Table of Contents
| Cover Page | 1 |
| Chairman's Letter | 4 |
| Managing Director's Report | 6 |
| Operations Review | 8 |
| Petroleum Permit Interest Schedule | 12 |
| Directors' Report | 14 |
| Auditor's Independence Declaration | 28 |
| Corporate Governance Statement | 29 |
| Directors' Declaration | 31 |
| Consolidated Income Statement | 32 |
| Consolidated Balance Sheet | 33 |
| Consolidated Cash Flow Statement | 34 |
| Consolidated Statement of Changes in Equity | 35 |
| Notes to the Consolidated Financial Statements | 36 |
| Independent Audit Report | 81 |
| Additional Stock Exchange Information | 83 |
| Corporate Directory | 86 |
FULL ANNUAL REPORT
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Chairman's Letter
Dear Shareholder,
2007 was another year of high activity for Nido Petroleum Limited (Nido or Company), focused almost entirely on its oil and gas exploration and development programmes in the Philippine offshore Palawan Basin. Activities were centred on pre-drill exploration activity in our huge offshore exploration portfolio and on the Galoc Development Project in Service Contract 14. This activity took place in anticipation of an exploration drilling programme commencing during the second half of 2008 in SC 54 and Galoc oil production commencing in 2008. The Company’s exploration and development expenditure during 2007 amounted to a record $29.2 million.
The Company has interests in five Service Contract areas in the Philippines, covering a gross area of more than three million hectares of contiguous acreage over almost the entire North West Palawan Basin. This makes Nido the second largest holder of oil and gas exploration acreage in the Philippines, after PNOC Exploration Corporation, the oil and gas arm of the Philippine National Oil Company. All of our exploration acreage is strategically located in the offshore Palawan Basin – an exploration province which has hosted the vast majority of commercial oil and gas discoveries in the Philippines.
During September, Nido commenced the largest seismic acquisition programme in the Company’s history across selected areas of SC 54, SC 58 and SC 63, which included:
- 5,000 line km of 2D seismic; and
- 846 sq km of 3D seismic.
This seismic programme was completed in January 2008 and interpretation is currently underway. The programme will enable an inventory of exploration leads and prospects to be developed across the most prospective areas of our acreage portfolio. Nido is presently seeking a farm-in partner for its Palawan acreage in order to mitigate exploration risk and share drilling costs.
The Galoc Development Project remained the centrepiece of Nido’s development activities during 2007. At the time of writing, the Galoc 3 and Galoc 4 appraisal wells had been drilled, successfully completed and flowed to surface. Current activity is focused on connection of the Galoc 3 and Galoc 4 appraisal wells to the Rubicon Intrepid floating production facility with a view towards establishing sustained oil production commencing in April 2008. Delays resulting from typhoon activity in the Palawan region have hampered the development programme and contributed to a 13% increase in the estimated capital cost of the project to US$104 million, of which Nido’s share is 22.28% or US$23 million. Despite this, we are now better placed than ever before to reap the rewards from this project, with crude oil prices presently hovering around US$100 per barrel.
In 2007, we divested our UK North Sea E&P assets to Encore Oil Plc in return for an equity investment in that company. Encore Oil Plc is a UK based independent oil company, focused on North Sea exploration activities. In October, we sold this investment, thereby bringing closure to our business in the UK.
During the year, we raised equity funds of $32.9 million in order to support our record exploration and development programme and to fund our ongoing overhead costs and new business development activity.
I would like to thank David Whitby and his team for a truly magnificent effort in executing the Company’s Palawan Basin exploration and development strategy towards the realisation of Galoc production revenues and the commencement of a new exploration drilling campaign during the second half of 2008. In ending, I would like to note that I am extremely proud to have been a part of the amazing growth of the Company and I am confident that as I retire back to the UK, I am leaving the Company in the best hands to assume the continued success of this dynamic company.
Yours sincerely,
Gregor Dixon
Chairman
Nido's Performance
Nido’s Investment in the Philippines
Shareholder Value
