Lasmo results hit by pounds 120m in write-offs: Lower oil price and falling production yields lead to passed final dividend

LASMO, the oil and gas company, has written off 6 per cent of the value of its reserves to take account of the lower oil price and falling production yields.

In addition, Lasmo will not pay a final dividend. It paid 1.3p at the interim stage and paid 3.3p for the whole of 1992. Lasmo will save pounds 20m by passing the final dividend. Joe Darby, chief executive, said that the company intends to pay a nominal 1p total dividend for the foreseeable future.

The write-off totalled pounds 120m and ripped a hole in the financial results. In 1993 Lasmo made bottom- line losses of pounds 141m. In 1992 write- downs of oil assets, coupled with losses on businesses sold, contributed to a bottom-line loss of pounds 417m.

In 1993, Lasmo wrote pounds 67m off the value of assets owned in Canada, pounds 21m in Italy and took a pounds 22m hit for the cost of constructing an accommodation platform in the North Sea. An additional pounds 10m was written off assets to be disposed of.

However, the impact of the write- offs was relieved by the release of a pounds 45m provision made this time last year. Lasmo had feared a large increase in its tax bill after changes were made to petroleum revenue tax in the March 1993 Budget.

Most of the 1992 losses resulted from the buyout of rival Ultramar for pounds 1bn in December 1991.

Comparable operating profits struck before exceptional items were more or less flat at pounds 110m. Profit before tax, ignoring the one- offs, was sharply down at pounds 62m against pounds 132m.

The fall in taxable profits resulted from higher interest charges. Lasmo's debt burden actually fell from pounds 1.1bn to pounds 794m. However, interest capitalised in 1992 was paid in 1993 as certain projects moved on from development stage.

Debt gearing on 31 December was 75 per cent compared with 110 per cent a year earlier. The reduction was achieved by the sale of assets, and since the end of the year more sales have reduced it further.

Yesterday the company sold its remaining interest in the Ninian field in the North Sea. Ninian was the first acquisition Lasmo made as a newly formed company in 1974. Its disposal will reduce gearing to 57 per cent.

Simon Flowers, oil analyst at stockbroker NatWest Securities, said: 'It is easy to criticise Lasmo for producing another year of substantial losses. However, you do not need to scratch very far beneath the surface to see that the new management has done a very good job over the last 12 months.'

Efforts to strengthen the balance sheet and reduce operating costs were particularly encouraging. Lasmo might be profitable in 1995, helped by an increase of oil production from cheaply exploitable fields, he said.

Bottom Line, page 38