TIDMCHAR
RNS Number : 1452Q
Chariot Oil & Gas Ld
17 June 2020
17 June 2020
Chariot Oil & Gas Limited
("Chariot", the "Company" or the "Group")
2019 Final Results
Chariot Oil & Gas Limited (AIM: CHAR), the Atlantic margins
focused oil and gas company, today announces its audited final
results for the year ended 31 December 2019.
2019 and Post Period Highlights
Corporate strategy updated to fit with evolving market
dynamics:
-- Risk appetite of investors and the industry has evolved.
-- Exploration in frontier regions has fallen out of favour.
-- Need for nearby / adjacent discoveries to unlock basin potential.
-- Importance of ESG has increased with societal preference for
low carbon energy feeding through to investor sentiment; upstream
energy projects now need to demonstrate Environmental, Social and
Governance ("ESG") credentials.
Lixus - A material, high value gas project with a route to free
cash flow:
-- Lixus Offshore Licence, Morocco, containing the Anchois
Discovery awarded to Chariot as operator with 75% interest, Q2
2019.
-- Anchois Discovery, Anchois Satellites and Additional
Prospects offer potential for a low risk near-term development
opportunity and material, strategic entry into a fast growing
Moroccan energy market and access to the Spanish and Portuguese gas
markets.
-- Strong ESG credentials of project support Moroccan energy
transition and appeal to a broad range of partners in an evolving
market.
-- Anchois Field Development targets a production of 53 mmscf/d,
which at US$8/mcf would deliver revenue of c.US$150 million per
year , paying back development capex in 2-3 years.
-- Attractive commercial and fiscal terms, with a 10-year
Moroccan tax holiday from the start of production.
Scale of the Gas Development Opportunity:
-- Independent Estimates by Netherland Sewell & Associates
Inc. ("NSAI"), completed in 2019, suggests in excess of >2.2 Tcf
(370 mboe) in 2C contingent and 2U prospective resources:
- Anchois-1 well gas discovery 307 Bcf with 2C contingent
resource forms core of fast-track development case with deeper sand
containing 116 Bcf 2U prospective resources making a combined 423
Bcf remaining recoverable resource.
- Anchois Satellites offer material tie-back opportunities with
588 Bcf 2U prospective resources. One of these, Anchois North,
confirmed as the low risk priority satellite with 308 Bcf of 2U
prospective resources and probability of geologic success of
43%
- Additional Prospects on-block offering exploration upside in
excess of 1.2 Tcf 2U prospective resources
-- Improved imaging on reprocessed 3D seismic data has further
de-risked the existing Anchois and Anchois satellite prospective
resource gas volumes.
-- Chariot is also evaluating new leads identified during
technical review, with companies participating in the partnering
process. These leads have the potential to add further prospects to
the portfolio when technically matured.
Monetising the Anchois Gas Discovery:
-- Development Feasibility Study completed. Results confirm
technically feasible with the potential for either a single phase
or a staged development to commercially optimise access to
different parts of the gas market.
-- Subsea-to-shore development, two wells tied back to a subsea
manifold, from which a flowline and control umbilical connect to an
onshore Central Processing Facility ("CPF"). All current,
off-the-shelf technology. Numerous examples of this development
scheme being implemented.
-- Drilling Environmental Impact Assessment ("EIA") completed and approvals received.
-- Progressing pre-Front End Engineering Design ("FEED") work
programme to optimise and reduce uncertainty in project cost,
volumes and price to deliver potential partners and unlock debt
financing.
-- A highly experienced technical, operational, financial and
commercial team with proven, recent operating capability.
Developing a low CO(2) Moroccan gas business
-- Moroccan Gas Market and Anchois Field Monetisation Assessment completed.
-- Morocco has a fast-growing energy market with strong gas
prices that underpins a commercially attractive project.
-- Proximity to power generation and Maghreb-Europe Gas pipeline
("GME") which connects Morocco with Spain and Portugal offer
numerous commercial options to monetise asset.
-- In discussion with a broad spectrum of potential farm-in
partners, multi-lateral lending agencies, debt finance providers,
reserved based lenders, midstream service providers and downstream
off-takers.
-- Company has held initial discussions with l'Office National
de l'Electricité et de l'Eau Potable ("ONEE"), the Moroccan state
electricity provider, and the key players in the Spanish gas
market.
Clear and focussed risk and capital management strategies:
-- Cash balance of US$9.6 million at 31 December 2019 with no remaining work commitments.
-- Annual cash overhead c.US$4.5 million, with a material
decrease to c.US$2.5 million expected following an extensive
cost-reduction programme - whilst retaining key skills and
operational capability.
-- No debt, strong record of capital discipline.
-- Position of strength to respond to current market uncertainty
related to COVID-19 and commodity price weakness.
-- Firmly focused on monetising Lixus licence - asset fits what
potential partners are looking for - discovered resources with ESG
credentials.
-- Board further strengthened with the appointment of Andrew
Hockey (Q2 2019) as Independent Non-Executive Director. Andrew has
extensive experience in the development and production of gas
assets.
Exploration portfolio:
With the strategic focus on Lixus, the Company will only proceed
with exploration if nearby adjacent drilling de-risks the basin
sufficiently to generate partnering.
-- In Namibia, three third-party wells, including one in the
block adjacent to Chariot's Central Blocks, due to be drilled. With
no remaining commitments, marketing of the remaining exploration
prospects ranging from 284 - 469mmbbls of gross mean prospective
resources will be contingent on results of this third-party
activity in the basin.
-- Post year-end Azinam gave notice of its intention to withdraw
from the Central Blocks. Chariot remains committed to continuing to
hold and progress the licence.
-- In Brazil, commitment wells in neighbouring blocks are being
monitored, progression of these projects is needed to trigger
further partnering activity. Chariot holds no remaining commitments
on the acreage.
-- In Morocco, the Company is reviewing Mohammedia and Kenitra
and will make a judgement based on prospectivity and the current
market environment.
2020 Strategic Focus:
-- Seek project endorsement, asset validation and de-risking through partnering.
-- Complete a Pre-FEED analysis to define the Anchois Field
development as a catalyst to unlock debt finance:
o Progress concept testing, selection and definition.
o Well engineering for production wells, reservoir model
engineering and design of production test for first development
well.
o Secure Heads of Agreement on Gas Sales Agreements with
potential off-takers.
Larry Bottomley, Chief Executive Officer of Chariot,
commented:
"Whilst the early part of 2019 marked a shift in the balance of
our portfolio, with the addition of the Lixus licence, the latter
half of 2019 and the start of 2020 has seen the Company
re-prioritise its strategy, accelerating efforts towards monetising
a major gas development project in Morocco. The asset has the
potential to deliver near term cashflows and delivers a more
suitable fuel source for global economies looking to transition to
less carbon intensive energy sources. This re-focus has coincided
with the impact of COVID-19 on the economic and operational
environment. Chariot was able to respond quickly and implemented an
extensive cost-reduction programme to restructure the organisation,
ensuring the retention of key skills and the operating capability
to deliver on Lixus, whilst enabling the business to preserve
cash.
The Anchois Field development has strong ESG credentials and,
when developed, will provide Morocco with a reliable domestic gas
source. Gas from Anchois has the potential to form a fundamental
part of the energy mix, aiding the country's transition from
imported oil and coal in its energy consumption, with any excess
gas exported via the GME to Spain. The studies undertaken have
highlighted the technical feasibility and economic viability of a
development and the gas market analysis confirms the potential to
deliver gas into Morocco and/or Spain at a price that delivers
strong returns on the capital invested. Reliable and plentiful
supply of energy from a domestic source can enhance conditions for
economic growth, particularly in such a fast-growing economy where
energy demand is predicted to double between 2015 and 2030. A
successful project delivery and development of a sustainable
Moroccan gas business will act as a catalyst for jobs in Morocco
and the overall wealth of the Kingdom. We look forward to
continuing our already strong relationships with our partners at
Office National des Hydrocarbures et des Mines ("ONHYM") and the
Moroccan Ministry of Energy and building on our new connections
with ONEE and Moroccan industry."
This announcement is inside information for the purposes of
Article 7 of Regulation 596/2014.
For further information please contact:
Chariot Oil & Gas Limited
Larry Bottomley, CEO +44 (0)20 7318 0450
finnCap (Nominated Adviser and Broker)
Christopher Raggett, Hannah Boros (Corporate
Finance), Andrew Burdis (ECM) +44 (0)20 7220 0500
Celicourt Communications (Financial PR)
Jimmy Lea +44 (0)208 434 2754
NOTES TO EDITORS
ABOUT CHARIOT
Chariot Oil & Gas Limited is an independent oil and gas
company focused on the Atlantic margins. It holds exploration
licences covering two blocks in Namibia, three blocks in Morocco
and four blocks in the Barreirinhas Basin offshore Brazil.
The ordinary shares of Chariot Oil & Gas Limited are
admitted to trading on the AIM Market of the London Stock Exchange
under the symbol 'CHAR'.
Chariot Oil & Gas Limited
Chairman's Statement
Responding to changing industry dynamics
The Chariot team is made up of highly experienced, technically
and operationally excellent people who are all striving to deliver
the goal of transformational value for stakeholders. To date, the
Company has employed its resources to execute a strategy of high
impact exploration drilling that in the success case had the
potential to deliver transformational value. Having completed the
2018 drilling campaign a period of review took place and it became
clear that industry appetite for the class of risk the Company was
operating in had evolved. It was with this evolution in mind that
Chariot sought to broaden its risk profile and, through hard work,
commercial acumen and opportunistic drive, successfully brought in
a licence containing a 307 Bcf gas discovery that would appeal to a
wider range of energy industry partners and investors and be better
placed to monetise a resource that is closer to near-term cashflow.
The Lixus licence therefore makes two fundamental changes to the
Company; it lowers the risk profile with the Anchois discovery and
low-risk tie-back prospects and it changes the timing of the
expected cashflows bringing them forward to the near-term.
The work the team has carried out so far indicates the discovery
has all the attributes of a gas resource with strategic importance
and material exploration upside. It also represents a compelling
investment case to gain entry into a fast growing Moroccan energy
market or into the significantly larger gas market in Spain and
Portugal with both offering attractive gas pricing, commercial and
fiscal terms. Furthermore, the project compares favourably to
current imported fossil fuel-based energy sources. Hence we believe
the licence has the potential to aid Moroccan energy
transition.
Applying the strategy: Broadening the risk profile
Whilst the Lixus licence marks a step change in project
characteristics for the Company it is still very much a product of
the existing strategy the Company was founded on. We are bringing
to market the Anchois Discovery by applying all the different
elements of our strategy against a lower risk gas asset with strong
ESG credentials that is close to a proven gas market, giving a
direct route to monetisation.
We have again managed to access large acreage in a new and
emerging basin, taking an operated position with high equity. In so
doing we are able to take control of the project and keep a tight
focus on costs but also keep equity available to bring in industry
partners at the appropriate time and at commercially attractive
levels. This new acreage has broadened the risk profile of the
Company and we are finding that the style of project has opened up
the range of potential partners we can invite into the data
room.
The licence itself under the previous operator had undergone a
full exploration campaign with seismic and well data which Chariot
has had the benefit of picking up and reworking with application of
its modern, state of the art risk reduction technologies. A key
part of risk management is the validation that comes from peer
group review and the endorsement and risk-sharing of partnering.
Just as we were able to lever our strong early mover position to a
near zero cost well in Rabat Deep, Morocco, we hope to repeat this
partnering success to deliver a commercially favourable outcome to
the Company from our high equity in Lixus, which we hope will act
as a catalyst to further debt financing. We therefore intend to
create value by delivering and monetising the Anchois Gas
discovery.
Maximising the value of the exploration potential in the Lixus
licence
The Anchois Gas Discovery is garnering significant interest in
its base case development scenario from potential farminees who
have been through the data room and engaged with us at various
industry events. By applying the same strategy demonstrated on
previous exploration licences we have deployed our unique,
differentiated in-house technical capabilities throughout a
campaign of reprocessing and interpretation of legacy 3D seismic
data on the block which has substantially enhanced the scale and
potential value of the opportunity. Leveraging the team's Atlantic
Margins expertise has yielded a conveyor belt of substantial leads
and prospects within the licence area, which have been validated
externally by successive Independent Estimates throughout the year.
Whilst tie-ing back these incremental, high-value exploration
opportunities to the primary Anchois development clearly
demonstrates the enormous running room and upside in the licence,
we are mindful and cognisant of the need to focus on the core
monetisation stage of the Anchois Discovery. Only once this has
been delivered will we look to undertake material exploration
activity on the block in a context in which downside risk is
managed both by the selection of priority targets with high chance
of geologic success and by achieving partnering prior to
drilling.
Guiding principal of Capital Discipline
Fundamental to the beliefs of the Company is to apply strong
capital discipline to all aspects of our work. Throughout a very
challenging business environment Chariot has retained its strong
balance sheet and ensured sufficient cash to cover work programme
commitments through the current project phase of Lixus. A key part
of our strategy is to operate projects using our in-house team
which enables us to maintain a firm grip on costs whilst expediting
delivery.
We will undertake to only proceed with exploration if nearby
adjacent drilling de-risks the basin sufficiently to generate
partnering. As such, we are monitoring closely the forthcoming
activity in Namibia and Brazil where third party commitment wells
have the potential to reignite interest in our acreage.
We have always sought to achieve a balance of risk, cost and
reward in our portfolio whilst still maintaining focus on capital
discipline. In order to ensure the greatest chance of success for
monetisation of discovered resources in Lixus, and in light of the
evolution in strategy, the Company is currently reviewing its
licences in Mohammedia and Kenitra in Morocco. Having fulfilled our
seismic work commitments across these licences and conducted
partnering processes for drill-ready prospects, we note that the
industry's change of appetite for these higher risk targets has not
yet led to successful partnering.
Our Relationships and Values
The 2018 drilling campaign across Morocco and Namibia was
conducted with no compromise on safety or environmental protection
and, whilst ultimately unsuccessful in delivering hydrocarbons, the
skills and capabilities demonstrated have led the Company to its
current project. To understand why the Lixus licence containing the
307 Bcf Anchois gas discovery was awarded to Chariot we must point
to the twin strengths of the Company exhibited in this campaign;
firstly in levered partnering on Rabat Deep where we took an early
stage exploration licence and attracted high calibre industry
partners in Woodside and Eni to join us in sharing the risk of what
was a wildcat exploration well, simultaneously retaining exposure
to the upside whilst protecting the Company from cost exposure; and
secondly, in Prospect S we safely and efficiently operated a
deepwater well at industry benchmark low cost in a manner which
showcased our values of fair, open and honest work with our
partners across the value chain, communicating closely with Energy
Ministry, Government, local empowerment partners, contractors and
suppliers.
Seeing what we could do in a such a short timeframe, having spud
Prospect S within 6 months of raising finance and knowing that we
go out and execute on our stated work strategy makes us an ideal
candidate to operate Lixus and bring to market a dormant gas
discovery that can contribute materially to Morocco's energy mix.
We would like to thank the Ministry for their co-operation in
securing the Lixus Offshore Licence in Morocco and look forward to
continuing to work in partnership with the Office National des
Hydrocarbures et des Mines ("ONHYM").
We seek to achieve excellence through our values of
collaborative teamwork, a collegiate approach, peer review and
regular technical reviews with the in-house team. Throughout the
organisation we seek a culture of continuous improvement and in
pursuit of this objective we have strengthened our technical review
capability with the appointment of Andrew Hockey to the Board in
June 2019. We welcome Andrew, whose technical insight and current
experience in developing gas assets has further strengthened the
decision making and strategic planning process.
Outlook
Elephant scale exploration activity in frontier regions has,
aside from a few notable exceptions, fallen out of favour with the
market and industry appetite is now clearly focused on the
environmental and social impact of energy projects and their
governance.
I believe that Chariot has evolved to fit with changing market
dynamics and the risk appetite of investors by refocusing its
corporate strategy on monetising the near term potential of the
Lixus licence and maximising value for investors by developing a
Moroccan gas business. In addition, the recent restructuring to
reduce ongoing costs, coupled with the fact we have no debt and no
remaining work programme commitments, puts Chariot in a good
position to respond to the current market uncertainty related to
COVID-19 and commodity price weakness.
George Canjar
Chairman
16 June 2020
Chariot Oil & Gas Limited
Chief Executive Officer's Review
The addition of the Lixus Licence, offshore Morocco, in the
first half of 2019 has brought discovered gas resources to the
portfolio for the first time and transformed the strategic focus of
the Company. This asset is located along the Moroccan Atlantic
industrial corridor and lies close to the Maghreb-Europe Gas
pipeline ("GME") which connects Morocco with the gas markets of
Spain and Portugal. Chariot is now the operator of a major low risk
appraisal and development opportunity which has the potential to
have a material impact on the energy mix of Morocco by opening an
untapped source of indigenous gas that can reduce reliance on
imported fossil fuels, with the potential for any excess gas to be
exported to the Iberian peninsula. This project can be delivered at
a low cost and with strong ESG credentials, supporting a Moroccan
energy transition and/or low-carbon energy in Spain.
The Lixus asset contains the Anchois Gas Discovery with 423 Bcf
of remaining recoverable resource, which alongside its Satellite
and Additional Prospects comprises in excess of 2.2 Tcf (370mboe)
in 2C contingent and 2U prospective resources as independently
evaluated by Netherland Sewell & Associates Inc. ("NSAI").
Monetising the Anchois Discovery to return transformational
shareholder value
Historically the Company has focused, with partnering, on
discovery of hydrocarbons in underexplored frontier regions and
higher risk, giant scale plays. As a response to evolving market
dynamics the corporate strategy has been broadened to position
Chariot to unlock value in the Lixus Licence, offshore Morocco. The
risk appetite of investors and the industry has gone through a
realignment and exploration in frontier regions, which have until
recently made up the core of our portfolio and yielded successful
partnering, has fallen out of favour. Following the post-2014 oil
price collapse and reorganisation of the sector focus has
redirected away from international exploration and as such the pool
of potential investors and partners for higher risk oil exploration
has diminished. Lixus represents a much lower risk development
opportunity with a clear line of sight to cashflow which we believe
is more appealing to a wider target market of potential investors
and partners.
At the same time as this refinement in risk appetite of
investors, the importance of ESG and energy transition has
increased in importance when it comes to project finance. We
believe the project has strong ESG credentials as the production of
natural gas will help Morocco transition from reliance on coal and
oil for its energy supply. The Company therefore intends to
continue applying the elements of its strategy of access, risk
management and delivery but this time exposing stakeholders to
transformational value by the monetisation of a material existing
gas asset that also holds exceptional upside potential.
Experienced and Strong Operational Team
To date, Chariot has built a reputation as a technically
capable, safe and efficient operator, with the ability to execute
successful exploration programmes with a strong focus on capital
discipline. The 2018 drilling campaign demonstrated these qualities
through both the attraction of high calibre industry partners in
Morocco and the delivery of a deepwater well in Namibia as operator
at a new benchmark low cost in the industry. The strong
relationship we have built with our Moroccan partner ONHYM through
successive operated exploration licences since 2012, coupled with
our recent demonstration of project execution capability in Namibia
meant that when we approached the Ministry in Morocco to take Lixus
on as operator we were met with a positive response.
Origination of the Opportunity and Rapid Progression of
Subsurface Description
The Anchois-1 well was drilled in 2009 in 388m water depth some
40km from the coast and encountered an estimated net gas pay of 55m
in two sands with very high quality 25-28% porosity reservoirs. An
independent estimate of this discovery by NSAI on this well and the
legacy 3D seismic data estimates a 2C contingent resource of 307
Bcf. A deeper target not penetrated by the well has 2U prospective
resources estimated by NSAI of 116 Bcf, with the Anchois discovery
combined containing a remaining recoverable resource of 423
Bcf.
The well results indicate sales quality gas with commercial flow
rates which make for a relatively simple development solution. The
well itself was suspended as a potential producer - an Anchois
Field development could potentially look to re-enter this well and
commission for first gas.
Since the award in the first half of 2019, three independent
estimates have been completed from interpretation of the legacy
seismic data over the Anchois Discovery, the Anchois Satellite
Prospects and the Additional Prospects. The Satellite prospects
that ring the Anchois discovery all have the potential to be tied
back to Anchois at low cost. They are viewed as low risk prospects
characterised by similar seismic attributes and are in the same
reservoir system as Anchois, with the Satellites independently
estimated by NSAI to hold 588 Bcf. The high-graded Anchois North,
is a 308 Bcf low risk opportunity with probability of geologic
success at 43% and is therefore a potential second drilling
candidate which, if successful, would add to the production profile
beyond the initial 10 year time frame anticipated in a core Anchois
development scenario, thus demonstrating a lucrative follow-on
upside.
The legacy 3D seismic data has been reprocessing to Pre-Stack
Depth migration with a significant uplift in data quality. These
data are currently being interpreted and will be incorporated in
Chariot's plans for the region.
Engineering and Gas Marketing
The Development Feasibility Study conducted in mid-2019
demonstrated the viability of the project and made it clear that a
compelling opportunity exists to grow a Moroccan gas business with
the prospect of near-term cashflow from a high value gas
development in a stable, growing economy with fast growing energy
demand and attractive gas prices and fiscal terms.
The Anchois Field reservoirs have a productive capacity which is
potentially sufficient to fully supply individual power stations,
with any surplus gas being contracted to domestic industrial users
or export off-takers. The fast track base case development option
we are focusing on is a low cost subsea-to-shore model with two
subsea wells tied into a subsea manifold, from which a 40km
flowline and umbilical connect to an onshore Central Processing
Facility ("CPF"). This would deliver a plateau production rate of
53 mmscf/d, representing 60% of the 2C resource potential of the A
and B sands only, delivering approximately US$150million per year
in revenue under a US$8/mcf gas price assumption. This concept
allows for future wells to be tied-in to the core infrastructure in
phases and open capacity to ramp-up production in response to
progressive demand and favourable project economics. Preliminary
feasibility study costs range from -30% to +50% of the base case ,
based on the American Association of Cost Engineers ("AACE")
International Class 4 feasibility study standards and we will be
working to reduce uncertainty in this range as Pre-FEED studies
proceed.
The Gas Market Analysis and the Anchois Field Monetisation
Assessment conducted by a third-party consultancy highlighted the
strong fundamentals that underpin this market. Moroccan energy
demand has doubled since the year 2000 and is forecast to double
again between 2015 and 2030. Power generation is principally from
imported coal, fuel oil and gas and the majority of growth in
recent times has come from renewables and imported gas from
Algeria. There is therefore a potential for power generation from
indigenous gas, as a transition from fuel oil and coal, to mitigate
the carbon footprint of the country's energy consumption and
improve its ESG credentials. This project would serve the need to
both diversify and focus on security of supply by accessing a
low-cost, strategically important domestic energy base whilst
minimising environmental impact. Importantly, prices of c.US$8/mcf
are expected to the power sector, an assessment also supported by a
recently announced peer group gas sales agreement. Sales to
industrial users would be expected to be smaller volume, higher
margin in nature at around US$11/mcf offering material upside. In
addition to targeting power generation, gas-to-power projects and
industrial users, the Maghreb-Eurpoe Gas pipeline ("GME") is within
30 kilometers of landfall of the Lixus licence which makes the
export of gas into the Iberian Peninsula, a potentially lucrative
market, feasible. Initial discussions have been held with ONEE, the
Moroccan state electricity company and the key players in the
Spanish gas market with a view to future gas-offtake
arrangements.
Finance and Partnering
We have been very pleased and encouraged by the response we have
received from both potential upstream partners and a wide range of
potential strategic alliances across the energy value chain. As
operator with 75% of the licence, the data room has been host not
just to E&P companies, but also, in line with the rebalancing
of risk this project has opened the door to financing with
midstream players, engineering service companies, downstream power
generators and third party off-takers. As with previous farm-out
campaigns, we will seek partnering prior to first development
drilling as both a key de-risking strategy for validation of the
asset and as a crucial source of funding. The licence has
exceptional commercial contract terms, internationally attractive
gas prices and fiscal conditions, with tax breaks in the first 10
years of production that augment an already strong base case cash
flow profile, all of which we believe will be appealing to
potential farm-in partners.
In addition, discussions have been held with multi-lateral
lending agencies, reserves-based lenders and other debt finance
providers which have framed the project planning to enable bespoke
work to meet criteria for unlocking funding. Two engineering group
consortia have also expressed their interest in the project, either
by taking an equity position or through future sales tariff. The
team is pushing forward with a Pre-FEED project to reduce
uncertainty and narrow the range on project costs to AACE Class 3
level with an expected accuracy range from -20% to +30% of the base
case, mature development concept plans, build reservoir models,
design the well production test and seek to secure heads of terms
on gas sales agreements with potential off-takers, all of which
move the Anchois gas discovery along its path to attracting
partners, unlocking debt financing, first gas production and
monetisation.
Active Exploration Portfolio Management
We note that a number of companies have near-term plans to drill
nearby Chariot's Central Blocks in Namibia and, in one case,
adjacent acreage. Any discovery would have the potential to unlock
the basin and improve the chances of re-marketing the remaining
giant scale exploration prospects on our block. There are no
remaining work commitments, with the Prospect S well in 2018 having
fulfilled drilling requirements on the licence. Chariot remains
committed to continuing to hold and progress the licence.
In Brazil, we await a play opening commitment well to be drilled
by a third-party in the neighbouring deepwater block, following
which a partnering process will be re-initiated for a partner to
join in drilling Prospect 1, estimated to contain 911 mmbls of
prospected resources in stacked targets.
We have always sought to achieve of balance of risk, cost and
reward in our portfolio whilst still maintaining focus on capital
discipline. To ensure the greatest chance of success for
monetisation of discovered resources in Lixus, and in light of the
evolution in strategy, the Company is currently reviewing
Mohammedia and Kenitra in Morocco. Having fulfilled our seismic
work commitments across these licences and conducted partnering
processes to progress drill ready prospects, we note that the
industry's change in appetite for these higher risk targets has not
yet led to successful partnering.
Outlook
In 2020, all our efforts are geared towards defining the Anchois
Field development plan whilst simultaneously progressing partnering
discussions. Execution of the strategy has the potential to deliver
an initial phase 1 development of the Anchois discovery, putting in
place a core infrastructure that will not only deliver first gas,
near-term cashflow on a standalone basis and a sustainable Moroccan
gas business, but also allows the Company to leverage its position
to add incremental value-accretive growth from the Anchois
satellite prospects and wider exploration targets on the block in
the years to come.
Chariot has built a reputation for operational excellence and
attracting high calibre industry partners to its projects and the
team is fully focused on applying its skillset to capture value in
the Lixus opportunity. The investment case is clear. All the
elements are in place to make a major impact on the Moroccan energy
market with a phased development of Anchois and the wider Lixus
portfolio, monetising a high value resource and delivering
transformational value for stakeholders.
Larry Bottomley
Chief Executive Officer
16 June 2020
Chariot Oil & Gas Limited
Chief Financial Officer's Review
Funding and Liquidity as at 31 December 2019
The Group entered 2020 with a debt free balance sheet, cash of
US$9.6 million as at 31 December 2019 (31 December 2018: US$19.8
million) and no material remaining work programme commitments.
Having demonstrated capital discipline throughout our drilling
operations and the award of a new licence in Morocco with minimal
commitments our continued focus on costs has been further
illustrated by the recent extensive cost reduction programme which
has reduced our annual cash overhead to c.US$2.5 million.
During 2019, the Group continued to develop its portfolio and
business by investing c.US$10 million into its exploration
portfolio and administration activities (31 December 2018: c.US$12
million) primarily in the new Lixus licence in Morocco.
As at 31 December 2019, US$0.7 million of the Group's cash
balances were held as security against licence work commitments.
The decrease from US$0.8 million at 31 December 2018 was due to the
release of Moroccan bank guarantees.
Financial Performance - Year Ended 31 December 2019
The Group's loss after tax for the year to 31 December 2019 was
US$4.1 million, which is US$11.0 million lower than the US$15.1
million loss incurred for the year ended 31 December 2018. The vast
majority of this decrease in the annual loss is due to an
impairment charge of US$10.9 million in 2018 against previously
capitalised drilling costs in the Namibian Central Blocks. This
equates to a loss per share of US$(0.01) compared to a loss per
share of US$(0.04) in 2018.
The share based payments charge of US$0.7 million for the year
ended 31 December 2019 in relation to employee and Directors
deferred share awards was broadly consistent with US$0.9 million in
the previous year.
Other administrative expenses of US$3.4 million for the year
ended 31 December 2019 is in line with the prior year (31 December
2018: US$3.4 million).
The finance income and expense net US$Nil (31 December 2018:
US$Nil) comprises interest on cash, foreign exchange movements on
non-US$ cash and finance expense on the office lease liability.
Interest income of US$0.2 million for the year ended 31 December
2019 is slightly lower than the prior year due to a decrease in
cash held on deposit (31 December 2018: US$0.4 million).
The foreign exchange loss on non-US$ cash of US$0.1 million for
the year ended 31 December 2019 has reduced due to the reduction in
Sterling requirements which were needed to meet well commitments in
2018 (31 December 2018: US$0.4 million loss). The effect of
unwinding of the discount on the lease liability from adoption of
IFRS 16 Leases has led to a finance expense charge of US$0.1
million in the current year (31 December 2018:US$Nil).
The tax expense of less than US$0.1 million in the year to 31
December 2019 (31 December 2018: less than US$0.1 million) relates
to Brazilian taxation levied on interest income.
Exploration and Appraisal Assets as at 31 December 2019
During the year to 31 December 2019, the carrying value of the
Group's exploration and appraisal assets increased by US$4.1
million to US$78.3 million from US$74.2 million as at 31 December
2018. This US$4.1 million increase was principally due to
investment into the Lixus licence in Morocco as the project moves
forward. US$3.0 million was incurred mainly on interpretation and
reprocessing of legacy Lixus 2D & 3D seismic data, development
feasibility and gas market studies, drilling environmental impact
assessment in preparation toward a first development well and
project subsurface description for funding. In Namibia, US$0.6
million and in Brazil, US$0.5 million were incurred on ongoing
interpretation and licence costs.
Other Assets and Liabilities as at 31 December 2019
The Group's inventory balance of US$0.5 million as at 31
December 2019 is unchanged from the US$0.5 million at 31 December
2018.
As at 31 December 2019, the Group's net balance of current trade
and other receivables and current trade and other payables shows a
net current liability position of US$1.8 million (31 December 2018:
US$4.7 million) with the decrease primarily due to settlement of
outstanding payables for the drilling in Namibia, offset by tax
recoveries in both Brazil and Namibia.
Upon adoption of IFRS 16 Leases with effect from 1 January 2019,
rental commitments paid on the UK office which were previously
charged on a straight-line basis to the income statement over the
term of the lease, with the total commitment disclosed in the
notes, have now been brought onto the balance sheet. As a result,
the Group has recognized at 31 December 2019 a depreciating
right-of use asset of US$1.0 million and a corresponding lease
liability based on discounted cashflows of US$1.2 million, with the
annual cash impact to the business unaffected by these accounting
adjustments.
Outlook
With US$9.6 million of cash at 31 December 2019, no debt and no
material work programme commitments, the Group has a stable
platform from which to focus on funding the Lixus opportunity.
Delivery of the immediate project actions has the potential to
attract partners and act as a trigger to debt financing. Our
current engagement with an expanded set of potential funding
providers is encouraging and we look forward to updating the market
as and when progress is made.
Julian Maurice-Williams
Chief Financial Officer
16 June 2020
Chariot Oil & Gas Limited
Exploration Manager's Review of Operations
Morocco: Appraisal & Development - Lixus Offshore (75%
Chariot (Operator), 25% ONHYM (carried interest))
Overview
In 2019 we broadened the risk profile of the Company's portfolio
by securing the Lixus Offshore licence in Morocco. This licence
area contains the legacy Anchois gas discovery (made by Repsol in
2009) which contains 307 Bcf of 2C Contingent Resources as
independently assessed by NSAI and represents a high value gas
appraisal and development project which we believe offers an early
route to monetisation. The Anchois discovery was made in high
quality reservoirs and with a favourable gas composition which
together facilitate a development solution underpinned by
conventional technology with delivery into a growing gas market
with strong established prices. Importantly the gas bearing
reservoirs are directly imaged on seismic data, and the resulting
calibration of this data helps to describe a significant and low
risk portfolio of analogous exploration prospects.
It was the analysis of the results of the Rabat Deep 1 (RSD-1)
well drilled in 2018 which initially led us to the identification
of the Lixus Offshore area as a potential new venture. It was a
process of analysis to understand the presence of oleananes in the
oils recovered from the Mid-Jurassic carbonate reservoirs in the
well, implying a Cretaceous or younger source rock, which
challenged our understanding of the regional petroleum systems. The
team analysed all the thermogenic hydrocarbon indications in the
region, initially for the benefit of the existing drill ready
exploration targets in the adjacent Mohammedia and Kenitra
licences. Whilst reviewing the results of the Anchois-1 thermogenic
gas discovery to the north the team recognised the potential for a
commercial development of the Anchois discovery in a lower cost
environment supported by a maturing local gas market, along with
substantial remaining exploration potential in the same play.
Once the opportunity was recognised, as a nimble, independent
upstream Company, we were able to move quickly to secure the
acreage. We believe that our track record in operating exploration
ventures in Morocco, in conducting exploration work programmes and
attracting external investment were important in securing the
support of our local partner ONHYM. This support helped us to
secure the acreage under excellent terms and in a timely fashion,
whilst quickly compiling a comprehensive database of geological and
geophysical data which permitted a rapid evaluation of the
potential of the area upon licence award.
Favourable Subsurface Conditions
The Anchois Discovery was made in Tertiary-aged turbidite
reservoirs, which are similar to those demonstrated to be highly
productive in analogous environments, such as the Nile Delta,
offshore Egypt. The reservoir sands were deposited in a deepwater
setting in mini-basins which developed above the pre-Rifaine nappe
(or Olistostrome) which formed during the Alpine orogeny as Africa
and Europe collided in this region approximately 5 million years
ago. Gas was discovered in two sands, Gas Sands A and B, which both
recorded gas columns of approximately 50m and 22m and 33m of net
gas pay respectively. They both exhibit excellent petrophysical
properties with porosity averages ranging from 26% to 28% and
reservoir sampling in Gas Sand B demonstrating the potential for
multi-Darcy permeability. We would therefore expect very high
productivity wells in any development. Reservoir sampling via MDT
also yielded gas composition data from the B Sand accumulation,
confirming high quality dry gas, with 97% (Mol %) of Methane (C(1)
) and without problematic impurities such as CO(2) or H(2) S. Gas
Sand A and Gas Sand B have distinctive seismic signatures with
bright high amplitudes and far-offset (AVO) seismic anomalies
associated to the gas bearing sands and there is therefore high
confidence in the lateral extent of those sands away from the
proven well location. Based upon the evaluation of the legacy
Pre-Stack Time Migration ("PSTM") 3D seismic data, NSAI performed
an Independent Estimate of the Contingent Resources associated to
the Anchois discovery, resulting in an estimate of 156 Bcf of 1C
(or Proven) resources, 307 of 2C (or Probable) resources and 433
Bcf of 3C (or Possible) resources.
Together, the high-quality reservoirs, high-quality gas and the
ability to directly map the extent of the gas sands on the legacy
seismic data, reduce the uncertainty on the resource volumes and
subsurface risks for a development project, also allowing the use
of standard equipment for a relatively simple development
solution.
In addition to the description of the gas discovered in the
well, Chariot's team also identified an undrilled seismic anomaly,
called Gas Sand C, with similar distinctive seismic attributes that
would offer low risk exploration upside to the east of the
discovery well and at the same elevation to where thin gas bearing
sands were identified in the well. Again, NSAI performed an
independent estimation on the resource potential of this reservoir,
resulting in a Best Estimate (2U) of 116 Bcf of Prospective
Resources, which could be targeted in combination with a first
appraisal or development well on the Anchois Field.
Leveraging the insights from the evaluation of the Anchois
discovery, the team was able to quickly identify further prospects
surrounding the Anchois discovery, as they both share the same
reservoir systems and possess very similar seismic attributes. Of
these 'Satellite Prospects', Anchois North was high-graded based
upon its prospective resource potential, estimated by NSAI to
contain 308 Bcf of 2U prospective resources and its high
probability of geologic success of 43%. Together with the four
other Satellite Prospects, Anchois and its satellites are an
amplitude and AVO supported discovery and prospect inventory with
remaining recoverable resources in combination in excess of 1 Tcf,
as independently estimated by NSAI, demonstrating a potentially
high-value, low risk and material resource base for growth in the
medium term.
In addition to the satellites, five further exploration
prospects (Turbot, Tombe, Maquereau North, Maquereau Central and
Maquereau South) have been identified and independently estimated
by NSAI within the Miocene play, with a total remaining recoverable
resource in excess of 1.2 Tcf 2U prospective resources. These
prospects offer the potential to be additional production centres
beyond the Anchois area for the longer term, in the case of
successful exploration drilling. Beyond the potential captured in
the independently estimated portfolio, which totals 2.2 Tcf of
mid-case 2C & 2U resources, the exploration team continues to
work on the identification and description of additional targets
within the proven Miocene gas play and the maturation of additional
exploration play systems which together have the potential to
deliver additional prospects and significant resource upgrades to
the portfolio once technically matured. Other play systems include
both a shallower gas play within the younger Pliocene reservoir
systems and also a high-risk high-reward oil play in the Mesozoic
reservoirs of the sub-nappe section.
This exploration work will be enhanced through the results of a
Pre-Stack Depth Migration ("PSDM") reprocessing campaign on the
legacy 3D seismic data. This will materially improve the seismic
image and depth accuracy over Lixus through the application of
technologies which were not available at the time of the original
processing. Initial screening of the early products from this
reprocessing campaign indicates that the 1C resource assigned to
the Anchois discovery is expected to increase while the 2C resource
is unlikely to materially change. An improvement in the 1C resource
base expands the various development and funding options available
for the project and allows the possibility for a commercially
attractive fast-track development. Such a development has the
potential to underpin the project whilst allowing for production
growth as reservoir performance is confirmed and the gas market
demand expands to include a variety of potential offtakers. This
improved seismic image is also expected to impact on the
description of the additional exploration prospectivity in the
licence by reducing both risk and uncertainty, and the improvements
in imaging at depth will be critical to unlocking the potential of
the sub-nappe oil play.
To ensure Chariot can capture the value created through the
reprocessing campaign, the Company will re-assess the Anchois
development options and incorporate the findings into the upstream
partnering process.
A Proven Development Concept
Chariot sought third party validation of its subsea to shore
concept and the independent Development Feasibility Study conducted
in mid-2019 served to both validate the team's concept and to
provide indicative CAPEX and OPEX costs which together demonstrated
the eminent viability of the project. High-quality reservoirs and
favourable gas composition allow the application of a conventional
development scheme using standard technology that has been employed
in many places around the world, including examples in Africa.
Based upon the resource potential, subsurface uncertainty and
initial gas market, the favoured concept is a fast track
development with two subsea production wells tied into a subsea
manifold. From which a 40km flowline and reciprocal umbilical and
flowline for glycol or other hydrate inhibitor, would connect to an
onshore Central Processing Facility ("CPF"). The expectation is
that this would deliver a plateau production rate of 53 mmscf/d,
representing 60% of the 2C resource potential of the A&B sands
only based upon a 10 years plateau duration. This would deliver
approximately US$150million per year in revenue under a US$8/mcf
gas price assumption. This concept provides a robust initial
cashflow and allows for future wells to be tied-in to this core
infrastructure in phases, to ramp-up production in response to
progressive demand growth and to provide even more favourable
project economics. Preliminary feasibility study costs range from
-30% to +50% of the base case, based on the American Association of
Cost Engineers ("AACE") International Class 4 feasibility study
standards, and more-accurate cost estimates are expected as part of
a Pre-FEED study, which is expected to complete by mid-2020.
Moroccan Gas Market and Anchois Field Monetisation
Assessment
Primary energy demand in Morocco has doubled since the year 2000
and is forecast to double again from 2015 to 2030. In terms of
power generation, imported fossil fuels dominate, with Morocco
relying on imports for 96% of its needs. Since the construction of
the Maghreb-Europe Pipeline ("GME") in 2004, Morocco has been
importing gas from Algeria for power generation. Together the Ain
Beni Mathar and Tahaddart Power stations have consumed around 100
mmscfd since 2012. The Moroccan government has been working on
policies designed to improve security of supply, access to energy
at a low cost, and to minimize the environmental impact of its
energy mix. As part of this process, gas has been a major factor in
its vision, including the possibility of imported LNG and the
construction of further power infrastructure, for example a new
1,200MW CCGT power plant has been contemplated at Dhar Doum, which
would be favourably located in close proximity to the landfall
location of an Anchois Field gas pipeline.
Clearly indigenous Moroccan gas, such as that from an Anchois
Field development, has the ability to fuel these existing and
planned CCGT power stations (thus displacing the need to import gas
from Algeria), reduce the volumes required from LNG projects which
require material investment, switch expensive and underutilised
fuel oil power stations to gas and to reduce import coal. Over and
above power projects, there is a proven fast-growing industrial
demand for gas with prices already established in the region of
US$10-11/mcf. Once a material gas resource, such as Anchois, is
connected to an industrial region such as that of Morocco's
Atlantic coast, it is anticipated that industrial gas consumption
will grow significantly, through a variety of possible delivery
networks such as piped gas and Compressed Natural Gas ("CNG");
which will allow industrial customers to switch from other more
expensive fuels such as fuel oil and Liquefied Petroleum Gas
("LPG").
Furthermore, with a connection to the GME pipeline, for which
ownership transitions to Morocco in 2021, surplus gas from the
Anchois Field development could potentially be exported to the
Iberian Peninsula, highlighting the project's flexibility in
commercial options.
Lixus boasts excellent contract terms in what is widely known
internationally to be a favourable fiscal environment. There is a
10-year tax holiday on production revenues and a low 3.5% royalty
on gas produced offshore at the water depth of the Anchois
discovery, with ONHYM paying their 25% share of the development.
The 10-year tax holiday is an important incentive to encourage the
kickstarting of a domestic offshore gas supply and we note this
coincides with the production window our project is targeting to
meet the expected doubling of energy demand. We are encouraged by
the excellent responses received so far in data room. For larger
E&P companies the running room in the asset is garnering
attention as an attractive entry into an emerging economy with fast
growing energy demand.
Forward Plan 2020/21:
-- Seek partners and funding for a first appraisal/development
well, which is to be suspended as a potential future producer
-- 3D seismic PSDM reprocessing and interpretation to further
refine the understanding of the Anchois discovery and
identification of further exploration opportunities within both the
shallow low-risk gas play and also to develop potentially giant
sub-nappe oil prospectivity
-- Develop the gas market, testing development concepts,
conducting drilling preparatory work, developing strategic
alliances to progress funding solutions
Exploration Portfolio:
With a strategic focus on Lixus and having fulfilled its minimum
work programmes across the portfolio, the Company will continue to
monitor results of adjacent activity and will largely continue with
investments in in-house technical work on the rest of its
exploration portfolio. If nearby drilling success de-risks the
basin, then the company will be ready to rapidly define a forward
work programme to benefit from that activity. Active third-party
drilling campaigns are anticipated over the next 12-24 months in
Brazil and Namibia, as described below.
Brief description of:
Namibia
Following the drilling of the Prospect S exploration well in
2018, which fulfilled the work commitments in the current licence
period, post-well evaluation studies have been completed. We
continue to monitor activity on offset acreage in Namibia and we
await results from nearby drilling which may help to derisk the
remaining prospectivity in our Namibian exploration portfolio. The
industry anticipates that between 2 and 4 wells will be drilled
over the coming 12 to 24 months.
Brazil
Chariot has fulfilled the current period commitments on its
acreage in the Barreirinhas basin and continues to mature
exploration studies and host data rooms whilst awaiting for results
from offset drilling in the basin. Neighbouring blocks contain
multiple commitments wells, both those bid in the 13th bid round of
the ANP in 2013, and other legacy well commitment from previous
licence rounds (Petrobras has announced plans to drill the Guajuru
prospect in Q4 2020 as part of its environmental licensing
application). In an underexplored deepwater basin, the results from
these wells will be important in revealing the exploration
potential of the basin and derisking our acreage ahead of drilling
decisions.
Mohammedia / Kenitra
In light of the evolution in strategy and the current business
environment, the Company is reviewing its licences in Mohammedia
and Kenitra in Morocco.
Duncan Wallace
Exploration Manager
16 June 2020
Chariot Oil & Gas Limited
Consolidated Statement of Comprehensive Income for the Year
Ended 31 December 2019
Year ended Year ended
31 December 31 December
2019 2018
Notes US$000 US$000
Share based payments 20 (651) (904)
Im pairment of exploration
asset 11 - (10,876)
Other administrative expenses (3,395) (3,359)
-------------------------------------- ------ -------------- --------------
Total operating expenses (4,046) (15,139)
-------------------------------------- ------ -------------- --------------
Loss from operations 4 (4,046) (15,139)
Finance income 6 190 371
Finance expense 6 (183) (356)
-------------------------------------- ------ -------------- --------------
Loss for the year before taxation (4,039) (15,124)
Tax expense 8 (11) (12)
-------------------------------------- ------ -------------- --------------
Loss for the year and total
comprehensive loss for the
year attributable to equity
owners of the parent (4,050) (15,136)
-------------------------------------- ------ -------------- --------------
Loss per Ordinary share attributable 9 US$(0.01) US$(0.04)
to the equity holders of the
parent - basic and diluted
-------------------------------------- ------ -------------- --------------
All amounts relate to continuing activities.
The notes form part of these financial statements.
Chariot Oil & Gas Limited
Consolidated Statement of Changes in Equity for the Year Ended
31 December 2019
Share based Total
payment Foreign attributable
Share Share Contributed reserve exchange Retained to equity
capital premium equity reserve deficit holders of
the parent
US$000 US$000 US$000 US$000 US$000 US$000 US$000
---------------- ------------ ------------ ------------- ------------ ------------ ------------ -------------
As at 1 January
2018 4,881 340,743 796 4,472 (1,241) (261,988) 87,663
Loss and
Total
comprehensive
loss for the
year - - - - - (15,136) (15,136)
Issue of
capital 1,355 16,258 - - - - 17,613
Issue costs - (1,085) - - - - (1,085)
Share based
payments - - - 904 - - 904
Transfer of
reserves due
to issue of
share awards 28 420 - (448) - - -
As at 31
December 2018 6,264 356,336 796 4,928 (1,241) (277,124) 89,959
---------------- ------------ ------------ ------------- ------------ ------------ ------------ -------------
Loss and
total
comprehensive
loss for the
year - - - - - (4,050) (4,050)
Share based
payments - - - 651 - - 651
Transfer of
reserves due
to issue of
share awards 4 167 - (171) - - -
As at 31
December 2019 6,268 356,503 796 5,408 (1,241) (281,174) 86,560
---------------- ------------ ------------ ------------- ------------ ------------ ------------ -------------
The following describes the nature and purpose of each reserve
within owners' equity.
Share capital Amount subscribed for share capital at nominal value.
Share premium Amount subscribed for share capital in excess of
nominal value.
Contributed equity Amount representing equity contributed by the
shareholders.
Share based payments reserve Amount representing the cumulative
charge recognised under IFRS2 in respect of share option, LTIP and
RSU schemes.
Foreign exchange reserve Foreign exchange differences arising on
translating into the reporting
currency.
Retained deficit Cumulative net gains and losses recognised in
the financial statements.
The notes form part of these financial statements.
Chariot Oil & Gas Limited
Consolidated Statement of Financial Position as at 31 December
2019
31 December 31 December
2019 2018
Notes US$000 US$000
Non-current assets
Exploration and appraisal costs 10 78,264 74,236
Property, plant and equipment 11 94 100
Right of use asset 15 983 -
----------------------------------- ------ ------------ ------------
Total non-current assets 79,341 74,336
----------------------------------- ------ ------------ ------------
Current assets
Trade and other receivables 12 781 2,306
Inventory 13 524 524
Cash and cash equivalents 14 9,635 19,822
----------------------------------- ------ ------------ ------------
Total current assets 10,940 22,652
----------------------------------- ------ ------------ ------------
Total assets 90,281 96,988
----------------------------------- ------ ------------ ------------
Current liabilities
Trade and other payables 16 2,535 7,029
Lease liability: office lease 15 366 -
----------------------------------- ------ ------------ ------------
Total current liabilities 2,901 7,029
----------------------------------- ------ ------------ ------------
Non-current liabilities
Lease liability: office lease 15 820 -
Total non-current liabilities 820 -
----------------------------------- ------ ------------ ------------
Total liabilities 3,721 7,029
----------------------------------- ------ ------------ ------------
Net assets 86,560 89,959
----------------------------------- ------ ------------ ------------
Capital and reserves attributable
to equity holders of the parent
Share capital 17 6,268 6,264
Share premium 356,503 356,336
Contributed equity 796 796
Share based payment reserve 5,408 4,928
Foreign exchange reserve (1,241) (1,241)
Retained deficit (281,174) (277,124)
----------------------------------- ------ ------------ ------------
Total equity 86,560 89,959
----------------------------------- ------ ------------ ------------
The notes form part of these financial statements.
The financial statements were approved by the Board of Directors
and authorised for issue on 16 June 2020 .
George Canjar
Chairman
Chariot Oil & Gas Limited
Consolidated Cash Flow Statement for the Year Ended 31 December
2019
Year ended Year ended
31 December 31 December
2019 2018
US$000 US$000
Operating activities
Loss for the year before taxation (4,039) (15,124)
Adjustments for:
Finance income (190) (371)
Finance expense 183 356
Depreciation 401 56
Share based payments 651 904
Im pairment of exploration asset - 10,876
----------------------------------------- -------------- --------------
Net cash outflow from operating
activities before changes in working
capital (2,994) (3,303)
Decrease / (increase) in trade and
other receivables 1,036 (560)
Increase / (decrease) in trade and
other payables 930 (775)
Increase in inventories - (44)
----------------------------------------- -------------- --------------
Cash outflow from operating activities (1,028) (4,682)
Tax payment (11) (12)
Net cash outflow from operating
activities (1,039) (4,694)
----------------------------------------- -------------- --------------
Investing activities
Finance income 217 357
Payments in respect of property,
plant and equipment (67) (23)
Payments in respect of exploration
assets (8,828) (7,223)
Net cash outflow used in investing
activities (8,678) (6,889)
----------------------------------------- -------------- --------------
Financing activities
Issue of ordinary share capital - 17,613
Issue costs - (1,085)
Payments of lease liabilities (287) -
Finance expense on lease (97) -
---------------------------------------- -------------- --------------
Net cash (outflow) / inflow from
financing activities (384) 16,528
----------------------------------------- -------------- --------------
Net (decrease) / increase in cash
and cash equivalents in the year (10,101) 4,945
Cash and cash equivalents at start
of the year 19,822 15,233
Effect of foreign exchange rate
changes on cash and cash equivalent (86) (356)
Cash and cash equivalents at end
of the year 9,635 19,822
----------------------------------------- -------------- --------------
The notes form part of these financial statements.
Chariot Oil & Gas Limited
Notes forming part of the financial statements for the year
ended 31 December 2019
1 General information
Chariot Oil & Gas Limited is a company incorporated in
Guernsey with registration number 47532. The address of the
registered office is Regency Court, Glategny Esplanade, St Peter
Port, Guernsey, GY1 1WW. The nature of the Company's operations and
its principal activities are set out in the Report of the Directors
and in the Exploration Manager's Review of Operations.
2 Accounting policies
Basis of preparation
The financial statements have been prepared in accordance with
International Financial Reporting Standards (IFRS) and IFRIC
interpretations, as issued by the International Accounting
Standards Board (IASB), as adopted by the European Union.
In accordance with the provisions of section 244 of the
Companies (Guernsey) Law, 2008, the Group has chosen to only report
the Group's consolidated position, hence separate Company only
financial statements are not presented.
The financial statements are prepared under the historical cost
accounting convention on a going concern basis.
Going concern
As at 31 December 2019, the Group had cash of US$9.6 million, no
debt and no licence commitments.
In response to the current market uncertainty related to
COVID-19 and commodity price weakness post year end a
restructuring, to reduce annual running costs, has been
undertaken.
The Company key corporate strategy is to focus on monetising the
near term potential of the Lixus licence via partnering and
maximising value for investors by developing a Moroccan gas
business and the Board have the reasonable expectation of
generating future value and cash from this strategy.
The Directors are of the opinion that the Group has adequate
financial resources to enable it to undertake its planned programme
of exploration and appraisal activities for a period of at least 12
months and additionally, the Board have considered downside
scenarios including the event where there is delay to the expected
generation of cash under which the Board has further opportunities
within its control to further manage its cost base if needed so as
to continue as a going concern - and this effectively acted as a
reverse stress test.
New Accounting Standards
The following new standards and amendments to standards are
mandatory for the first time for the Group for the financial year
beginning 1 January 2019. Whilst the implementation of these
standards and amendments to standards may have given rise to
changes in the Group's accounting policies, the effect of the
changes has not been material.
Standard Effective year
commencing on
or after
Annual Improvements to IFRSs - (2015-2017 1 January 2019
Cycle)
---------------
IAS 28: Long-term Interests in Associates 1 January 2019
and Joint Ventures
---------------
IFRS 16: Leases 1 January 2019
---------------
Certain new standards and amendments to standards have been
published that are mandatory for the Group's accounting periods
beginning after 1 January 2020 or later years to which the Group
has decided not to adopt early when early adoption is available.
The implementation of these standards and amendments is expected to
have no material effect on the Group's accounting policies. These
are:
Standard Effective year
commencing on
or after
IFRS 3: Definition of a Business (Amendments 1 January 2020
to IFRS 3)
----------------
IAS1, IAS8: Definition of Material (amendments 1 January 2020
to IAS1 and
IAS 8)
----------------
Amendments to References to the Conceptual 1 January 2020
Framework in IFRS Standards
----------------
IFRS 17: Insurance Contracts 1 January 2021*
----------------
* Not yet endorsed by the EU.
IFRS 16 - Leases
The Group has adopted IFRS 16 Leases effective 1 January 2019.
On adoption, the Group recognised
a lease liability and corresponding right-of-use asset in
relation to the UK office that had previously been classified as an
operating lease under the principles of IAS 17 Leases. The group
has applied the modified retrospective adoption method under IFRS
16 and therefore has only recognised leases on the balance sheet as
at 1 January 2019 with no requirement for restatement of
comparatives for the 2018 financial year.
The lease liability has been initially measured at the present
value of the remaining lease payments and discounted using an
incremental borrowing rate at 1 January 2019. The associated
right-of-use asset has been measured at an amount equal to the
lease liability adjusted for any prepaid or accrued lease payments
relating to the lease recognised on the balance sheet as at 31
December 2019.
Each lease payment is allocated between the liability and
finance cost. The finance cost is charged to profit or loss over
the lease period to produce a constant periodic rate of interest on
the remaining balance of the liability for each period. The
right-of-use asset is depreciated over the shorter of the asset's
useful life and the lease term on a straight-line basis.
This affected the following items in the consolidated balance
sheet on 1 January 2019:
-- right-of-use assets - increase by US$1.3 million (31 December
2019: US$1.0 million)
-- lease liabilities - increase by US$1.5 million (31 December
2019: US$1.2 million)
The Group has elected not to recognize right-of-use assets and
liabilities for leases where the total lease term is less than or
equal to 12 months, or for leases of low-value assets. Low-value
assets comprise IT equipment and small items of office furniture.
Payments associated with short-term leases and leases of low-value
assets are recognized on a straight-line basis as an expense in
profit or loss.
Further details on the lease liability can be found in note
15.
Exploration and appraisal costs
All expenditure relating to the acquisition, exploration and
appraisal of oil and gas interests, including an appropriate share
of directly attributable overheads, is capitalised within cost
pools.
The Board regularly reviews the carrying values of each cost
pool and writes down capitalised expenditure to levels it considers
to be recoverable. Cost pools are determined on the basis of
geographic principles. The Group currently has three cost pools
being Central Blocks in Namibia, Morocco and Brazil. In addition
where exploration wells have been drilled, consideration of the
drilling results is made for the purposes of impairment of the
specific well costs. If the results sufficiently enhance the
understanding of the reservoir and its characteristics it may be
carried forward when there is an intention to continue exploration
and drill further wells on that target.
Where farm-in transactions occur which include elements of cash
consideration for, amongst other things, the reimbursement of past
costs, this cash consideration is credited to the relevant accounts
within the cost pools where the farm-in assets were located. Any
amounts of farm-in cash consideration in excess of the value of the
historic costs in the cost pools is treated as a credit to the
Consolidated Statement of Comprehensive Income.
Inventories
The Group's share of any material and equipment inventories is
accounted for at the lower of cost and net realisable value. The
cost of inventories comprises all costs of purchase, costs of
conversion and other costs incurred in bringing the inventories to
their present location and condition.
Taxation
Income tax expense represents the sum of the current tax and
deferred tax charge for the year.
Deferred tax is recognised on differences between the carrying
amounts of assets and liabilities in the financial statements and
the corresponding tax bases, and is accounted for using the balance
sheet liability method. Deferred tax liabilities are recognised for
all taxable temporary differences and deferred tax assets are
recognised to the extent that it is probable that taxable profits
will be available against which deductible temporary differences
can be utilised.
The carrying amount of deferred tax assets is reviewed at each
reporting date and reduced to the extent that it is no longer
probable that sufficient taxable profits will be available to allow
all or part of the asset to be recovered.
Deferred tax is calculated at the tax rates that have been
enacted or substantively enacted and are expected to apply in the
year when the liability is settled or the asset realised. Deferred
tax is charged or credited to the Consolidated Statement of
Comprehensive Income, except when it relates to items charged or
credited directly to equity, in which case the deferred tax is also
dealt with in equity.
Deferred tax assets and liabilities are offset when there is a
legally enforceable right to set off current tax assets against
current tax liabilities and when they relate to income taxes levied
by the same taxation authority and the Group intends to settle its
current tax assets and liabilities on a net basis.
Foreign currencies
Transactions in foreign currencies are translated into US
Dollars at the exchange rate ruling at the date of the transaction.
Monetary assets and liabilities denominated in foreign currencies
are translated into US Dollars at the closing rates at the
reporting date and the exchange differences are included in the
Consolidated Statement of Comprehensive Income . The functional and
presentational currency of the parent and all Group companies is
the US Dollar.
Property, plant and equipment and depreciation
Property, plant and equipment are stated at cost or fair value
on acquisition less depreciation and impairment. Depreciation is
provided on a straight line basis at rates calculated to write off
the cost less the estimated residual value of each asset over its
expected useful economic life. The residual value is the estimated
amount that would currently be obtained from disposal of the asset
if the asset were already of the age and in the condition expected
at the end of its useful life.
Property, plant and equipment are depreciated using the straight
line method over their estimated useful lives over a range of 3 - 5
years.
The carrying value of property, plant and equipment is assessed
annually and any impairment charge is charged to the Consolidated
Statement of Comprehensive Income.
Share based payments
Where equity settled share awards are awarded to employees or
Directors, the fair value of the awards at the date of grant is
charged to the Consolidated Statement of Comprehensive Income over
the vesting period. Non-market vesting conditions are taken into
account by adjusting the number of equity instruments expected to
vest at each balance sheet date so that, ultimately, the cumulative
amount recognised over the vesting period is based on the number of
awards that eventually vest. Market vesting conditions are factored
into the fair value of the awards granted. As long as all other
vesting conditions are satisfied, a charge is made irrespective of
whether the market vesting conditions are satisfied. The cumulative
expense is not adjusted for failure to achieve a market vesting
condition.
Where the terms and conditions of awards are modified before
they vest, the increase in the fair value of the awards, measured
immediately before and after the modification, is also charged to
the Consolidated Statement of Comprehensive Income over the
remaining vesting period.
Where shares already in existence have been given to employees
by shareholders, the fair value of the shares transferred is
charged to the Consolidated Statement of Comprehensive Income and
recognised in reserves as Contributed Equity.
Basis of consolidation
Where the Company has control over an investee, it is classified
as a subsidiary. The Company controls an investee if it has power
over the investee and it is exposed to variable returns from the
investee and it has the ability to use its power to affect those
variable returns. Control is reassessed whenever facts and
circumstances indicate that there may be a change in any of these
elements of control. The consolidated financial statements present
the results of the Company and its subsidiaries ("the Group") as if
they formed a single entity. Intercompany transactions and balances
between the Group companies are therefore eliminated in full.
Trade and other receivables
Trade and other receivables are stated initially at fair value
and subsequently at amortised cost.
Financial instruments
The Group's financial assets consist of a bank current account
or short-term deposits at variable interest rates and other
receivables. Any interest earned is accrued and classified as
finance income.
The Group's financial liabilities consist of trade and other
payables. The trade and other payables are stated initially at fair
value and subsequently at amortised cost.
Joint operations
Joint operations are those in which the Group has certain
contractual agreements with other participants to engage in joint
activities that do not create an entity carrying on a trade or
business on its own. The Group includes its share of assets,
liabilities and cash flows in joint arrangements, measured in
accordance with the terms of each arrangement, which is usually pro
rata to the Group's interest in the joint operations . The Group
conducts its exploration, development and production activities
jointly with other companies in this way.
Critical accounting estimates and judgements
The Group makes estimates and assumptions regarding the future.
Estimates and judgements are continually evaluated based on
historical experiences and other factors, including expectations of
future events that are believed to be reasonable under the
circumstances. In the future, actual experience may deviate from
these estimates and assumptions. If these estimates and assumptions
are significantly over or under stated, this could cause a material
adjustment to the carrying amounts of assets and liabilities within
the next financial year. The areas where this could impact the
Group are:
a) Areas of judgement
i. Recoverability of exploration and appraisal costs
Expenditure is capitalised as an intangible asset by reference
to appropriate cost pools and is assessed for impairment when
circumstances suggest that the carrying amount may exceed its
recoverable value.
ii. Treatment of farm-in transactions
All farm-in transactions are reflected in these financial
statements in line with the accounting policy on Exploration and
Appraisal Costs. Farm-in transactions are recognised in the
financial statements if they are legally complete during the year
under review or, if all key commercial terms are agreed and legal
completion is only subject to administrative approvals which are
obtained within the post balance sheet period or are expected to be
obtained within a reasonable timeframe thereafter.
iii. Covid-19
Post year end the Covid-19 pandemic has caused severe and
unexpected disruption both to the economy and to working practices.
In order to mitigate against this risk the Group announced on 9
April 2020 that its corporate strategy was to focus on monetising
the near term potential of the Lixus licence and maximising value
for investors by developing a Moroccan gas business. In addition a
restructuring, to reduce annual running costs, has been undertaken
to deliver this strategy, with a continued focus on capital
discipline.
3 Segmental analysis
The Group has two reportable segments being exploration and
appraisal and corporate costs. The operating results of each of
these segments are regularly reviewed by the Board of Directors in
order to make decisions about the allocation of resources and
assess their performance.
31 December 2019
Exploration Corporate Total
and Appraisal
US$000 US$000 US$000
--------------- ---------- --------
Share based payment - (651) (651)
--------------- ---------- --------
Administrative expenses (365) (3,030) (3,395)
--------------- ---------- --------
Finance income - 190 190
--------------- ---------- --------
Finance expense - (183) (183)
--------------- ---------- --------
Tax expense - (11) (11)
--------------- ---------- --------
Loss after taxation (365) (3,685) (4,050)
--------------- ---------- --------
Additions to non-current assets 4,028 67 4,095
--------------- ---------- --------
Total assets 78,788 11,493 90,281
--------------- ---------- --------
Total liabilities (1,113) (2,608) (3,721)
--------------- ---------- --------
Net assets 77,675 8,885 86,560
--------------- ---------- --------
31 December 2018
Exploration Corporate Total
and Appraisal
US$000 US$000 US$000
--------------- ------------------- ---------------
Share based payment - (904) (904)
--------------- ------------------- ---------------
Administrative expenses (416) (2,943) (3,359)
--------------- ------------------- ---------------
Impairment of exploration
asset (10,876) - (10,876)
--------------- ------------------- ---------------
Finance income - 371 371
--------------- ------------------- ---------------
Finance expense - (356) (356)
--------------- ------------------- ---------------
Tax expense - (12) (12)
--------------- ------------------- ---------------
Loss after taxation (11,292) (3,844) (15,136)
--------------- ------------------- ---------------
Additions to non-current assets 12,342 23 12,365
--------------- ------------------- ---------------
Total assets 75,224 21,764 96,988
--------------- ------------------- ---------------
Total liabilities (6,501) (528) (7,029)
--------------- ------------------- ---------------
Net assets 68,723 21,236 89,959
--------------- ------------------- ---------------
4 Loss from operations
31 December 31 December
2019 2018
US$000 US$000
------------ ------------
Loss from operations is stated after
charging:
------------ ------------
Impairment of exploration asset - 10,876
------------ ------------
Depreciation of property, plant and equipment 73 56
------------ ------------
Depreciation of Right of Use asset 328 -
------------ ------------
Share based payments - Long Term Incentive
Scheme 614 847
------------ ------------
Share based payments - Restricted Share
Unit Scheme 37 57
------------ ------------
Auditors' remuneration:
------------ ------------
Fees payable to the Company's Auditors
for the audit of the Company's annual
accounts 56 62
------------ ------------
Audit of the Company's subsidiaries pursuant
to legislation 14 14
------------ ------------
Fees payable to the Company's Auditors
for the review of the Company's interim
accounts 10 10
------------ ------------
Total payable 80 86
------------ ------------
5 Employment costs
Employees 31 December 31 December
2019 2018
US$000 US$000
------------ ------------
Wages and salaries 3,016 2,213
------------ ------------
Pension costs 128 98
------------ ------------
Share based payments 321 514
------------ ------------
Sub-total 3,465 2,825
------------ ------------
Capitalised to exploration costs (2,410) (1,624)
------------ ------------
Total 1,055 1,201
------------ ------------
Key management personnel 31 December 31 December
2019 2018
US$000 US$000
------------ ------------
Wages, salaries and fees 753 611
------------ ------------
Social security costs 75 63
------------ ------------
Share based payments 330 390
------------ ------------
Sub-total 1,158 1,064
------------ ------------
Capitalised to exploration costs (403) (194)
------------ ------------
Total 755 870
------------ ------------
The Directors are the key management personnel of the Group.
Details of the Directors' emoluments and interest in shares are
shown in the Directors' Remuneration Report.
6 Finance income and expense
Finance income 31 December 31 December
2019 2018
US$000 US$000
------------ ------------
Bank interest receivable 190 371
------------ ------------
Total 190 371
------------ ------------
Finance expense 31 December 31 December
2019 2018
US$000 US$000
------------ ------------
Foreign exchange loss 86 356
------------ ------------
Finance expense on lease 97 -
------------ ------------
Total 183 356
------------ ------------
7 Investments
The Company's wholly owned subsidiary undertakings at 31
December 2019 and 31 December 2018, excluding dormant entities,
were:
Subsidiary undertaking Principal activity Country of incorporation
Chariot Oil & Gas Investments Holding company Guernsey
(Namibia) Limited
------------------------ -------------------------
Chariot Oil & Gas Investments Oil and gas exploration Guernsey
(Mauritania) Limited
------------------------ -------------------------
Chariot Oil & Gas Investments Oil and gas exploration Guernsey
(Morocco) Limited
------------------------ -------------------------
Chariot Oil and Gas Statistics Service company UK
Limited
------------------------ -------------------------
Enigma Oil & Gas Exploration Oil and gas exploration Namibia
(Proprietary) Limited(1)
------------------------ -------------------------
Chariot Oil & Gas Investments Holding company Guernsey
(Brazil) Limited
------------------------ -------------------------
Chariot Brasil Petroleo e Oil and gas exploration Brazil
Gas Ltda
------------------------ -------------------------
Chariot Oil & Gas Finance Service company Guernsey
(Brazil) Limited(1)
------------------------ -------------------------
Chariot Oil & Gas Holdings Oil and gas exploration UK
(Morocco) Limited (2)
------------------------ -------------------------
(1) Indirect shareholding of the Company.
(2) On 29 January 2019 the Company incorporated a new wholly
owned subsidiary Chariot Oil & Gas Holdings (Morocco) Limited
in the UK.
8 Taxation
The Company is tax resident in the UK, however no tax charge
arises due to taxable losses for the year (31 December 2018:
US$Nil).
No taxation charge arises in Namibia, Morocco or the UK
subsidiaries as they have recorded taxable losses for the year (31
December 2018: US$Nil).
In Brazil, there were taxable profits due to interest received
on cash balances resulting in a tax charge payable of US$11,000 (31
December 2018: US$12,000). There was no deferred tax charge or
credit in either period presented.
Factors affecting the tax charge for the current year
The reasons for the difference between the actual tax charge for
the year and the standard rate of corporation tax in the UK applied
to losses for the year are as follows:
31 December 31 December
2019 2018
US$000 US$000
------------ ------------
Tax reconciliation
------------ ------------
Loss on ordinary activities for the
year before tax (4,039) (15,124)
------------ ------------
Loss on ordinary activities at the
standard rate of corporation tax in
the UK of 19% (31 December 2018: 19%) (767) (2,874)
------------ ------------
Non-deductible expenses 200 2,249
------------ ------------
Difference in tax rates in other jurisdictions 26 71
------------ ------------
Deferred tax effect not recognised 552 566
------------ ------------
Total taxation charge 11 12
------------ ------------
The Company had tax losses carried forward on which no deferred
tax asset is recognised. Deferred tax not recognised in respect of
losses carried forward total US$7.1 million (31 December 2018:
US$6.5 million). Deferred tax assets were not recognised as there
is uncertainty regarding the timing of future profits against which
these assets could be utilised.
9 Loss per share
The calculation of basic loss per Ordinary share is based on a
loss of US$4,050,000 (31 December 2018: loss of US$15,136,000) and
on 367,405,011 Ordinary shares (31 December 2018: 343,201,438)
being the weighted average number of Ordinary shares in issue
during the year. Potentially dilutive share awards are detailed in
note 20, however these do not have any dilutive impact as the Group
reported a loss for the year, consequently a separate diluted loss
per share has not been presented.
10 Exploration and appraisal costs
31 December 2019 31 December 2018
US$000 US$000
----------------- -----------------
Net book value brought forward 74,236 72,770
----------------- -----------------
Additions 4,028 12,342
----------------- -----------------
Impairment - (10,876)
----------------- -----------------
Net book value carried forward 78,264 74,236
----------------- -----------------
As at 31 December 2019 the net book values of the three cost
pools are Central Blocks offshore Namibia US$51.1 million (31
December 2018: US$50.5 million), Morocco US$11.5 million (31
December 2018: US$8.5 million) and Brazil US$15.7 million (31
December 2018: US$15.2 million).
The impairment charge in 2018 is in respect of drilling the
Prospect S well in the Central Blocks offshore Namibia. The Group
continues to see value in the remaining prospects within the
Central Blocks with recoverable amount assessed to be in excess of
carrying value.
11 Property, plant and equipment
Fixtures, fittings Fixtures, fittings
and equipment and equipment
31 December 2019 31 December 2018
------------------- -------------------
US$000 US$000
------------------- -------------------
Cost
------------------- -------------------
Brought forward 1,781 1,758
------------------- -------------------
Additions 67 23
------------------- -------------------
Disposals (500) -
------------------- -------------------
Carried forward 1,348 1,781
------------------- -------------------
Depreciation
------------------- -------------------
Brought forward 1,681 1,625
------------------- -------------------
Charge 73 56
------------------- -------------------
Eliminated on disposals (500) -
------------------- -------------------
Carried forward 1,254 1,681
------------------- -------------------
Net book value brought forward 100 133
------------------- -------------------
Net book value carried forward 94 100
------------------- -------------------
12 Trade and other receivables
31 December 2019 31 December 2018
US$000 US$000
----------------- -----------------
Other receivables and prepayments 781 2,306
----------------- -----------------
The fair value of trade and other receivables is equal to their
book value.
13 Inventory
31 December 2019 31 December 2018
US$000 US$000
----------------- -----------------
Wellheads and casing 524 524
----------------- -----------------
14 Cash and cash equivalents
31 December 2019 31 December 2018
Analysis by currency US$000 US$000
----------------- -----------------
US Dollar 9,114 19,325
----------------- -----------------
Brazilian Real 52 2
----------------- -----------------
Sterling 342 489
----------------- -----------------
Namibian dollar 127 6
----------------- -----------------
9,635 19,822
----------------- -----------------
As at 31 December 2019 and 31 December 2018 the US Dollar and
Sterling cash is held in UK and Guernsey bank accounts. All other
cash balances are held in the relevant country of operation.
As at 31 December 2019, the cash balance of US$9.6 million (31
December 2018: US$19.8 million) contains the following cash
deposits that are secured against bank guarantees given in respect
of exploration work to be carried out:
31 December 2019 31 December 2018
US$000 US$000
----------------- -----------------
Moroccan licences 650 800
----------------- -----------------
650 800
----------------- -----------------
The funds are freely transferrable but alternative collateral
would need to be put in place to replace the cash security.
15 Leases
The lease relates to the UK office.
Right-of-use asset:
31 December 2019 1 January 2019
US$000 US$000
----------------- ---------------
Brought forward 1,311 -
----------------- ---------------
Initial recognition - 1,311
----------------- ---------------
Depreciation (328) -
----------------- ---------------
Carried forward 983 1,311
----------------- ---------------
Lease liability:
31 December 2019 1 January 2019
US$000 US$000
----------------- ---------------
Current 366 327
----------------- ---------------
Non-current 820 1,146
----------------- ---------------
Total lease liability 1,186 1,473
----------------- ---------------
The maturity analysis of the lease liability at 31 December 2019
is as follows:
31 December 2019 1 January 2019
US$000 US$000
----------------- ---------------
Maturity analysis - contractual undiscounted cash flows
----------------- ---------------
Less than one year 439 424
----------------- ---------------
Between one and two years 439 424
----------------- ---------------
Between two and three years 437 424
----------------- ---------------
Between three and four years - 422
----------------- ---------------
Total undiscounted lease liabilities 1,315 1,694
----------------- ---------------
Effect of interest (129) (221)
----------------- ---------------
Total lease liability 1,186 1,473
----------------- ---------------
16 Trade and other payables
31 December 2019 31 December 2018
US$000 US$000
----------------- -----------------
Trade payables 1,235 6,379
----------------- -----------------
Accruals 1,300 650
----------------- -----------------
2,535 7,029
----------------- -----------------
The fair value of trade and other payables is equal to their
book value.
17 Share capital
Allotted, called up and fully paid
31 December 31 December 31 December 31 December
2019 2019 2018 2018
------------ ------------ ------------ ------------
Number US$000 Number US$000
------------ ------------ ------------ ------------
Ordinary shares
of 1p each(1) 367,532,909 6,268 367,259,909 6,264
------------ ------------ ------------ ------------
1. The authorised and initially allotted and issued share
capital on admission (19 May 2008) has been translated at the
historic rate of US$GBP of 1.995. The shares issued since admission
have been translated at the date of issue, or, in the case of share
awards, the date of grant and not subsequently retranslated.
Details of the Ordinary shares issued are in the table
below:
Date Description Price No of shares
US$
31 December
2017 Opening Balance 268,873,197
------------------------------- ------ -------------
Issue of shares at GBP0.13 in
28 March 2018 Placing and Open Offer 0.18 96,494,701
------------------------------- ------ -------------
8 June 2018 Issue of share award 0.12 27,500
------------------------------- ------ -------------
8 June 2018 Issue of share award 0.20 13,750
------------------------------- ------ -------------
8 June 2018 Issue of share award 0.11 11,140
------------------------------- ------ -------------
8 June 2018 Issue of share award 0.11 139,042
------------------------------- ------ -------------
8 June 2018 Issue of share award 0.20 8,334
------------------------------- ------ -------------
8 June 2018 Issue of share award 0.11 44,021
------------------------------- ------ -------------
2 July 2018 Issue of share award 0.33 300,000
------------------------------- ------ -------------
2 July 2018 Issue of share award 0.14 212,500
------------------------------- ------ -------------
2 July 2018 Issue of share award 0.12 218,751
------------------------------- ------ -------------
2 July 2018 Issue of share award 0.11 244,935
------------------------------- ------ -------------
4 September
2018 Issue of share award 0.33 400,000
------------------------------- ------ -------------
4 September
2018 Issue of share award 0.13 140,816
------------------------------- ------ -------------
28 September
2018 Issue of share award 3.06 14,000
------------------------------- ------ -------------
28 September
2018 Issue of share award 0.50 86,000
------------------------------- ------ -------------
28 September
2018 Issue of share award 0.10 31,222
------------------------------- ------ -------------
31 December
2018 367,259,909
------ -------------
20 June 2019 Issue of share award 1.35 40,000
------------------------------- ------ -------------
20 June 2019 Issue of share award 0.50 233,000
------------------------------- ------ -------------
31 December
2019 367,532,909
------ -------------
18 Related party transactions
- Key management personnel comprises the Directors and details
of their remuneration are set out in note 5 and the Directors'
Remuneration Report.
- There were no related party transactions during the current
year or year ended 31 December 2018.
19 Financial instruments
The Board of Directors determine, as required, the degree to
which it is appropriate to use financial instruments or other
hedging contracts or techniques to mitigate risk. Throughout the
year ending 31 December 2019, no trading in financial instruments
was undertaken (31 December 2018: US$Nil). There is no material
difference between the book value and fair value of the Group cash
balances, short term receivables and payables.
Market risk
Market risk arises from the Group's use of interest bearing and
foreign currency financial instruments. It is the risk that future
cash flows of a financial instrument will fluctuate because of
changes in interest rates (interest rate risk) and foreign exchange
rates (currency risk). Throughout the year, the Group has held
surplus funds on deposit, principally with its main relationship
bank Barclays, on fixed short term deposits. The credit ratings of
the main relationship bank the Group holds cash with do not fall
below A or equivalent. The Group does not undertake any form of
speculation on long term interest rates or currency movements,
therefore it manages market risk by maintaining a short term
investment horizon and placing funds on deposit to optimise short
term yields where possible but, moreover, to ensure that it always
has sufficient cash resources to meet payables and other working
capital requirements when necessary. As such, market risk is not
viewed as a significant risk to the Group. The Directors have not
disclosed the impact of interest rate sensitivity analysis on the
Group's financial assets and liabilities at the year-end as the
risk is not deemed to be material.
This transactional risk is managed by the Group holding the
majority of its funds in US Dollars to recognise that US Dollars is
the trading currency of the industry, with an appropriate balance
maintained in Brazilian Real, Sterling and Namibian Dollars to meet
other non-US Dollar industry costs and on-going corporate and
overhead commitments.
At the year end, the Group had cash balances of US$9.6 million
(31 December 2018: US$19.8 million) as detailed in note 15.
Other than the non-US Dollar cash balances described in note 14,
no other material financial instrument is denominated in a currency
other than US Dollars. A 10% adverse movement in exchange rates
would lead to a foreign exchange loss of US$50,000 and a 10%
favourable movement in exchange rates would lead to a corresponding
gain; the effect on net assets would be the same as the effect on
profits (31 December 2018: US$50,000).
Capital
In managing its capital, the Group's primary objective is to
maintain a sufficient funding base to enable it to meet its working
capital and strategic investment needs. The Group currently holds
sufficient capital to meet its on-going needs for at least the next
12 months.
Liquidity risk
The Group's practice is to regularly review cash needs and to
place excess funds on fixed term deposits. This process enables the
Group to optimise the yield on its cash resources whilst ensuring
that it always has sufficient liquidity to meet payables and other
working capital requirements when these become due.
The Group has sufficient funds to continue operations for the
forthcoming year and has no perceived liquidity risk.
Credit risk
The Group's policy is to perform appropriate due diligence on
any party with whom it intends to enter into a contractual
arrangement. Where this involves credit risk, the Group will put in
place measures that it has assessed as prudent to mitigate the risk
of default by the other party. This could consist of instruments
such as bank guarantees and parent company guarantees.
At the year-end the Group acts as Operator in one non-carried
joint venture relationship on one of the Group's licences and
therefore from time to time is owed money from its joint venture
partners. The joint venture partner which has a 20% interest in the
Central Blocks in Namibia is an entity which is part owned by one
of the world's largest seismic and geoscience companies.
As such, the Group has not put in place any particular credit
risk measures in this instance as the Directors view the risk of
default on any payments due from the joint venture partner as being
very low.
20 Share based payments
Share Option Scheme
During the year, the Company operated the Chariot Oil & Gas
Share Option Scheme ("Share Option Scheme"). The Company recognised
total expenses of US$Nil (31 December 2018: US$Nil) related to
equity settled share-based payment transactions under the plan.
The options expire if they remain unexercised after the exercise
period has lapsed. For options valued using the Black-Scholes
model, there are no market performance conditions or other vesting
conditions attributed to the options.
The following table sets out details of all outstanding options
granted under the Share Option Scheme:
31 December 31 December
2019 2018
Number of Options Number of Options
------------------ ------------------
Outstanding at beginning of
the year 3,000,000 3,000,000
------------------ ------------------
Outstanding at the end of the
year 3,000,000 3,000,000
------------------ ------------------
Exercisable at the end of the
year 3,000,000 3,000,000
------------------ ------------------
The range of the exercise price of share options exercisable at
the year-end falls between US$0.36 (27p) - US$1.65 (125p) (31
December 2018: US$0.34 (27p) - US$1.59 (125p)).
The estimated fair values of options which fall under IFRS 2 and
the inputs used in the Black-Scholes model to calculate those fair
values are as follows:
Date of grant Estimated Share Exercise Expected Expected Risk Expected
fair value price price volatility life free dividend
rate
1 September
2011 GBP0.87 GBP1.29 GBP1.25 80% 5 years 4.3% 0%
------------- ---------- ---------- ------------ --------- ------ ----------
22 April
2013 GBP0.11 GBP0.186 GBP0.273 80% 5 years 1.5% 0%
------------- ---------- ---------- ------------ --------- ------ ----------
Expected volatility was determined by calculating the annualised
standard deviation of the daily changes in the share price.
Long Term Incentive Scheme ("LTIP")
The plan provides for the awarding of shares to employees and
Directors for nil consideration. The award will lapse if an
employee or Director leaves employment.
Shares granted when an individual is an employee will vest in
equal instalments over a three year period from the grant date and
shares granted when an individual is a Director or otherwise
specified will vest three years from the end of the year or period
that the award relates.
The Group recognised a charge under the plan for the year to 31
December 2019 of US$614,000 (31 December 2018: US$847,000).
The following table sets out details of all outstanding share
awards under the LTIP:
31 December 2019 31 December
2018
Number of awards Number of awards
----------------- -----------------
Outstanding at beginning of the
year 22,433,201 21,980,015
----------------- -----------------
Granted during the year 2,840,444 2,563,946
----------------- -----------------
Shares issued for no consideration
during the year (273,000) (1,892,011)
----------------- -----------------
Lapsed during the year - (218,749)
----------------- -----------------
Outstanding at the end of the
year 25,000,645 22,433,201
----------------- -----------------
Exercisable at the end of the
year 14,494,547 8,778,432
----------------- -----------------
Non-Executive Directors' Restricted Share Unit Scheme
("RSU")
The plan provides for the awarding of shares to Non-Executive
Directors for nil consideration. An award can be Standalone or
Matching.
Standalone share awards are one-off awards to Non-Executive
Directors which will vest in equal instalments over a three year
period and will lapse if not exercised within a fixed period on
stepping down from the Board.
Matching share awards will be granted equal to the number of
existing Chariot shares purchased by the Non-Executive Director in
each calendar year capped at the value of their gross annual fees
for that year. The shares will vest in equal instalments over a
three year period and will lapse if not exercised prior to stepping
down from the Board or if the original purchased shares are sold
prior to the vesting of the relevant Matching award. Any potential
Matching awards not granted in a calendar year shall be forfeited
and shall not roll over to subsequent years.
The Group recognised a charge under the plan for the year to 31
December 2019 of US$37,000 (31 December 2018: US$57,000).
The following table sets out details of all outstanding share
awards under the RSU:
31 December 2019 31 December
2018
Number of awards Number of awards
----------------- -----------------
Outstanding at beginning of the
year 2,191,852 2,191,852
----------------- -----------------
Granted during the year 648,023 -
----------------- -----------------
Outstanding at the end of the
year 2,839,875 2,191,852
----------------- -----------------
Exercisable at the end of the
year 1,981,193 1,540,886
----------------- -----------------
21 Contingent liabilities
From 30 December 2011 the Namibian tax authorities introduced a
withholding tax of 25% on all services provided by non-Namibian
entities which are received and paid for by Namibian residents.
From 30 December 2015 the withholding tax was reduced to 10%. As at
31 December 2019, based upon independent legal and tax opinions,
the Group has no withholding tax liability (31 December 2018:
US$Nil). Any subsequent exposure to Namibian withholding tax will
be determined by how the relevant legislation evolves in the future
and the contracting strategy of the Group.
22 Events after the balance sheet date
The Directors consider these events to be a non-adjusting post
balance sheet events.
a) Azinam Notice of Withdrawal
Post year end Azinam Limited, who have a 20% equity interest in
the Central Blocks licence offshore Namibia (currently Chariot 65%
(Operator), Azinam 20%, NAMCOR 10% and Ignitus 5%), served a notice
of its intention to withdraw from this licence. This withdrawal
process is currently underway. All the commitments on this licence
have been met and this withdrawal has no material impact on the
group operations.
b) Strategic Update and Response to Market Conditions
On 9 April 2020, the Company provided an update on its strategic
direction and response to the current market uncertainty related to
COVID-19 and commodity price weakness. The Company announced that
its corporate strategy was to focus on monetising the near term
potential of the Lixus licence and maximising value for investors
by developing a Moroccan gas business. In addition a restructuring,
to reduce annual running costs, has been undertaken to deliver this
strategy, with a continued focus on capital discipline.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
FR GPUGPQUPUGCQ
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