Seven Heads problems drag Ramco deep into red

Scottish exploration group Ramco slumped to a £104.1 million (€157.8 million pre-tax loss last year, weighed down by problems at its Seven Heads field off the Cork coast.

The group took an exceptional charge of £93 million to cover problems at the Irish field, which emerged late last January, just over a month after it came onstream.

Doubts over the levels of gas reserves in the field have seen the company's shares fall to less than 10 per cent of their pre-disclosure level and forced the company to delay announcing their results for 2003 until yesterday. The figures had originally been due for release in April.

They show a 24 per cent increase in turnover at the Aberdeen-based company to £20.8 million from £16.8 million.

The company was forced to make provisions for exceptional charges of £99.2 million in total, the vast bulk relating to the Seven Heads field.

However, it also allowed £5.6 million against a loan due from an associated company that holds Ramco's interest in exploration in Poland and £600,000 for the costs of an appeal against a US court judgment.

Stripping out exceptionals, Ramco made a loss of £3.4 million, half the £6.8 million incurred in 2002.

The company said discussions with its banks lenders over the rescheduling of £68.6 million of debt incurred to develop the Irish operation were ongoing. Uncertainty surrounding these and the US legal situation would be referred to by Ramco's auditors in their annual report, the company said.

Executive chairman Mr Steve Remp, said: "Our achievements in 2003 have been overshadowed by the unexpected problems at Sevens Heads. We are, however, taking positive action to stabilise our operational and financial position so that we are able to derive the maximum value from the field and exploit the potential elsewhere in our portfolio."

The company is continuing a detailed technical review of the gas reservoir at the Seven Heads field, which will determine the company's future development programme. Results are expected in the next few months.

In the meantime, the company is producing gas at 25 million cubic feet a day, far below the 60 million level it initially flowed at and which the company has contracted to provide to German group Innogy. The company has had to buy the balance in the UK to honour the contract.

However, it says the current flow rates generate sufficient revenue to cover operating costs and loan interest.

Mr Remp acknowledged that the problems at the Seven Heads field, in which the firm has an 86.5 per cent interest and which is the focus of its production effort, had presented a major challenge for the group.