TIDMCHAR
RNS Number : 6422V
Chariot Oil & Gas Ld
10 April 2019
10 April 2019
Chariot Oil & Gas Limited
("Chariot", the "Company" or the "Group")
2018 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 2018.
2018 and Post Period Highlights
Creating a Balanced Portfolio and Sustainable Business:
New Venture, Lixus licence, containing Anchois-1 discovery,
secured in Morocco
-- Anchois-1 well gas discovery - 307 Bcf of 2C contingent
resources offering near-term development opportunity
-- Deeper potential not penetrated by the Anchois-1 well of 116
Bcf 2U prospective resource has also been identified
-- Material tie-back opportunities from low risk, exploration
prospects offer an attractive upside of 527 Bcf of 2U prospective
resources in satellite prospects adjacent to the Anchois
discovery
-- Additional on-block exploration running room in licence
-- World-class commercial contract terms with high gas prices in
a developing market with growing energy demand offers a potentially
high-value project
-- Minimal initial licence commitment funded from current cash
-- Future development anticipated to deliver strong returns and significant cash flow
Operational Flexibility achieved through Capital Discipline:
-- Debt free with a cash balance of US$19.8 million as at 31 December 2018
-- Fully funded for current work commitments - less than US$1.0 million
-- Annual cash overhead remains below US$5.0 million
-- Strong cash position enhanced by Q1 2018 placing and open
offer of net US$16.5 million providing funds to allow the Company
to deliver Prospect S at the bottom of the cost cycle
Delivery of Drilling Programme at Optimum Point of Cost
Cycle:
-- Achieved Zero Cost Drilling: Rabat Deep 1, Morocco - Dry:
Successful partnering meant drilling was achieved at zero cost to
Chariot. Information from the well provides valuable insight into
the prospectivity of the Company's remaining licences and the newly
awarded Lixus licence
-- Demonstrated Chariot's Operational Capability: Prospect S,
Namibia - Dry: The well is anticipated to be the lowest cost
deepwater well of 2018, with a gross cost of c. US$16 million,
significantly under budget and operated with no incidents. Analysis
of results ongoing
De-Risking of the Broader Portfolio:
Rabat Deep 1 well analysis, Morocco:
-- Primary Jurassic carbonate was tight with oil shows
-- Geochemical analysis indicates a hydrocarbon charge from
Cretaceous or younger source rock, with the Cretaceous known as a
world class source rock - this has led to a new prospect inventory
in Mohammedia and Kenitra, and the acquisition of the Lixus
licence
-- Excellent quality upper Jurassic sandstone reservoirs and
effective seal significantly de-risk the Clastic prospects and
leads in Mohammedia and Kenitra with prospect MOH-B (gross mean
prospective resource of 637mmbbls) and KEN-A (gross mean
prospective resource of 445mmbbls) priority targets
Prospect S drilling, Namibia:
-- Cretaceous targets were water bearing. Results expected to
degrade the risk profile of prospects T, U and D, but that of V and
W remain unaffected
-- Calibration of well results with proprietary 2D and 3D data
as well as information from nearby wells ongoing
Drill-Ready Prospect Inventory, Brazil:
-- Integrated seismic interpretation and CPR completed with a
large four-way dip-closed structure identified and a portfolio
consisting of seven reservoir targets individually ranging up to
366mmbbls of gross mean prospective resource
-- A single vertical well located at Prospect 1 can penetrate
the TP-1, TP-3 and KP-3 stacked targets which have a summed
on-licence gross mean prospective resource of 911mmbbls
Governance:
-- Board strengthened with the appointment of Chris Zeal (Q3
2018) as Independent Non-Executive Director. Chris' depth of
knowledge in corporate finance is anticipated to provide valuable
contributions to the decision making and strategic planning
process
2019 Strategic Focus:
-- Develop gas market opportunities and identify strategic
alliances for Lixus appraisal programme
-- Continue partnering processes in Brazil and Morocco to
progress drilling of giant prospects in exploration assets
-- Apply technical expertise to calibrate well results with
regional knowledge and proprietary 2D and 3D data across the
Namibian and Moroccan assets
-- Maintain Capital Discipline in all areas of business
-- Remain vigilant of additional value accretive new venture
opportunities that will continue to balance the risk profile of the
Company
Larry Bottomley, Chief Executive Officer of Chariot,
commented:
"Chariot has had an exciting start to 2019 with the recent award
of the Lixus licence offshore Morocco. The addition of discovered
resources rebalances the portfolio providing a near-term
development opportunity, low risk exploration upside and ultimately
a sustainable footing to continue to pursue our high impact
exploration portfolio. We will be looking to source strategic
partners to develop the Anchois-1 gas discovery.
Chariot's 2018 drilling programme, whilst disappointing in not
delivering a giant discovery, did demonstrate Chariot's ability to
attract quality industry partners and enhance its reputation for
operational efficiency, safety and effectiveness. These wells take
the Company another step further in maturing and de-risking the
areas in which it operates at no to low cost.
We remain committed to progressing our high impact exploration
programme. The analysis of the Namibian drilling results is ongoing
and we are excited by the implications of the Rabat Deep 1 well in
Morocco, which has led to a new portfolio of prospects charged by
world class source rock and de-risked the Clastic priority
prospects MOH-B and Ken-A in Mohammedia and Kenitra. This,
alongside our independently audited Brazilian prospect inventory
will be the focus of our partnering process in the year ahead.
The shift in balance of risk and reward with the addition of the
Lixus licence fulfils the Company's goal of seeking an opportunity
to generate cash flow. We now have a diversified inventory of
giant, high margin, high risk prospects complemented by a high
value, low risk, low cost gas appraisal project in an emerging gas
market supported by a growing energy demand. With our exceptional
team, supported by an enhanced board and strong balance sheet, we
believe that the year ahead offers exciting opportunity for
progressing all areas of the Company's portfolio."
Investor Conference Call:
Investor Conference Call: Management will host a conference call
for investors at 12pm Noon (BST) today, 10 April 2019. Dial in
details for the call are shown below and participants should
request to join the "Chariot Oil & Gas - Investor Call".
Dial in number: +44 (0)330 336 9411
Conference Code: 8960196
This announcement contains 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 Advisor and Broker)
Matt Goode, Christopher Raggett, Anthony Adams
(Corporate Finance)
Andrew Burdis (ECM) +44 (0)20 7220 0500
Celicourt Communications (Financial PR)
Henry Lerwill +44 (0)20 7520 9261
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
As it continued to refine its high impact prospect portfolio,
Chariot also delivered on several of its strategic goals during the
course of the last year. The Company participated in two deepwater
wells, one in Morocco at zero cost following successful partnering
at two stages of investment, the other in Namibia drilled and
operated by Chariot significantly under budget having capitalised
on the low-price environment in the offshore service sector. Both
wells targeted prospects that had the potential for realising
transformational value. Whilst, unfortunately, they were
unsuccessful, the learnings from these drilling campaigns are
invaluable in progressing the portfolio towards our ultimate target
of delivering transformational value.
In addition to this operational activity, Chariot continued the
technical maturation of its other licences, confirming giant
prospectivity in its operated assets in Morocco and Brazil with
independent audits, as well as successfully pursuing its new
venture strategy. These achievements are a direct result of the
team's continued application of its de-risking strategy, technical
and commercial expertise, operational capability and respect for
the Company's core focus and values.
Capital Discipline
With a year end cash balance of US$19.8 million the Company is
fully funded to progress its exploration licences and meet the
commitments of the newly acquired Lixus licence. Chariot has a
strong position in partnering negotiations for its high impact
drilling campaigns and is well placed for strategic funding
discussions for the future appraisal of the Anchois discovery. It
also has demonstrated the capability to capitalise on new venture
opportunities where appropriate.
This robust cash position has been achieved through the team's
execution and core tenet of capital discipline and efficiency. From
asset acquisition through to its technical evaluation, partnering
processes and contractual agreements we focus on cost control and
the ultimate quality of our work. In 2018, this resulted in
Chariot's participation in one well at no cost and the financial
flexibility to accelerate its drilling programme with the operation
of another well in order to capitalise on a low-cost service sector
window.
Accelerating the Drilling Campaign in a Low-Cost Window
In Q1 2018, Chariot participated in the Rabat Deep 1 well having
partnered at both the seismic and drilling phase, securing funding
from Woodside and ENI when the operational costs of exploration
were at their peak. As a result, the Company was exposed to
transformational potential at zero cost, demonstrating the
effectiveness of the partnering strategy.
Whilst the team maintains its aspiration for "zero cost
exploration", it also anticipates and reacts to external influences
that may shift the industry landscape. Through previous partnering
in its Central Blocks, Namibia, for example, the Company obtained
third party technical validation and a contribution to its 3D
seismic campaigns. The subsequent partnering process for drilling
also received significant industry interest. The opportunity for
this well, however, was unique as it coincided with historically
low rig rates. Having secured equity funding in Q1 2018 the Company
opted to capitalise on the opportunity to retain a higher equity
level in a low cost well.
Thus, in Q4 2018 Chariot operated the drilling of Prospect S in
Namibia. This strategy allowed the Company to not only deliver the
drilling of this well at the bottom of the cost cycle, but through
its efficient operations and synergy with other regional
contractors, to do so at circa US$10 million under budget. The well
was drilled in 17 days, with a final gross cost of approximately
US$16 million, an accomplishment which is almost certain to become
the new benchmark for deepwater drilling. The operation was
undertaken with no compromise on safety or environmental
protection.
This was achieved through the team's tactical foresight combined
with its operational and technical expertise and ultimately,
execution. As we see a return to exploration from a volatile but
directionally stronger oil forward curve we anticipate cost
escalation in the service sector. This will return our focus to
more traditional partnering strategies at the same time as watching
for opportunities to accelerate the drilling and work programme to
progress our understanding of our licences where appropriate.
Balancing the Risk Profile with Value Accretive New Venture
Opportunities
The disappointing results of the 2018 drilling programme
highlights that high risk, high impact exploration is a long term
venture best undertaken via a large portfolio of opportunities to
improve the probability of success. As part of balancing its risk,
Chariot has built a diverse portfolio in terms of geography, basins
and plays; however, as giant-scale opportunities in frontier and
emerging basins, they primarily reside at the higher end of the
exploration risk spectrum.
Conscious of this, and amplified with the downturn of the oil
and gas market, Chariot has actively screened the market for value
accretive assets that offer a chance to broaden its risk profile
and make it less susceptible to external influences by introducing
cash flow from production or low risk, near term development
opportunities. In particular it aims to leverage its knowledge of
the Atlantic Margins using its regional depth of understanding to
identify assets that will either sustain or balance the risk
profile of the portfolio.
The recent acquisition of the Lixus licence offshore Morocco
presents this opportunity through the possibility of generating
cash flow from the near term development of the Anchois gas
discovery and additional nearby prospectivity. Clearly, if
successful, the associated production will not only underwrite
ongoing Company overhead but also allow both addition and
optimisation of the higher risk exploration portfolio. The Lixus
licence appraisal, development and exploration opportunity is
supported by a strong Moroccan gas price with a growing gas market
in a country with growing energy demand. This was secured by
Chariot with an initial technical programme of 3D seismic
reprocessing and interpretation, for which the Company is fully
funded.
During the year, the Company was also offered a back-in option
for between 10% and 20% by Shell over its previously held C-19
block in Mauritania. Though testament to the quality of Chariot's
work on the asset and its industry reputation in being selected as
a preferred partner, the Company opted not to proceed. This was in
due consideration of the timing, relative risk, equity and initial
financial outlay of the project which, despite its giant potential
did not fit with the Company's current aim for achieving more
balance in its portfolio.
Our Relationships and Values
Chariot has built a reputation for attracting quality industry
partners as well as operational efficiency. Where the C-19
opportunity in Mauritania demonstrated the value of Chariot's
technical capability in region, we also found that, owing to our
consistent delivery on exploration programmes, Chariot was welcomed
by the Ministry in Morocco to take operatorship of the Lixus
licence. We believe this to be a reflection of Chariot's strong
working relationships and evidence of our respect for all those
that we work with; our technical and operational capability and our
commitment to deliver on our goals.
In our operations we seek to protect all people we work with and
the environment that we work in. In particular, this was
demonstrated this year by the delivery of safe and efficient
drilling operations in Namibia. Chariot is committed to working
fairly, honestly and openly with its partners and we continue to
host regular meetings to share technical and operational
developments within each region to facilitate communication and
processes at all levels. We would like to thank the Energy
Ministries, Governments, their respective national oil companies
and local empowerment partners, contractors and suppliers for their
continued cooperation in working towards de-risking our assets and
unlocking these underexplored regions' potential. We would also
like to thank our stakeholders for their continued support as we
strive towards delivering transformational value.
At Board level, we continue to carry out in-depth technical
reviews in accordance with our financial position, de-risking
strategy and portfolio direction at regular meetings, with our
committees supporting the delivery of best practice corporate
standards. To enhance this oversight, in Q3 2018 we welcomed Chris
Zeal onto the Board as independent non-executive director. We
believe that Chris' in-depth knowledge of corporate finance will
strengthen decision making and the strategic planning process.
Outlook
Owing to our continued focus on capital discipline we have a
strong cash balance with the ability to carry out all of our
current commitments and the flexibility to capitalise on
opportunities as they arise. Through the monetisation of Lixus we
hope to provide cashflow to support our high impact drilling
campaigns - through which we aim to deliver transformational value.
Our core values and adherence to our de-risking strategy remain the
same and partnering is fundamental to our operational activity.
We are excited by our refined drilling inventory and will
continue to look for partners for our priority prospects as well as
for securing strategic relationships for the development of
Anchois. We look forward to progressing the portfolio in this vein,
with the continued support from our stakeholders, in-country
partners and contractors, the strengthened Board, and a capable,
motivated team.
George Canjar
Chairman
9 April 2019
Chariot Oil & Gas Limited
Chief Executive Officer's Review
While the results of our 2018 drilling programme were extremely
disappointing in not delivering giant discoveries, they demonstrate
Chariot's ability to attract quality industry partners and enhance
the Company's reputation for operational efficiency, safety and
effectiveness. These wells also take the Company another step
further in maturing and de-risking the areas in which it operates
and we remain committed to progressing our giant, high margin, high
risk prospects: Whilst the analysis of the Namibian drilling is
still underway, we are excited by the implications of the Rabat
Deep 1 well in Morocco, which has identified the possibility for
world class source rock to charge the refined priority prospects
MOH-B (gross mean prospective resource of 637mmbbls) and KEN-A
(gross mean prospective resource of 445mmbbls) in our neighbouring
acreage. This, alongside our independently audited Brazilian
prospect inventory will be the focus of our partnering process in
the year ahead.
With the addition of the Anchois-1 gas discovery in Morocco, we
now have a portfolio of giant, high margin prospects complemented
by a high value gas appraisal project which offers the opportunity
for a low-cost development programme in a country which has high
gas prices in a developing gas market with growing energy demand
and an aspiration for gas to be a major contributor to the future
energy mix. Through this balance of risk and reward we hope to
create a fiscal foundation that will offer Chariot a consistently
strong negotiating position in partnering processes and the ability
to accelerate and progress its ongoing high impact drilling
campaigns in the long term.
Applying the De-risking Strategy to our 2018 Exploration
Programme
The drilling campaigns of 2018 were unsuccessful in delivering
on the Company's goal to deliver material accumulations of
hydrocarbons, however it is from the drilling of these wells and
calibrating the results with our models that we can refine our
understanding of these regions in order to progress our portfolio
towards success in the future.
In securing large acreage positions in the early phases of
exploration, Chariot can capture a diversity of plays within each
licence and in a variety of basins. As part of the Company's risk
management strategy, we work in regions of the Atlantic margins
where the technical team has extensive experience and relationships
and we rigorously manage the portfolio and its diversity. In
addition, Chariot develops a thorough understanding of its acreage
through the application of state-of-the-art technology and the
evaluation of proprietary 2D and 3D seismic programmes to create
its prospect drilling inventory. The Company looks to support the
technical management of risk with the strategic positioning of the
portfolio as a fast follower and through securing levered partners
at the major investment phases where possible. Obtaining the
appropriate balance between risk, cost and reward drives the
Company's decision making.
For example, the zero-cost exploration programme in Rabat Deep
1, Morocco, which targeted one of the largest prospects worldwide
in 2018, encountered tight Carbonates that were non-reservoir. This
resulted in the downgrading of the remaining Carbonate
prospectivity in the licence and, in line with Chariot's portfolio
management, the partnership allowed Rabat Deep to lapse. However,
the well also provided valuable insight and, notably, indications
of a charge from world class Cretaceous or younger source rock
which underpins a new prospect inventory in Chariot's neighbouring
licences, Mohammedia and Kenitra.
This also exemplifies why it is important for the Company to
encompass a variety of play types and basins in its portfolio.
Where the Rabat Deep 1 well downgraded the Middle Jurassic
Carbonate prospects in the Rabat Deep licence, it has significantly
improved the chance of success in the Upper Jurassic Clastic play
in Mohammedia and Kenitra, particularly MOH-B (637mmbbls
independently audited gross mean prospective resource) and KEN-A
(445mmbbls independently audited gross mean prospective resource)
that are now priority drilling targets.
As with Rabat Deep 1, the drilling of Prospect S in the Central
Blocks, Namibia, had the potential to be transformational for the
Company in the success case. The well was unsuccessful as
Cretaceous reservoir targets were water bearing. Using our broader
regional knowledge and our vast resource of 2D and 3D data we will
look to calibrate these well results to decipher the future
prospectivity in the licence. This licence also contains a variety
of play types and where we expect the well results to degrade the
risk profile of prospects T, U and D, we anticipate that of V and W
to remain unaffected.
Another aspect of being an early entrant into these relatively
immature regions of exploration is the ability to lock in licences
where third parties are focusing on similar prospectivity, whose
exploration programme commitments are a phase ahead. From this, the
Company can analyse information from peer exploration programmes,
de-risking aspects of its own portfolio without having to test this
part of its portfolio with the drill bit. Where we applied this to
our analysis of the cretaceous following previous third party
drilling offshore Morocco, we are currently seeing this fast
follower strategy come to the fore in our Brazilian acreage. Here,
we have identified a large four-way dip-closed structure and a
portfolio consisting of seven independently audited prospective
reservoir targets individually ranging up to 366mmbbls. This
prospectivity extends into neighbouring acreage that has a drilling
commitment ahead of Chariot. Using the information from this
anticipated near term play opening well, the team will hope to
de-risk its prospect inventory and refine its own drilling
programme accordingly.
Balancing Risk, Cost and Reward: Seeking Long Term
Sustainability
Chariot secured this giant potential Brazilian acreage with a
low signature bonus as a seismic option rather than drilling
commitment owing to its regional knowledge, the team's previous
experience in country and through the application of capital
discipline. In acquiring its most recent new venture asset, Lixus,
to the north of its current acreage in Morocco, the team has again
succeeded in leveraging its regional knowledge and reputation to
secure an additional value accretive opportunity at low cost; this
time with the aim of balancing the risk profile through the
potential to generate cash-flow for the business in order to
sustain its high impact drilling programmes.
Following the results of the geochemical analysis of extracted
hydrocarbons from the Rabat Deep 1 well, the Company investigated
the potential of the Lixus licence, and in particular the Anchois
discovery made by Repsol in 2009, as part of a technical review of
thermogenic hydrocarbons in the region. At the same time,
commercial analysis of the prospect inventory in Chariot's operated
permits, Mohammedia and Kenitra, highlighted the commercial
attractiveness of gas in Morocco.
The Anchois-1 well was drilled in 388m water depth some 40km
from the coast. An independent audit of this discovery by
Netherland Sewell and Associates Inc. ("NSAI") estimates a gross 2C
resource of 307 Bcf, with an underlying target not penetrated in
the well of 116 Bcf of gross 2U prospective resources. The
excellent quality reservoirs encountered offer the potential for
high rate wells and the consequent possibility of a low-cost
development of a resource in the region of 400 Bcf. This, combined
with excellent commercial contract terms in a country with strong
gas market fundamentals, makes the Anchois discovery a potentially
material, high value project - with the opportunity for delivering
strong returns and significant cash flow to Chariot.
As with our other assets, Lixus contains a number of additional
follow on prospects with low-cost tie-back opportunities in the
same play, having gross 2U prospective resources of 527 Bcf
(summation of NSAI and Chariot internal estimates) and a further
block-wide exploration prospect portfolio with 845 Bcf (Chariot
internal estimate of mid case prospective resources). The Company
has also identified prospectivity in a deeper play type with the
potential for giant scale prospective resources in the sub-Nappe,
with the same source kitchen interpreted to have charged the oil
shows in the Rabat Deep-1 well.
Concurrently, we continue to use our in-depth technical and
regional knowledge to screen for and consider additional assets of
suitable fit to the portfolio for the continued diversification and
growth trajectory of our asset base.
Progressing the Drilling Programme through Partnering
Throughout 2018 we continued to engage with supermajors, majors
and large independents in our data rooms. Though the farm-out
market is still challenging, we believe that a return to
exploration and a global demand for high margin discoveries means
that our assets remain attractive to potential partners.
Subsequent to our evaluation of the Rabat Deep 1 well we refined
and independently audited our prospect inventory in Mohammedia and
Kenitra. The dataroom is open with an aim of securing partners to
drill giant prospects MOH-B and KEN-A, potentially back-to-back. As
part of its focus on accelerating drilling, Chariot has launched
drilling preparations in Mohammedia and Kenitra through the
approval of the drilling Environmental Impact Assessments, long
lead items identification and other operational arrangements. This
allows the Company to be unhindered in timing operations to
opportunistically capture the cost cycle and to ensure drilling
progresses without any unnecessary delays.
We have seen a rise in footfall to our Brazilian dataroom
following exploration success in Guyana and a general increase in
activity along the South American equatorial margin in 2018, where
we promote the independently audited multi-stacked Prospect 1,
which has a combined gross mean prospective resource of 911mmbbls.
Chariot aims to drill this after third party drilling in adjacent
acreage tests the play, offering valuable information for
de-risking the Company's own prospect portfolio.
In Namibia, Chariot will continue its evaluation of Prospect S
drilling results to refine its prospect inventory in this area.
Chariot also retains an option to back-in for 10% equity at no cost
after exploration drilling in the Southern Blocks, in return for
which the Company will facilitate the partnering programme led by
NAMCOR, the Namibian State Oil company.
We are also excited to pursue the opportunities that arise from
strategic funding discussions for our low cost, high value gas
appraisal project in Lixus, with the aim of building strategic
alliances and progressing funding solutions for the first phase of
development. Chariot has initiated 2D and 3D seismic reprocessing
and interpretation on the licence to evaluate the exploration
potential and also aims to investigate the gas market, test
development concepts and plan for contingent drilling activity.
Experienced and Operationally Excellent Team
As previously mentioned, Chariot has built a reputation for
attracting quality industry partners and operational efficiency
which has been hard won by Chariot's exceptional team.
It is no mean feat to deliver a zero-cost deepwater well by the
introduction of quality partners, to drill an operated well within
six months of funding, and to set a new industry benchmark for
deepwater drilling in West Africa. The Chariot team has delivered
this whilst managing the Company's ongoing data rooms; screening
several new venture opportunities and securing a material, low-cost
asset whilst also retaining capital to make the Company nimble in
its exploration developments.
I would like to thank the Chariot team for their dedication and
diligence and to particularly congratulate them on their
operational capability in setting a new benchmark through the
drilling of the deepwater well in Namibia.
Outlook
With the skillset exemplified this year by our exceptional team
in a technical, commercial and operational capacity, supported by
an enhanced board and strong funding position, we believe that the
year ahead offers exciting opportunity for progressing all areas of
the Company's portfolio; in Morocco and Brazil through partnering
for further near term drilling in MOH-B and Prospect 1
respectively, and in Lixus through developing the monetisation of
the Anchois-1 discovery well.
With a focus on risk management and capital discipline, the
Company will remain vigilant in its portfolio management through
high grading the current asset base and continuing to screen for
value accretive new venture opportunities, its aim being to
maintain an appropriate balance of risk and prize throughout the
portfolio. Chariot has a reputation for attracting partners and
effective operational delivery, and we will look to apply these
capabilities as we continue to strive for the realisation of
transformational value for all stakeholders.
Larry Bottomley
Chief Executive Officer
9 April 2019
Chariot Oil & Gas Limited
Chief Financial Officer's Review
Funding and Liquidity as at 31 December 2018
The Group continues to have a robust balance sheet with no debt,
cash of US$19.8 million as at 31 December 2018 (31 December 2017:
US$15.2 million) which, after the drilling of the Rabat Deep 1 well
in Morocco and the Prospect S well in Namibia, is significantly in
excess of current work programme commitments which are less than
US$1.0 million.
The equity fundraising announced in Q1 2018 raised an additional
net US$16.5 million providing funding for the drilling of Prospect
S at a gross cost of c.US$16 million in Namibia. Continued focus on
costs has maintained the annual cash overhead at below US$5.0
million.
During 2018 the Group continued with the development of its
portfolio and business by investing c.US$12 million into its
exploration portfolio and administration activities (31 December
2017: c.US$13 million) primarily in the drilling campaign in
Namibia. The project execution of the Prospect S drilling again
demonstrated Chariot's operational capability, allowing the Group
to fulfil its commitments early in the licence phase at
historically low rates.
As at 31 December 2018, US$0.8 million of the Group's cash
balances were held as security against licence work commitments.
The decrease from US$7.6 million at 31 December 2017 was due to the
release of Moroccan bank guarantees.
Financial Performance - Year Ended 31 December 2018
The Group's loss after tax for the year to 31 December 2018 was
US$15.1 million, which is US$40.3 million lower than the US$55.4
million loss incurred for the year ended 31 December 2017.
The vast majority of this US$40.3 million decrease in the annual
loss is due to an impairment charge of US$51.3 million in 2017
against previously capitalised costs in the Namibian Southern
Blocks due to its relinquishment in August 2017, compared with a
US$10.9 million impairment charge in relation to drilling costs in
Namibia Central Blocks in the current year. This equates to a loss
per share of US$(0.04) compared to a loss per share of US$(0.21) in
2017.
The share based payments charge of US$0.9 million for the year
ended 31 December 2018 in relation to employee and Directors
deferred share awards was consistent with US$0.9 million in the
previous year.
Other administrative expenses of US$3.4 million for the year
ended 31 December 2018 is in line with the prior year (31 December
2017: US$3.4 million).
The finance income and expense net US$Nil (31 December 2017:
US$0.2 million net gain) comprises interest on cash and foreign
exchange movements on non-US$ cash.
Interest income of US$0.4 million for the year ended 31 December
2018 is slightly higher than the prior year due to an increase in
cash held on deposit (31 December 2017: US$0.2 million).
The foreign exchange loss on non-US$ cash of US$0.4 million for
the year ended 31 December 2018 is due to the holding of slightly
higher cash balances in Sterling to meet drilling costs denominated
in Sterling resulting in higher foreign exchange movement (31
December 2017: <US$0.1 million loss).
The tax expense of less than US$0.1 million in the year to 31
December 2018 (31 December 2017: less than US$0.1 million) relates
to Brazilian taxation levied on interest income.
Exploration and Appraisal Assets as at 31 December 2018
During the year to 31 December 2018, the carrying value of the
Group's exploration and appraisal assets increased by US$1.4
million to US$74.2 million from US$72.8 million as at 31 December
2017. This US$1.4 million increase was due to US$12.3 million of
portfolio investment undertaken in 2018 offset by the US$10.9
million impairment charge against the Central Blocks Namibia for
drilling costs of the Prospect S well.
The US$12.3 million portfolio investment is split as follows: in
Namibia, US$10.9 million was incurred on the drilling of Prospect
S; in Morocco, US$0.7 million was incurred mainly on further
interpretation of acquired 2D & 3D seismic; and in Brazil,
US$0.7 million was incurred on ongoing interpretation and licence
costs.
Other Assets and Liabilities as at 31 December 2018
The Group's inventory balance of US$0.5 million as at 31
December 2018 is in line with US$0.5 million at 31 December
2017.
As at 31 December 2018, 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$4.7 million (31 December 2017:
US$1.0 million) with the increase primarily due to outstanding
payables for the drilling in Namibia.
Outlook
With US$19.8 million of cash at 31 December 2018, no debt and
minimal commitments the Group is well placed to continue the
strategy of creating a balanced portfolio and sustainable business
that delivers high risk, high reward exploration prospects that are
potentially transformational in the success case. Due to the
Group's in-house technical and operational expertise the drilling
campaign of 2018 was completed well below budget, completing the
vast majority of the Group's work commitments in a historically low
price window. This commitment to capital discipline and
demonstration of excellent project delivery has lead to value
accretive new venture opportunities arising. With the recent
operational achievements of 2018 in mind we look forward to
progressing our portfolio of existing high margin exploration
targets alongside the lower risk gas appraisal project in the newly
awarded Lixus Offshore licence in Morocco.
Julian Maurice-Williams
Chief Financial Officer
9 April 2019
Chariot Oil & Gas Limited
Exploration Manager's Review of Operations
Chariot has built a diverse portfolio encompassing the
giant-potential, underexplored deep-water regions offshore Morocco,
Brazil and Namibia and, through its application of modern seismic
technology, has developed a drill-ready inventory with
transformational potential. This year, as well as testing this
potential through the drilling of two wells, we have also looked to
balance the risk profile of the portfolio with the introduction of
a high value, low cost gas appraisal project which we believe
offers long term sustainability to underpin our high impact
drilling programmes.
Chariot has proven that it has the in-house technical competence
to identify, mature and drill exploration prospects to blue chip
industry standard; hosting data rooms that attract majors as well
as the large independents; demonstrating operational capability
exemplified by its performance in Prospect S this year and a robust
financial position providing flexibility and strength in partnering
discussions.
Despite the wells proving to be dry, the data gathered from our
2018 wells provides valuable information for improving the
understanding of the remaining prospectivity in our licences and
refining our drilling inventory. Whilst we are still calibrating
our geological models with this data on our Namibian acreage, we
are excited by the implications on our Moroccan assets with the
potential for a new petroleum system identified alongside the
de-risking of the target clastic reservoirs in the priority
prospects. In the year ahead we look forward to progressing
partnering negotiations on these prioritised drilling targets, as
well as on our independently audited Brazilian prospect inventory
and at the same time as developing our appraisal programme and
partnering options on our newly acquired Lixus licence.
Morocco: Exploration and Appraisal
Overview
The northern margin of Morocco is thought to be analogous to the
conjugate Nova Scotia Basins where significant discoveries have
been made in equivalent play systems to those that are present
within Chariot's licences, and currently being explored by third
parties in the region.
Chariot holds three offshore licences in this area of Morocco,
two of which (Mohammedia and Kenitra) form part of its high impact
exploration portfolio in which the team has identified giant
potential prospectivity; and a third, Lixus, which contains the
Anchois gas discovery from which the Company anticipates strong
returns and significant cash flow once developed, thereby helping
to sustain its high impact exploration campaigns in the future.
Commercially, Morocco has some of the most competitive fiscal
terms in the world, that are supported by a robust regulatory
framework and highly regarded state oil company ONHYM who are also
a partner in the licences (25% carried interest during the
Exploration Phase). Morocco also has strong gas market fundamentals
with increasing demand and high prices and provides the opportunity
to bring gas into a growing and diversifying market. Since
Chariot's entry into the region, a number of industry players have
also acquired exploration acreage and there has been significant
third party activity in both exploration and gas development
projects.
Exploration:
Mohammedia and Kenitra (75% Chariot (Operator), 25% ONHYM
(carried interest))
The Mohammedia and Kenitra permits are situated from the
shoreline to 50km offshore in northern Morocco and cover a combined
area of approximately 12,800km(2) . They are in close proximity to
historic onshore oil production, current onshore gas production and
oil and gas condensate discoveries in both the offshore and
onshore. Oil slicks, geochemical surveys and seismic direct
hydrocarbon indicators (DHIs) within Chariot's licences support the
presence of an effective hydrocarbon system.
Chariot holds a diverse and comprehensive database across the
area comprising 10,000km of 2D legacy seismic data, 2,250 km and
2,700 km(2) of proprietary 2D and 3D seismic data respectively, a
4,000 km(2) Multi-Beam Bathymetry Survey (MBES), 100 Seabed
Geochemical Cores and data from the most recent well, Rabat Deep 1,
that Chariot participated in during Q1 2018 with ENI and
Woodside.
Using this information the Company has actively managed its
Moroccan portfolio, acquiring and relinquishing permits to ensure
that it captures the most prospective areas as its understanding
evolves. Whilst the Rabat Deep 1 well was dry and has since been
plugged and abandoned, an extensive evaluation programme was
conducted including acquisition of electric log data and side-wall
cores, which were analysed and the results then calibrated with the
Company's regional datasets. The results downgraded the remaining
Jurassic carbonate targets in the Rabat Deep licence and it was
therefore subsequently allowed to lapse, however, it provided
valuable information for the prospectivity of the clastic reservoir
potential in the Company's neighbouring Mohammedia and Kenitra
licences as well as identifying evidence for an active world class
source rock in region. This information enabled the team to develop
a new prospect inventory which has since been independently
audited. The Company has now high-graded the priority prospects
MOH-B (637mmbbls gross mean prospective resource) and KEN-A
(445mmbbls gross mean prospective resource) as drilling candidates
and a dataroom has been opened to attract new partners, with
drilling preparations underway.
Case Study: Rabat Deep 1 Drilling Results Analysis: a new
petroleum system?
The Rabat Deep partnership (Eni 40% (operator), Woodside 25%,
ONHYM 25% (carried interest), Chariot 10%) drilled the Rabat Deep 1
well using the Saipem 12000 drillship. The JP1 prospect targeted by
the well had the potential to be transformational for the Company
in the success case and was closely watched by the industry as one
of the largest prospects to be drilled anywhere in the world during
2018. The well was safely drilled to a total measured depth of
3,180m but was unsuccessful as the primary Jurassic carbonate
reservoir was tight with poor porosity and permeability
development.
The data collected from the Rabat Deep 1 well allowed the
Company to develop its understanding, and to refine priority
targets in its Kenitra and Mohammedia permits in two ways:
1. Geochemical analysis of hydrocarbons extracted from sidewall
cores showed the presence of oleanane - a characteristic of source
rocks that are younger than Jurassic in age. This indicates the
potential for hydrocarbon migration from a Cretaceous or younger
source rock which would represent a new petroleum system for
offshore Morocco.
Whilst the development of high quality Cretaceous onshore oil
shales in Morocco is well known, the Cretaceous is not historically
considered as a likely source rock for the offshore petroleum
systems as it is not believed to be sufficiently buried to be
generative. However, unique to Northern Morocco is the development
of the Alpine fold-belt system, created by the collision of Africa
with Europe. Here the source rock plunges below the Alpine
fold-belt and is believed to be buried sufficiently to be within
the oil window at present day. Considering this hypothesis, the
Chariot team evaluated and analysed a variety of historic oil
fields and seeps onshore from its licences which also proved the
existence of oleananes thus providing further support for an active
Cretaceous petroleum system in a sub-nappe setting.
2. The well also encountered Upper Jurassic reservoir sands of
high quality and an effective siliciclastic top seal. These Upper
Jurassic sands extend to the south of the well into Chariot's
adjacent Kenitra licence and the siliciclastic nature of the
interval also supports the interpretation of shallow marine and
deltaic reservoir sands to the east in Mohammedia. These sands are
deposited on a strong migration focus from the potential Cretaceous
sub-nappe source kitchen to the north.
Having integrated this knowledge with our previous data, we have
now expanded the Mohammedia and Kenitra portfolio with an inventory
of Upper Jurassic Clastic prospects charged from the Cretaceous
source rocks (of Albian and Cenomanian-Turonian age) matured by
burial below the Alpine fold-belt. These are all supported by
seismic anomalies calibrated to the Rabat Deep 1 well which are
modelled to be consistent with the presence of hydrocarbons. Of
these prospects, Chariot is targeting the drilling of the
Mohammedia licence prospect MOH-B, which has a gross mean
prospective resource of 637mmbbls in two targets as part of a
larger portfolio in the Mohammedia and Kenitra licences, totalling
2.6 billion barrels of gross mean prospective resources.
Appraisal: Lixus (75% Chariot (Operator), 25% ONHYM (carried
interest))
Lixus is also located in the northern part of the Moroccan
Offshore Atlantic margin and it covers an area of approximately
2,390km(2) with water depths ranging from the coastline to 850m. It
has been subject to earlier exploration with legacy 2D seismic data
and modern 3D seismic data covering a total of approximately
1,425km(2) and four exploration wells, importantly including the
Anchois gas discovery.
The Anchois-1 well was drilled in 2009 in 388m water depth some
40km from the coast by Repsol and encountered total net gas pay of
55m across two sands with average porosities ranging from 25% to
28%. An independent audit of this discovery by NSAI estimates a
gross 2C resource of 307 Bcf, with an underlying target not
penetrated in the well of 116 Bcf of gross 2U prospective
resources.
The Anchois discovery is in Tertiary-aged turbidite reservoirs
that occur in post-nappe mini-basins. These sands were gas-bearing
and have a characteristic and anomalous seismic signature which can
be used to identify additional low risk exploration targets.
Through initial analysis of 3D seismic data Chariot has identified
an additional five satellite prospects to the Anchois discovery
within the Lixus licence in similar geological settings and with
comparable anomalous seismic signature to Anchois, with three of
those prospects having combined gross 2U prospective resources of
251 Bcf, as estimated by NSAI. The final two prospects are in the
final stages of evaluation by Chariot before they are also
independently audited.
Beyond the Anchois area, Chariot is also assessing the
post-nappe gas exploration potential across the entire licence area
and is building a material portfolio of prospects which will be
independently audited in the near future. Chariot is also
evaluating the section below the nappe which has the potential for
giant scale prospective resources and the possibility to retain an
oil charge, for which the project to reprocess seismic data will be
important to improve the imaging to enable the identification of
prospective structures.
Alongside the exploration studies, the excellent quality
reservoirs in the Anchois-1 well offer the potential for high rate
producer wells, which, combined with the favourable gas composition
and operating environment, opens the opportunity for a low-cost
development. This project is supported by exceptional commercial
contract terms in a country with high gas prices in a developing
market and growing energy demand. The low risk satellite prospect
inventory provides running room for additional gas resources which
would be low-cost tie-back opportunities to Anchois production
infrastructure.
The initial period of the licence carries a light commitment
geophysical work programme of 2D and 3D seismic reprocessing and
interpretation to evaluate the exploration potential of Lixus. As
part of the programme, Chariot will also investigate the gas
market, test development concepts, conduct drilling preparatory
work and seek strategic partnerships and alliances to progress
funding solutions for a potential appraisal and development of the
Anchois discovery.
Strong Moroccan Gas Market Fundamentals:
Not only is Anchois an attractive appraisal project, but it also
offers a potentially high value gas development project, which can
be fast-tracked to benefit from a rapidly growing energy market in
Morocco in which gas is taking centre-stage:
Moroccan power generation is principally from imported fuel oil,
gas and coal, yet its energy demand is forecast to increase by over
6% per annum to reach 85,000 Gwh by 2025 (source: ONEE). Current
publicly reported gas prices for industrial users range from 9.4
US$/mscf to 10.5 US$/mscf and the country continues to look to
source additional gas supplies.
Existing Gas-to-Power projects are supplied by Algerian gas
through the Maghreb-Europe gas pipeline ("MEG") which transports
gas to the European market via the Iberian Peninsula. This is
anticipated to transition to Moroccan ownership in 2021 and
coincides with the creation of a new Moroccan Gas Agency, which is
under discussion.
The development of projects to meet Morocco's future energy
needs is strongly supported by the government with the desire to
find indigenous energy sources, to use them in-country and to
develop multiple gas markets (both domestic and imported) to
replace coal and fuel oil for power generation at a lower cost:
-- Gas-to-power plan for imported LNG to be a major fuel for power generation from 2025
-- Fuel Oil power plants to be converted to gas
-- New 1200MW CCGT power plant planned at Dar Dhoum, which is
equivalent to 150 mmscf/d and is planned to be constructed in close
proximity to the probable landfall of any Anchois gas pipeline, as
well as multiple other power generation opportunities to the north
and south
As with our other Moroccan assets, Lixus boasts excellent
contract terms and favourable development cost metrics:
-- 10 year tax holiday on production revenues with low 3.5% - 5%
royalty on produced gas, with ONHYM paying their 25% share of the
development;
-- Early development concept requires standard industry
equipment and operations, with a subsea tie-back to onshore CPF
solution offering a low-cost development opportunity. Combined with
attractive sales prices and fiscal terms, this gives high value
project economics
Forward Plan 2019/20:
Exploration: Mohammedia and Kenitra:
-- Drill MOH-B (637mmbbls gross mean prospective resource) in
Mohammedia and KEN-A (445mmbbls gross mean prospective resource))
in Kenitra back-to-back (subject to well results and
partnering).
Appraisal & Exploration: Lixus
-- 2D & 3D 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
-- 1 contingent appraisal well, suspended as a potential future
producer, subject to partnering
Remaining Commitments:
Exploration: Mohammedia and Kenitra:
-- No remaining commitments
Appraisal: Lixus:
-- 2D & 3D reprocessing and interpretation. Conduct
conceptual development and gas market studies for the Anchois
discovery.
Brazil: Exploration
BAR-M-292, 293, 313 and 314 (100% Chariot (Operator))
Chariot consistently looks for opportunities to develop its
exploration portfolio, balancing risk through the diversification
of the asset base with a range of exploration maturity, basins and
play types. Through its successful participation in the 11th
licencing round in Brazil in 2013, the team achieved this in the
highly prospective and underexplored Barreirinhas Basin. By winning
the bidding process on the BAR-M-292, 293, 313 and 314 licences
Chariot gained a fast follower positioning with a seismic
option.
Whilst there have only been three deep-water wells drilled
within the basin to date, the information these have provided has
proven the presence of excellent quality Tertiary and Cretaceous
deep-water turbidite reservoirs. In addition, the presence of
Santonian and Cenomanian-Turonian source rocks have been
demonstrated in legacy shallow-water wells drilled in-board of
Chariot's acreage with evidence for sufficient burial for
hydrocarbon generation, which is supported by prevalent shows in
offset wells. Furthermore, successful drilling campaigns on the
conjugate margin of Cote d'Ivoire and Ghana offer an analogue for
hydrocarbon generation. These factors made the licensing round
extremely competitive, with many neighbouring operators securing
their acreage for significantly higher signature bonuses than
Chariot and committing to drill wells rather than only conducting
seismic campaigns within the first exploration phase.
Since entering the licence Chariot has fulfilled its commitments
through the acquisition, processing and evaluation of 775km(2) of
3D seismic data and carried out an independent audit on its
resulting prospect and lead inventory. This portfolio consists of
seven prospective reservoir targets in a range of trapping
configurations from purely structural and combination traps,
associated to a 200km(2) 4-way dip-closed structure which sits
principally over Block 314, to stratigraphic traps. The on-licence
gross mean prospective resource of individual targets range up to
366mmbbls, and a single vertical well located at Prospect 1 can
penetrate the TP-1, TP-3 and KP-3 stacked targets which have a
summed on-licence gross mean prospective resource of 911mmbbls.
Additionally, the portfolio contains multiple additional
structural, combination and stratigraphic closures in reservoir
targets in the Tertiary and Upper Cretaceous.
Owing to its fast follower positioning, Chariot has not only
benefitted from recent successes in neighbouring Guyana and
increased levels of activity across the margin, but it anticipates
that the drilling of committed third party wells in adjacent and
surrounding acreage, that will test the potential of the deeper
outboard basin, will occur before Chariot takes on a well
commitment. This drilling is expected to directly de-risk Chariot's
acreage which is located within the same play fairway, but
critically in an up-dip setting.
The Company has opened a dataroom to gain partner participation
on the drilling of Prospect 1 post this third party drilling
activity.
Forward Plan 2019/20:
-- Partnering process initiated for a partner to join in
drilling to follow a play opening commitment to be drilled by a
third-party in the neighbouring deep-water block
Remaining Commitments:
-- No remaining commitments
Namibia: Exploration
PEL-71, "Central Blocks", (65% Chariot (Operator); Azinam 20%;
NAMCOR 10%; Ignitus 5%)
In Namibia Chariot operates PEL-71, the "Central Blocks" which
sits within the Walvis Basin and spans a vast 16,800km(2) . As it
is a frontier province, Chariot entered Namibian exploration as a
play opener and, having acquired, processed and interpreted over
10,000km(2) of 3D seismic and drilled three deepwater exploration
wells, it has secured one of the largest databases of seismic and
well data in the country.
Concurrent to Chariot's work, other industry activity in recent
years has provided new and encouraging information on the
prospectivity of the Namibia offshore. Where previous drilling in
the 1990s was focused on shallow shelf targets based upon 2D
seismic data, more recent drilling activity took place in the deep
water on areas covered by modern 3D seismic, proving two principal
source rocks in the Aptian and the Cenomanian-Turonian. These wells
confirmed the presence of excellent quality thick, oil prone mature
source rock, recovered light oil and also encountered good quality
turbidite reservoirs. This means that, in addition to the proven
Kudu gas play, all elements required for a material oil
accumulation were demonstrated to be present offshore Namibia.
This year Chariot safely and efficiently drilled Prospect S
using the Ocean Rig Poseidon on behalf of our partners Azinam,
NAMCOR and Ignitus. The prospect that this well targeted had the
potential to be transformational for the Company in the success
case and was also closely watched by the industry. Disappointingly
the well was unsuccessful as the anticipated Cretaceous clastic
reservoir targets were found to be water bearing. Extensive
post-well analysis is underway to determine the impact on the
remaining prospectivity of the Central Blocks.
Case Study: Prospect S Drilling Operations
The Central Blocks partnership (65% Chariot (Operator); Azinam
20%; NAMCOR 10%; Ignitus 5%) drilled Prospect S in Q4 2018. The
well was operated by Chariot and drilled by the Ocean Rig Poseidon
drillship to a total measured depth of 4,165m to test the stacked
reservoir targets in Prospect S, which, unfortunately, were water
bearing.
Pre-drill the Prospect S was independently estimated as a gross
mean prospective resource of 459mmbbls and a probability of
geologic success of 29% by Netherland Sewell Associated Inc.. It
was one of five dip-closed structural traps, totalling 1,758mmbbls
gross mean prospective resources that were identified in the Upper
Cretaceous turbidite clastic play fairway and as such was not just
a transformational opportunity in itself, but also in its ability
to de-risk significant follow on potential. The well penetrated the
anticipated turbidite reservoir sands, in line with the pre-drill
prognosis, however the reservoirs were water-bearing and did not
encounter a hydrocarbon accumulation. The well was plugged and
abandoned and the drilling costs were impaired once the results
were known
Though unsuccessful in discovering a hydrocarbon accumulation,
the data recovered from the well has provided valuable information
about the excellent reservoir potential of these turbidite sand
systems which form the primary targets across many of the remaining
Central Blocks prospects, including Prospect B, V and W. In
addition, through the operational performance in drilling the well,
Chariot has demonstrated that it is capable of safely and
efficiently operating a deepwater well in a remote location.
Though the Company's normal preference is to farm-out equity
ahead of drilling, in this case Chariot had already secured a
partner ahead of acquiring seismic data and recognised the
opportunity to retain a high equity level in an attractive
exploration project at a time when the drilling market was very
weak. This strategy allowed the Company to not only achieve the
drilling of this well at the bottom of the cost cycle, but through
its efficient operations and synergy with other regional
contractors, to do so at around US$10 million under budget: The
well was drilled within 17 days, with a final gross cost of
approximately US$16 million, an achievement which is almost
certainly to become the new benchmark for the sector.
Also in Namibia, Chariot retains an option to back-in for 10%
equity at no cost after exploration drilling in the "Southern
Blocks" (PEL 67 & 72), in return for which the Company will
facilitate the partnering programme led by NAMCOR, the Namibian
State Oil company. The Southern Blocks sit in the offshore of the
Orange basin in the southern region of the country, just to the
north of the Kudu Gas field discovery.
Forward Plan 2019/20:
-- Post well analysis of logs, samples and cuttings for failure
analysis and to determine the implications of the well results on
the prospectivity of the remaining prospect inventory
-- Continue to support NAMCOR on the marketing of the Southern
Blocks in fulfilment of the back-in option
Remaining Commitments:
-- No remaining commitments
Duncan Wallace
Exploration Manager
9 April 2019
Chariot Oil & Gas Limited
Consolidated Statement of Comprehensive Income for the Year
Ended 31 December 2018
Year ended Year ended
31 December 31 December
2018 2017
Notes US$000 US$000
Share based payments 20 (904) (875)
Impairment of exploration asset 11 (10,876) (51,307)
Other administrative expenses (3,359) (3,370)
-------------------------------------- ------ -------------- --------------
Total operating expenses (15,139) (55,552)
-------------------------------------- ------ -------------- --------------
Loss from operations 4 (15,139) (55,552)
Finance income 7 371 195
Finance expense 7 (356) (36)
-------------------------------------- ------ -------------- --------------
Loss for the year before taxation (15,124) (55,393)
Tax expense 9 (12) (25)
-------------------------------------- ------ -------------- --------------
Loss for the year and total
comprehensive loss for the
year attributable to equity
owners of the parent (15,136) (55,418)
-------------------------------------- ------ -------------- --------------
Loss per Ordinary share attributable 10 US$(0.04) US$(0.21)
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 2018
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
2017 4,874 340,633 796 3,714 (1,241) (206,570) 142,206
Loss and total
comprehensive
loss for the
year - - - - - (55,418) (55,418)
Share based
payments - - - 875 - - 875
Transfer of
reserves due
to issue of
share awards 7 110 - (117) - - -
As at 31
December 2017 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
---------------- ------------ ------------- ------------- ------------ ------------ ------------ -------------
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
2018
31 December 31 December
2018 2017
Notes US$000 US$000
Non-current assets
Exploration and appraisal costs 11 74,236 72,770
Property, plant and equipment 12 100 133
----------------------------------- ------ ------------ ------------
Total non-current assets 74,336 72,903
----------------------------------- ------ ------------ ------------
Current assets
Trade and other receivables 13 2,306 1,328
Inventory 14 524 480
Cash and cash equivalents 15 19,822 15,233
----------------------------------- ------ ------------ ------------
Total current assets 22,652 17,041
----------------------------------- ------ ------------ ------------
Total assets 96,988 89,944
----------------------------------- ------ ------------ ------------
Current liabilities
Trade and other payables 16 7,029 2,281
Total current liabilities 7,029 2,281
----------------------------------- ------ ------------ ------------
Total liabilities 7,029 2,281
----------------------------------- ------ ------------ ------------
Net assets 89,959 87,663
----------------------------------- ------ ------------ ------------
Capital and reserves attributable
to equity holders of the parent
Share capital 17 6,264 4,881
Share premium 356,336 340,743
Contributed equity 796 796
Share based payment reserve 4,928 4,472
Foreign exchange reserve (1,241) (1,241)
Retained deficit (277,124) (261,988)
----------------------------------- ------ ------------ ------------
Total equity 89,959 87,663
----------------------------------- ------ ------------ ------------
The notes form part of these financial statements.
The financial statements were approved by the Board of Directors
and authorised for issue on 9 April 2019.
George Canjar
Chairman
Chariot Oil & Gas Limited
Consolidated Cash Flow Statement for the Year Ended 31 December
2018
Year ended Year ended
31 December 31 December
2018 2017
US$000 US$000
Operating activities
Loss for the year before taxation (15,124) (55,393)
Adjustments for:
Finance income (371) (195)
Finance expense 356 36
Depreciation 56 26
Share based payments 904 875
Impairment of exploration asset 10,876 51,307
-------------------------------------------- -------------- --------------
Net cash outflow from operating
activities before changes in working
capital (3,303) (3,344)
(Increase)/decrease in trade and
other receivables (560) 861
(Decrease)/increase in trade and
other payables (775) 183
(Increase)/decrease in inventories (44) 458
-------------------------------------------- -------------- --------------
Cash outflow from operating activities (4,682) (1,842)
Tax payment (12) (32)
Net cash outflow from operating
activities (4,694) (1,874)
-------------------------------------------- -------------- --------------
Investing activities
Finance income 357 189
Payments in respect of property,
plant and equipment (23) (123)
Farm-in proceeds - 3,000
Payments in respect of exploration
assets (7,223) (10,944)
Net cash outflow used in investing
activities (6,889) (7,878)
-------------------------------------------- -------------- --------------
Financing activities
Issue of ordinary share capital 17,613 -
Issue costs (1,085) -
------------------------------------------- -------------- --------------
Net cash inflow from financing activities 16,528 -
------------------------------------------- -------------- --------------
Net increase / (decrease) in cash
and cash equivalents in the year 4,945 (9,752)
Cash and cash equivalents at start
of the year 15,233 25,021
Effect of foreign exchange rate
changes on cash and cash equivalent (356) (36)
Cash and cash equivalents at end
of the year 19,822 15,233
-------------------------------------------- -------------- --------------
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 2018
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
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.
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 2018. 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
IFRS 9 - Financial Instruments 1 January 2018
---------------
IFRS 15 - Revenue from Contract with Customers 1 January 2018
---------------
IFRS 2 - Share Based Payments (Amendments) 1 January 2018
---------------
Annual Improvements to IFRSs - (2014-2016 1 January 2018
Cycle)
---------------
Certain new standards and amendments to standards have been
published that are mandatory for the Group's accounting periods
beginning after 1 January 2019 or later years to which the Group
has decided not to adopt early when early adoption is available.
The most significant of these is IFRS 16 Leases.
IFRS 16 - Leases
Adoption of IFRS 16 will result in the group recognising
right-of-use assets and lease liabilities for all contracts that
are, or contain, a lease. For leases currently classified as
operating leases, under current accounting requirements the group
does not recognise related assets or liabilities, and instead
charges the lease payments to the Consolidated Statement of
Comprehensive Income on a straight-line basis over the term of the
lease, with the total commitment disclosed in note 5. Upon adoption
of IFRS 16, the group will instead recognise interest on its lease
liabilities and amortisation on its right-of-use assets on a
straight-line basis over the remaining life of the lease.
The Board has decided it will apply the modified retrospective
adoption method in IFRS 16, and, therefore, will only recognise
leases on balance sheet as at 1 January 2019. In addition, it has
decided to measure right-of-use assets by reference to the
measurement of the lease liability on that date. The Group expects
to recognise lease liabilities of approximately $1.0 million in
relation to the office lease in the UK with a corresponding
right-of-use asset for the same amount. Additional disclosure will
be provided in the 2019 Financial Statements relating to leases
where material.
The implementation of the following 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
Annual Improvements to IFRSs - (2015-2017 1 January 2019*
Cycle)
----------------
IAS 28: Long-term Interests in Associates 1 January 2019
and Joint Ventures
----------------
* Not yet endorsed by the EU.
Exploration and appraisal costs
All expenditure relating to the acquisition, exploration,
appraisal and development 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.
Operating leases
Rent paid on operating leases is charged to the Consolidated
Statement of Comprehensive Income on a straight line basis over the
term of the lease.
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.
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. Trade and other receivables are stated initially at
fair value and subsequently at amortised cost.
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 intangible assets
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. This assessment involves judgement as to: (i)
the likely future commerciality of the asset and when such
commerciality should be determined; (ii) future revenues and costs
pertaining to any asset based on proved plus probable, prospective
and contingent resources; and (iii) the discount rate to be applied
to such revenues and costs for the purpose of deriving a
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.
3 Segmental analysis
The Group has two reportable segments being exploration for oil
and gas 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 2018
Exploration Corporate Total
for
Oil and Gas
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
------------- ------------------- ---------------
31 December 2017
Exploration Corporate Total
for
Oil and Gas
US$000 US$000 US$000
------------- ---------- -----------------
Share based payment - (875) (875)
------------- ---------- -----------------
Administrative expenses (471) (2,899) (3,370)
------------- ---------- -----------------
Impairment of exploration
asset (51,307) - (51,307)
------------- ---------- -----------------
Finance income - 195 195
------------- ---------- -----------------
Finance expense - (36) (36)
------------- ---------- -----------------
Tax expense - (25) (25)
------------- ---------- -----------------
Loss after taxation (51,778) (3,640) (55,418)
------------- ---------- -----------------
Additions to non-current assets 7,347 123 7,470
------------- ---------- -----------------
Total assets 73,310 16,634 89,944
------------- ---------- -----------------
Total liabilities (978) (1,303) (2,281)
------------- ---------- -----------------
Net assets 72,332 15,331 87,663
------------- ---------- -----------------
4 Loss from operations
31 December 31 December
2018 2017
US$000 US$000
------------ ------------
Loss from operations is stated after
charging:
------------ ------------
Impairment of exploration asset 10,876 51,307
------------ ------------
Operating lease - office rental 489 473
------------ ------------
Depreciation 56 26
------------ ------------
Share based payments - Long Term Incentive
Scheme 847 806
------------ ------------
Share based payments - Restricted Share
Unit Scheme 57 69
------------ ------------
Auditors' remuneration:
------------ ------------
Fees payable to the Company's Auditors
for the audit of the Company's annual
accounts 62 56
------------ ------------
Audit of the Company's subsidiaries pursuant
to legislation 14 15
------------ ------------
Fees payable to the Company's Auditors
for the review of the Company's interim
accounts 10 10
------------ ------------
Total payable 86 81
------------ ------------
5 Leases commitments
31 December 31 December
2018 2017
US$000 US$000
-------------------- ------------
Not later than one year 486 364
-------------------- ------------
Later than one year and not later than
five years 1,221 1,862
-------------------- ------------
Total 1,707 2,226
-------------------- ------------
The leases are operating leases in relation to the offices in
the UK and overseas.
6 Employment costs
Employees 31 December 31 December
2018 2017
US$000 US$000
------------ ------------
Wages and salaries 2,213 2,295
------------ ------------
Pension costs 98 83
------------ ------------
Share based payments 514 506
------------ ------------
Sub-total 2,825 2,884
------------ ------------
Capitalised to exploration costs (1,624) (1,318)
------------ ------------
Total 1,201 1,566
------------ ------------
Key management personnel 31 December 31 December
2018 2017
US$000 US$000
------------ ------------
Wages, salaries and fees 611 366
------------ ------------
Social security costs 63 40
------------ ------------
Share based payments 390 369
------------ ------------
Sub-total 1,064 775
------------ ------------
Capitalised to exploration costs (194) (142)
------------ ------------
Total 870 633
------------ ------------
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.
7 Finance income and expense
Finance income 31 December 31 December
2018 2017
US$000 US$000
------------ ------------
Bank interest receivable 371 195
------------ ------------
Total 371 195
------------ ------------
Finance expense 31 December 31 December
2018 2017
US$000 US$000
------------ ------------
Foreign exchange loss 356 36
------------ ------------
Total 356 36
------------ ------------
8 Investments
The Company's wholly owned subsidiary undertakings at 31
December 2018 and 31 December 2017, excluding dormant entities,
were:
Subsidiary undertaking(2) Principal activity Country of incorporation
Chariot Oil & Gas Investments Holding company Guernsey
(Namibia) Limited
------------------------ -------------------------
Chariot Oil & Gas Investments Oil and gas exploration Guernsey
(Mauritania) Limited
------------------------ -------------------------
Chariot Oil & Gas Investments Oil and gas exploration Guernsey
(Morocco) Limited
------------------------ -------------------------
Chariot Oil and Gas Statistics Service company UK
Limited
------------------------ -------------------------
Enigma Oil & Gas Exploration Oil and gas exploration Namibia
(Proprietary) Limited(1)
------------------------ -------------------------
Chariot Oil & Gas Investments Holding company Guernsey
(Brazil) Limited
------------------------ -------------------------
Chariot Brasil Petroleo e Oil and gas exploration Brazil
Gas Ltda
------------------------ -------------------------
Chariot Oil & Gas Finance Service company Guernsey
(Brazil) Limited(1)
------------------------ -------------------------
(1) Indirect shareholding of the Company.
(2) On 29 January 2019 the Company incorporated a new wholly
owned subsidiary Chariot Oil & Gas Holdings (Morocco) Limited
in the UK.
9 Taxation
The Company is tax resident in the UK, however no tax charge
arises due to taxable losses for the year (31 December 2017:
US$Nil).
No taxation charge arises in Namibia, Morocco or the UK
subsidiaries as they have recorded taxable losses for the year (31
December 2017: US$Nil).
In Brazil, there were taxable profits due to interest received
on cash balances resulting in a tax charge payable of US$12,000 (31
December 2017: US$25,000). 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
2018 2017
US$000 US$000
------------ ------------
Tax reconciliation
------------ ------------
Loss on ordinary activities for the
year before tax (15,124) (55,393)
------------ ------------
Loss on ordinary activities at the
standard rate of corporation tax in
the UK of 19% (31 December 2017: 19.25%) (2,874) (10,663)
------------ ------------
Non-deductible expenses 2,249 10,050
------------ ------------
Difference in tax rates in other jurisdictions 71 95
------------ ------------
Deferred tax effect not recognised 566 543
------------ ------------
Total taxation charge 12 25
------------ ------------
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$6.5 million (31 December 2017:
US$5.9 million). Deferred tax assets were not recognised as there
is uncertainty regarding the timing of future profits against which
these assets could be utilised.
10 Loss per share
The calculation of basic loss per Ordinary share is based on a
loss of US$15,136,000 (31 December 2017: loss of US$55,418,000) and
on 343,201,438 Ordinary shares (31 December 2017: 268,595,921)
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.
11 Exploration and appraisal costs
31 December 2018 31 December 2017
US$000 US$000
----------------------- ----------------------
Net book value brought forward 72,770 119,730
----------------------- ----------------------
Additions 12,342 7,347
----------------------- ----------------------
Farm-in proceeds - (3,000)
----------------------- ----------------------
Impairment (10,876) (51,307)
----------------------- ----------------------
Net book value carried forward 74,236 72,770
----------------------- ----------------------
As at 31 December 2018 the net book values of the three cost
pools are Central Blocks offshore Namibia US$50.5 million (31
December 2017: US$50.5 million), Morocco US$8.5 million (31
December 2017: US$7.8 million) and Brazil US$15.2 million (31
December 2017: US$14.5 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.
On 29 August 2017 the Company announced that it had elected not
to enter into the First Renewal Exploration Period of the Southern
Blocks offshore Namibia, causing an impairment of US$51.3
million.
Farm-in proceeds are in relation to the completion of the
farm-out of 40% of the Rabat Deep Offshore permits I-VI, Morocco,
to a wholly owned subsidiary of Eni, which was announced on 9
January 2017.
12 Property, plant and equipment
Fixtures, fittings Fixtures, fittings
and equipment and equipment
31 December 2018 31 December 2017
------------------- -------------------
US$000 US$000
------------------- -------------------
Cost
------------------- -------------------
Brought forward 1,758 1,635
------------------- -------------------
Additions 23 123
------------------- -------------------
Carried forward 1,781 1,758
------------------- -------------------
Depreciation
------------------- -------------------
Brought forward 1,625 1,599
------------------- -------------------
Charge 56 26
------------------- -------------------
Carried forward 1,681 1,625
------------------- -------------------
Net book value brought forward 133 36
------------------- -------------------
Net book value carried forward 100 133
------------------- -------------------
13 Trade and other receivables
31 December 2018 31 December 2017
US$000 US$000
----------------- -----------------
Other receivables and prepayments 2,306 1,328
----------------- -----------------
The fair value of trade and other receivables is equal to their
book value.
14 Inventory
31 December 2018 31 December 2017
US$000 US$000
----------------- -----------------
Wellheads and casing 524 480
----------------- -----------------
15 Cash and cash equivalents
31 December 2018 31 December 2017
Analysis by currency US$000 US$000
----------------- -----------------
US Dollar 19,325 14,733
----------------- -----------------
Brazilian Real 2 245
----------------- -----------------
Sterling 489 214
----------------- -----------------
Other currencies 6 41
----------------- -----------------
19,822 15,233
----------------- -----------------
As at 31 December 2018 and 31 December 2017 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 2018, the cash balance of US$19.8 million (31
December 2017: US$15.2 million) contains the following cash
deposits that are secured against bank guarantees given in respect
of exploration work to be carried out:
31 December 2018 31 December 2017
US$000 US$000
----------------- -----------------
Moroccan licences 800 7,550
----------------- -----------------
800 7,550
----------------- -----------------
The funds are freely transferrable but alternative collateral
would need to be put in place to replace the cash security.
16 Trade and other payables
31 December 2018 31 December 2017
US$000 US$000
----------------- -----------------
Trade payables 6,379 1,572
----------------- -----------------
Accruals 650 709
----------------- -----------------
7,029 2,281
----------------- -----------------
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
2018 2018 2017 2017
------------ ------------ ------------ ------------
Number US$000 Number US$000
------------ ------------ ------------ ------------
Ordinary shares
of 1p each(1) 367,259,909 6,264 268,873,197 4,881
------------ ------------ ------------ ------------
1. The authorised and initially allotted and issued share
capital on admission (19 May 2008) has been translated at the
historic rate of US$: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
2016 Opening Balance 268,352,392
------------------------------- ------ -------------
23 February
2017 Issue of share award 0.30 129,601
------------------------------- ------ -------------
23 February
2017 Issue of share award 0.14 40,464
------------------------------- ------ -------------
11 July 2017 Issue of share award 0.08 57,125
------------------------------- ------ -------------
11 July 2017 Issue of share award 0.17 17,836
------------------------------- ------ -------------
6 October 2017 Issue of share award 0.20 80,000
------------------------------- ------ -------------
6 October 2017 Issue of share award 0.16 23,896
------------------------------- ------ -------------
10 October 2017 Issue of share award 0.30 129,601
------------------------------- ------ -------------
10 October 2017 Issue of share award 0.17 42,282
------------------------------- ------ -------------
31 December
2017 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
------ -------------
18 Related party transactions
- Key management personnel comprises the Directors and details
of their remuneration are set out in note 6 and the Directors'
Remuneration Report.
- Alufer Mining Limited ("Alufer") is a company of which Adonis
Pouroulis is a Director. During the year ended 31 December 2018
Alufer received administrative services from an employee of Chariot
for which it incurred fees payable to Chariot of US$Nil (31
December 2017: US$24,053). The amount outstanding as at 31 December
2018 was US$Nil (31 December 2017: US$Nil).
19 Financial instruments
The Board of Directors determine, as required, the degree to
which it is appropriate to use financial instruments or other
hedging contracts or techniques to mitigate risk. Throughout the
year ending 31 December 2018, no trading in financial instruments
was undertaken (31 December 2017: US$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$19.8 million
(31 December 2017: US$15.2 million) as detailed in note 15.
Other than the non-US Dollar cash balances described in note 15,
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 2017: US$50,000).
Capital
In managing its capital, the Group's primary objective is to
maintain a sufficient funding base to enable it to meet its working
capital and strategic investment needs. The Group currently holds
sufficient capital to meet its on-going needs for at least the next
12 months.
Liquidity risk
The Group's practice is to regularly review cash needs and to
place excess funds on fixed term deposits. This process enables the
Group to optimise the yield on its cash resources whilst ensuring
that it always has sufficient liquidity to meet payables and other
working capital requirements when these become due.
The Group has sufficient funds to continue operations for the
forthcoming year and has no perceived liquidity risk.
Credit risk
The Group's policy is to perform appropriate due diligence on
any party with whom it intends to enter into a contractual
arrangement. Where this involves credit risk, the Company will put
in place measures that it has assessed as prudent to mitigate the
risk of default by the other party. This could consist of
instruments such as bank guarantees and parent company
guarantees.
At the year-end the Group acts as Operator in one non-carried
joint venture relationship on one of the Group's licences and
therefore from time to time is owed money from its joint venture
partners. The joint venture partner which has a 20% interest in the
Central Blocks in Namibia is an entity which is part owned by one
of the world's largest seismic and geoscience companies.
As such, the Group has not put in place any particular credit
risk measures in this instance as the Directors view the risk of
default on any payments due from the joint venture partner as being
very low.
20 Share based payments
Share Option Scheme
During the year, the Company operated the Chariot Oil & Gas
Share Option Scheme ("Share Option Scheme"). The Company recognised
total expenses of US$Nil (31 December 2017: 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
2018 2017
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$0.34 (27p) - US$1.59 (125p) (31
December 2017: US$0.36 (27p) - US$1.68 (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 2018 of US$847,000 (31 December 2017: US$806,000).
The following table sets out details of all outstanding share
awards under the LTIP:
31 December 2018 31 December
2017
Number of awards Number of awards
----------------- -----------------
Outstanding at beginning of the
year 21,980,015 14,347,278
----------------- -----------------
Granted during the year 2,563,946 8,267,792
----------------- -----------------
Shares issued for no consideration
during the year (1,892,011) (520,805)
----------------- -----------------
Lapsed during the year (218,749) (114,250)
----------------- -----------------
Outstanding at the end of the
year 22,433,201 21,980,015
----------------- -----------------
Exercisable at the end of the
year 8,778,432 6,606,366
----------------- -----------------
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 2018 of US$57,000 (31 December 2017: US$69,000).
The following table sets out details of all outstanding share
awards under the RSU:
31 December 2018 31 December
2017
Number of awards Number of awards
----------------- -----------------
Outstanding at beginning of the
year 2,191,852 1,559,873
----------------- -----------------
Granted during the year - 631,979
----------------- -----------------
Outstanding at the end of the
year 2,191,852 2,191,852
----------------- -----------------
Exercisable at the end of the
year 1,540,886 1,225,677
----------------- -----------------
21 Contingent liabilities
From 30 December 2011 the Namibian tax authorities introduced a
withholding tax of 25% on all services provided by non-Namibian
entities which are received and paid for by Namibian residents.
From 30 December 2015 the withholding tax was reduced to 10%. As at
31 December 2018, based upon independent legal and tax opinions,
the Group has no withholding tax liability (31 December 2017:
US$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
a) Award of Lixus Offshore Exploration Permit
On 3 April 2019 the Company announced that its newly
incorporated, wholly owned subsidiary, Chariot Oil & Gas
Holdings (Morocco) Limited, had been awarded a 75% interest and
operatorship of the Lixus Offshore Exploration Permit ("Lixus"),
Morocco in partnership with the Office des Hydrocarbures et des
Mines ("ONHYM") which holds a 25% carried interest.
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 UGUMACUPBGUB
(END) Dow Jones Newswires
April 10, 2019 02:00 ET (06:00 GMT)
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