 development. Major production and Snezhnoye !eld Kargasok appraisal drilling is planned for exploration well on South Maiskoye of oil. The Letnaya and Trostnikovaya ” production facility successfully tested commercial oil ß o w prospects have signiÞ cant oil potential Luginetskoye Festivalnoye Þ e ld in 2008. 85 77 Parabel from the Tyumen reservoir. In addition, and remain to be explored. Maiskoye !eld transfer station this well discovered Vasyugan oil bearing 70 production facility Festivalnoye !eld 69 sands, conÞ rming the existence of both Kolpashevo Vasyugan and Tyumen reservoirs 86 extending from the productive Maiskoye 85 Luginetskoye transfer station Þ e l d a few km to the north-east. Middle TOMSMaiskoyeKAY !eldA OBLAST70 Glukhovskoye oil Þ e ld was newly production facility discovered and registered in 2007. 86 TOMSKAYA OBLAST Tomsk 0 100 km Imperial acreage RUSSIA Tomsk Held acreage Tomsk Oblast 0 100 km Gas pipeline Block 77 Block 80 Block 85 Oil pipeline Transneft Kostanay Province Imperial acreage Imperial pipeline Held acreage KAZAKHSTAN Snezhnoye and Dvoinoye Þ elds Kiev-Eganskoye Þ eld. In October South Festivalnoye, Tamratskoye Cities/towns Gas pipeline 2007, Imperial received the and Nyulginskoye Þ elds Oil pipeline Transneft SigniÞ cant development work was carried Imperial pipeline results of new seismic data on Cities/towns out at the Snezhnoye Þ e ld in 2007 with The South Festivalnoye well was 14 wells currently in production. Major Block 80, including 380 sq km of successfully drilled and identiÞ ed production and appraisal drilling is 3-D seismic hydrocarbons. This well will be tested Block 86 The North Torgai Block, Pipelines & Field Facilities planned for 2008 for that Þ eld. Dvoinoye and the Þ e ld registered in 2008. The Strezhevoy Kazakhstan Þ e l d comprises one well to date which is The 3-D data revealed one signiÞ cant Nyulginskaya prospect was successfully Chagvinskoye and Two pipelines, the 159 km Maiskoye- currently producing. Chizhapskaya and NE-SW trending structure and several drilled with oil identiÞ ed in Cretaceous Kiev-Eganskoye !eld 80 Festivalnoye-Luginetskoye pipeline and Dvoinaya-NW prospects have been Vodorazdelnoye Þ elds The results of Imperial’s seismic the 49 km Snezhnoye-Zavyalovo pipeline smaller surrounding structures with and Tyumen reservoirs. An additional survey show several leads deÞ ned in the north-west of Block 77. a high exploration potential. SigniÞ cant well was drilled in Tamratskoye and Well Chagvinskoye 4 was tested in 2007 are now fully operational. Oil is ß owing exploration and appraisal drilling is due tested commercial rates of oil. in a number of layers. Further testing and one potential prospect directly to the Transneft system through to take place on Kiev-Eganskoye Þ e ld Tamratskoye oil Þ e ld was newly and Þ e ld registration will be carried out of interest. Imperial’s own custody transfer stations Zavyalovo at Luginetskoye and Zavyalovo. A third in 2008. discovered and registered in 2007. in 2008 prior to Þ eld development transfer station pipeline, 152 km long east of the Ob River Vodorazdelnoye 3 exploration74 well Kargasok The Board has decided to explore Snezhnoye !eld has already completed the construction was succeproductionssfully facilidrilletyd, tested and this prospect which is situated in the registered in 2007. The well was77 Parabelnorthern part of the block, to the west of phase with commissioning due by the end hydraulically fractured; further testing Lake Kushmurun. Drilling of this structure of summer 2008, and Þ rst oil is expected to Festivalnoye !eld 69 ß o w in autumn 2008. Imperial has invested and Þ e ld registration will be completed has nowKolpashevo commenced. It is anticipated during 2008. that the results of this well will now be in construction and upgrading of Þ eld 85 Luginetskoye facilities at Snezhnoye and Maiskoye, and transfer station announced by the end of May 2008. Maiskoye !eld 70 has started the construction of facilities at production facility Festivalnoye and Kiev-Eganskoye Þ e lds. 86 TOMSKAYA OBLAST Tomsk 0 100 km Imperial acreage Imperial Energy Corporation PLC 10 Annual Report and Accounts 2007 Chairman’s Statement The year 2007 saw Imperial deliver on its key Key events which have already occurred Dividend objectives. Whilst it was a year not without in 2008: Taking into account the stage of Imperial’s its challenges, by the end of it the following n Imperial’s independently estimated 2P development, the Directors do not had been achieved: reserves increased to 920 million boe recommend the payment of any dividend n Significant appraisal and exploration and our aggregate 3P reserves now (2006: nil). work including 34 new wells and major stand at 3.4 billion boe. seismic acquisition which increased n Continued increase in Russian Registered Operations our SPE based reserves, subsequently Reserves – a further 15% rise to 432 A summary of the main operations confirmed in the newly published million boe in the first three months undertaken by the Group in 2007, independent reserves report. (a 630% increase since 2006). developments subsequent to the year n 229% growth in Russian Registered n Exploration licences for Block 74 end and plans for the remainder of 2008 Reserves over the year. extended for a further two years. are set out in the Operational Review. n The end of year target production rate of n Since the effective date of the 10,000 bopd was exceeded before end independent reserves report, further Financial resources of December. new discoveries have been made in the Imperial is in the midst of a capital intensive n Our two major pipelines, being 208 km Tomsk region not taken into account in programme, the result of which is designed in aggregate length, built during the the present reserve estimates.