TIDMPET
RNS Number : 1363R
Petrel Resources PLC
25 June 2015
25(th) June 2015
Petrel Resources plc
("Petrel" or the "Company")
Preliminary Results for the Year Ended 31 December 2014
Petrel Resources announces its results for the year ended 31
December 2014.
ENDS
Enquiries:
Petrel Resources Plc
John Teeling, Chairman +353 (0) 1 833 2833
David Horgan, Director
Nominated Adviser and Broker
Northland Capital Partners Limited
Edward Hutton / Gerry Beaney +44 (0)20 7382 1100
John Howes/Mark Treharne (Broking)
Public Relations
Blytheweigh +44 (0)20 7138 3204
Tim Blythe +44 (0) 7816 924 626
Halimah Hussain +44 (0) 7725 978 141
Camilla Horsfall +44 (0) 7871 841 793
PSG Plus
Aoife Ross +353 (0) 1 661 4055
Alan Tyrrell +353 (0) 1 661 4055
www.petrelresources.com
Statement Accompanying the Preliminary Results
The lack of interest in junior explorers continues. Despite an
active year for Petrel Resources, the share price continued to
decline from 15p to 3p. Since the beginning of the current downturn
in resource shares, in 2008, the price of Petrel has declined by
over 90% - despite having carried interests and cash. While
currently there appears to be some weak indications of interest
returning principally more buying activity, and some media
interest, the overall position remains dire. There is nothing new
in vicious junior resource company share price cycles but the
current version is deep and long. Few if any junior explorers have
been able to raise money to continue meaningful exploration
activities. Petrel is among the very few with cash and with a world
class partner, Woodside Energy who continues work in the Irish
Offshore Oil Exploration sector. To succeed in our sector, first
you must survive. We have shown over decades our ability to
survive. Then to succeed you need to be in a good sector, have good
ground, good people and good technology. Petrel is active in three
areas, Offshore Ireland, Iraq and Ghana.
The future market position of oil and gas is not in doubt. There
are claims that renewables will damage the sector. It might in the
very long term but for the next 30 to 50 years world economic
growth will depend on a secure supply of energy. That will come
from oil and gas. Billions of people will become middle class in
the coming decades. That means they will want a Western World
lifestyle - which is energy intensive. Consensus forecasts for
energy demand show a strong upward trend. Of course there will be
blips and setbacks along the way but the overall trend is
clear.
Given that there is a market how best do you find oil and gas?
It seems a blinding glimpse of the obvious that explorers need good
ground. But it is not only the physical ground. There is also
economics and politics associated with it. The Petrel strategy is
to go where oil is likely to be. If this means taking greater
political and technical risks so be it. We are on the ground in
Iraq, probably the most prospective oil country in the world with
production costing $2 a barrel but the political situation is close
to impossible. We are Offshore Ireland, which is a frontier area
geologically and technically, while politically stable. But there
is the possibility of elephant discoveries. We are in Ghana, a
frontier area when we first entered. Now with lower geological risk
but unable to make political progress.
If you have ground in prospective areas you need people who have
the skills, commitment and the nerve to plough on in the face of
adversity. The board of Petrel and our technical backup have all of
the above plus we have experience. Petrel was formed in the early
1980s to explore Offshore Ireland, the venture failed. It was
reborn in the 1990s to explore in Africa and the Middle East. We
have had a presence in Iraq since 1997. It has been a turbulent
experience but we are still there. We know Ghana for over 20 years.
Our experience in the past few years has disappointed. We believed
the country to have transparent procedures and the rule of law. The
rule of law operates but ratification procedures are obtuse.
Use of the most modern technology can reduce the level of risk
in exploration. Petrel has strengths in this area. Over the years
we have built a network of technology specialists which we contract
in when needed and we have joint ventured with some of the world's
best oil and gas companies thereby gaining access to their
technology. In Iraq, we have a carry with one of the largest
private groups in the country who in turn have a joint venture with
a listed Canadian company, Oryx. Our Irish Offshore partner,
Woodside Energy, is one of the world's foremost and successful gas
explorers. Our local Irish technical experts are the go to people
in the industry.
Despite all of the above exploration remains high risk. If we
are successful in any one of our ventures the reward will more than
compensate for the risks.
Activities
Petrel holds a 15% interest in 1,050 km of prospective acreage
in the Porcupine Basin of the Irish Atlantic. The Irish Atlantic is
virtually unexplored - only 31 wells have been drilled mainly in
shallower water. Petrel with two exploration licences, 3/14 and
4/14, is focused on prospects in 600 to 800 metres of water. We
have a joint venture with Woodside Energy, an Australian based
hydrocarbon producer. In return for a substantially carried 15%
interest in the early stages of exploration Woodside became the
operator. Petrel had completed significant desk based work on the
two blocks. Woodside is enhancing this work and intends to complete
3D seismic as soon as is practicable. This phase of the work has
been delayed while the Irish government completes an offshore
environmental assessment. Results are expected in Q3 2015 which
means the seismic programme is likely to take place in 2016.
New technology, new discoveries in similar geology and high oil
prices made prospecting in the Atlantic fashionable in recent years
but a series of recent setbacks and a lower oil price have dampened
enthusiasm. Exploration in Irish Atlantic waters is not for the
faint hearted. Prospects look good but exploration costs are huge.
A well on either of the two Petrel blocks is likely to cost upwards
of $60 million - this is a new exploration province. Uncertainties
introduced by possible tax changes, delays in issuing permits and
the ongoing political problems with the Corrib gas field discourage
explorers, as does the lower oil price. But the Irish Atlantic is
one of the few remaining frontiers where big discoveries may be
made.
Petrel and an associate company, Clontarf Energy had high
expectations when they obtained an exploration concession (via Pan
Andean Resources Ltd (30% Petrel, 60% Clontarf Energy, 10% local
interests)) from the Ghana National Petroleum Company (GNPC) in
2010. The concession, which was always subject to cabinet and
parliamentary approval covers 1,532 sq km in the Tano basin. Terms
were very good reflecting the early stage of oil exploration in the
country. Ratification of the agreement has dragged on for 5 years
during which Ghana has become a significant oil producer - in an
area south of Tano where our concession lies. For the past year the
consortium of Petrel, Clontarf Energy and a local partner have been
in litigation with the Ghanaian government and state agencies over
an attempt to award ground from our licence in Tano to a third
party. A court approved agreement was reached. This was acceptable
to all parties concerned. The Ghanaian authorities have failed to
implement the agreement. Ongoing talks have led to further
settlement proposals which as yet are not acceptable to the
consortium. What is happening in Ghana is regrettable. The country
is a good place in which to work. The rule of law applies and title
was thought to be good. Having very reluctantly commenced
litigation Petrel and partners will see it through.
When Petrel first invested in Iraq in 1997 it was the Saddam
era. Investing in Iraq was a clear example of choosing low
geological risk over high political risk. We underestimated the
political chaos of the last decade. Iraq has the potential to go to
10 million barrels a day of oil production. It is currently at 3.8m
and growing despite the chaos. The Petrel interests are in the
Wasit province where we have a carry which will be paid for in
Petrel shares when certain milestones such as drilling are reached.
Should the operator, Oryx, be unable to spud wells within the next
4 years then the agreement lapses. Iraq will be at the forefront of
world oil development in the coming decades but it is difficult to
attach a present value to the interests.
Future
Petrel has sufficient cash at present expenditure levels to
continue for two or three years. This is not an option that the
board accepts. We are actively working with our partner, our
advisors and the Irish authorities on helping them complete the
Irish Offshore Strategic Environmental Assessment. An early
resolution will enable orderly planning for 2016. We have ongoing
discussions with the authorities in Ghana. Neither side wants a
court action but this may be inevitable. Current proposals from the
authorities to the consortium have unacceptable risks. In Iraq we
wait and observe.
We continue to evaluate possible opportunities in emerging
frontier exploration areas. Investors in Petrel, as in most other
junior explorers, have seen their shareholding literally decimated
in value. We have cash, people and potentially very good ground.
There are small signs of life in the stock exchange sector in which
Petrel operates. If life blossoms then the potential return is
significant.
John Teeling
Chairman
24(th) June 2015
PETREL RESOURCES PLC
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2014
2014 2013
EUR EUR
CONTINUING OPERATIONS
Administrative expenses (430,903) (528,597)
Impairment of evaluation and exploration assets (2,528,975)
OPERATING LOSS (2,959,878) (528,597)
Investment revenue 386 1,814
LOSS BEFORE TAXATION (2,959,492) (526,783)
Income tax expense - -
LOSS FOR THE FINANCIAL YEAR: all attributable
to equity holders of the parent (2,959,492) (526,783)
Other comprehensive (expense) Income
Items that are or may be reclassified
subsequently to profit or loss
Exchange differences 500,887 (218,452)
TOTAL COMPREHENSIVE LOSS FOR THE FINANCIAL YEAR (2,458,605) (745,235)
Loss per share - basic and diluted (2.97c) (0.63c)
CONSOLIDATED BALANCE SHEET AS AT 31 DECEMBER 2014
2014 2013
EUR EUR
ASSETS
NON-CURRENT ASSETS
Financial Asset 4,211,123 4,211,123
Intangible assets 1,539,277 4,017,982
5,750,400 8,229,105
CURRENT ASSETS
Trade and other receivables 44,408 34,044
Cash and cash equivalents 1,330,766 1,425,025
1,375,174 1,459,069
TOTAL ASSETS 7,125,574 9,688,174
CURRENT LIABILITIES
Trade and other payables (306,831) (410,826)
NET CURRENT ASSETS 1,068,343 1,048,243
NET ASSETS 6,818,743 9,277,348
EQUITY
Called-up share capital 1,246,025 1,246,025
Capital conversion reserve fund 7,694 7,694
Share premium 21,416,085 21,416,085
Share based payment reserve 26,871 26,871
Translation reserve 348,737 (152,150)
Retained deficit (16,226,669) (13,267,177)
TOTAL EQUITY 6,818,743 9,277,348
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2014
Capital Share
Conversion Based
Share Share Reserve Payment Translation Retained
Capital Premium fund Reserve Reserve Deficit Total
EUR EUR EUR EUR EUR EUR EUR
At 1 January 2013 958,308 17,784,268 7,694 - 66,302 (12,740,394) 6,076,178
Shares issued 287,717 3,631,817 - - - - 3,919,534
Share options granted - - - 26,871 - - 26,871
Total comprehensive
income for the
financial year - - - - (218,452) (526,783) (745,235)
At 31 December 2013 1,246,025 21,416,085 7,694 26,871 (152,150) (13,267,177) 9,277,348
Total comprehensive
income for the
financial year - - - - 500,887 (2,959,492) (2,458,605)
At 31 December 2014 1,246,025 21,416,085 7,694 26,871 348,737 (16,226,669) 6,818,743
========== =========== ============ ========= ============ ============= ============
Share premium
Share premium comprises of the excess of monies received in
respect of the issue of share capital over the nominal value of
shares issued.
Capital conversion reserve fund
The ordinary shares of the Company were renominalised from
EUR0.0126774 each to EUR0.0125 each in 2001 and the amount by which
the issued share capital of the Company was reduced was transferred
to the capital conversion reserve fund.
Share based payment reserve
The share based payment reserve represents share options granted
which are not yet exercised and issued as shares.
Translation Reserve
The translation reserve comprises of foreign exchange movement
on translation from US Dollars (functional currency) to Euro
(presentation currency).
Retained deficit
Retained deficit comprises accumulated losses in the current
financial year and prior financial years.
CONSOLIDATED CASH FLOW STATEMENT
FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2014
2014 2013
EUR EUR
CASH FLOW FROM OPERATING ACTIVITIES
Loss for the financial year (2,959,492) (526,783)
Impairment charge 2,528,975 19,658
Share based payments - 13,435
Investment revenue recognised in loss (386) (1,814)
OPERATING CASHFLOW BEFORE
MOVEMENTS IN WORKING CAPITAL (430,903) (495,504)
Movements in working capital:
(Decrease)/increase in trade and other payables (216,495) 3,631
(Increase)/decrease in trade and other receivables (10,364) 9,422
CASH USED IN OPERATIONS (657,762) (482,451)
Investment revenue 386 1,814
NET CASH USED IN OPERATING ACTIVITIES (657,376) (480,637)
INVESTING ACTIVITIES
Payments for exploration and evaluation assets (575,303) (747,172)
Receipts in respect of farm out of exploration assets 945,214
Payments for investments - (421,649)
NET CASH USED IN INVESTING ACTIVITIES 369,911 (1,168,821)
FINANCING ACTIVITIES
Proceeds from share issue - 130,060
NET CASH GENERATED FROM FINANCING ACTIVITIES - 130,060
NET DECREASE IN CASH AND CASH EQUIVALENTS (287,465) (1,519,398)
Cash and cash equivalents at beginning of financial year 1,425,025 3,015,858
Effect of exchange rate changes on cash held in
foreign currencies 193,206 (71,435)
Cash and cash equivalents at end of financial year 1,330,766 1,425,025
NOTES:
1. ACCOUNTING POLICIES
There were no changes in accounting policies from those used to
prepare the Group's Annual Report for financial year ended 31
December 2013. The financial statements have been prepared in
accordance with International Financial Reporting Standards (IFRSs)
as adopted by the European Union.
2. LOSS PER SHARE
2014 2013
EUR EUR
Loss per share - basic and diluted (2.97c) (0.63c)
Basic loss per share
The earnings and weighted average number of ordinary shares used
in the calculation of basic loss per share are as follows:
2014 2013
EUR EUR
Loss for the year attributable to equity holders (2,959,492) (526,783)
2014 2013
Number Number
Weighted average number of ordinary shares for the
purpose of basic earnings per share 99,681,992 84,088,217
Basic and diluted loss per share are the same as the effect of
the outstanding share options is anti-dilutive.
3. FINANCIAL ASSET
Investment
2014 2013
EUR EUR
At the beginning of the year 4,211,123 -
Additions - 4,211,123
At the end of the year 4,211,123 4,211,123
On 14 August 2013 the Company announced that through its wholly
owned subsidiary, Petrel Resources (TCI) Limited, it had acquired a
20 per cent shareholding in Amira Hydrocarbons Wasit B.V.("Amira")
from Amira Petroleum N.V. Amira is a special purpose vehicle which
holds a 25 per cent carried to production interest in an early
stage oil opportunity in the large, underexplored and
underdeveloped province of Wasit, Iraq.
Although the Company owns 20 per cent of Amira, it does not have
significant influence over Amira. Petrel does not have any
representation on the Board of Amira. It does not have the right to
participate in any financial or operating policy decisions. As a
result Amira does not meet the definition of an associate and is
treated as an investment.
The consideration for the Acquisition comprised an up-front cash
payment of US$500,000 and the issue of 18,947,368 shares in Petrel
("Initial Consideration Shares"), representing 19.82 per cent of
the enlarged issued share capital of Petrel. The Initial
Consideration Shares are locked-in until the spudding of the first
conventional oil well in respect of Amira's interest in the Wasit
province. If the Spudding Date has not occurred by 19 August 2018,
Petrel may, amongst other things, elect to re-acquire the Initial
Consideration Shares for a nominal amount.
Following completion of the Acquisition, a further 21,052,632
shares in Petrel may be issued in two tranches upon the occurrence
of certain events ("Deferred Consideration Shares"). The first
tranche of 10,526,316 Deferred Consideration Shares is to be issued
upon the Spudding of the first conventional oil well. The second
tranche of 10,526,316 Deferred Consideration Shares is to be issued
upon notification of a discovery in respect of Amira's interest in
the Wasit Province.
As part of the Acquisition, Arman Kayablian, COO of Amira
Industries, joined the board of Petrel as a non-executive director
with effect from 19 August 2013.
Under the terms of the Acquisition agreement, Petrel is also
given a right of first refusal to participate or acquire an
operated interest in any future exploration and production licences
that Amira Industries secures in the Iraqi provinces of Muthanna,
Karbala, Babil and Najaf, which are currently being pursued by
Amira Industries. The terms of Petrel's participation in such
licence are subject to agreement between the parties but are likely
to be similar to Amira Industries' arrangement with Oryx Petroleum
("Oryx") in respect of the Wasit licences.
Fair value information for the investment in Amira has not been
disclosed as its fair value cannot be reliably measured. As a
result the investment is carried at cost. Fair value cannot be
reliably measured as the investment is held in a private company.
Amira's equity instruments do not have a quoted price in an active
market.
The recoverability of the group's financial asset is dependent
on the discovery and successful development of the economic
reserves which is subject to a number of risks as outlined
below:
-- Licence obligations;
-- Funding requirements;
-- Political and legal risks, including title to licence, profit sharing and taxation;
-- Geological and development risks;
-- Exchange rate risk;
-- Political risk; and
-- Financial risk management.
4. INTANGIBLE ASSETS
2014 2013
EUR EUR
Exploration and evaluation assets:
Cost:
Opening balance 4,017,982 3,424,049
Additions 687,803 760,608
Receipt from farm out of exploration assets (945,214) -
Impairment charge (2,528,975) (19,658)
Exchange translation adjustment 307,681 (147,017)
Closing balance 1,539,277 4,017,982
4. INTANGIBLE ASSESTS (CONTINUED)
Segmental Analysis 2014 2013
EUR EUR
Iraq - 2,382,185
Ghana 801,834 662,943
Ireland 737,443 972,854
1,539,277 4,017,982
Exploration and evaluation assets at 31 December 2014 represent
exploration and related expenditure in respect of projects in
Ireland and Ghana. The directors are aware that by its nature there
is an inherent uncertainty in relation to the recoverability of
amounts capitalised on the exploration projects.
Due to the political and legal uncertainty in Iraq the directors
have decided to impair in full the exploration and evaluation
assets in Iraq to nil, resulting in an impairment charge of
EUR2,470,320.
In addition the group incurred expenditure of EUR58,655 on
various projects in Cameroon and Mozambique. The directors have
decided to impair this cost, and accordingly an impairment charge
of EUR58,655 was written off against the exploration and evaluation
assets in Africa.
On 4 March 2014 the Company announced that it had finalized an
85% farm-out agreement with Woodside, Australia on its offshore
Ireland acreage. The agreement covers all of Petrel's participating
interest in Licensing Option 11/6 (comprising offshore blocks 45/6,
45/11 and 45/16) and Licensing Option 11/4 (comprising offshore
blocks 35/23, 35/24 and the western half of 35/25) Woodside will be
operator of the licensing blocks. Petrel Resources received
US$1,300,000 from Woodside for the 85% farm-out.
Relating to the remaining exploration and evaluation assets at
the financial year end, the directors believe there were no facts
or circumstances indicating that the carrying value of these
intangible assets may exceed their recoverable amount and thus no
impairment review was deemed necessary by the directors. The
realisation of these intangible assets is dependent on the
successful discovery and development of economic reserves and is
subject to a number of significant potential risks, as set
below.
Directors' remuneration of EUR175,000 (2013: EUR175,000),
salaries of EUR115,000 (2013: EUR110,000) and share based payments
of EURNil (2013: EUR13,436) were capitalised as exploration and
evaluation expenditure during the financial year.
The Group's exploration activities are subject to a number of
significant and potential risks including:
-- Licence obligations;
-- Funding requirements;
-- Political and legal risks, including title to licence, profit sharing and taxation;
-- Geological and development risks;
-- Exchange rate risk;
-- Political risk; and
-- Financial risk management.
The directors are aware that by its nature there is an inherent
uncertainty in such exploration and evaluation expenditure as to
the value of the asset. Having reviewed the carrying value of
exploration and evaluation of assets at 31 December 2014, the
directors are satisfied that the value of the intangible asset is
not less than carrying value.
5. SHARE CAPITAL
2014 2013
EUR EUR
Authorised:
200,000,000 ordinary shares of EUR0.0125 2,500,000 2,500,000
Allotted, called-up and fully paid:
Number Share Capital Premium
EUR EUR
At 31 December 2013 and 1 January 2014 99,681,992 1,246,025 21,416,085
Issued during the financial year - - -
At 31 December 2014 99,681,992 1,246,025 21,416,085
Movements in share capital
On 13 August 2013 the Company issued 18,947,368 new ordinary
shares to Amira Petroleum N.V. at a price of 20c per share as part
consideration for the acquisition of a 20 per cent shareholding in
Amira Hydrocarbons Wasit B.V. Details of this acquisition are
provided in Note 3.
On 17 December 2013 the directors of the Company exercised
4,070,000 options at exercise prices ranging from 2.5p to 5p.
6. POST BALANCE SHEET EVENTS
There were no material post balance sheet events affecting the
group.
7. ANNUAL GENERAL MEETING
The Company's Annual General Meeting will be held on 29(th) July
2015 in the Westbury Hotel, Grafton Street, Dublin at 11am.
8. GENERAL INFORMATION
The financial information set out above does not constitute the
Company's financial statements for the year ended 31 December 2014.
The financial information for 2013 is derived from the financial
statements for 2013 which have been delivered to the Companies
Registration Office. The auditors have reported on 2013 statements;
their report was unqualified with an emphasis of matter in respect
of considering the adequacy of the disclosures made in the
financial statements concerning the valuation of intangible assets,
investment in subsidiaries and amounts due by group undertakings.
The financial statements for 2014 will be delivered to the
Companies Registration Office.
A copy of the Company's Annual Report and Accounts for 2014 will
be mailed to all shareholders shortly and will also be available
for collection from the Company's registered office, 162 Clontarf
Road, Dublin 3, Ireland. The annual report will shortly be
available for viewing at Petrel Resources Company PLC's website at
www.petrelresources.com
This information is provided by RNS
The company news service from the London Stock Exchange
END
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