In June, the company warned that it could be forced into making an additional write-off, despite an pounds 80m provision made in its preliminary results for last year. Yesterday's move means the entire value of the field has now been written off.
The total provision, taken as an exceptional item, now amounts to pounds 97m, pushing Midland into a revised pre- tax loss of pounds 114m, up from pounds 46m in the previous year. The loss per share jumped from 22p to 55p.
The higher provisions stem from a full assessment of its drilling programme, which revealed that, to maximise Emerald's potential, Midland would need more wells and to enlarge the area of development.
Although the field, in which Midland has a 98 per cent stake, is expected to provide a positive cash flow, this will not be sufficient to pay interest charges on loans taken out for the project. The company hopes to meet the shortfall using earnings from its Italian floating production platform.
Midland's net debts at the year end amounted to about dollars 250m. Its lenders have confirmed they will continue to support the project.
The company's problems arose after it took an over-optimistic view of the Emerald field, which has cost well over pounds 100m to develop. But its estimated recoverable reserves have been repeatedly scaled down - due to complex geology - from about 40 million barrels to about half that level.
In a formal statement, the group said: 'The full accounts explain that the group has received confirmations from relevant lenders of their present intention to continue support for the Emerald project, which has allowed the directors to prepare the accounts on a going concern basis. In their report on the accounts, which is unqualified, the auditors have drawn attention to this point.'
The shares slumped 3.5p to 12p.Reuse content